Digital Gadgets, a company under investigation for its owners’ involvement in Gov. Kathy Hochul’s campaign while the company also secured $637 million in contracts to provide COVID-19 testing, is now suing the administration and argues that it failed to comply with the rules of the competition when bidding for subsequent test orders.
In a lawsuit filed in the Albany County Superior Court, Digital Gadgets alleges that the state Department of Health and Human Services violated state law when it issued a solicitation for bids to obtain COVID-19 test kits, but later relied on an executive order, when the company protested their rejection of the bid.
“Digital Gadgets filed this lawsuit to ensure the state complies with the rules they set out along with the bidding process,” said John Gallagher, spokesman for Digital Gadgets of the guidelines issued by the department.”
Between December 2021 and March 2022, Digital Gadgets had been contracted by the state to supply around 52 million COVID-19 test kits as part of efforts to combat the Omicron wave of the virus. Jackie Bray, commissioner of the New York Division of Homeland Security and Emergency Services, executed these orders under Executive Order 11, a policy that allows the state to bypass normal procurement procedures amid the COVID-19 emergency. Those contracts cost the state nearly $637 million.
The Albany Times Union reported in July that Hochul had received $300,000 in donations for her re-election campaign from Digital Gadgets owner Charlie Tebele and his family around the same time the state was negotiating those deals. Hochul has denied knowing the Tebele family and said she was unaware of the details of the Digital Gadgets orders.
In April, May and June, according to the lawsuit, state officials, including Bray, negotiated another purchase order with Digital Gadgets. In the midst of these talks, Charlie Tebele and his wife donated another approximately $40,000 to the governor’s campaign.
Then, on July 12, the Department of Health issued a tender (IFB) that was “virtually identical” to the parameters negotiated between Digital Gadgets and the state the month before, the company’s lawsuit says. The IFB was published a week before the publication of Times Union’s first story on Digital Gadgets.
Digital Gadgets and 119 other companies submitted bids at the IFB in the summer. At the same time, more details about the Tebele family’s connections with the Hochul campaign came to light.
After being denied the job in August, Digital Gadgets requested a debrief from Department of Health officials to explain why the company had not been awarded the contract. Such a debriefing was allowed on the basis of the original IFB documents. Digital Gadgets’ attorney at the time wrote in a subsequent letter attached to the court filings that the concerned Department of Health official advised that any protests against the surcharge should be filed with the State Comptroller as usual.
“During the debriefing with DOH on August 31, 2022, I asked Ms. Keefe to confirm directly that this meant that protests should be filed directly with OSC and not with an internal protest officer at DOH. She looked me in the eye and told me yes, bid protests must be made [the state comptroller]’ wrote Benjamin Neidl, Digital Gadgets’ attorney at the time.
When Digital Gadgets protested the bid to the Director of Contracts in the Comptroller’s office, Digital Gadgets was told that the contract had indeed been awarded under Executive Order 11, which rendered the procedures prescribed in the IFB obsolete.
After several letters between Digital Gadgets, the Office of the Audit Office and a Ministry of Health official, the latter indicated that the original IFB was not used to examine the bids.
“The Department released this procurement as a precautionary measure to obtain pricing and related information from responsible and responsive bidders in order to be good stewards of taxpayers’ money,” wrote Eryn Keefe, DOH’s procurement manager, in a letter to Digital Gadgets’ attorney.
When asked for an opinion, the Court of Auditors referred the WSKG to the health department.
“DOH is unable to comment due to pending litigation,” Health Department spokesman Jeffrey Hammond wrote in response to questions from WSKG.
After reviewing Digital Gadgets’ legal complaint, Bill Hammond, senior fellow for health policy at the Empire Center, said the situation is complicated, but it is possible to identify political motivations influencing state decisions around the IFB.
“It seems like the state has been a little squirting here,” Hammond said. “First they negotiated under the emergency order. Then they issued what looked like a competitive bid document. No, we’re buying under the emergency decree.'”
The lawsuit is currently pending in the Albany County Superior Court.