Five years of investments in failed business ventures by a group of well-paid executives have left Blind Industries and Services of Maryland in a severe financial crisis.
The not-for-profit organization, which sells sweat shirts and paper pads made by blind Marylanders, has been losing sales, is behind on its payments to suppliers and is in the midst of a mass layoff.
And the remaining employees are quarreling over how the 86-year-old organization got in such a fix.
Some say the troubles were caused by well-meaning, but unsuccessful, attempts by recently departed managers to find new products that blind Marylanders could make and sell profitably.
Others charge the losses are an avoidable and bitter legacy of overpaid managers who had no understanding of blindness. The critics say the crisis could have been avoided if the Maryland attorney general's office had won its 1991 lawsuit to place the organization in receivership.
The suit, which charged that managers were wasting money, was dismissed by Baltimore Circuit Judge Joseph H. H. Kaplan.
There is little disagreement, however, over the current grim financial picture or the ominous long-term outlook.
Blind Industries' finances right now are "tenuous at best," said Fred Puente, chairman of the board and acting president of the Baltimore-based group.
And, he warned, changes in government buying rules threaten to take away the organization's biggest customer in the next several years.
Government agencies, which had been required by law to buy some products from organizations for the handicapped and which have bought about 80 percent of Blind Industries' products, are increasingly shopping by price alone because of tight budgets, he said.
"That's the most frightening aspect," Mr. Puente said, explaining that Blind Industries' policies make its products more costly. Unlike most manufacturers, which have been upgrading production processes to reduce manpower, Blind Industries uses old production methods because they employ more people.
"We cannot compete" with products made on automated factory lines, Mr. Puente said.
"We've got to come up with something we can do," he said.
The immediate concern, however, is finding enough cash to keep the organization's doors open, he said.
Last weekBlind Industries executives said they would be laying TC off more than 40 workers at a Cumberland rag and pillowcase plant, bringing the total number of layoffs since December to about 100.
And Mr. Puente confirmed that the organization, which receives $1.1 million a year from Maryland taxpayers, is surviving only on the forbearance of its creditors.
Bills are overdue
Nearly half of Blind Industries' approximately $1 million of bills is overdue, and one vendor, who is owed about $57,000, has been waiting more than five months for payment, according to organization records.
"The suppliers have been very, very supportive. Without their support, we would not be in business," Mr. Puente said.
One of the group's biggest creditors is the state of Maryland. Blind Industries owes approximately $94,000 in back bills for unemployment benefits, and is likely to see that debt rise by another $60,000 over the next six months as the newly laid-off workers make claims.
The state's Department of Economic and Employment Development has agreed to let Blind Industries take much longer than normal to pay off its bill, according to DEED spokesman Marco Merrick.
Ken Harper, Blind Industries' controller, said that while the organization is struggling to pay its debts, it is "far from being insolvent."
The group has an investment fund -- which it can tap only with the permission of the board of directors -- worth $2.8 million, more than enough to pay off its current $1.6 million credit-line debt as well as its creditors.
Costs are slashed
And the cash crunch will be eased soon because Blind Industries has been slashing its costs, he said.
Besides the more than 80 hourly workers at plants in Cumberland, Salisbury and Baltimore who have lost their jobs since December, the Baltimore headquarters office has cut 16 administrative employees, saving the organization an additional $10,000 a week in salaries, he said.
Staffing at Blind Industries dropped from about 230 employees last year to slightly more than 100 by the end of April, he said.
In addition, the organization is selling some company cars and plans to eliminate prescription benefits for employees, to save another $40,000 a year, he said.
Mr. Harper said he thought the crunch may start easing as soon as next month, and should show definite improvement by the end of the year.
Employees angry
While grateful that steps are finally being taken to save the organizations, many current and former employees say they are angry about the solution.
Blind workers, they charge, are suffering to correct problems caused by mismanagement by sighted managers and the state-appointed board of trustees.
"You can't say they haven't tried" to find new products to replace the declining government demand for rags and pillowcases, said Carlene McKenzie, a Blind Industries employee for the past 15 years who fears she is about to lose her job as a seamstress in the Cumberland plant.
"But, they haven't got one" and wasted a lot of money on duds, she said. "A lot of people are very angry."
Ellsworth "Skip" Sharpe, an engineer who was not reappointed to the board last year, said there was resentment of sighted managers such as former President Richard J. Brueckner, who earned more than $97,000 last year, had the use of an organization-owned car, and, for one year, a paid membership in a golf club.
Not devoted to profit
Mr. Brueckner was dismissed in December, after the board of directors saw that sales, which topped $13.5 million last year, would fall to about $7 million this year.
In his four years leading Blind Industries, Mr. Brueckner, who is not blind, hired more than a dozen other highly paid sighted managers who had no idea how to find new markets for the blind, Mr. Sharpe charged.
"The people making all the money weren't blind people," said Mr. Sharpe, who is blind. The hourly workers, most of whom are blind, earn about $5 an hour, he said.
The high salaries and perks for the managers were inappropriate because the organization "never made a lot of money" and isn't a business devoted to profit. Rather, its mission is supposed to be to try to keep blind people employed, Mr. Sharpe said.
Mr. Sharpe also blames the board, which approved Mr. Brueckner's plans even when they appeared to be too optimistic and of little help to blind people.
For example, he said, Mr. Brueckner had Blind Industries invest in a soda vending system for small offices. But many, if not most, of the vending service jobs would have gone to people who can see because driving was required, Mr. Sharpe said.
The investment failed for other reasons, costing the organization several thousand dollars, he said.
But Mr. Brueckner defended his management, saying "I did the best I could" to find new products for blind workers.
His only fault, he said, was not correctly forecasting the sudden downturn in demand from the military, which buys the bulk of Blind Industries' products.
"We would still be doing fine if we hadn't gotten smacked along the head by the cutbacks," he said.
He said that he hired many salespeople to try to find private-sector markets for the organization's products, but that they were unable to find those buyers in time to make up for the budget cuts.
He's not angry that he's sometimes blamed for the organization's problems. "I am disappointed," he said, adding that he feels that many of his achievements, such as arranging for raises for hourly workers, are overlooked. "We put as much money as possible into the hands of blind employees."
Mr. Puente, who has taken over the reins of the organization while the board searches for a new president, says he has come under fire from employees for waiting until December to change management.
The criticisms of the previous management and the board " are not totally untrue," he acknowledged. "I now look back and see I could have acted months earlier," he said. "But hindsight is 20-20."
Now, though, he added, "Those folks are gone. We have to move on and make the best of what we have."