Congress is turning up the heat on nonprofit corporations like ORC Industries of La Crosse that employ workers with disabilities and pay their CEOs "excessive" salaries.
A report by Senate Health Committee investigators released Thursday said the government is wasting billions of dollars on ineffective programs to help employ people with disabilities.
The committee singled out
five nonprofits, including La Crosse-based ORC, which paid its CEO, Barbara Barnard, $682,000 in 2003, compared with a national average
of $126,701 for other large sheltered employment programs.
At a hearing Thursday, Chairman Mike Enzi, R-Wyo., said the investigators' findings "remind me of the
corporate greed and accountability issues that led Congress to pass
the Sarbanes-Oxley Act, and I fear this may only represent the tip of the iceberg."
"These programs are performing dismally, and Congress must improve them," Enzi said. "When we know there are currently about 15 million unemployed persons with disabilities between the ages of 16 and 64, this kind of waste under the nose of Congress and several administrations is even more tragic."
Rob Geist, a Washington-based attorney and spokesman for ORC Industries who attended the hearing, declined comment on the criticisms of Barnard's salary.
"ORC has always been very proud of the products and services it provides to the nation and the hard work of its employees that has helped expand employment opportunities for disabled workers in Wisconsin and Texas," Geist said.
The committee's investigation began after backers of the programs complained to lawmakers.
Enzi and the committee's ranking Democrat, Sen. Edward M. Kennedy of Massachusetts, have promised legislation to address problems with the Randolph-Sheppard program for the blind and the Javits-Wagner-O'Day (JWOD) program for people with physical or intellectual disabilities.
They're considering combining the two programs into one to provide more oversight, creating incentives and opportunities for integrated, competitive employment, and requiring accountability, based on outcomes.
In the JWOD program, federal agencies buy products manufactured primarily by disabled people who work for more than 600 participating nonprofit organizations. Its sales to the federal government totaled about $2 billion last year.
It provides jobs to more than 45,000 people, and it's the largest single source of employment for people who are blind or have other severe disabilities. The workers make mouse pads, aprons, ink pens and thousands of other products.
In 2004, ORC had more than $60 million in gross sales, much of it in apparel for the military produced at plants employing more than 750 workers in La Crosse and Brownsville, Texas.
The report faults ORC for Barnard's $682,000 compensation and for leasing office space from her for $47,000 a year in 2003.
In 2002, Barnard received $625,000 in salary, including a $250,000 one-time payment for signing a non-compete agreement. The same year, ORC's board established a deferred compensation fund worth nearly $1.1 million for Barnard because she wasn't covered by any retirement plan during the previous decade.
In 2004, Barnard earned $382,692 in pay and $162,837 in fringe benefits.
The report said nonprofit executives "can exploit (JWOD) contracts for financial gain. There are no financial incentives to mainstream persons with disabilities. There are numerous examples of excessive executive compensation, lavish perquisites, conflicts of interest and self-dealing."
In addition to ORC, the committee cited:
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-National Center for Employment of the Disabled in El Paso, Texas, which paid its CEO no salary, but paid his management company $4.6 million. NCED also loaned $1.6 million to the CEO's consulting company, pledged assets in exchange for discounted CEO Lear jet travel, entered into stock swaps with the CEO, and paid $2 million to a construction company controlled by a NCED director. NCED makes chemical warfare suits for the military.
-The Chimes, a Baltimore-based agency that paid its CEO $715,000 and had numerous vehicle leases with affiliated companies. Chimes workers clean federal office buildings.
-Pride Industries of California, which paid its CEO $594,000 in salary and benefits. Pride workers clean commercial and government office buildings, and work in manufacturing and mailing services.
-Social Vocational Services of California, which paid its CEO $369,000, paid its chief financial officer (the CEO's wife) $274,000 per year, paid $1.3 million to lease vans from an entity controlled by the CEO and CFO, and paid $98,000 to lease office space from an entity under their control. The agency provides services to more than 2,500 clients with developmental disabilities.
Kennedy said some of the compensation is over the top.
"It is unconscionable that private companies and employers exploit federal laws to make millions off individuals with disabilities," he said. "It's also unconscionable that federal agencies responsible for implementing the laws designed to provide job opportunities aren't stopping this abuse."
Enzi said he was "shocked and appalled" by some of the salaries. He said nonprofits are supposed to take their profits and put them back into improving the jobs programs.
"Instead, they're lining the pockets of their executive directors and CEOs," he said.
The report faults JWOD programs in general for failing to move disabled workers into the mainstream.
"Supervisors want to keep their best workers, not mainstream them," the report said. Productive workers, who could probably work in "normal" jobs, are disproportionately valuable in a JWOD setting because they compensate for their less-productive co-workers.
"To satisfy Javits-Wagner-O'Day customers' often-demanding specifications, it makes sense for supervisors to keep their best workers, not help them move up and out," the report said.
Geist told the Tribune he did not have specific data showing how well ORC places workers in mainstream jobs, but said it "does a very good job of trying to encourage workers to move up in the organization" and to move out into the community.
Robert Lawhead, executive director of a job placement program in Boulder, Colo., testified at the hearing he helps place about 200 disabled workers annually into private sector jobs.
"People don't want to be segregated because of a particular individual characteristic," Lawhead said. "They want to be a part of the community."
Each year, only about 2,500 workers in the JWOD program, or about 6 percent, are "outplaced" to jobs where, for example, they might work as greeters at Wal-Mart, or grocery baggers at Safeway.
"Those sheltered workshops don't help people learn the skills they need to move out into the community," said Lawhead.
The federal government designates two nonprofits to implement the jobs program. They in essence broker agreements in which federal agencies agree to buy goods and services from the nonprofits.
Tony Young, senior policy planner for one of those nonprofits, NISH - Creating Employment Opportunities for People with Severe Disabilities, said it's important to understand that people in the program have not been able to get jobs in the private sector.
"This program is often the only way these folks with very significant disabilities can get into the workforce at all," he said, adding that it focuses on trying to give workers the skills and confidence needed to work on their own.
"One of the major factors there is that private employers are not willing to hire people with severe disabilities into their workforce," he said.
Young said the government agency that oversees the jobs program is preparing to issue proposed rules on executive compensation. He cited a letter to nonprofits, dated Aug. 15, that said the agency "must ensure that we are both maintaining and strengthening our accountability and transparency to Congress and to the American taxpayers."
The Associated Press contributed to this report. Reid Magney can be reached at (608) 791-8211 or email@example.com.