As Investor Alleges Securities Violations, State Auditor Calls TestIowa COVID-19 Reporting Process Illegal

State Auditor Rob Sand accused TestIowa of "illegal and unbusinesslike practices, inefficiencies, and apparently pointless risks." Meanwhile, an investor is suing one of the companies involved for allegedly lying about the accuracy of their COVID-19 tests.

State Auditor Rob Sand. Photo: Gkhauenstein/Wikimedia Commons

State Auditor Rob Sand issued a report Tuesday alleging that COVID-19 reporting procedures used by a group of Utah tech startups operating under the name TestIowa are in violation of state law because of how tests are processed out of state before reaching the Iowa Department of Public Health to be officially recorded.

The report came the day before the longtime spokesperson for the IDPH was apparently ousted from her position over her openness about the pandemic with the media. It also added to growing scrutiny over Governor Kim Reynolds’ decision to award a $26 million, no-bid contract to the Utah firm leading the initiative, Nomi Health. Nomi is partnered with three other startups on TestIowa, including one not mentioned in Sand’s report that is separately being sued by an investor for allegedly making false claims about the accuracy of its test results. (Both Sand’s report and the lawsuit are embedded at the end of this article.)

In his report, Sand noted that it was initiated as the result of state- and county-level employees contacting his office with concerns about TestIowa reporting delays, which Sand wrote “could have a negative impact on the pandemic response by hindering contact tracing and decision-making at both governmental and individual levels.”

After interviewing county employees at public health departments; collecting information from the Iowa Department of Public Health and Iowa State Hygienic Lab, a public facility at the University of Iowa; and reviewing Iowa law as it related to the obligations specified in the state’s no-bid contract with Nomi Health, Sand claimed he “identified illegal and unbusinesslike practices, inefficiencies, and apparently pointless risks.”

The report specifically focuses on a section of the Iowa Code stipulating that “the health care provider or public, private, or hospital clinical laboratory attending a person infected with a reportable disease shall immediately report the case to the department,” referring to the IDPH, which shall “publish and distribute instructions concerning the method of reporting.” An April 18 order from the IDPH that explains reporting procedures and requires labs to “immediately report all positive and negative” results is also appended to the report.

According to the report’s findings, although the State Hygienic Lab has been analyzing potential COVID-19 specimens collected by TestIowa, it has been forced to send those results to two Utah firms working with Nomi Health — Qualtrics, which set up the TestIowa questionnaire used to determine who qualifies to get tested; and Domo, a cloud computing startup — before they’ve reached the state’s Office of the Chief Information Officer, an agency established in 2013 that handles IT for the executive branch, and finally the IDPH.

This roundabout reporting process, which has been used only for TestIowa-administered tests, has led to concerns about delays and “testing equipment related to that reporting system,” which the SHL was instructed to maintain but “was so inefficient it was replaced.” Because the reporting system requires the results to go through Qualtrics and Domo before reaching the IDPH, some Iowans have raised privacy concerns independent of Sand’s report, suspicious that TestIowa is largely a data-mining operation.

It was Iowa-born actor and venture capitalist Ashton Kutcher’s friendship with the CEO of Qualtrics, Ryan Smith, that led to Governor Reynolds’ decision to award the no-bid contract to Nomi Health in late April. Kutcher mentioned the TestUtah initiative Smith’s company was involved with when the governor contacted him to participate in a coronavirus PSA.

As a result of that conversation, Reynolds partnered with a group of startups with little to no experience in healthcare but with ethically suspect track records. The TestIowa questionnaire created by Smith’s company included a question about whether Iowans were allergic to hydroxychloroquine, a potentially dangerous anti-malarial drug touted without evidence by President Trump as a miracle cure for COVID-19. Nomi Health CEO Mark Newman had been promoting the drug, as well — all the while sitting on the board of Meds in Motion, a pharmacy that had recently secured an $800,000 deal with the state of Utah to sell the drug. The deal blew up into a scandal as officials subsequently tried to back away from their rushed decision to embrace the drug. (In Iowa, state officials claimed at the time that they were not pursuing a similar contract for hydroxychloroquine.)

As columnist Lyz Lenz reported for the Cedar Rapids Gazette, Newman previously founded a company in 2004 called HireVue that created artificial intelligence-based job interview technology. It took off, Lenz wrote, as major companies including Goldman Sachs embraced the tech. But it also led to concerns of bias; in an interview with The Washington Post, an AI researcher called it “profoundly disturbing,” “pseudoscience,” and “a license to discriminate.” Newman left the company in 2017. Lenz added that two years later — the same year, she reported, that Newman created Nomi Health with plans to launch in 2021 before the pandemic changed that — the watchdog group Electronic Privacy Information Center filed an FTC complaint against HireVue, alleging that the company’s “intrusive collection and secret analysis of biometric data thus causes substantial privacy harms to job candidates.”

Domo, the cloud computing startup that, along with Qualtrics, analyzes TestIowa results before they are sent to the IDPH, has its own ethical problems. Lenz drew attention to how Domo’s founder and CEO, Josh James, was accused of making comments insensitive to women and people of color. She also cited articles from Bloomberg and The Los Angeles Times that described how James used his startup’s soaring stock value to personally enrich himself and his brother’s restaurant before the stock plummeted when he went public with Domo.

A similar story may be playing out now with the third tech startup partnered with Nomi Health on the TestIowa initiative, Co-Diagnostics, which is not mentioned in Sand’s report. Based in Salt Lake City, the company is the only one with a clear healthcare-related background — Nomi Health’s CEO reached out to it because of its work producing malaria tests. In mid-June, a Cayman Islands-based investment company named Gelt Trading Ltd. filed a proposed class-action lawsuit in federal district court alleging that Co-Diagnostics artificially inflated its stock value in part by falsely claiming that the test it developed for COVID-19 showed “100% sensitivity and 100% specificity, the metrics used to define accuracy in molecular diagnostics testing.” Although Co-Diagnostics’ stock value has since rebounded — at least for now — in response to the demand for COVID-19 test kits, a New York City law firm on Wednesday encouraged other investors who bought the company’s stock between February 25 and May 15 and suffered losses exceeding $100,000 as the result of the alleged violation of federal securities laws to join the suit.

Gelt Trading’s complaint, embedded below, cites a May 14 report from The Salt Lake Tribune about TestUtah’s refusal to join other labs in the state in an experiment to determine the accuracy of various COVID-19 tests. The report mentions an analysis by BioCentury, a life sciences publication, finding that TestUtah’s tests had “a higher ‘limit of detection’ — that is, they require more of the virus to trigger a positive result — than most other coronavirus tests approved for sale.” The Tribune also cited reports from the Register and Gazette about test result delays as long as 17 days and health officials claiming that close to 10 percent of TestIowa results were “inconclusive.”

The complaint also cites another column of Lenz’s from May 20 about investors bailing on Co-Diagnostics. Quoting Lenz, a call with investors is described as sounding “more like Thanksgiving with drunk uncles — dogs were barking, people were swearing, and someone was moaning.” The complaint goes on to state that both Co-Diagnostics and Nomi Health had revealed little information about Logix Smart tests they were using that, Lenz noted, had been criticized as inaccurate.

Iowa Republicans were quick to criticize Rob Sand’s conclusion that the TestIowa reporting process violated state law, pointing to the contrary legal opinion of the state attorney general’s office — which is also appended to Sand’s report — that it “complies with IDPH’s reporting order and is considered by IDPH to be timely reporting of COVID-19 test results.” Jeff Kaufmann, the chairman of the Iowa GOP and an obsessive critic of Sand who has accused him of politicizing the office as a stepping stone to an eventual campaign for higher office, spun the difference of opinion by claiming that “his own AG says he’s lying.” Both Sand and Attorney General Tom Miller are Democrats.

The TestIowa contract stipulates that Nomi Health is responsible for an additional 3,000 COVID-19 tests per day, a target the startup appeared to fall far short of initially. Although Governor Reynolds has since claimed that number has been met, it’s been virtually impossible for reporters to confirm this because the data presented by the state does not separate TestIowa results from other tests conducted in Iowa.


Gavin Aronsen
Gavin Aronsen is an editor and reporter for and founding member of the Iowa Informer. He previously worked as a city reporter for the Ames Tribune, research assistant to investigative journalist Wayne Barrett at the Village Voice, and in various roles at Mother Jones, where his work contributed to a National Magazine Award nomination for the magazine's digital media coverage of the Occupy Wall Street movement. Email: garonsen [at] iowainformer [dot] com.