Lawmakers react to comptroller Betty Yee’s role in mask deal
California lawmakers say they are troubled by state comptroller Betty Yee’s behind-the-scenes advice to a politically connected company seeking an untendered $600 million government contract to supply COVID-19 masks, prompting some to demand a second legislative hearing on the failed deal.
Yee’s role in California’s scuttled state contract with Blue Flame Medical LLC remained secret for two years, despite a lengthy legislative investigation and federal investigation. Civil lawsuit documents reviewed by The Times detail how the two-term Democrat — with no formal role in the state’s contracting process — sought to make inroads for Blue Flame with the governor’s administration. Gavin Newsom, suggested language on how to ask the state for a large upfront payment and then worked to expedite the deal.
After California officials were forced to claw back the state’s $457 million cash advance to Blue Flame due to fraud concerns, lawmakers demanded transparency and accountability at a hearing in May 2020. But Yee’s name was never mentioned.
“Ultimately, the Blue Flame fiasco was a near miss for the state,” said Assemblyman Cottie Petrie-Norris (D-Irvine), who presided over the legislative hearing.
In a text message included in court documents, Yee discouraged Blue Flame co-founder John Thomas, a Republican political fundraiser, from disclosing how much the company could earn from the deal because it could “become a public record and make headlines”. .”
Blue Flame’s internal records, disclosed in an ongoing lawsuit, showed the company could make a profit of $134 million by charging the state price markups of 20 to 30 percent.
Following the revelation of Yee’s role in the deal, Petrie-Norris said she was calling for a follow-up hearing and asking the state legislative analyst’s office to provide recommendations “so we can strengthen our verification and approval processes during a protracted emergency”.
“I wish we knew at the time of the hearing what we know now,” said Assemblyman Jim Patterson (R-Fresno), deputy chairman of the Assembly’s Accountability Committee. and the administrative review that led to the 2020 oversight hearing. “I am absolutely flabbergasted. It’s the controller. She is the last bastion to send a lot of taxpayers’ money to organizations.
Assemblyman Jose Medina (D-Riverside), also a member of the accountability panel, said lawmakers should have been given more information. “The fact that we were not made aware of the full extent of this situation during such hearings hampers our work.”
The nearly 150 text messages between Yee and Thomas over the course of a week in March 2020 – part of the public record in a contract failure lawsuit – include instances where the comptroller criticizes Newsom staff for moving too slowly when shopping for supplies in the early days of the pandemic. At the time, Thomas told Yee he had 100 million N95 masks at the Port of Long Beach that his company could “move to you today.”
A few hours later, Thomas texted Yee saying that Blue Flame had almost sold everything, but he promised that 100 million more masks would arrive at the port every week. Yee texted Thomas saying she would continue to ‘bug’ the governor’s office over his offer and suggested how he should formulate a request for the prepayment, but ‘without calling my name’ with administrative officials.
“I’m going to get my folks working on how to make prepayment easier,” Yee wrote to Thomas.
The next day, Yee told Thomas that she had instructed her chief of staff to call the director of the California Department of General Services, known as DGS. Thomas quickly texted back, “OMG! YES!”
Later, Yee texted Thomas, “Prepayment process in place.”
In the days that followed, Thomas repeatedly texted the comptroller for updates as he waited for the state to wire $457 million to Blue Flame’s bank account.
“We sat ready while DGS took its time,” Yee wrote to Thomas after state officials missed the original March 25 deadline to wire money to Blue Flame. “They missed the deadline. Sorry about that.”
The next morning, Thomas started texting Yee early to “make sure your shop hits the button” at 8 a.m. to send the thread. “Really, I will soon lose my place in the queue and inventory,” he wrote.
But the size of the state’s eventual deposit triggered a warning by bank officials of a potential scam, given that Blue Flame had opened its account the day before. The wire was then reversed a few hours later. Yee rebuffed a later request from Thomas to speak on the phone, texting him to “please stop updating me; this is not helpful. … You now have a credibility problem that you need to solve. Good luck.”
In his deposition last year, Thomas said Blue Flame did not in fact sell any of the 100 million masks he claimed to have at the port, despite what he told Yee. The failure of the deal sparked a federal investigation, although Blue Flame’s attorney said in a letter obtained by The Times that the investigations “have long since ended and the government has confirmed that no charges of no kind has been or will be sought”.
Lawmakers say the Blue Flame deal is a cautionary tale of the dangers of no-bid contracts, which the Newsom administration relied heavily on early in the COVID-19 pandemic to help officials buy vital supplies quickly.
“As we heard at the 2020 surveillance hearing, the state enacted more extensive vetting procedures soon after this contract was revealed, and perhaps in part because this contract was revealed,” Assemblyman Adam Gray (D-Merced), who participated in the 2020 hearing reviewing the state’s deal with Blue Flame, said in a statement. “We’ve also heard that lessons have been learned in the rush to get emergency supplies to our hospitals, but we can’t learn lessons that we don’t know.”
Court documents allege that Democratic fundraiser Mathew Littman, who was one of Blue Flame’s paid referral partners, contacted Yee’s political fundraiser, Stephanie Daily Smith, who the documents say later presented Yeah to Thomas.
“I put him in touch with the appropriate contacts in the administration to make his speech, in the hope that they would then do their work of verification,” Yee said last week in a letter submitted to the pages of Times opinion on its role in the deal. The comptroller declined to comment when contacted by The Times for the original story, citing ongoing litigation.
She said in her letter to the newspaper’s editor that her advice was “no different from the advice on state contracting with my team and which I would offer any small business owner who joins our frequent free webinars”.
“I never had a financial interest in the success of the Blue Flame contract, nor anyone I was affiliated with,” Yee wrote. “My only concern, then as now, was making sure California’s frontline health care workers and other essential workers had the protective equipment they needed to be safe in the face of the pandemic. of COVID-19.”
Yee’s term as state comptroller ends in January, and she has opened a campaign account to run for state treasurer in 2026. Several of the candidates seeking to replace Yee have criticized her involvement with Blueflame.
Democratic candidate Malia Cohen, who was endorsed by Yee, said business owners also contacted her about mask offers when there was a critical need for such supplies at the start of the pandemic. .
“The way I approached it was to send them to the state so they could go through a vetting process to determine if there was a clear track record for the companies to deliver,” Cohen said, who is chairman of the State Board of Equalization.
If elected to serve as monitor, she said, she would keep the same distance from the details of any deal. “I think Comptroller Yee should have walked away from the process and allowed the appropriate state officials to negotiate and review the offers and contracts,” Cohen added.
State Sen. Steve Glazer (D-Orinda), also a candidate to succeed Yee, said his actions “were clearly wrong.”
“The Comptroller is the guardian of our taxes and it’s very important that they don’t defend any particular vendor,” Glazer said.
Lanhee Chen, the only Republican running for state comptroller, issued a challenge to his fellow candidates. “I pledge never to interfere in government contracts and I urge all my opponents to do the same. Californians deserve nothing less.