Trump health official’s approach to contracts faces scrutiny

Questions raised after a whistleblower complaint alleges officials may have awarded lucrative contracts to acquaintances

Robert Kadlec, assistant secretary for preparedness and response at HHS, testifies during a House Oversight and Reform Committee hearing on March 11, 2020.  (Tom Williams/CQ Roll Call)
Robert Kadlec, assistant secretary for preparedness and response at HHS, testifies during a House Oversight and Reform Committee hearing on March 11, 2020. (Tom Williams/CQ Roll Call)
Posted June 10, 2020 at 8:00am

A company that won a $628 million contract from the Department of Health and Human Services last week is one Robert Kadlec, the official who leads the agency's pandemic response, knows well.

Kadlec, the assistant secretary for preparedness and response, served as a consultant to Emergent Biosolutions until 2015, according to a company spokeswoman. Since Kadlec's 2017 confirmation, the biodefense company has received more than $1.2 billion from the division Kadlec oversees, including a part of HHS known as the Biomedical Advanced Research and Development Authority, federal records and company news releases show. Emergent Biosolutions is scheduled to get more. 

The contract raises questions because a whistleblower complaint filed in May by former BARDA Director Rick Bright alleges Kadlec and other officials may have broken the law by awarding lucrative contracts to former business acquaintances and friends. 

Bright's concerns date back to 2017, but are of particular interest since Congress awarded HHS billions of dollars this year to combat COVID-19. 

Under pressure from Democrats, the HHS Office of Inspector General is now weighing a review of BARDA contracts from fiscal 2017 through May 2019. 

Bright said in his complaint that Kadlec steers money to projects that don't have enough scientific merit to justify federal funding. Bright said he was forcibly reassigned from his role as BARDA director in late April to a lower-ranking National Institutes of Health position because he raised concerns about cronyism by Kadlec and others.

The risk, Bright said, is that federal funding will go to improper contracts rather than supporting truly promising medicines and vaccines that could save lives. 

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Ethics experts say laws that forbid contracts from going to allies of federal officials are lax and unlikely to be enforced.

"The public should have no confidence whatsoever these contracts are being awarded based on merit and not based on personal relationships," said Craig Holman, a Public Citizen lobbyist for tighter ethics rules.

Democrats are voicing concerns about potential violations of federal contract law, including the Federal Acquisition Regulation, which says "government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none."

"Our taxpayer dollars may be wasted on projects with little scientific evidence but that have great lobbyists," Rep. Katie Porter, D-Calif., said at a House Oversight and Reform Committee hearing last month. 

In a statement to CQ Roll Call, HHS said all contracts named in Bright's complaint were done in consultation with federal contracting officers and the HHS Office of the General Counsel. 

"Rick Bright's attorneys have not pointed to a HHS contract that violates a provision of the FAR. This is not surprising, as the contracts referenced in the whistleblower complaint were procured by federal contracting officers," said HHS spokeswoman Carol Danko, using the same statement HHS released after Bright testified before the House Energy and Commerce Health Subcommittee in May. "Dr. Kadlec considers the recommendations of his career experts and scientists, and applies his own expertise, to make decisions that provide the best protection for the American people."

HHS denies 'influence peddling'

Kadlec's connection to Emergent was not mentioned in Bright's complaint, which predates the $628 million contract. But the money to a former client of Kadlec raises questions that echo Bright's allegations about how Kadlec's division, the HHS Office of the Assistant Secretary for Preparedness and Response, awards funding.

"Kadlec cultivated an environment in which industry partners regularly bypassed agency procedures designed to prevent influence peddling and conflicts of interest," Bright's complaint reads.

Kadlec has multiple ties to Emergent, a company that says it specializes in "public health threats," including biological warfare. 

Kadlec and Emergent CEO Fuad El-Hibri co-founded another biodefense company called East West Protection LLC in 2012, according to The Washington Post. Kadlec sold his share to El-Hibri in 2015.

Bright's whistleblower complaint raised concerns about the influence of pharmaceutical consultant John Clerici, who continues to work for Emergent, according to the company.

Clerici and Kadlec worked together when Kadlec was a Senate GOP aide 15 years ago and Clerici was a lobbyist for Emergent, according to an April 3 news report shared on the website of Clerici's firm, Blank Rome. Clerici also consults through a company called Tiber Creek Partners.

A 2019 deal to supply the Strategic National Stockpile with smallpox vaccines will net Emergent $2.8 billion over 10 years, and will cost taxpayers more than twice the charge per dose than the previous supplier, according to The Washington Post.

"We have had a strong working relationship with BARDA since its inception that has lasted through multiple administrations, with many government officials and we look forward to that continuing into the future," Emergent Senior Vice President of Global Communications and Public Affairs Nina DeLorenzo said in a statement. 

Kadlec did not disclose his connection to Emergent on ethics disclosure forms after his nomination by Trump. Democrats on the Senate Health, Education, Labor, and Pensions Committee wrote to Kadlec in May and asked him to update those forms.

"As we face an unprecedented public health crisis, we seek your assurances that all decisions you make as the Assistant Secretary for Preparedness and Response are driven by public health, and request additional information from you in order to understand any potential conflicts of interest that may have arisen as a result of the omissions in your Committee paperwork," the Senate HELP Democrats wrote. 

HHS said Kadlec's ethics disclosure "will be updated to include publicly-available information previously reported to the Senate." 

Claims in Bright's complaint

When Bright's complaint was released, several parts generated headlines. He alleged that the Strategic National Stockpile obtained a large supply of hydroxychloroquine, touted by President Donald Trump as a  COVID-19 treatment, because of political pressure and that the United States did not heed early warnings to stock up on protective equipment such as N95 respirator masks.

HHS has disputed or downplayed those claims. 

However, Bright's allegations of contracts awarded without thorough scientific vetting received less attention. 

Bright alleges a Kadlec deputy, Senior Science Advisor Chris Hassell, sought $100 million for labs that Hassell told Kadlec in an email were "in trouble for shady dealings, illegal accounting, and lack of accountability" for unspecified Department of Defense projects.

But Hassell sought to work outside typical funding channels to accept DOD's requests. Hassell accidentally copied Bright on emails to Kadlec in which he complained about Bright being an obstacle. Hassell wrote he would "keep [Kadlec] legal." 

Kadlec also established a fund called ASPR Next in the summer of 2019, before COVID-19 arrived. Kadlec said in a 2019 introductory video the program is meant to fund "outside-the-mainstream" solutions to emergencies.

Bright contends that ASPR Next was a slush fund for "pet projects" of Kadlec's friends, even as the pandemic hit. The complaint says Bright discouraged funding projects that came to BARDA's contract officers through that channel.

Bright alleges Clerici and Emory Institute for Drug Development President and CEO George Painter sought funding through ASPR Next for the drug EIDD-2801 as a potential "cure all" for the flu and Ebola, and later COVID-19, although clinical research on the drug wasn't completed. The drug was developed by Ridgeback Therapeutics and acquired by Merck last month. 

Danko of HHS said in a statement that "no therapeutic or vaccine development has been funded through ASPR Next" and "no contract award has been made to Ridgeback Therapeutics under ASPR Next."

Like many Trump appointees who gave up private-sector jobs to join government, Kadlec was banned from any involvement with contracts to former clients. His two-year ethics pledge expired in 2019, about the time Kadlec introduced ASPR Next. Ethics experts say a Trump executive order meant to prevent conflicts of interests in federal contracts and "drain the swamp" has not been enforced.

But pandemic profiteering could still face investigations, experts say.

"Any cooling-off period may have expired, but that does not erase the fact that if you give preferential treatment to a former client, that's something that could be taken a look at by the [Department of Justice] Public Integrity Section," said Scott H. Amey, general counsel to the Project on Government Oversight. 

It can be challenging to determine whether contracts are going to companies like Emergent with relationships to federal officials when consulting firms sometimes do not disclose their clients. 

"It shouldn't be up to watchdogs or journalists to track down when federal officials are violating ethical codes. Unfortunately, it is," Holman said.