Despite being found to be in contempt, last month Jason Cardiff dodged incarceration based on representations that VPL Medical was a viable business.
In a nutshell, the court ruled that Cardiff being put to work for VPL was of more benefit to the FTC than incarceration.
As part of that arrangement, the court-appointed Redwood Receiver is required to file periodic status reports.
As per the Receiver’s first October 1st report, production at VPL Medical is “approximately four weeks behind” schedule.
The scheduling was put forth to the court by the Receiver,
based on multiple discussions with and representations by Jason Cardiff (“Cardiff”) and Bobby Bedi (Bedi”), and their beliefs about what they could and would accomplish if authorized to do so, and with the Receiver’s interviews with other third parties.
These representations date back to June 24th, when VPL advised the Receiver it could be operational “within days”.
The ongoing production delays have been put down to “multiple factors”, but primarily
erratic and untimely responses from various vendors who are being scheduled and managed day-to-day by Cardiff and Bedi.
As of October 1st, VPL
is still not operational despite Cardiff and Bedi having access to all necessary resources and a month of work on operational issues.
Since the Receiver took control of VPL Medical around $450,000 has been blown through, with nothing much to show for it.
An additional $720,000 has been set aside, as a preemptive caution against tax issues pending an IRS decision on a late filing.
Despite VPL Medical being non-operational for the month of September, Jason Cardiff was paid $18,879. The funds however have yet to be released, pending an agreement reached between Cardiff and the FTC.
I imagine the FTC aren’t impressed with the entirely predictable situation of VPL Medical being non-functional.
As to the production issues, problem one is the air filtration and AC system.
During the September 1 meeting, Bedi stated that he was in the process of obtaining bids from vendors and should be receiving them in the next two days or so.
On September 10, the Receiver was notified by Cardiff via email that an air filtration/AC system vendor confirmed he would start installation on September 21 of the required air filtration/AC systems.
The Receiver inquired if the existing electrical system in the production facility could meet and deliver the power needed for the air filtration/AC system, to which Cardiff replied “at first glance not an issue across the board.”
On September 17, the Receiver followed up to inquire if existing electrical system could meet and deliver the power needed for the air filtration/AC system, to which Cardiff replied that he would be meeting with the vendors shortly and would provide an update.
On September 18, Cardiff notified the Receiver that electrical vendor needed to start that day to keep on schedule.
The electrical system installation quote came in the same day and was $16,000, which was $7,500 higher than the original budget of $8,500.
Running over budget and meeting with third parties without the Receiver being present are both violations of the court’s orders.
Nonetheless, installation of the filtration/AC system continued.
The Receiver was notified that the electrical work would be completed over the weekend and the air filtration/AC vendor would start that installation on September 21.
Cardiff stated that electrical vendor could be trusted and left to do the work by themselves, but he did not trust the air filtration/AC system vendor to be unsupervised.
The Receiver received the air filtration/AC system invoice from Cardiff on September 18 and the Receiver requested wiring instructions, which the Receiver did not receive until September 22.
On the morning of September 21, the Receiver was first notified that the air filtration/AC vendor would arrive at noon.
Less than two hours later the Receiver was notified vendor would not arrive until following day at 9:30 a.m.
On September 22, the Receiver arrived on site at the appointed time of 9:30 a.m., but no one was there.
The Receiver tried to call/text Cardiff without success so the Receiver emailed Cardiff and he replied that he would be there shortly. Cardiff arrived around 10:00 a.m., and the air filtration/AC vendor arrived around 10:30 a.m.
The vendor dropped off AC compressors, measured the site, compiled a parts list, and left to pick up parts.
The vendor called around 1:30 p.m. and requested payment in currency up front because they googled the company name and didn’t want to get “burned.”
The Receiver declined to make payment in currency so Cardiff negotiated to 80% wire transfer up front, 10% on September 25 and 10% when system is installed and operating.
The Receiver was not able to wire the funds that day because it was past the 2:00 p.m. bank wire deadline.
The vendor noted that he had all equipment reserved pending payment and pick up so he could start the next day once he received payment.
On September 23, the Receiver requested and received an electronically signed W-9 and a one year warranty and wired the 80% payment to the vendor.
The vendor was scheduled to start work at 1:00 p.m. Cardiff emailed and notified the Receiver at 11:50 a.m. that the vendor would not be on site until 9:00 a.m. the next day, September 24.
Bedi then followed up with an email and stated vendor would be on site at 10:00 a.m. on September 24.
On September 24, the Receiver arrived on site 10:00 a.m. The vendor arrived around 11:00 a.m., and proceeded to move the compressor units to the roof.
Thereafter, the vendor left to acquire more parts. He stated he would text Bedi on the return schedule.
At 3:00 p.m., Bedi informed the Receiver that the vendor would not return to work until September 25 at 9:00 a.m.
On September 25, the Receiver arrived on site 9:00 a.m.
When the Receiver entered the production facility, the Receiver noticed the access hatch to the roof was left open when vendor finished work at the roof the previous day.
The vendor arrived around 9:30 a.m., and started work. Around 5:00 p.m., Cardiff talked to the vendor to find out their schedule and decided that he would leave and asked Bedi to return and check the facility after vendor completed work.
The Receiver was later notified by Bedi that the vendor left around 8:50 p.m. and would return on September 26 at 10:00 a.m.
The revised, anticipated completion date of the production facility is October 2.
No idea if that deadline was met. And unfortunately we’ll probably have to wait for the next 60-day report filing date to find out.
With respect to VPL’s manufacturing machines, on September 1st Cardiff and Bedi
repeatedly stated that parts would be available from their Chinese vendors within two days via express shipment.
The first shipment of parts didn’t actually arrive until September 22nd. The second shipment cleared US customs on September 30th.
Attempts to hire required machinist assistants were also unsuccessful.
On September 23 Bedi sent an email to 11 job applicants, from which he had received online applications, for machinist assistants, scheduling them to be on site for interview on September 25 between 11:30 a.m. and 1:30 p.m.
On September 25 the Receiver waited at the office to interview the applicants but no one showed up.
A temporary employment agency was contacted as an alternative. As of October 1st however, they were unable “to locate any machinists”.
The automation engineer supervising the repair of VPL Medical’s machines, Mr. Singh, has meanwhile gone AWOL.
During conversation with Bedi on September 28, Bedi stated he has not been able to reach Mr. Singh in the past four days so that Singh’s availability remains unclear at the moment.
Looking forward, Cardiff still seems optimistic about VPL Medical’s potential.
On September 29 Cardiff provided the Receiver with a list of potential business opportunities.
The entities on the list appear to be credit worthy and warrant follow up.
Most, if not all, of the prospects want to see an operational production facility before executing a contract with VPL.
As detailed in the sections below, the production facility is not yet ready for operation and the mask assembly machines are not ready for production.
Therefore, the Receiver cannot provide the Court with earnings projections at this time.
It’s worth noting that the viability of VPL Medical was, in no small part, determined by a pending Veterans Administration contract.
As per the contract, VPL Medical was to supply the VA with two million masks by July 14th.
At the time VPL Medical had one machine operational, which the Receiver determined was “not functioning well”.
VPL Medical did manage to eventually send off 270,000 masks, however they were promptly rejected by the VA.
The reason for the rejection is stated in the Receiver’s report.
Despite repeated representations throughout this matter that such masks could be sold, Cardiff has now apparently determined these masks are not readily saleable.
He has located a potential candidate in the Los Angeles area who may be willing to accept the masks as a donation.
In an October 5th filed response to the Receiver’s report, Jason Cardiff asserts his VPL Medical salary was “earned”.
The dispute with the FTC pertains to Cardiff’s requested living expenses, with the FTC maintaining Cardiff has failed to purge his contempt (likely due to VPL Medical remaining nonoperational).
Cardiff claims if he’s not paid he might “lose any incentive to work”. A motion requesting the release of funds (payable to Cardiff) was filed on October 7th.
Pending the possible collapse of VPL Medical in the meantime, the Receiver’s next report is due sixty-days from October 1st.
There’s also a potential legal issue arising from a recent decision Third Circuit decision.
I’m not going to get into that until the FTC files a response and/or the court issues an order. I’ll continue to monitor the case docket.