The Annals of Crony Capitalism: Is Siga Technologies the New Solyndra?

The Obama administration's crony capitalism Solyndra scandal just keeps on getting worse. Reason readers will recall Solyndra is the failed solar panel company that was showered with more than half a billion dollars in federal loan guarantees.

Yesterday, my colleague Tim Cavanaugh cited the Washington Post report that administration officials asked Solyndra executives to delay layoff announcements until after the Nov. 2, 2010 election. In fact, the layoffs were announced on Nov. 3rd. From the Post:

The Obama administration, which gave the solar company Solyndra a half-billion-dollar loan to help create jobs, asked the company to delay announcing it would lay off workers until after the hotly contested November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show.

The announcement could have been politically damaging because President Obama and others in the administration had held up Solyndra as a poster child of its clean-energy initiative, saying the company's new factory, built with the help of stimulus money, could create 1,000 jobs. Six months before the midterm elections, Obama visited Solyndra's California plant to praise its success, even though outside auditors had questioned whether the operation might collapse in debt.

As the contentious 2010 elections approached, Solyndra found itself foundering, and it warned the Energy Department that it would need an emergency cash infusion. A Solyndra investment adviser wrote in an Oct. 30, 2010, e-mail — without explaining the reason — that Energy Department officials were pushing "very hard" to delay making the layoffs public until the day after the elections.

The announcement ultimately was made on Nov. 3, 2010 — immediately following the Nov. 2 vote.

Well.

Now comes Siga Technologies. Earlier this week, the Los Angeles Times reported on a federal sweetheart deal given to that biotech company which is run by another big Obama campaign donor. As the L.A. Times explained: 

Over the last year, the Obama administration has aggressively pushed a $433-million plan to buy an experimental smallpox drug, despite uncertainty over whether it is needed or will work.

Senior officials have taken unusual steps to secure the contract for New York-based Siga Technologies Inc., whose controlling shareholder is billionaire Ronald O. Perelman, one of the world's richest men and a longtime Democratic Party donor.

When Siga complained that contracting specialists at the Department of Health and Human Services were resisting the company's financial demands, senior officials replaced the government's lead negotiator for the deal, interviews and documents show.

When Siga was in danger of losing its grip on the contract a year ago, the officials blocked other firms from competing.

Siga was awarded the final contract in May through a "sole-source" procurement in which it was the only company asked to submit a proposal. The contract calls for Siga to deliver 1.7 million doses of the drug for the nation's biodefense stockpile. The price of approximately $255 per dose is well above what the government's specialists had earlier said was reasonable, according to internal documents and interviews….

Negotiations over the price of the drug and Siga's profit margin were contentious. In an internal memo in March, Dr. Richard J. Hatchett, chief medical officer for HHS' biodefense preparedness unit, said Siga's projected profit at that point was 180%, which he called "outrageous."

In an email earlier the same day, a department colleague told Hatchett that no government contracting officer "would sign a 3 digit profit percentage."

In April, after Siga's chief executive, Dr. Eric A. Rose, complained in writing about the department's "approach to profit," [Dr. Nicole] Lurie [a presidential appointee who heads biodefense planning at Health and Human Services] assured him that the "most senior procurement official" would be taking over the negotiations.

"I trust this will be satisfactory to you," Lurie wrote Rose in a letter.

Very satisfactory indeed, one suspects. 

It should be noted that the contract with Siga is part of the $5.6 billion Project Bioshield adopted by the Bush administration. Project Bioshield was set up to guarantee a federal market for new chemical, biological, radiological, and nuclear medical countermeasures for the Strategic National Stockpile (SNS). The question is was it used specifically to guarantee the profits of an Obama crony? Stay tuned. 

One further note: The SNS already has 300 million doses of conventional smallpox vaccine costing $3 each and has ordered 20 million doses of a vaccine that could be given safely to immuno-compromised people. The conventional vaccine can prevent disease if administered within four days of exposure to the virus.