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Smallpox Probe About Influence Says Chairman

Thursday, 16 Jun 2011 | 1:16 PM ET

The chairman of the House Oversight and Government Reform Committee told CNBC that he wants to know whether political considerations drove the government’s decision to steer a potentially multi-billion dollar contract to a company in which financier Ron Perelman's investment firm has a significant stake.

"I am concerned about it," said Rep. Darrell Issa (R-Calif.) of the possibility that Perelman was involved in pushing for the contract. "We may never get to the bottom of it, but we’re going to keep asking the question."

Rep. Darrell Issa
Source: U.S. Congress
Rep. Darrell Issa

In a brief interview Wednesday, Issa said he is investigating what he sees as a broader pattern in Washington in which Democrats have used federal machinery to reward supporters and allies. (Issa heads Congress' top investigative committee, which has been widely expected to lead a Republican effort to look for potential scandals within the Obama administration. Issa has promised an aggressive investigative agenda).

Issa said his concern about Perelman was one of the reasons his committee, along with the House Small Business Committee, sent a letter June 9th to the Department of Health and Human Services asking for documents about the award to SIGA Technologies of a contract for smallpox medicine known as ST-246 worth up to $2.8 billion. (Read the letter here)

That request was first reported by CNBC on Monday.

SIGA is 30 percent owned by Perelman’s MacAndrews & Forbes Holdings, and several of SIGA’s board members are current or former executives of MacAndrews & Forbes.

Perelman is a supporter of President Barack Obama’s who wrote a check for $50,000 to support the president’s inauguration in 2009. MacAndrews & Forbes’ political action committee contributed $266,136 in the 2010 election cycle, and 64 percent of that went to Democrats, according to the Center for Responsive Politics.

The Capitol Hill committees asked HHS for documents and communications relating to the awarding of the smallpox contract as well as any communications between the Executive Office of the President at the White House and the department on the deal.

MacAndrews & Forbes spokeswoman Christine Taylor said, "Mr. Perelman has never contacted the White House about this contract nor asked anyone else to contact the White House on behalf of SIGA or its contact for ST-246." Taylor also said, "The Department of Homeland security designated smallpox a "Category A" bio-terror threat in the wake of 9/11. SIGA Technologies has spent years and millions of its own dollars developing ST-246, which is the only drug that has been shown to be effective in the treatment of smallpox."

"The purchase of ST-246 for the Government Strategic National Stockpile was completely appropriate," Taylor continued, "and SIGA has at all times proceeded in compliance with all applicable contacting rules."

SIGA itself is well connected politically: Andy Stern, one of the United States’ top labor leaders and a close ally of the Obama White House, sits on SIGA’s board, along with Frances Fragos Townsend, the former Homeland Security Advisor to President George W. Bush.

In an interview with CNBC, a Republican member of the Small Business Committee pointed to Perelman’s ownership stake in the company that won the contract. “That does make you wonder what the situation was that made this event happen," said Rep. Renee Ellmers. She said employees of SIGA competitor Chimerix live in her congressional district.

In the June 9 letter, a copy of which was obtained by CNBC, the two committee chairmen wrote that they are "concerned about the procurement process used to select SIGA and the Department’s apparent indifference toward its obligation to obtain full and open competition."

Issa and Graves also say the convoluted history of the deal is worrisome. "The procurement began as a small business set-aside, and the Department received offers from at least two small business firms," they wrote. "However, when SIGA was determined to not be a small business and therefore ineligible for the award under the terms of the solicitation, the Department chose to forego competition altogether, cancel the solicitation, and direct a sole source award to SIGA."

One analyst covering SIGA wrote that the Congressional investigation is not likely to have any long-term impact on the company.

The investigation "will have no effect on contract award work or award of the contract to SIGA, in our opinion," wrote analyst Gregory R. Wade of Wedbush Equity Research on Tuesday.

Wedbush also called into question the relationship between Rep. Issa and the law and lobbying firm of McKenna, Long and Aldridge, which represents a SIGA competitor called Chimerix, Inc. "We note that there appear to be several conflicts of interests between Rep. Issa and McKenna, Long and Aldridge," Wedbush wrote, "which, obviously, in our opinion, raise questions about the motivation for the investigation."

Ron Perelman
Getty Images
Ron Perelman

In the 2010 election cycle, the law firm contributed $2,600 to Rep. Issa, according to the Center for Responsive Politics.

Issa spokesman Jeffrey Solsby responded to the Wedbush report, saying: "These issues were not a factor in the committee asking the questions."

A spokesman for SIGA did not immediately respond to a call from CNBC.

A spokesperson for Chimerix told CNBC, "Chimerix is unaware of and uninvolved in the contributions policy and activities of McKenna, Long and Aldridge, a firm that represents 1,000s of clients. We encourage you to speak directly with the firm. Chimerix awaits for the results of an independent evaluation by the GAO of significant concerns that Chimerix and others have raised about the SIGA sole source procurement."

McKenna, Long and Aldridge had no comment.

The White House referred a reporter to the Department of Health and Human Services.

A spokesman for HHS told CNBC on Monday that no one from the White House communicated with HHS about the SIGA contract, and no one at the department discussed the contract with Andy Stern.

"This procurement was handled exclusively by career federal acquisition professionals, following strict legal guidelines designed to preclude political interference in fact or appearance," said HHS’s Chris Stenrud on Monday. "Their decisions were based on which company could best serve the American people should significant amounts of smallpox antiviral courses be needed in a national emergency."

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