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Gov. Kathy Hochul in Buffalo on Monday, Nov. 14, 2022.
ALBANY – When Gov. Kathy Hochul’s administration used emergency authority to buy $637 million in coronavirus tests through a company owned by a major Hochul campaign donor, critics and political opponents pounced.
Pay to play, they said of the late 2021 state purchase orders. Conflict of interest.
For months, Hochul and her allies have insisted the governor did not have any direct involvement in the deal. Hochul stated her “only involvement” was directing her team to purchase as many tests as possible from any available sources.
But an email written 13 months ago by the company’s owner, Charlie Tebele, suggested he may have directly discussed Covid-19 tests with Hochul – at a campaign fundraiser Tebele had thrown for the governor.
Tebele’s email, written to a top Hochul aide, was seeking a follow-up conversation about several topics, including “Covid-19 tests.” Four days after the email, Hochul’s administration approved spending $338 million for Covid-19 tests procured through his company. The email was obtained by The Buffalo News through the Freedom of Information Law.
Hochul’s press secretary, Hazel Crampton-Hays, said Hochul did not recall the conversation with Tebele.
Echoing past statements, Crampton-Hays said Hochul did not oversee the procurement process “and was not involved in the day-to-day procurement decisions.”
“She simply instructed her team to purchase as many available tests as possible to meet the tremendous need across the state, and they did exactly that to keep New Yorkers safe,” Crampton-Hays said. “As we have always said, campaign donations do not have any influence on government decisions and we reject any implication otherwise.”
Like her predecessor Andrew Cuomo, Hochul has faced criticism for her handling of the pandemic on issues as varied as masking mandates and virtual learning. But Hochul also has been dogged by questions about whether she used emergency powers during the public health emergency to benefit herself politically.
The $637 million paid to Tebele’s company, Digital Gadgets LLC, is among her administration’s largest discretionary expenditures, and the tests were purchased at a price much higher than what other states paid around the same time, without competitive bidding. More recently, the relationship between the state and the company has soured to the point that the two sides are now on opposite sides of a lawsuit related to competitive bidding and Covid-19 tests.
Tebele’s email did not explicitly say he and Hochul discussed Covid tests at the November 2021 fundraiser he threw in the New York City area. And Tebele has for months publicly denied ever speaking directly to the governor about selling tests to her administration. A Tebele spokesman reiterated that such a conversation never occurred.
The Tebele spokesman did confirm the email’s referenced discussion about “community matters” occurred at the November 2021 fundraiser, something never directly stated in the email exchange.
‘I was asked to reach out to you’
The email from Tebele was sent to Micah Lasher, Hochul’s director of policy, on Dec. 16, 2021, and was titled “Gov Hochul visit.” Tebele described a discussion he had had with Hochul at the fundraising event on Nov. 22, 2021.
“We had a conversation with the Governor regarding some community matters when we had her in for a meeting, and I was asked to reach out to you for follow up,” Tebele wrote to Lasher. “Is there a way we can schedule a brief call to discuss?”
Tebele then listed three matters he wished to discuss: a prekindergarten reimbursement program; the licensing process for an eating disorder clinic; and “COVID tests.”
“We have a community company that has available supply,” Tebele wrote.
An email from Digital Gadgets founder Charlie Tebele to Gov. Kathy Hochul’s top policy adviser, Micah Lasher, written on Dec. 16, 2021.
From the email, it’s not clear whether Hochul – or someone from Hochul’s campaign – told Tebele to follow up with Lasher on the government-related matters following the fundraiser. Tebele spokesman John Gallagher refused to say who directed Tebele to contact Lasher.
According to Gallagher, some topics listed in the email were indeed “community matters” that Tebele had discussed with Hochul at the fundraiser. But selling Covid tests was a new topic Tebele was broaching, he said.
Gallagher also noted a follow-up email Tebele wrote in the early evening of Dec. 16, 2021, more than six hours after his initial email, headlined “URGENT INFO ADDED.”
In that email, Tebele wrote that he had just read Hochul wanted to mail “instant COVID tests” to peoples’ homes, and that his company had such a capability. That day, the New York Times had reported on the plan.
“Digital Gadgets only learned of the state’s testing needs from New York Times reporting on December 16th, 2021, which is the date of the first time that Digital Gadgets’ ability to sell tests was communicated to the state,” Gallagher said.
On Dec. 16, 2021, Digital Gadgets founder Charlie Tebele wrote a follow-up email at 5:04 p.m. to Gov. Kathy Hochul’s policy director, Micah Lasher.
But the first email to Lasher on the morning of Dec. 16, 2021 – written before the New York Times article was published – had also broached selling Covid tests to the state. As for Hochul’s administration, the state Department of Health for months had sought to buy Covid tests, striking a deal with another company in September 2021. The state’s need intensified after Thanksgiving 2021, when infection fueled by a new variant, surged.
Indeed, other aspects of the timeline suggest that, at the time of the fundraiser, obtaining tests might not have been a top Hochul priority. The World Health Organization did not label the highly contagious Omicron variant of Covid-19 a “variant of concern” until four days after Tebele’s event.
That same day, Nov. 26, 2021, Hochul issued an executive order suspending normal competitive bidding rules for Covid-19-related supplies, a suspension that soon would enable the $637 million in no-bid purchase orders.
State business at fundraisers
The Tebele family threw financial support behind Hochul’s quest to become the first woman elected governor in New York, a campaign she started following Cuomo’s resignation in August 2021 amid a series of sexual harassment allegations made against him.
In total, various members of the extended Tebele family would give Hochul nearly $300,000 during the campaign; just ahead of Election Day in November, Nancy and Charlie Tebele additionally gave a combined $235,000 more to the state Democratic Party, which served as an arm of Hochul’s campaign operation.
In other instances during her campaign for governor, Hochul proved willing to discuss governmental matters at campaign fundraisers. Donors cut checks to Hochul’s campaign, attended the often-intimate, high-dollar events, then were allowed to speak directly to the state’s most powerful official about matters before her administration.
And following such conversations, donors in multiple instances were directed by Hochul campaign staff to then contact Lasher, emails have shown. Like Tebele, other donors referenced having held a private conversation with Hochul, while writing follow-up emails seeking Lasher’s attention.
Hochul built a massive campaign war chest, $60 million raised in 15 months. She pulled out a victory in November over the Republican nominee, Rep. Lee Zeldin, in the closest gubernatorial election in decades.
On Dec. 16, 2021 – the same day as Charlie Tebele’s email to Lasher – a member of Tebele’s family listing the same home address in Manhattan, Leon Tebele, gave Hochul a $20,000 campaign donation.
On Dec. 20, 2021, Hochul’s office approved a purchase order for an initial $338 million in rapid, at-home Covid tests bought from Digital Gadgets.
The deal for 26 million tests came together quickly: Hochul’s administration received an offer to buy the tests from Tebele on Dec. 20 for $13 apiece. The same day, Hochul’s office signed off on the deal at that price. The no-bid purchase order was enabled by the executive order Hochul had signed the previous month.
By January 2022, the state had struck a second, $299 million purchase order with Digital Gadgets to buy 26 million more tests.
Lasher does not appear to have facilitated the Tebele deals: He did not respond to Tebele’s Dec. 16, 2021, email until five days later.
By that time, the Hochul administration had already agreed to the first purchase order with Digital Gadgets. According to other emails written by Tebele, he finalized that deal through Jackie Bray, commissioner of the State Division of Homeland Security and Emergency Services. From the emails, it’s not clear how Tebele gained access to Bray.
The state paid Digital Gadgets an average of $12.25 per test – significantly more than any other test vendor charged New York State, and nearly double what California paid for the same tests. Unlike New York, California bought the tests directly through the manufacturer, rather than through Digital Gadgets, a third-party distributor that took a significant cut in the deal struck with Hochul’s administration.
Digital Gadgets, based in New Jersey, purchased the tests for an undisclosed amount from a medical product developer called AccessBio. In exchange for its payment from New York, Digital Gadgets says it provided significant logistical support, enabling rapid acquisition of scarce tests at a time when the Omicron variant was surging.
Hochul says she simply told her team to acquire as many tests as possible to ensure children could return to school in New York in early January 2022 – and that Digital Gadgets was the only company with a significant, ready supply.
In July, Hochul said at a news briefing that when the deals were struck, she was “not aware” Digital Gadgets had been supportive of her campaign.
Hochul’s statement was called into question by the revelation that Tebele threw the in-person, November 2021 fundraiser for Hochul, a month before the first deal was struck between Tebele and Hochul’s administration.
After the initial 52 million tests were delivered by Digital Gadgets as promised, Tebele hosted a second campaign fundraiser for Hochul on April 10, 2022. It was the beginning of a more intense period of campaign giving by the Tebele family, at a time Hochul’s office was considering another nine-figure purchase order. That deal never came to fruition and has now resulted in litigation.
A falling out
The Hochul administration’s consideration of an additional, no-bid deal with the company was disclosed in a lawsuit Digital Gadgets recently filed against the Hochul administration.
About two weeks after the second Tebele campaign fundraiser, Digital Gadgets met with Bray and and her chief of staff, Peter Cichetti, to hear a proposal from the company, according to the lawsuit. On June 10, according to the lawsuit, Cichetti confirmed an order of 24 million more tests through Digital Gadgets at a cost of $8.50 each.
On June 24, five members of the extended Tebele family donated a total of $104,000 to Hochul.
But on July 12, the state Department of Health “abruptly” reversed course, publicly posting a request for competitive bids for Covid tests, breaking its promise to Digital Gadgets, according to the company’s lawsuit.
With the process now competitive, Digital Gadgets submitted a bid offering to sell the tests for $2.75 each, far lower than the $8.50 figure the state allegedly agreed to less than two months earlier.
But in late August, the Hochul administration informed Digital Gadgets that it was awarding the contracts to three other bidders.
Yet when Digital Gadgets formally challenged those awards this fall, the company was told competitive bidding had not, in fact, been conducted in awarding the contracts to the competitors. Hochul’s administration now maintains the awards were issued through the 2021 executive order allowing no-bid procurement of supplies.
It was the same Hochul order that had once allowed the initial, $637 million in payments to Digital Gadgets.
“If the facts in this lawsuit are correct, the taxpayers dodged a bullet when the Hochul administration belatedly decided to seek competitive bids,” said Bill Hammond, senior fellow for health policy at the Empire Center for Public Policy. “If they had taken that simple precaution earlier, the state could have saved hundreds of millions of dollars.”
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Gov. Kathy Hochul in Buffalo on Monday, Nov. 14, 2022.
An email from Digital Gadgets founder Charlie Tebele to Gov. Kathy Hochul’s top policy adviser, Micah Lasher, written on Dec. 16, 2021.
On Dec. 16, 2021, Digital Gadgets founder Charlie Tebele wrote a follow-up email at 5:04 p.m. to Gov. Kathy Hochul’s policy director, Micah Lasher.
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