Not all views are charitable

By Aaron Zitner, Globe Staff, February 3, 1999

WSHINGTON -- Every year, Dr. Edward Scott struggles to collect enough blood to serve the patients and hospitals around Memphis. He never finds enough. The nonprofit blood bank he leads, which provides more than 99 percent of the local supply, is always forced to buy blood from other regions of the country.

So Scott and other officials at Lifeblood/Mid-South Regional Blood Center were surprised three years ago when a big new competitor won the exclusive right to draw blood at the city's largest employer -- Federal Express Corp. -- and began shipping most of the blood out of town.

That fearsome rival was also the nation's most beloved charity, the American Red Cross, led by the popular Elizabeth Hanford Dole.

Now, as Dole considers whether to run for president of the United States, she is using the apple-pie image of the disaster-relief agency, and her record as its top manager, to boost her political fortunes.

But while soothing victims of disasters, critics say, the Red Cross under Dole tarnished its own charitable tradition by starting a business war in what is actually its largest activity: blood banking. Critics say Dole was a leading agent in turning blood from a social service into a fiercely competitive business, to the possible detriment of patients.

Dole's activity in the blood industry, as well as her management of other Red Cross services, would become central if she sought the Republican nomination for president. At 62, she has never held elective office and would be likely to highlight the leadership skills she displayed at the giant charity and as US transportation secretary under President Reagan and labor secretary under President Bush. Her seven-year tenure at the Red Cross ended on Jan. 15.

"There was not an area of the Red Cross that Elizabeth Dole didn't improve -- disaster services, biomedical services, fund-raising," said John William Thomas, former senior vice president for fund-raising at the Red Cross. "The strength of this woman is her ability to identify core problems and then figure out how to solve them, and to lend the weight of her office to intervene to make sure it's successful."

Several critics, however, say Dole brought a political tenor to the charity and to its business activities, hiring consultants who also worked for the 1996 presidential campaign of her husband, Bob Dole, the former Senate majority leader. The Red Cross also took millions in donations from companies that were simultaneously giving to the former Republican senator or seeking his aid in Congress.

Federal Express, for example, gave money to Bob Dole's 1996 campaign at about the time it granted the Red Cross exclusive rights to draw blood from employees at its Memphis headquarters for one year. The company says the two events were unrelated, but the independent blood center in Memphis still complains about Red Cross access to Federal Express workers.

"There's a tremendous blood need here locally that we are struggling to meet, and the Cross is taking blood from here that benefits their national organization, but not our local community," said Scott, the Lifeblood chief executive.

Dole declined requests for an interview, but her aides rejected Scott's charge, saying the changes in the Red Cross blood business have resulted in more blood being collected and improved health safeguards.

With 31,000 employees, 1.3 million volunteers and an annual budget of $2.2 billion, the Red Cross is almost large enough to join the list of Fortune 500 companies. Each year, it offers housing and food to victims of 60,000 disasters. It teaches 12 million people lifesaving and safety skills. It delivers 1.4 million emergency messages between US military personnel and their families.

But more than half of the agency's costs and revenues come from collecting and distributing blood. And when Dole arrived in 1991, the Red Cross blood operations faced serious problems.

For decades, the blood supply has been managed as a series of regional monopolies. Boston, for example, is a Red Cross city. In New York, Kansas City, and many other places, blood is collected and sold by small, independent agencies, most of them nonprofits. The Red Cross supervises about half of the blood supply, and independents control almost all of the rest.

This arrangement started to come under pressure in the 1980s, as AIDS and hepatitis forced blood banks to run expensive tests to make sure blood was safe. At the same time, blood agencies were squeezed by hospitals that wanted to cut costs and pay lower prices.

The Red Cross had an additional challenge: poor management.

In the mid-1980s, the Red Cross released blood that had not been properly tested, alarming Congress and the Food and Drug Administration. By 1993, two years after Dole's arrival, the FDA became so worried that it went to court and forced the Red Cross to sign a consent decree that mandates closer federal supervision of its blood banks.

Improving blood operations became one of Dole's top priorities. Today, many people say she succeeded. The Red Cross has spent $287 million to consolidate a hodgepodge of computer systems into one, and to streamline 53 blood-testing centers into eight. It is better able to track blood from donor to testing lab to patient.

"I would give Elizabeth Dole very high marks for improving the blood operations," said Representative John Dingell, a Michigan Democrat who held hearings on the Red Cross blood problems in the early 1990s. The Red Cross says it recently fulfilled the last requirements of the consent decree and expects to be free of it soon.

But Dole also created a large group of critics among the independent blood centers. To recoup the millions it spent on improvements, they say, the Red Cross has begun "poaching" hospital customers and blood donors from the independent blood centers -- donors at places like Federal Express.

In Indiana, patients from across the state often find themselves at the large cluster of hospitals in Indianapolis, which is served by an independent blood bank. When patients came from around Fort Wayne or Louisville, Ky., the Red Cross blood centers in those areas used to send blood to Indianapolis to make sure the hospitals had enough.

No longer. "I'm pretty much shut off from Red Cross blood," said Byron Buhner, chief of the Central Indiana Regional Blood Center in Indianapolis. He now buys more blood from other independent centers and, in a retaliatory move, has opened blood-donation centers in several Red Cross territories.

In Kansas City, Red Cross workers for years helped gather donors for the independent blood bank. But now they work only for the new Red Cross blood center, said Bill Coenen, chief operating officer of the independent Community Blood Center of Greater Kansas City.

While the independent centers say competition will turn off donors, confusing them with multiple appeals for blood, the Red Cross says competition prompts more people to give blood. It also says that it was hospitals, not the Red Cross, that changed the blood industry into a competitive business by forming large chains and looking nationwide for cheap blood.

"Hospitals have gone out and asked for bids to provide blood, and the Red Cross responds to them," said Red Cross spokesman Michael Fulwider. "So do the independent blood centers."

But Jim MacPherson, director of America's Blood Centers, the independents' trade group, says the Red Cross has weakened all blood banks by forcing them to open new offices and take on new costs as they compete with one another. The Red Cross biomedical division lost money in four of the last five years, for a total loss in that period of $191 million, and that division is carrying $295 million in debt. The agency says the losses and much of the debt come from the cost of revamping its blood division, ensuring safety, and of developing new products.

"The Red Cross certainly hasn't improved anything," MacPherson said. "And we've lost the collegiality that used to make us strong and cooperative, to help make blood safer and more available."

Blood banking was only one of Dole's challenges. With the United Way cutting back contributions, Dole led a fund-raising campaign that has steadied Red Cross finances, the agency says. She donated thousands of dollars in her own speaking fees to the Red Cross and did not accept a salary, set at $200,000, in her first year as president.

Dole also overhauled the agency's disaster-relief efforts and boosted the number of disaster workers. During her tenure, the Red Cross created two telephone call centers to improve the process of passing emergency messages between military personnel and their families, one of its most valued services. A 1996 survey by KPMG Peat Marwick, an independent auditor commissioned by the Red Cross, was sharply critical of the agency's accounting and planning procedures. But the Red Cross says it addressed many of those criticisms, and that others were based on wrong information.

In managing the Red Cross, Dole drew on her political contacts and aides who worked with her in government. The Red Cross, for example, bought the services of public policy consultant Mari Maseng Will, who held high positions in Bob Dole's various presidential campaigns and is the wife of conservative columnist George Will.

The Red Cross also bought consulting services from two other members of the Bob Dole campaign: lawyer Robert Davis and Melinda Farris, a consultant known for coaching the wives of Republican candidates on their public appearance.

Some of those consultants joined what became known as Elizabeth Dole's "special team." In addition to Will, the team included Jennifer Dorn and John Heubusch, who had worked for Dole when she was a Cabinet secretary and took senior jobs at the Red Cross.

Some Red Cross volunteers said Dole relied too heavily on these advisers at the expense of longtime volunteers and staff. Commonly, Will or Dorn would screen requests from people who wanted to see Dole, and Dole would hold only meetings "that were fully scripted in advance," said Manning Warren III, a Louisville, Ky., law professor and former member of the charity's international services committee.

"When Dole took over, the Red Cross was an incredibly intense volunteer organization with new ideas bubbling forth constantly," said Warren, who quit two senior volunteer positions in 1994 in a dispute with Dole. "With Elizabeth Dole, the vitality seemed to seep out. I thought it was due to the political risks she carried as the wife of a candidate, or being a potential candidate herself."

Now, some former Red Cross staff members and consultants are helping Dole assess her chances for a presidential campaign. They include Stewart McLaurin, Dole's chief of staff at the Red Cross, and Kathryn Wilson, her scheduler. And several media reports have said that Heubusch, Davis, and Mari Maseng Will are also now political advisers to Dole.

Dole's prolific fund-raising for the Red Cross -- she raised $3.4 billion during her time at the charity -- drew from companies that have long had ties to her husband. For example, Bob Dole was a stalwart defender of tax breaks for ethanol, saving millions of dollars for the Archer Daniels Midland Co. and its former chairman, Dwayne O. Andreas. ADM and the Andreas family have given thousands of dollars to Bob Dole's campaigns and foundations.

ADM has also been generous to the Red Cross. One year after Elizabeth Dole became president, Andreas's wife, Inez, joined the Red Cross board, and ADM donated at least $1 million to the charity.

Similarly, Federal Express gave $5,000 to Bob Dole's 1996 presidential campaign at about the same time it formed a "philanthropic alliance" with the Red Cross to ship disaster supplies for free and give the charity the exclusive right for one year to hold blood drives among its Memphis employees.

There is nothing illegal in the donations, and many US companies want to affiliate themselves with the Red Cross, one of the world's best-known charities. "As a good corporate citizen, Federal Express wants to have a good relation with the American Red Cross, and that will not change regardless of who is its president," said Patrick Melancon, manager of community relations for Federal Express.

But others say Elizabeth Dole risked turning the Red Cross into an avenue for corporations to influence her husband.

"If you want to curry favor with a presidential candidate or a member of Congress, and his wife is in a position to receive funds, corporations will give that way, too," said Ellen Miller of Public Campaign, a watchdog group. "There is no question that these corporations were attempting to curry more favor with the Dole family."

Other donors to both Bob Dole and his wife's charity include American Financial Corp., a company that Bob Dole helped during a 1995 trade dispute, and the Gallo Foundation. Bob Dole aided the Gallo winery family in a 1986 tax matter and a 1992 dispute with the Treasury Department.

"I know that Elizabeth has always bent over backwards to maintain the nonpartisan aspect of the Red Cross," said Mari Maseng Will. "She considered it a sacred trust because of the idea that donors must feel that their money is spent only for humanitarian purposes."