The Gulf Coast hurricanes have raised new questions about the integrity and competence of the American Red Cross to respond to national emergencies. In this July 1996 report from The Nation archive (originally headlined "Blood on the Campaign Trail"), Linda Heller raised early alarms.

The Consent Decree

In spite of these problems, by 1993 the Red Cross's biomedical division had begun to make some of the changes called for in the transformation program. Although the much-heralded idea of shutting down blood centers had ultimately been abandoned, the organization had begun to consolidate some of the testing laboratories, to upgrade its computer system and to provide additional training for the staff at the many different blood banks. But the F.D.A. still wasn't satisfied.

"We continued to find extreme unevenness in the performance of the regional Red Cross blood banks, and the organization wasn't taking advantage of its best regions and using them to set an example for the others," says Jane Henney, a former F.D.A. regulator who today is vice president of health sciences at the University of New Mexico. "The informal arrangement we had had with the Red Cross clearly wasn't enough to get them to take matters more seriously. Ultimately, we had no choice but to take them to court."

At 6:30 on a spring night in 1993, a fax machine in the corporate counsel's office of the Red Cross began receiving a rather lengthy document. The thirty-two-page consent decree stated that the Food and Drug Administration had just filed suit against the American Red Cross in Washington district court accusing the organization of broad regulatory violations in its blood centers. The document set timetables for a far-reaching overhaul of the blood centers, and it said that criminal charges would be filed against Red Cross executives if the organization did not make those changes in the allotted time. Heading the list of those whom the F.D.A. held legally responsible was Elizabeth Dole.

According to a former vice president of the Red Cross, Mrs. Dole quickly called Representative Dingell and Secretary of Health and Human Services Donna Shalala to reassure them that the blood supply was safe. Meanwhile, Karen Lipton, the former Red Cross general counsel, along with Kyle and other officials, negotiated an alternative version of the consent decree with the F.D.A.--one that omitted Dole as a defendant and didn't hold her senior staff legally responsible for failing to meet the terms of the agreement. But the decree still imposed--and continues to impose--tremendous reporting and training requirements on the Red Cross. It stipulates that all the different regions, and even the thousands of Red Cross bloodmobiles, have to operate under a single set of standard operating procedures. It also charges the Red Cross for the costs of all subsequent F.D.A. inspections that the regulatory agency conducts to evaluate compliance with the decree.

"The F.D.A. was pushing us so hard at that point, we actually talked about getting out of the blood business altogether," recalls Lipton, who is now the C.E.O. of the American Association of Blood Banks.

According to a well-placed source privy to the negotiations, "Elizabeth became extremely concerned to the point of paranoia about our failing to meet the conditions of the decree--and especially how that would look for her politically."

Because of that concern, Dole asked a member of her special team, Michael Goldfarb, and the senior vice president of the Red Cross's national operations group, retired Gen. William Reno, to begin an investigation of the biomedical services division, even though that division had just spent thousands of dollars on an internal audit that found no safety problems in the Red Cross blood supply.

"Elizabeth asked her own team to go behind the scenes to find out where the money was being spent, and why certain projects weren't completed," says Braley. She didn't tell Fred Kyle about her decision until the review was about to begin.

"Kyle and his staff had no choice but to resign," Braley adds. "The review came as a direct slap in the face. Going behind people's backs to find out what they were doing totally demoralized the troops." With more than 14,000 employees and several million volunteers in the biomedical services division, the director's resignation also created chaos in the chapters.

"Between the consent decree, all of the changes we were being asked to make and all of the turmoil in national headquarters, morale within the Red Cross reached the point of crisis," recalls blood services regional officer Tony Dombroski. "All around the country, doctors and nurses and lab technicians left the organization. We saw a mass exodus of all of the best staff who had worked at the Red Cross who really knew blood banking."

Karen Lipton became the interim chief of blood services, and during the eight-month search for a chief, the F.D.A. frequently voiced concerns about the lack of stability in the organization. Says Lipton: "To be in a position of trying to run your business while someone is looking over your shoulder is very difficult. Just imagine if you're working in a situation where there's an internal review going on, and the people in charge of it don't want you to make any major changes until they're done and they've made certain recommendations. But meanwhile you're operating under a consent decree, so you have to get certain things accomplished within a tight period of time. We had a hard time filling the director's position, because it's a no-win job."

By the time Elizabeth Dole took her leave, not just Kyle but also Lipton and John William Thomas, the senior vice president for development, had resigned as well.

According to Brian McDonough, a veteran of the Red Cross and its new executive vice president and chief operating officer for blood services and biomedical services, the Red Cross has so far spent at least $162 million on the transformation program, and it will not be completed for at least two to three more years.

In 1995, the last year for which Elizabeth Dole had responsibility, the blood division reported its largest deficit ever--$113 million, after losing $50 million the year before. This resulted in an $84 million loss for the Red Cross, the largest in its history. To finance the major deficit, national headquarters has borrowed $11 million from blood services regions; more than $60 million from the chapters, including a substantial sum from the disaster relief fund, which was recently repaid; and $22 million from the pension reversion fund. It has also responded the way many organizations respond when they're looking down the barrel of a major deficit: It froze wages, cut its staff by more than 5 percent and raised prices on the blood products it sells to hospitals.

Although F.D.A. Commissioner Kessler has praised the Red Cross for making progress in addressing its problems, in a 1994 letter to the organization, obtained by The Nation under the Freedom of Information Act, the F.D.A. continued to express concern about the Red Cross's blood banks. In the letter, associate F.D.A. commissioner for regulatory affairs Ronald Chesemore called the Red Cross's proposed quality assurance program "unacceptable" and the changes in its computer systems "inadequate," and said the "ARC has not adequately addressed several critical areas of operation."

Soon after that letter, in 1995, Senate majority leader Bob Dole introduced legislation to curb the power of the F.D.A. Coincidence? Maybe. A conflict of interest? No doubt about it.

This year, Bob Dole's close ally, Senator Nancy Kassebaum, is pushing a bill specifically targeting the F.D.A.'s regulatory duties, while House Republicans are advocating a more extreme bill that would allow the blood-banking industry to hire its own private contractors to inspect blood banks. The same bill allows the pharmaceutical industry to hire its own consultants to test the safety of drugs and other medical devices, and would take away the F.D.A.'s power to review computer programs used by blood banks--a particular concern of the American Red Cross, which has spent millions of dollars trying to satisfy the F.D.A.'s requirements and still hasn't completed its computer revamping.

A new internal F.D.A. assessment of the Republican legislation, obtained by The Nation, states that the "F.D.A. would be unable to protect the nation's blood supply" if the House version became law. "F.D.A.'s current enforcement powers to act against violative blood banks would be limited, and the agency could not even force the recall of contaminated blood. Also, blood processing and handling organizations would be able to inspect themselves, in lieu of current F.D.A. inspections."

Because the nation's principal blood banks belong to the Red Cross, the legislation would benefit that organization more than any other blood-banking group. If Bob Dole reaches the White House, he will be in a position to sign a Republican- passed bill that would protect his wife's organization from legal liability and federal regulation.

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