By Chuck Strouse
By Scott Fishman
By Terrence McCoy
By Ryan Yousefi
By Ciara LaVelle, Kat Bein, Carolina Del Busto, and Liz Tracy
By Pepe Billete
By Ryan Yousefi
By Kyle Swenson
Michael Piquion, a shy thirteen-year-old with a soft smile and eyes that dart timidly from strangers, sits in a Jackson Memorial Hospital room with walls decorated in pastels, polka dots, and Rugrats characters. With his left hand he grips a crimson cord connected to a plastic bag overhead that contains a pint of the blood that keeps him alive.
Michael isn't the kind of kid you'd imagine God would pick to punish. But he has been selected in some horrible genetic lottery to suffer from sickle cell anemia, a disease that has stolen his childhood and may kill him before he can have kids of his own. He doesn't dwell on it, though he wishes he could at least play in gym class or ride bikes after school. "I don't know why I have it," he says. "I know there's a lot of people with sickle cell, so I know it's not just me."
Every three weeks doctors replace a third of his blood to remove some of the crescent-shaped cells that were willed to him by his parents, who don't have the disease but carry the recessive gene. The sickle cells, which may have developed eons ago in humans as a response to malaria, can clog like a traffic jam when Michael is exercising. Such backups can kill him instantly or cause a stroke that would leave him a vegetable. He's nearly died twice already, but ambulances rushed him from his home in North Miami, veins in his head bulging like swollen river deltas and his face turning blue.
Michael's mom, Daniella, remembers watching him writhe in pain the first time. He was just three months old. "It was so sad to see," she says as she curls up on a recliner waiting for the transfusion to finish. "But you can touch him and see him. He's the same as other boys without this thing."
It's important to think of Michael when you learn about how the blood got to his hospital room. It's easy to forget about the people whose lives depend on the open veins of others when you delve into the nasty business of blood-banking in South Florida.
South Florida Blood Banks, the West Palm Beach-based nonprofit charity that supplied the blood to Jackson Memorial, has become a significant force in the regional blood trade recently, at least partially by employing corporate thievery, unseemly tactics to secure donors, and questionable accounting practices that seem more fit for Wall Street than Mercy Street.
Thanks to the population boom here and the ever-growing health care industry, the blood-supply business has doubled in South Florida in just the last three years. The blood banks now pull in a healthy profit and can afford to pay their top executives salaries in excess of a quarter-million dollars. If it hasn't already, South Florida Blood Banks is poised to become the leader in the blood trade from Miami to Port St. Lucie. The West Palm firm has successfully undercut its main competitor, Lauderhill-based Community Blood Centers of South Florida.
Though once allies, the two companies are preparing to make aggressive forays into each others' territories by opening new, multimillion-dollar collection and processing centers. The moves will escalate the tension between the two, which has already resulted in more than a half-dozen lawsuits and constant bickering over contracts to draw blood during the past decade.
While the U.S. Food and Drug Administration monitors the safety of blood banks, no government agency is charged specifically with overseeing the ways they secure deals to supply hospitals and recruit donors.
Dr. Charles Rouault, president of Community Blood Centers, says competition is inevitable, even among charities. "It's money. There's a great deal of it in blood-banking," he comments candidly. "Whenever money changes hands, there's going to be competition, whether it's prostitution, the business world, or charities."
On a recent Friday afternoon at Community Blood Centers, Rouault sipped a Coke from a crooked straw as his blood seeped from a needle in his arm, through a clear tube, and into a plastic bag hung below him. Wearing scuffed loafers and an oxford shirt with a rip below the armpit, the bespectacled and bald physician at first doesn't stand out among the donors in the blood bank's main building in Lauderhill. But when you look closer, you see scar tissue in the crook of his left arm that has built up from years of donating every two months. Like most repeat donors, he can no longer feel the needle entering his body.
When Rouault finishes and the needle is removed, technicians will drop the bag containing his blood into a device the size of a washing machine that will spin it at 2200 revolutions a minute for twenty minutes. Each part of the blood -- plasma, red blood cells, and platelets -- has a different mass, so the gravitational force will separate them into layers. Technicians will then squeeze the three components of Rouault's blood into separate containers. After the samples are tested for AIDS and other blood-borne diseases, bags full of the separate parts will be sent, likely within 72 hours, to hospitals that have requested new supplies. Pints fetch as much as $200.
The price per pint not only pays for the expensive separating and testing processes, but also yields the blood banks an impressive profit. Last year South Florida Blood Banks made a profit of $1.36 million, and Community Blood Centers reported more than $3 million in profits at year's end. Charities can't legally turn a profit, so blood-bank officials say the extra cash will be used in the construction of new processing plants, the purchase of new bloodmobiles, and staff salaries.
The profits have also allowed the blood banks to give top executives handsome raises. John Flynn, who made $124,000 in 1996 as president and CEO of South Florida Blood Banks, now earns more than double that: $279,000 per year. Rouault's salary at Community Blood Centers jumped 30 percent from $215,000 in 1996 to $280,000 this year.
Profits have also allowed South Florida Blood Banks to pay consulting fees and salaries to its volunteer board of directors totaling at least $312,000. A decade ago board president Douglas Johansen received $36,000 for also serving as a consultant, and the blood bank paid Admiralty Bank, which Johansen founded, $121,000 to lease computers. Similarly around that time, John Flynn paid his brother Howard $30,000 to develop a computer program to help the blood bank conform to government regulations, even though the firm also had a staff computer technician making $118,000 a year.
South Florida Blood Banks board members say they're no longer being paid for their services. The blood bank in 1993 announced that it had passed rules forbidding such payments. But Rouault and others at Community Blood Centers claim its rival still pays its board -- while Community has never compensated its directors for their time. Curt Lyman, a financial consultant who joined the South Florida Blood Banks board a year ago, insists he and others on the board are not paid. "This board of directors is not receiving any compensation for the job that it does," Lyman says. "We do this to serve the community."
One member of the South Florida Blood Banks board, Laura South, is also listed in state records as a board member of a for-profit corporation called South Florida Blood Banks Services, Inc. Speaking from the office where she works as executive director of Moroso Motorsports Park in West Palm Beach, South said in October that she wasn't aware of the listing. Obviously surprised by the fact, South said she would check into it. But in the ensuing weeks, she did not return several phone calls from New Times.
South Florida Blood Banks has one board that oversees its main corporation and another for its foundation, or fundraising arm. Last year, two members of those boards -- Philip Arvidson and Maria Ornelas -- also served on the board of the Pheonix Foundation for Children. Sometime last year they convinced their colleagues at the blood bank to donate $50,000 to that charity, whose former top executive, Tom Abrams, is now serving a 25-year federal prison sentence for conducting a Ponzi scheme to scam at least $19 million in charity donations and investments. Ornelas couldn't be reached for comment and Arvidson, a former PepsiCo executive, didn't return phone calls. After the FBI raided the Pheonix offices in West Palm Beach in October of last year, Arvidson told the Palm Beach Post: "I know the [Pheonix] board is being run right, and everything we collect is going back to the kids."
South Florida Blood Banks has also channeled at least $2.3 million into private companies associated with John Flynn, according to state records. One of the firms, the Association of Independent Blood Centers, works as a purchasing agent for a group of blood banks. Flynn serves as the CEO of that company, which contributes one-fifth of his $279,000 salary. Another company operating as a for-profit corporation serves as a landlord for property owned by South Florida Blood Banks, board member Lyman said, adding that he couldn't recall that company's name. But audits of South Florida Blood Banks, which are supposed to keep track of the charity's money, don't document the use of cash paid to the for-profit corporations. Apparently not even members of the South Florida Blood Banks board know what happens to the money paid to these corporations. "I was under the impression that those companies were part of our audit," said Lyman.
Lyman's comments came during an October meeting with New Times.South Florida Blood Banks' initial response to questions, however, was an October 14 e-mail from spokeswoman Kristina Krueger that said the blood bank had "decided to not provide interviews." After New Timesbegan contacting board members and employees independently, Krueger wrote again October 22 that she was "concerned and disappointed by the questions you are raising about South Florida Blood Banks." She agreed to meet to discuss the questions along with board member Lyman and Rachele Scholes, a media-relations specialist with Newz2use of West Palm Beach. The three provided the blood bank's official response.
CEO John Flynn does not respond to interview requests from the press. Lyman says Flynn is too busy running the blood bank. Instead his only words printed in local newspapers in recent years come from a lawsuit filed this past September by former employees accusing him of discrimination. "Forget all this nonprofit stuff," he said at a meeting, according to court papers. "Show me the blood and I'll show you the money."
Blood transfusions got off to a rather bad start. The first recorded one killed Pope Innocent VIII the same year Columbus stumbled around the Caribbean for the first time. An Oxford physician successfully transferred blood between dogs in 1665, and a Philadelphia doctor made the first person-to-person blood exchange nearly a century later. But it wasn't until the Forties and Fifties that blood-banking became popular, as donors lined up to help the war effort. The American Red Cross became the leader of blood-banking in major cities, but hospitals and small charities performed the task in still-developing areas like South Florida. In most states, regional leaders developed, making the competitive nature of the business in South Florida unique. Only the competition in the Tampa-St. Petersburg area could compare, with three blood banks battling for four decades; but that rivalry ended six years ago when the bay-area charities merged.
By the Sixties, much of the blood supplied to South Florida hospitals came from charities that paid donors. A large portion of it was given by vagrants and tramps infected with hepatitis and other blood-related diseases. Blood was so tainted with viruses and ailments that blood-borne diseases complicated surgery in the area. Miami's John Elliot Blood Bank, the last of these pay-for-donation organizations, closed in 1980, allowing three charitable organizations -- South Florida Blood Banks, Community Blood Centers, and the American Red Cross South Florida Blood Services -- to take over the supply. Soon Rouault realized the Red Cross, with its national name recognition, would likely move into his turf in Broward County. So Rouault brokered a deal in 1982 with his rival, Flynn, to cooperate in fighting the invasion. Flynn and Rouault formed the Gulfstream Regional Blood Program, and with it came the unwritten agreement that Community and South Florida Blood Banks (at that time known as the Palm Beach Blood Bank) would stay within their respective counties.
During those years, the two blood banks helped each other when one ran low on blood. To keep prices down, they also ordered supplies in bulk together. The deal lasted eight years until, Rouault explains, Flynn called him unexpectedly one day and said he was pulling out. "He wanted a divorce," Rouault says. "That's all I know. He never explained why."
Unconstrained by the agreement, Community Blood Centers began creeping into Palm Beach County. It used the name Palm Beach Community Blood Centers when staging blood drives as a way to appear local. South Florida Blood Banks board member Johansen wrote a letter to Community shortly afterward alleging that the move would "destabilize" the blood-supply business. South Florida Blood Banks filed suit over the name in 1992, but agreed to drop the case three years later, when the West Palm firm apparently came up with its own plans to cross enemy lines by sending bloodmobiles into Broward and Miami-Dade. Then Flynn took a page from his competition's playbook, changing his organization's name from Palm Beach Blood Bank to South Florida Blood Banks.
With its West Palm competitor moving south, Community also needed to expand, so in 1998 it paid the Red Cross two million dollars to take over operations that were still largely confined to Miami. With the deal came access to Red Cross testing facilities in Atlanta, which Community still uses, and a donor list that included 100,000 names. That list became the subject of courtroom debate; former Red Cross employees who were hired by South Florida Blood Banks provided their new employer with a copy. After Community Blood Centers sued South Florida Blood Banks in federal court, U.S. District Judge James Lawrence King ordered the West Palm company to stop using the donor list. King also forbade South Florida Blood Banks from posing as the Red Cross in an effort to steal Community's clients.
In July 1999, not long after South Florida Blood Banks began expanding, the FDA found a serious flaw in the firm's computer system. During a routine inspection, the agency discovered the program that lists donors who have previously tested positive for blood-borne diseases was not being properly maintained; at least six problem blood contributors had not been excluded. One man, whose exam had shown hepatitis in February 1998, was allowed to give blood three more times. That blood went into general circulation.
South Florida Blood Banks ordered a recall of its blood and claimed publicly that the donor in question later tested negative for hepatitis. Blood bank officials say the problem was fixed shortly after the FDA issued a stern warning that threatened sanctions. Community Blood Centers officials claim the episode resulted from cost-cutting and an attempt to undercut their blood prices. Lyman, speaking for South Florida Blood Banks, declined to discuss specifics of the FDA's warning.
South Florida Blood Banks struck a particularly harsh blow to Community in 1999 by winning the contract to supply Jackson Memorial Hospital, the area's largest blood user. Jackson needs 30,000 pints a year, the equivalent of the blood flowing through 2700 people. Lyman claims the Jackson contract will help his company surpass the average 140,000 pints a year sold by Community Blood Centers.
Indeed the West Palm company's recent expansion has come so quickly that it has run out of blood during holiday seasons. In 1999, after the Jackson contract was signed, it was forced to pay blood banks elsewhere in the country $90 per pint to stock its shelves. And a June 7, 2000, letter from Flynn to his employees told them to warn area hospitals that supplies were so low that elective surgeries should be delayed.
The problems haven't slowed South Florida Blood Banks' expansion efforts. The West Palm firm claims it has taken more than 50 percent of the Broward market and 45 percent of the Miami-Dade market. Community Blood Centers officials say those numbers are exaggerated and claim South Florida Blood Banks managed to capture a smaller fraction of the market by offering blood as low as $60 a pint.
These days it isn't clear who's number one. Four years ago Community Blood Centers collected 20,000 more pints per year than it averages now. But Rouault claims his firm is still solidly on top, supplying blood to 43 hospitals while its competitor delivers to only 17. South Florida Blood Banks, meanwhile, claims it supplies 29 hospitals, but declines to provide details on how many pints of blood it collects annually.
To get more blood, South Florida Blood Banks last year set its sights on the Miami-Dade Public Schools, which have traditionally been the region's largest blood source. Community Blood Centers had held exclusive rights to draw blood there since it bought out the Red Cross four years ago; during that period it collected an average of 14,000 pints per year, worth about $2.8 million when sold to hospitals.
To win the schools contract, South Florida Blood Banks hired a trio of Miami's most accomplished and expensive lobbyists: former Miami-Dade County Manager Sergio Pereira, former Miami Herald reporter Dusty Melton, and influential lawyer George Knox. (Melton won't discuss how much the three were paid or exactly what they did to lobby the school board.)
To begin negotiations, South Florida Blood Banks promised the school board more scholarship money for donations than the $32,000 yearly its competitor had given. When the school board shot down that idea, the West Palm company went to court. This past August, Tallahassee administrative Judge Claude B. Arrington ruled the district had used a "tainted" process to select Community Blood Centers. In response board members gave the West Palm firm access to fifteen high schools; Community was granted approval to recruit donors at twenty others. As part of the new deal, the blood banks will pay the district $20 per pint for scholarships, which will cost each of them nearly $300,000 per year.
When recruiting students for drives, school officials and blood bank workers don't mention the competition between the companies, nor the cash involved. "No, it's not about the money and we don't discuss that," says Diana Rizikow Venturino, who's in charge of the blood-donation program for the school district. "It's about teaching community service."
David Louis, a blood-drive recruiter for South Florida Blood Banks, was standing in a deli line at a Winn-Dixie on a lunch break this past January when he had an epiphany. In his beefy hands, which match his wide frame, he held a fifteen-page report he had stayed up the prior night compiling. It included graphs and charts -- it was a Jerry Maguire-style document, the kind that's supposed to change things that have been wrong for a long time.
The document declared that South Florida Blood Banks ignores minority donors, labeling them less likely to have acceptable blood because they more frequently have diseases or low iron. Supervisors decline to hold blood drives in minority neighborhoods, Louis claimed, and refuse to provide Haitian interpreters. The report outlined ways for the blood bank to target African-American and Haitian communities and boasted of the blood that could be gained by this often ignored, sixteen-percent chunk of the South Florida population.
Before compiling the analysis, Louis, son of a Haitian father and Bahamian mother, contends he had proposed the ideas to his supervisor, Sharon Briggs, who had ignored them. So on the spur of the moment that day in January, he says he grabbed his company-issued two-way radio and called the firm's head honcho, John Flynn. "I was told he had an open-door policy, so I figured, why not?" Louis recalls. "The first thing he asked me was if I knew what the chain of command was." Flynn quickly brushed him off by telling him to hand over the report to Briggs.
Louis and his old friend and colleague Duncan Anches say the report, and the corporate-etiquette blunder, were not forgotten. According to the pair: At the next meeting of blood recruiters in March, Flynn showed up. He'd never been to such a gathering before. Soon after arriving, Flynn began discounting the ideas outlined in Louis's report. The CEO said collecting blood from minorities wasn't "cost effective." The two recall Flynn saying, "This is a corporation, and the bottom line is we are here to make money." Not long after the meeting, the two say managers told them to sign a contract that forbade them from doing the same kind of work for a competitor. They refused and were sacked. They have since taken jobs at Community Blood Centers.
South Florida Blood Banks board member Curt Lyman says it wouldn't make business sense to disregard potential donors. He contends the blood bank initiated an advertising campaign two years ago to attract more minority donors. But the firm declined a New Times request to inspect documents, which Lyman said likely exist, urging employees to target minority donors.
Louis and Anches also claim they were passed over for promotions because they are black and say South Florida Blood Banks has few, if any, minorities in positions of power. Blood bank officials deny that accusation. At the October meeting with New Timesthey said they would produce a list of positions filled by minority employees. But their e-mailed response November 1 stated only: "We have an equally wide variety of minority managers from the senior management level to line supervisors."
In the discrimination lawsuit filed by Louis and Anches this past September, they claim South Florida Blood Banks deliberately scams donors by telling them their donations will help poor children overseas. The West Palm company launched the Children's World Blood Bank in March of this year with the promise of helping 10,000 children each year in poor countries. Flynn kicked off the effort with a $2500-a-plate dinner at the Breakers in Palm Beach. Attendees included Anglican Archbishop Desmond Tutu of South Africa and former Costa Rican President Oscar Arias. Mikhail Gorbachev headlined a second event this month, with tickets at $350 a pop. Despite the hype, no blood has been sent out of the country, and South Florida Blood Banks admits it isn't sure when it will begin. Yet promotional material notes the blood bank has agreed "to donate ten units of blood monthly to designated hospitals in countries where there is a critical need for safe blood."
South Florida Blood Banks officials say Louis and Anches are merely disgruntled former employees. The firm does require its workers to sign noncompete waivers, board member Lyman concedes, but that's only a response to Community Blood Centers' "raiding" of its staff. And Louis and Anches, he says, gain by making the claims in the lawsuit because hurting their former employer can only help their output at their new jobs. "All I'll say," he adds, "is consider the source."
Today competition between Community Blood Centers and South Florida Blood Banks has become so ferocious that the groups accuse each other of weaseling in on drives. Both say their competitor's mobile units sometimes show up hours or days early at blood-drive sites to steal potential donors (and donors can only give once every two months). South Florida Blood Banks declined to give examples of this, but Community employees produced a list of about a dozen cases. New Times, however, was unable to verify claims from either side.
The dispute has even dissuaded some people from giving blood, says Mayte McConnell, a supervisor at Memorial Blood Bank, the third-largest in South Florida. Memorial collects about 24,000 units a year, a fraction of the blood garnered by the big two, and ships it mainly to Joe DiMaggio Children's Hospital in Hollywood. "The Publixes and car dealers are sick of us calling them and bugging them," McConnell says. "[South Florida Blood Banks and Community Blood Centers] have given them a bad impression of what blood banking is like. They're both at it for the money ... and the competition is just hurting them."