House Panels Probing Contract Awarded to Perelman-Affiliated Company

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Doctor holding test tube

Two Congressional committees are investigating how a company affiliated with financier Ron Perelman won a massive federal contract for smallpox antiviral medicine, CNBC has learned.

At issue is whether or not Perelman’s Democratic political connections helped a company he holds a significant stake in secure a contract potentially worth billions of dollars.

Capitol Hill’s top investigator, Rep. Darrell Issa (R-Calif.), said he wants documents from the White House and the Department of Health and Human Services relating to the award of a no-bid contract worth up to $2.8 billion, and he is demanding to know what the White House’s role was, if any, in prodding the HHS to sign off on the enormous pharmaceutical deal.

In a letter dated June 9, Reps. Issa, chairman of the House Oversight and Government Reform Committee, and Sam Graves (R-Mo.), chairman of the Small Business Committee, wrote to HHS Secretary Kathleen Sebelius raising concerns about the contract, which was awarded in May to SIGA Technologies.

SIGA is 30 percent owned by Perelman’s MacAndrews & Forbes Holdings.

One person familiar with the situation said he’s worried the company’s Democratic political connections could have improperly affected the deal.

MacAndrews & Forbes’ political action committee contributed $266,136 in the 2010 election cycle, 64 percent to Democrats, according to the Center for Responsive Politics.

SIGA 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 the June 9 letter, a copy of which was obtained by CNBC, the two men write that their committees 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.”

The two members of Congress demanded that any documents and communications between HHS and the White House about the SIGA contract be turned over by June 24.

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

A spokesman for HHS said 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. “Their decisions were based on which company could best serve the American people should significant amounts of small pox antiviral courses be needed in a national emergency.”

Similarly, a spokeswoman for MacAndrews & Forbes said the contract was handled appropriately.

“SIGA has at all times proceeded in compliance with all applicable contracting rules," said Christine Taylor, senior vice president of corporate communications at MacAndrews & Forbes.

“No one associated with either SIGA or MacAndrews & Forbes had any contact with the White House concerning this procurement. SIGA personnel interacted with HHS only in the ways permitted by the applicable contracting rules,” she said.

The contract was awarded to SIGA on May 13, sending the company’s stock price up in after-hours trading.

Two days later, however, the company announced a competing developer of antiviral medicines, Chimerix, Inc., had filed a protest with the Government Accountability Office that the contract was awarded improperly.

The GAO says that dispute will be decided by Aug. 22. Typically, companies are not allowed to proceed with work under contracts that are under protest.

MacAndrews & Forbes said it believes that the Chimerix complaint “lacks merit.”