As officials scurried to find protective equipment that had become vitally necessary and increasingly hard to find as the COVID-19 virus spread rapidly early last month, a suburban couple was pushing to broker a nearly $640 million deal for a stockpile of highly sought-after protective masks.
Though John and Kristi Dunn Kucera had no experience in the industry, they used personal connections to find a dealer claiming to have hundreds of millions of N95 respirator masks and a buyer willing to pay a premium for the gear that’s desperately needed by essential workers on the front lines of the fight against the deadly virus.
The Kuceras, of Downers Grove, learned almost immediately why the industry has been compared to the “wild west” as they dealt with a variety of shifty players who continually backed out of deals, only to come back with new offers at higher prices.
As it turns out, the multinational company they thought they were negotiating with was actually a different business with the same name that had no license to operate. One of the men promising to deliver the masks admitted to the Sun-Times earlier this month that his company at the time hadn’t procured a single N95 mask, let alone millions.
One of the Kuceras’ proposed deals would have sent five million masks to a buyer with an order to provide them to the city and county of San Francisco. But the order was ultimately canceled and later referred to the FBI along with others like it.
Their experience offers a lesson to anyone seeking to delve into the PPE market, the couple said. The Kuceras eventually secured thousands of masks, but many have gone unsold and are now sitting in warehouses as potential buyers have grown leery of new sellers in a market that’s been upended by grifters and counterfeiters.
Kucera admits mistakes were made as they attempted to cash in on the crisis, though he insists they jumped into the fray for the right reasons.
“It was chaos, but we had heard we could get supply,” Kucera said. “We got involved because we really wanted to help people. We had no idea how crazy it was going to be.”
Feds aggressively target potential fraud
Their experience is by no means unique as the market for personal protective equipment, or PPE, has devolved into a hotbed for fraud and profiteering. Federal authorities have started aggressively prosecuting scams involving N95 masks, targeting counterfeiters and price gougers, and probing companies that have failed to deliver on government contracts.
John Kucera had been consulting on a handful of major real estate developments in Nashville, but the projects stalled in January as the pandemic took hold in the U.S.
That’s when he and his wife, a publicist who served as a spokeswoman to Amara Enyia’s unsuccessful mayoral bid in Chicago last year, started hearing they could get their hands on PPE. A neighbor of a longtime friend in California ultimately introduced them to Jon Chaffee, a businessman from Orange County who claimed he had access to millions of masks.
In late March, John Kucera said the owner of one of the stalled development properties connected him and his business partner Steve Sannikov, of River North, to a buyer from Nashville named Michael Haley who Kucera said was being financed by a billionaire from India.
When they first tried to make a deal in early April, Kucera said Chaffee told the group they just missed out on buying 75 million masks, which he had just sold for $3.75 each. The following day, Chaffee informed them that a total of 300 million masks had actually sold a day earlier as he offered up 150 million more.
That same day, Haley sent Chaffee’s supplier in San Diego two purchase orders for those masks, five million of which he planned to offload to a California company that had secured an agreement to deliver them to San Francisco.
The entire order was worth $637 million, or $4.25 for each 8210 model mask, according to purchase orders shared with the Sun-Times. The list price for that model, however, is between $1.02 and $1.31, according to an April memo the Minnesota manufacturer 3M issued warning of fraudulent activity, price gouging and counterfeit products.
While Kucera said he was suspicious about whether they really had massive inventories of a product that had seemingly become impossible to find, Haley grew more anxious to strike a deal.
But as negotiations continued, more red flags went up when the sellers failed to send a “proof of life” video showing they had access to the masks, Kucera said.
Then, in a phone call on April 3, Chaffee and an associate, Peter Wojdak, canceled the deal, claiming another buyer had beaten the Kuceras’ team to the punch. On that call, Chaffee and Wojdak proposed another deal at a much higher price: $535 million for 90 million 1860 model masks, which are used in surgery, for $5.95 each. According to the manufacturer 3M, the list price for those N95 masks in $1.27.
What’s more, the brokers now wanted Kucera and his team to put up a 25% deposit.
“I’m listening to this and my jaw is on the ground because there’s the hook,” said Kucera. Kucera even said he tried to see if Chaffee would agree to accepting a questionable source of money in case the deal came under scrutiny from authorities.
“I asked him one time, ‘Do you mind if this is drug money?’ And they actually blanched at that,” he said.
Chaffee said that comment raised serious alarms to him. He and Wojdak denied the whole exchange was anything more than a business transaction that didn’t work out.
“The whole deal kind of died,” Chaffee said, because his team simply “could never come up with anything to inspect or look at.”
Said Wojdak: “They probably just didn’t like the terms of the agreement or they decided they wanted it according to their terms, which wasn’t going to work. So it never happened.”
Deal on feds’ radar
Before the deal fell through, the buyer from Nashville, Haley, had agreed to send five million of the masks to the Maclean Group, a veteran-owned business in the Bay Area.
According to Taraneh Moayed, assistant director of San Francisco’s office of contract administration, the city and county government issued a purchase order to spend $27.5 million for those masks.
John Deterding, Maclean’s president, said the order was swiftly canceled when the masks weren't delivered and the Department of Defense failed to confirm that it was “an authorized deal” since it involved a veteran.
Moayed said FBI officials have since met with city attorneys to discuss similar attempted transactions, some of which have been a “complete waste of time” and have created budgeting headaches as officials attempt to respond to the public health crisis. Moayed said she spoke to an FBI agent this month who was “primarily interested in 3M [products] and I think the price markups are going with it.
“We gave him a list of all the [purchase orders] that we’ve issued, including the ones that we canceled, which would include this,” Moayed said of the purchase order from the Maclean Group.
She credited the Maclean Group for promptly alerting her office that the masks wouldn’t be delivered and didn’t accuse the company of any wrongdoing.
The FBI didn’t respond to a request for comment.
No license to operate
When the Kuceras first dove headlong into the mask deal, they were encouraged to learn the seller was UETA Inc., which they believed was the Panamanian company that owns duty-free stores at airports across the country and has active business licenses in California.
However, the UETA Inc. they had pledged to send hundreds of millions of dollars was actually an unlicensed trading company headquartered in the San Diego bungalow of its owner, Gary Wetter. That location was initially provided for the purchase orders, but Chaffee later changed the address to a building in Florida that previously housed the corporate offices of the Panamanian company.
Gabriel Groisman, an attorney for the legitimate UETA Inc., said the company isn’t involved in the sale of N95 masks and noted that Wetter “is not an employee, affiliate or representative of UETA Inc.”
“In fact, the address listed by this individual in the purchase order that you provided for our review is an address which has not been used by UETA Inc. since 2004,” said Groisman, adding the company “will pursue all of its rights and remedies under the law to protect its business name, goodwill and reputation.”
Asked why he provided that address, Chaffee said “it might have been a mistake.” Meanwhile, Wetter insisted his company’s name wasn’t meant to be deceptive. “There’s no corruption,” he said.
“Why wouldn’t they send me a letter and say stop using it? They didn’t,” he said of the Panamanian business.
Wetter said the name was simply an acronym for his company, Universal Enterprises and Trading Associates, which has a suspended business license in California.
“There’s no law says I can’t operate a company without a license,” he claimed.
Wetter said he has recently sourced around four million N95 masks from China and sold them to buyers in Mexico, but he claimed he was unaware of the massive purchase orders sent by Haley. Wojdak, who dealt directly with the Kuceras’ team on behalf of Wetter, said that claim wasn’t true.
“If they made a purchase order out to UETA, then UETA got the purchase order,” Wojdak said.
Records show that in recent years Wetter, Wojdak and Chaffee have all been slapped with liens, faced eviction and filed for Chapter 7 bankruptcy, though none of those cases is active.
Stuck with thousands of masks
Since the deal went up in smoke, the Kuceras started a new company called TellUs Global Solutions as they shifted attention to sourcing smaller shipments of KN95 masks, which are similar to the N95 models but meet Chinese safety standards instead of those held by the FDA.
Things started looking up when they struck a deal last month with a local hospital system to provide 90,000 masks. But after delivering 50,000 John Kucera said he culled from a “shady” warehouse in Glenview and another supplier in Dallas, Kucera said the deal was called off when the provider received a letter from state officials warning of counterfeiters. He hasn’t sold anything since.
“I couldn’t even give them away,” Kucera says of the masks, which he’s unsuccessfully tried to foist off on Portillo’s and the Cook County government. “That’s how much confusion there is at this point as to what’s what, what’s real. And it’s basically like a complete bomb was dropped on this whole industry.”
As he tries to salvage his efforts, Chaffee has continued to send emails advertising massive inventories.
“We currently have 9 Billion 3M masks on a ‘Spot Buy’ arriving in Los Angeles, California,” Chaffee wrote to him late last month, adding that he had “the ability to buy 3M masks directly from 3M.”
Despite that message, Chaffee admitted earlier this month that at the time he still hadn’t acquired a single N95 mask.
“I’ve tried a million times,” he said. “We call it a unicorn. It just doesn’t exist.”