Case

Blood is big business – Holland & Knight paid over $1 Million for legal services while employing Chairman Yates

In 1 on February 3, 2009 at 12:59 am

Tracking the big business of donated blood in Orlando

Dan Tracy | Sentinel Staff Writer
 
Blood is big business.

It starts with Rebecca Zamrycki, 27, who lives in Orlando and has given a pint every eight weeks for a decade.

It ends with people such as Ed Havill, the 67-year-old Lake County property appraiser who needs blood transfusions to battle his leukemia.

In the middle is Florida's Blood Centers of Orlando, which draws the blood, tests it and sells it for an average of $300 a pint to hospitals and health-care facilities in 21 counties.

For its services, FBC expects to gross $100 million this year, making the nonprofit the fourth-largest independent blood bank in the nation.

Based in a four-story building once owned by the Planet Hollywood restaurant chain, the 66-year-old center employs nearly 1,000. That includes an administrative staff with nine managers paid more than $100,000 and a CEO — Anne Chinoda — whose compensation package tops $500,000 a year.

The 40-member board that oversees FBC is drawn from the region's top employers and community leaders, some of whom also do business with the agency. They have been involved in deals worth more than $2 million annually in recent years.

Such arrangements are common in blood banking, though the practice draws criticism from some nonprofit experts because of the potential for conflicts of interest.

FBC officials say they follow strict ethical standards that ensure those arrangements are aboveboard and financially beneficial to the agency.

Chinoda deferred comments to FBC board chairman Leighton Yates, who said, "We have to make sure it is all done in the open. . . . We feel what we have done is fair to all at the blood bank."

FBC's existence depends on the largesse of people such as Zamrycki. Reputable blood banks don't pay for blood out of a belief that those who sell it are much more likely to have communicable diseases and that the money would give donors a financial incentive to lie about their medical history.

Last year, she and thousands of other donors gave more than 320,000 pints of blood to FBC, which has offices throughout Central Florida and parts of South Florida.

"I may sound a little saccharine when I say this, but donating blood really is giving the gift of life. One donation can save three lives. Knowing this, how could I choose not to donate?" Zamrycki said by e-mail.

FBC technicians put donated blood through an expensive series of tests for diseases such as HIV, West Nile virus, hepatitis and syphilis. It is then split into red cells, platelets and plasma and sold, making FBC the critical link between blood donors and transfusion recipients such as Havill.

He owes his life to his numerous transfusions, including three in one recent 24-hour period, said his wife, Donna. "Ed can tell when his levels are getting low, extreme fatigue and the feeling of being out of breath," she said.

Directors' connections

As a nonprofit, the blood bank does not have to release details of its finances. Instead, FBC files annual disclosure forms called 990s with the IRS. Information in those forms is sometimes inconsistent — and at least a year old before it becomes public. But it's clear from the 990s that FBC does business with companies that employ its directors:

*Holland & Knight, the law firm that employs chairman Yates, has been paid more than $1 million for legal services since 2003, the first year the IRS pushed for such payments to be reported.

* Darden Restaurants, represented on the board by its senior vice president, Bradford Richmond, has sold almost $1.6 million worth of restaurant coupons to FBC in each of the past three years. The $10 gift cards cost FBC $5.50 each and are given to donors as a token of appreciation.

*Orlando-based Eidson Insurance agency has sold nearly $2 million worth of policies to FBC from 2004-06.

*The Orlando Sentinel, WFTV-Channel 9 and Sprint/Embarq, who at the time had executives on the board, also have received business.

Between 2004-06, WFTV was paid more than $367,000 for promotional work; Sprint/Embarq nearly $350,000 for phone services; and the Sentinel more than $35,000, in part for a marketing study. The Sentinel and WFTV no longer have employees on the board.

FBC officials say they don't allow board members to vote on transactions with their companies. And some of the contracts are bid, though Yates wouldn't identify them.

Yates also said that FBC board members' companies offer services at competitive or below-market rates. He would not provide an example.

"It seems unreasonable to exclude them from doing business with us," said Yates, whose firm advises FBC on contract and labor issues.

Holland & Knight, he said, handles only work for which it is qualified. FBC employs different firms for other legal issues, such as defending personal-injury allegations.

Eidson has done the most business with FBC recently, selling nearly $2 million worth of policies to the center from 2004-06, IRS records show.

Now retired from the agency and a trustee emeritus, agency founder Ted Eidson said he started selling insurance to FBC when he went on the board in the 1980s, when it was difficult for FBC to find affordable insurance because of the breakout of HIV/AIDS.

He said his former agency gets the best rates available: "We grind them every year and work them as hard as we can."

A spokesman for WFTV would not comment about its work with FBC. An Embarq representative confirmed the company was paid for phone services but said it's not allowed to give discounts.

Critics take issue

Officials at local nonprofits would not speak on the record about FBC's business practices, saying they did not want to upset the organization or its board. But several authorities outside Florida were critical.

Jeff Trexler, a nonprofit expert and professor of social entrepreneurship at Pace University in New York City, took particular issue with doing business with directors.

"Just because something is legal, it doesn't make it wise. . . . This doesn't pass the smell test. Basically, it stinks to high heaven," Trexler said. Many nonprofits prohibit such dealings because they could constitute a conflict of interest, he said.

By comparison, two blood banks of like size to FBC — one in Milwaukee, the other in St. Petersburg — do business with board members but not nearly as much as FBC does, their most recent 990s show. A third, in Houston, does not do business with board members, according to the 990s.

A spokesman for America's Blood Centers, an industry trade group with 77 members in North America, said the practice is widely accepted by its members.

In an e-mail, spokesman Mac Benton wrote: "As a practical matter, one individual board member can neither sway business their way, nor would it be fair for them to automatically be excluded from doing business with the organization."

Alan Weiss, a Rhode Island-based nonprofit consultant, said the policy could open an organization to charges of favoritism: "One hand feeding the other hand; it's not right," said Weiss, who has served on several nonprofit boards and is president of Summit Consulting Group Inc.

Community support?

Yates said the Darden gift cards are FBC's most popular giveaway, ranking ahead of T-shirts and gas coupons. Such gifts are important because FBC needs to daily attract as many as 1,200 donors.

Zamrycki said she likes the gift cards and saves them to use for a "special" meal at Seasons 52, an upscale Darden restaurant. Other Darden eateries include Red Lobster, Olive Garden and Bahama Breeze.

For Darden, the gift cards provide the chain with a promotional boost in addition to the $1.6 million in direct revenue.

They are a "very effective local marketing strategy," said Melissa Wilson, a principal at Technomic Inc., a Chicago food-research company. She said the coupons drive customers to the company's restaurants without cheapening its brand — because they are earned by giving blood.

Darden spokesman Rich Jeffers said his company is interested more in aiding FBC than in any marketing advantages. He would not say whether Darden takes a charitable contribution on the sale of the discounted gift cards. "We look at it as community support, and it's one of many ways we support the community," he said.

Executive compensation

FBC's board sets policy and votes on purchases of at least $100,000. It leaves day-to-day operations to Chinoda and her staff. Chinoda's compensation went from about $300,000 in 2003, when she took over the top spot, to more than $500,000 in 2007, an increase of almost 67 percent.

Yates said Chinoda, who started in FBC's marketing department, earns her salary. Since she took the helm, FBC's revenues have almost doubled, thanks in part to the acquisition of a failing South Florida blood bank.

"We've done well financially. In the pharma business, lots of people would like to steal Anne Chinoda from us. We believe we have to pay a competitive amount," Yates said.

Chinoda, and the CEOs at similarly sized blood banks in St. Petersburg, Milwaukee and Houston, were paid more on average than the top executives at the largest nonprofits nationwide, according to a 2005 compensation survey.

Guidestar, a reporting service that tracks charities through IRS 990 documents, said the median salary paid by nonprofits with a gross income of at least $50 million was $333,479. Chinoda was paid more than $412,000 in 2005.

Blood banks in Milwaukee and St. Petersburg paid their CEOs even more: $511,000 and $493,000, respectively. Houston paid slightly less: $401,000.

Nine other managers at FBC are paid more than $109,000 a year, based on the most recent IRS records available. That's roughly equivalent to Milwaukee (eight managers paid more than $100,000), St. Petersburg (seven) and Houston (six), IRS records show.

Yates, who has been FBC chairman for 14 years, says critics of the agency are misinformed.

"I love this organization," Yates said. "I believe we are the best in the world at what we do."

Dan Tracy can be reached at dtracy@orlandosentinel.com or 407-420-5444.

 

Posted via email from HKLaw Investigation

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