DIRTY HANDS?

America’s Largest Disability Employer Accused of Running Like the ‘Mafia’

Two of America’s largest employers of people with disabilities are reportedly being probed for financial fraud, mismanagement, and steering of contracts.

AbilityOne is a federal program that offers job opportunities to almost 50,000 people with disabilities, making it the single largest employer of people with significant disabilities in the nation. CNN reported that AbilityOne, along with its main partner organization SourceAmerica, are the subjects of several federal investigations, suspected of enriching themselves and their friends at the expense of the people whom they are supposed to be helping.

According to CNN, AbilityOne and SourceAmerica are being investigated for a bevy of corruption charges, including fraud, mismanagement, steering of contracts, and misrepresenting the severity of the disabilities of their workers.

The Department of Justice declined to comment on the investigation. The State Department’s Office of the Inspector General confirmed that an investigation is underway, but would not comment further.

The Daily Beast received an audio file and transcript from a source participating in one of the federal investigations. The recording is of a December 2013 conversation between Jean Robinson, then-General Counsel of SourceAmerica, and Ruben Lopez, CEO of Bona Fide Conglomerates Inc. (Bona Fide is a nonprofit company that trains and employs workers with severe disabilities. It has been embroiled in on-and-off legal battles with SourceAmerica since 2010.) Lopez was participating in one of the federal investigations and wearing a wire.

During the recording, Robinson is heard describing her firsthand observations of ongoing conflicts of interest and mismanagement among the higher-ups at SourceAmerica. She paints a picture of back-scratching and underhanded deals in which SourceAmerica recommended federal contracts not for the most deserving organizations, but for their friends.

Robinson expresses her belief that she was sidelined as she attempted to rope the organization into good governance. She repeatedly denounces what she describes as “scheming” by a “mafia” or “allocation machine”; that is, a group of insiders at SourceAmerica who unfairly award lucrative contracts to themselves and to allies.

“The people who have been gunning for me are the people who, you know, are part of what I call the allocation machine or the—you know, the ‘let’s make sure this person, these entities, et cetera, have the contracts they need, et cetera,’” she says. “And one lawyer said to me, ‘Jean, you know, you’re onto the’—he called it, ‘the hustle, that you’re onto the hustle and you’re in the way.’”

Also during the recorded conversation, Robinson describes SourceAmerica insiders attempting to hide a pattern of conflicts of interest and favoritism in the recommendation of contracts from federal investigators.

***

AbilityOne was conceived in 1938 as a federal program to purchase goods and services from organizations that employed, primarily, blind people. In 1971, its mandate was expanded to include organizations employing people with severe disabilities.

The AbilityOne Commission maintains a sort of shopping list of goods and services that are available for federal agencies to purchase. The regulations for federal purchasing are notoriously convoluted, but generally speaking, when federal agencies wish to purchase items that appear on AbilityOne’s procurement list, they are often required to purchase from AbilityOne before considering other vendors. If a federal agency wishes to buy pens, for example, and AbilityOne offers them at a fair market price, in most cases they must purchase their pens through AbilityOne.

This generates seriously big business, with AbilityOne making close to $3 billion in annual sales.

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AbilityOne decides which vendors appear on its list based on the recommendations of two independent nonprofit organizations: SourceAmerica and the National Industries for the Blind (NIB). SourceAmerica and NIB work directly with the nonprofit organizations that employ people with disabilities. They evaluate the organizations and make recommendations to AbilityOne about who should be awarded contracts. Then NIB and SourceAmerica receive a portion of the revenue generated through their contracts. (AbilityOne’s contracts through NIB are not currently under investigation; the accusations have been made only about contracts with SourceAmerica.)

SourceAmerica is the larger of the two nonprofits. It works with close to 600 organizations that provide goods and services through the AbilityOne program, including Goodwill Industries. SourceAmerica’s AbilityOne contracts employ over 40,000 people with severe disabilities. (It also administers employment programs that are not under the AbilityOne aegis, which employ 75,000 other workers with disabilities.)

On the recording, Robinson suggests the executives at SourceAmerica wrongly blamed her for their legal woes, telling Lopez that they had hired outside counsel to investigate without informing her. She adds that the outside counsel found fault with her legal department for not strictly enforcing documentation of conflicts of interest.

“It was clear to me that somehow their lack of disclosure, their lack of compliance, et cetera, was going to get all blamed on legal,” she says on the tape. “Which to me is—not only, excuse my vernacular, pisses me off, but it’s sort of like, you know, I remember—I’ve been around long enough to remember when I had to fight you people to get an audit committee, I had to fight you to get governance rules.”

Throughout the recording, Robinson depicts an organization that awards contracts unfairly, selecting those organizations that have a connection to SourceAmerica.

She details a specific meeting at which she says SourceAmerica presented a report that contained an analysis of how many contracts were awarded to organizations that had ties with SourceAmerica. She accused them of choosing a particular time period to analyze—one that made the board of SourceAmerica look as if it had clean hands.

However, the report is nonetheless described as awarding a disproportionate number of contracts to affiliates that had ties with the National Council of SourceAmerica Employers (NCSE), an association representing the organizations that work with SourceAmerica. “So this report shows that 34 percent or something like that, it was like a—it was—it was large, that a large percentage of the opportunities that were given in the last year or so were NCSE members,” Robinson says.

SourceAmerica declined to respond to a question about the structure of NCSE and its relationship to SourceAmerica. A plaintiff’s complaint in Bona Fide’s ongoing antitrust lawsuit against SourceAmerica alleges that NCSE “is an unincorporated association of all AbilityOne Affiliates. The NCSE president serves on the SourceAmerica Board. NCSE has no budget, offices, staff, or resources of its own; it relies entirely on the SourceAmerica Board and SourceAmerica’s officers and employees.”

In the taped conversation, Robinson suggests that, in preparing the report, SourceAmerica’s board had made an effort to establish its own rectitude by pinning the blame on NCSE. She says she informed them that they were kidding themselves. The investigation will not make any distinctions between the board and NCSE, since they are both “insiders” at SourceAmerica. She names as an example one board member who previously headed up the NCSE.

“I don’t even know how you guys were able to make this artificial separation between the numbers looking really bad for the NCSE and—but not looking so bad for the board,” she says she told SourceAmerica’s higher-ups. “Because you’re one and the same. How are you dividing it?... So when they look at your—when these statistics here show your opportunities, how are you able to separate them?”

In Robinson’s telling, the board members began to get cold feet about the report that had been presented at the meeting when it dawned on them that the federal investigators would not care whether it was the board or NCSE who is implicated—they would see either as rank favoritism.

Robinson says the board members went on to discuss how they could withdraw the report—she describes them as “trying to figure out how to pull the report back or how to sanitize it or whatever”—but she explained that they have entered the report into the minutes of the meeting. The federal investigators had already informed them of their intention to analyze meeting minutes.

“I said, I don’t know what you guys think this is, but if you don’t want to use me as your legal counsel, you better go get some real legal counsel because these guys are not playing... this crap that you guys are doing is—you know, it’s sort of like thumbing your nose at a very serious investigation,” Robinson says. “Now that you don’t like what it says or what the results are, you want to change it in some way, and so my recommendation to you as the organization’s counsel is you leave it alone and it is what it is.”

Despite her explanation that withdrawing or changing the report likely amounted to an improper interference in a federal investigation, Robinson says that SourceAmerica decided to withdraw it.

A phone number for Jean Robinson turned out to be non-working, and she could not be located for comment. Ruben Lopez released a statement that said, in part, “I would like to emphasize how important it is to me that the severely handicapped receive the full benefits of the federal programs available to them. I have worked closely with federal agents on the SourceAmerica investigation in the interests of ensuring that the rights of the disadvantaged are protected and that a fair proposal process is maintained.”

SourceAmerica provided an initial statement to The Daily Beast before the receipt of the audio recording. They did not respond to a further email inquiring specifically about the recording. CEO Steve Soroka said:

“The allegations repeated in recent media stories are without merit. SourceAmerica conducts its business with the utmost integrity and complies with all federal and state requirements, including those related to the administration of the AbilityOne Program. SourceAmerica is vigorously defending itself against these unfounded allegations, many of which were made by anonymous or unnamed sources, or, in the case of the CNN story, individuals that are registered lobbyists for one of the litigants. The allegations all seem to be related to ongoing litigation brought forth by a very small number of individuals, and we anticipate a favorable resolution of these lawsuits. SourceAmerica wants to ensure the public has access to the information we provided CNN. Anyone can visit our website and read our public statement here.

“With respect to project recommendations, we conduct an exhaustive, thorough, and detailed analysis of competitive proposals that results in SourceAmerica making a recommendation to the U.S. AbilityOne Commission as to which proposal best meets the Federal Government’s requirements. The Commission staff conduct their own analysis, facilitate a public notification and comment period in the Federal Register, engage with existing contractors as appropriate to determine impact, and then distribute all pertinent information to fifteen Presidentially-appointed members of the Commission who each vote on whether the opportunity is appropriate for the Program and the recommended nonprofit agency.”

In its statement to CNN, SourceAmerica specifically addressed allegations of conflicts of interest and favoritism in awarding contracts. It reads in part:

“Project recommendations to the AbilityOne Commission from SourceAmerica are based solely on merit. There are a number of checks and balances to ensure AbilityOne bids are fairly and equitably evaluated, and the final decision on every federal AbilityOne contract is made by the Presidentially-appointed members of the Commission. No one involved in making award recommendations to the Commission is employed by an organization seeking those contracts. We want to be very clear, SourceAmerica Board Members are not involved in the evaluation of contract bids or recommendations to the AbilityOne Commission.”

AbilityOne indicated it could not comment on the Robinson/Lopez recording specifically, citing unspecified ongoing legislation (presumably including the Bona Fide antitrust case), but provided a statement to The Daily Beast:

“The U.S. AbilityOne Commission strongly emphasizes program integrity. We are unwavering in our commitment to the employment of people with significant disabilities. The Commission is dismayed by the misrepresentations and inaccuracies from sources identified after the initial airing as the unsuccessful bidder in the protest action. We find that the information reported needs more context. For example, all employment candidates must provide documentation of significant disabilities signed by a licensed medical professional, and this documentation is subject to multiple reviews and inspections.

“It is worth noting that as recently as May 2013, the Government Accountability Office examined the AbilityOne Program including the SourceAmerica recommendation process and made no findings of fraud, waste or abuse.”

It is true that the May 2013 GAO report does not detail fraud or abuse. However, the report is subtitled “Enhanced Oversight of the AbilityOne Program Needed.” It suggests that the very structures of AbilityOne and its relationship with NIB and SourceAmerica lend themselves to the potential for fraud and abuse.

“The Commission has not recently taken an active role in setting or monitoring CNA [Central Nonprofit Agency, that is, NIB and SourceAmerica] governance standards—such as developing CNA ethics standards and reviewing alleged violations—to help protect the program from possible waste, fraud, and abuse,” the report states. “Instead, the Commission is dependent upon the CNAs themselves, as well as other governmental entities, such as the Internal Revenue Service, to set and enforce some of these standards. Without strong standards and oversight, however, the program is vulnerable to potential fraud, waste, and abuse of government procurement funds.”

The report goes on: “Should such improprieties occur, the program’s reputation could be harmed and this could decrease employment opportunities for people who are blind or have severe disabilities.”

If in the end, the investigations indeed establish corruption on the part of SourceAmerica and AbilityOne, it is unclear what will happen to these programs. Thousands of vulnerable workers may be at risk of losing their livelihoods, while facing tragically high barriers finding the independence and dignity a job can provide.