Amid pandemic, Newsom faces scrutiny over $1B face-mask deal

In Summary

California legislators have demanded more details about Gov. Gavin Newsom's coronavirus spending and a recent news report raised questions about the company contracted to make the masks.

California lawmakers bestowed Gov. Gavin Newsom with unusual power last month before they put their legislative session on hold and left Sacramento, giving him bipartisan approval to spend up to $1 billion “for any purpose” related to the coronavirus pandemic.

It was a rare show of unanimity by a Legislature that is often riven by its own factions, and a huge sign of trust in a governor who had been on the job for barely more than a year.  

But since Newsom announced on national television last week that he had “inked a number of contracts” to buy hundreds of millions of protective face masks from a manufacturer in China, the kumbaya spirit has waned. Legislators have demanded more details on the arrangement and a recent news report raised questions about the company contracted to make the masks. Meanwhile, the Newsom administration told lawmakers on Friday that it will need to spend $6 billion beyond the $1 billion they approved to prepare the health care system to fight coronavirus — and legislators have set hearings to oversee the state spending.

Today Newsom defended his decision to order $1.4 billion in protective equipment from a consortium that includes BYD — a Chinese company with a subsidiary that manufactures electric buses in California — following a Vice News report over the weekend critical of the company. 

“We are confident we will not be procuring any products that don’t meet FDA approval,” Newsom said, adding that the masks will be vetted by major medical supply companies and tested at a lab in Utah. “We have the capacity to cancel if they do not meet all our specs, so we are confident in that respect.”

Newsom has said the deal will provide California with 200 million masks per month but his administration has declined to release the state’s contract with BYD. Mark Ghilarducci, Newsom’s director of emergency services, said today that the contract will be made public after some details are finalized.

More details could emerge at a state Senate hearing on Thursday that will be led by Sen. Holly Mitchell, a Los Angeles Democrat who chairs the budget committee. She sent a sharply-worded letter to Newsom’s finance director after the governor announced the $1.4 billion deal for protective gear last week.

“Under normal circumstances the Legislature would have had more time to deliberate an expenditure of this magnitude and would have been allowed to thoroughly vet the details of the contract before proceeding. I understand the Administration feels the need to act quickly due to the worldwide demand for masks and other (protective equipment),” Mitchell wrote.

“However, I request that the Administration provide the (budget committee) the full details of the contract including the performance standards required of the vendor and the manufacturer, the price per mask, the quality standards the masks are required to meet… the production and delivery timelines, and the efficacy of the technology utilized to clean the masks that will be reused.”

Republican Sen. John Moorlach, who also sits on the budget committee, said he’s concerned about the governor’s rapid-fire dealmaking during the coronavirus emergency. He wants to know if the Newsom administration got multiple bids for the masks, or vetted the potential contractors’ track records.

“Or was this just one of those smooth talkers that convinced someone — ‘You could really be a hero using us, this will be great,’ — and in the spur of the moment you get manipulated and you make a decision like this?” Moorlach said.

BYD (short for “Build Your Dreams”) is the world’s largest producer of electric vehicles, most of them made in its factory in its headquarters city of Shenzhen, China. It’s U.S. subsidiary makes buses that are deployed on U.S. roads.

In January, as the coronavirus devastated Wuhan, BYD announced it would convert part of its main factory in China to produce masks. By March, BYD was donating masks to workers in need, including public transit drivers in the U.S.

“We’re up to 25-30 million masks a day. It is something that makes sense,” Frank Girardot, BYD-America’s communications director, said of the plan to sell masks to California. “This is a global crisis. Our company has a long history of trying to do things to make the world better.”

BYD’s masks are designated as KN95, the Chinese version N95 used in the U.S.

“We are absolutely going to meet those [U.S.] standards,” Girardot said.

BYD-America’s footprint includes Sacramento, where it is represented by one of the top lobby firms, the Weideman Group. It also has been a campaign donor, though not a major one by California standards. Ke Li, the president of BYD’s automotive subsidiary, gave $40,000 to Newsom’s gubernatorial campaign, and the company has donated smaller sums to a handful of legislative campaigns.

Billionaire investor Warren Buffett’s Berkshire Hathaway owns 10% of BYD-America. The U.S. subsidiary gets subsidies from California, as part of the state’s effort to combat climate change. The California Air Resources Board reports that BYD-America has received $120 million in cap-and-trade funding to help jumpstart its electric vehicle factory.

The company’s first buses didn’t work as promised, The Los Angeles Times reported in 2018. But on  Feb. 20, before the coronavirus became part of the lexicon, Los Angeles Mayor Eric Garcetti announced that his city would purchase 134 electric buses from BYD-America. 

They will be made at BYD’s 750-worker factory in Lancaster, though that factory is shuttered now because of the pandemic. The buses are expected to start rolling off the line at the end of 2020.

Lawmakers in Washington are working to limit the company’s growing presence in the American transportation market. In 2019, Congress approved a bill that will prohibit federal funds from being spent on Chinese buses and railcars starting next year, including those made by BYD, according to a report in the Wall Street Journal

On March 5, the U.S. Senate Banking, Housing and Urban Affairs Committee held a hearing focused in part on BYD. Senators from both parties criticized the company, contending that the Chinese government subsidizes the firm, allowing it to undercut U.S.-owned competitors.

Sen. Sherrod Brown, an Ohio Democrat, was particularly pointed, saying “our concern is with the Chinese government’s influence and control.”

“BYD may not be technically owned by the Chinese government but it’s certainly controlled by it,” Brown said at the hearing.

More on the coronavirus in California:

Tracking coronavirus hospitalizations in California by county

CalMatters is tracking positive and suspected cases of COVID-19 in patients who are hospitalized throughout the state, broken down by county.

California’s response to coronavirus, explained

Gov. Gavin Newsom says the state appears to be flattening the curve. We unravel the response to the coronavirus outbreak and look at what lies ahead.

Timeline: California reacts to coronavirus

This timeline tracks how California state and local governments tackled the evolving COVID-19 crisis since the first case was detected.

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