Deep Background

Haste is the enemy of due diligence


June 11, 2020

Haste is the enemy of due diligence. 

That motto sums up the lesson of New York State’s recent experience with a Silicon Valley engineer offering a product that state officials desperately needed at the time, as described in recent media reports.

The engineer, who had no experience in medical equipment, had told the U.S. Federal Emergency Management Agency that he could deliver thousands of Chinese-made ventilators to hospitals treating Covid-19 patients. Asked for details, he sent a 28-page catalogue of medical gear.  “Interested buyers had to sign a contract within four hours of receiving a quote and pay the entirety of the order upfront,” the Times reported.  “‘Nonnegotiable,’ the catalog said.”

The federal government sent the information to New York officials, and “within days” they had agreed to pay $86 million for 1,450 ventilators, the paper said.  Soon, however, a bank decided that a transaction involving the engineer’s bank account was suspicious, and froze the account.  He warned the state the deal as agreed to wouldn’t work.  “State officials later tried to send inspectors to confirm the stockpile in China,” the paper reported.  “That effort was unsuccessful, and the contract was terminated.”

It turns out U.S. officials had also offered the deal to New Jersey, but officials there “were troubled by a series of warning signs,” including the demand for upfront payment. It also emerged that the engineer’s offer had been “originally fielded by a team of inexperienced young volunteers” brought into FEMA by the White House, the Times said.

New York officials said the engineer had passed a state background test, adding that federal officials told them that the U.S. had adequately vetted the engineer.  A federal official told the Times that even so, “states should still be doing their own due diligence.”