Respond to this Article April 2001

AIDS Incorporated

How federal AIDS money ended up funding psychic hotlines, Neiman Marcus, and flirting classes

By Wayne Turner

You must help us against these, these THIEVES!' demanded Jose Colon loudly, as a dozen or so members of Congress stared curiously from their dais. This was unusual testimony at an AIDS-funding hearing.

Colon's 10-minute address to the U.S. House of Representatives Commerce Subcommittee on Health and Environment last July marked the end of a long, painful journey. Colon, along with countless others, has been fighting for accountability in the use of federal AIDS funds. For him, that fight is deeply personal. Colon is living with AIDS; his partner of 17 years, Aramis, died in 1991, not from AIDS, but from neglect.

Colon, a resident of Puerto Rico, recalled for the committee how Aramis had contracted an opportunistic infection in his lungs and had sought treatment from a federally funded clinic, the San Juan AIDS Institute. Yet, Aramis was never able to get an appointment with his assigned doctor. Eventually, the infection overwhelmed him, and he ended up hospitalized.

Aramis' physician from the Institute, Dr. Jorge Garib, paid just one brief visit to his patient at the hospital, declaring, "You know you have a pneumonia that kills."

Then Dr. Garib abruptly left the hospital room and never returned. Several months later, Aramis died.

On the day Colon presented his testimony, a federal judge in San Juan sentenced Garib to the maximum 10 years in prison for his involvement in an embezzlement scandal at the AIDS clinic that rocked Puerto Rico and sent shock waves all the way to Washington.

During Garib's trial, and the trials of several other Institute officials, prosecutors outlined a paper trail of dummy corporations, off-shore bank accounts, payments for luxury cars, jet skis, cash pay-offs to the Institute's political benefactors, and for Dr. Garib, a personal maid---all using $2.2 million in federal AIDS funds.

Even the governor of Puerto Rico, Pedro Rossello, was twice subpoenaed to testify, though he has not been indicted. A prosecution witness claimed Rossello supervised the transfer of $250,000 in a shoe box from the Institute to support his 1992 election campaign.

Rossello, who decided not to seek re-election, continues to deny involvement in the scandal. Yet prior to his election as governor, Rossello ran the San Juan health department, administering the federal AIDS grants and hand-selecting the very AIDS Institute directors who now stand convicted of fraud.

The San Juan AIDS scandal was many years in the making, but the people responsible for ensuring that AIDS money is well spent did little but sit by and watch. A member of the Puerto Rican legislature, Rep. David Noriega Rodriguez, presented substantial evidence of AIDS fraud in a report to U.S. Health and Human Services Secretary Donna Shalala in May 1993, but received only a form letter in return.

The feds' indifference continued for years. According to the San Juan Star, Lawrence Poole, an HHS official responsible for monitoring federal funds distributed under the Ryan White CARE Act, admitted under oath in 1999 that his department continually paid millions of dollars to the Institute without ever receiving an accounting or financial report.

It took courthouse vigils in San Juan to force action on behalf of the victims. Colon and Anselmo Fonseca, who also lost his partner to AIDS, together formed Pacientes de SIDA Pro Politica Sana (AIDS Patients for Sane Policies) to demand more accountability in the use of federal AIDS funds for the poor.

At first, they were criticized for drawing attention to the scandal, mostly by employees of other AIDS agencies who feared the scandal could taint their own organizations. Despite political pressure, and even anonymous threats of violence, their numbers grew as more victims of the scandal stepped forward.

For these patients and family members who watched their loved ones die, the five convictions and seven guilty pleas won by the U.S. Attorney's Office in Puerto Rico are little consolation.

The activists attempting to expose such funding abuses in Puerto Rico and elsewhere have been met with stony silence and even outright hostility, mostly from those who are supposed to be their strongest allies in the fight against AIDS.

Their experience shows that after a hard-fought 20 years, the AIDS epidemic has finally become a sacred cow. It is immune from budget cuts; even the Republican-controlled Congress has steadily increased federal AIDS funding, at times well beyond the Clinton administration's request. The Ryan White CARE Act, a $1.7 billion program, was unanimously reauthorized by the 106th Congress last year.

Named 10 years ago in memory of a teenager who died from AIDS, the act was originally conceived to provide emergency relief to low-income people with HIV and AIDS, to provide doctor's visits, medications, food banks, emergency assistance, and other survival services.

Yet lawmakers and the administration have done little to ensure that the money actually helps patients. Lax oversight of federal AIDS programs has permitted a rash of abuses from San Francisco to San Juan. While the money keeps rolling in to bloated nonprofit and government AIDS agencies, many patients continue to suffer with low-quality care, or no services at all.

Fraud Cases Mount

When Colon and his colleagues began citing the San Juan case as symptomatic of larger problems with federal AIDS funding, many Washington policy makers and AIDS organizations simply dismissed it as an isolated incident. Even worse, some hinted that it was just those "corrupt Puerto Ricans." AIDS groups who have taken great pains to stake out a benevolent image still refuse to acknowledge that the number of "isolated incidents" of fraud, mismanagement, and abuse of AIDS funds are increasing nationwide.

Just a few examples:

  • In Texas, the FBI is currently probing a South Dallas AIDS clinic that misspent tens of thousands of federal dollars intended to benefit poor African Americans. A county audit of the former Margaret K. Wright Clinic discovered that shopping sprees to Neiman Marcus, home appliances, and psychic phone-line calls had all been billed to the Ryan White CARE Act.

    The Wright clinic has been the sole source of AIDS services in North Texas for low income African Americans, who comprise the region's highest percentage of AIDS cases. "The FBI also is investigating allegations that the clinic bought expensive AIDS drugs that remain unaccounted for and applied federal funds toward treatment of patients who might not have existed," wrote the Dallas Morning News last year.

  • Corey White, a bookkeeper for Central Florida United AIDS Resources in Orlando, Fla., was sentenced to 37 months in jail for embezzling more than $500,000 from the group, which provides assistance to AIDS patients needing housing and medications. According to investigators, White spent the funds on Disney tickets, hotels, and restaurants. Some months her credit card bills exceeded $25,000.

  • In North Carolina, the State Bureau of Investigation (SBI) is probing a Johnston County AIDS organization after an audit revealed that James Wise, the director of Drugs and AIDS Prevention Among African-Americans (DAPAA), kept 10 percent of all Medicaid payments to DAPAA as personal compensation, and wrote himself checks totaling $13,300, according to the Associated Press (AP). "Between June 1996 and October 1997, DAPPA obtained $15,380 from another AIDS agency by saying the money would pay the rent for DAPAA clients at specific properties. Wise arranged to have the checks made out to his mother, who did not own the properties."

    The SBI is also investigating Wise's wife, Janet, the assistant chief of the state's HIV/STD prevention section, who awarded $684,291 to DAPAA between 1993 and 1997.

  • Years of complaints finally led to a state audit of the Los Angeles County AIDS housing program, funded by the Federal Housing Opportunities for People with AIDS (HOPWA).

    The May audit showed that a whopping $21.8 million in federal grants to house homeless people with AIDS had accumulated since 1993 and remained unspent.

    Michael Weinstein, president of the AIDS Healthcare Foundation, told the AP, "The program is in shambles and every dollar wasted is costing a life."

  • AIDServe Indiana, the only state-wide agency providing assistance to patients with HIV/AIDS, "mismanaged hundreds of thousands of dollars, with devastating consequences for sick people," according to an investigation last year by the Indianapolis Star. While administrators diverted funds to help cover salaries and other operating costs, AIDServe owed thousands of dollars to dozens of landlords, pharmacies, doctors and dentists throughout Indiana. "Some are refusing to provide vital medical care, housing, and life-saving drugs to patients until they get their money," the Star reported.

    The Star documented the plight of AIDS patients hounded by creditors for unpaid medical bills, facing eviction notices from their homes, or living under bridges. The State Health Department canceled all contracts in November and is now conducting a full audit of the group's finances. $175,000 raised during last October's AIDS Walk was seized by Fifth Third Bank in February to pay for an overdue loan to AIDServe, according to the Star.

    AIDServe Indiana's president and chief executive officer, Mark St. John, wrote an op-ed last June defending AIDServe and urging the general assembly to increase the group's funding. Five months later, St. John resigned, admitting that funds had been mismanaged. The organization shut down in November.

Conferences or Junkets?

The Washington adage that it's often the legal things that are the most scandalous applies all too accurately to federal AIDS funding. AIDS has spawned a rash of conferences that are little more than taxpayer-financed vacation junkets. The annual exodus every March to the AIDS Update Conference in San Francisco is unabashedly referred to as "Spring Break" by employees of East coast AIDS service organizations.

This unique AIDS industry perk is finally receiving some attention. The Washington Post last year exposed an AIDS "conference" held in St. Thomas, Virgin Islands at the Marriott Frenchman's Reef Resort Hotel.

The conference was convened by Joe O'Neill, the head of the HIV/AIDS Bureau at the Health Resources Services Administration---responsible for monitoring federal AIDS funds earmarked for patient care---who urged the invitation-only participants to attend the Caribbean confab using their Ryan White funding.

Although the conference was supposed to highlight HIV/AIDS in poor, developing areas, no local physicians, public health officials, or patients were invited. A Virgin Islands Daily News reporter was ejected from the conference cocktail party reception, along with his photographer.

While the clients of AIDServe Indiana faced eviction from their homes, HRSA's O'Neill found the time and resources to attend another conference in Rio de Janeiro, held between the beaches of Ipanema and Copacabana no less, and flew to London in December, just in time for holiday shopping.

Yet O'Neill told a congressional subcommittee last July that his department lacked the resources to adequately monitor and detect AIDS funding scandals.

Indeed, reported instances of funding abuses in North Carolina, Florida, California, Texas, Puerto Rico, and Indiana were all uncovered, not by HRSA, but by local auditors, journalists, and community activists.

Cap Salaries, Not Services

Service providers often justify the conferences and free trips to the beach as an entitlement to compensate for their status as "underpaid" poverty workers. Yet the administrators of some AIDS charities earn more than mayors, governors, and members of Congress.

The head of the San Francisco AIDS Foundation, Pat Christen, tops the list, earning more than $200,000 a year, according to the group's 1999 tax forms. In the District of Columbia, the area's second largest AIDS service provider, Food and Friends, paid $163,111 to its executive director, Craig Shniderman, in 1998, the most recent year for which documents are available.

One D.C. clinic continued paying its well-compensated director even after he resigned to become a city council member. When Jim Graham resigned as executive director of Whitman-Walker Clinic, he saw his $186,453 annual salary cut by more than half. Clinic officials came to Graham's rescue, with a $70,000 consulting contract. The Washington City Paper blew the whistle on the secret deal in February 1999, and the contract was withdrawn due to conflict-of-interest rules.

Graham did end up with a consolation prize of sorts. The clinic, which has waiting lists for its services, donated a roomful of designer Stickley office furniture to the new councilmember, because Graham couldn't tolerate his government-issued desks.

The cushy positions of some AIDS executives stand in stark contrast to the subsistence living of many HIV/AIDS patients, whose disability income can range between $500-$700 per month. Gaining access to services provided through the government can often be a Herculean task.

Programs like Medicaid or food stamps require applicants to appear in person and, in places like D.C., waiting in line can take all day. There is little accommodation for those with fevers, nausea, vomiting, weakness, and other symptoms of HIV.

This daily struggle for survival is only confounded by the intricate maze of repetitious forms, red tape, paperwork, and waiting lists created by the AIDS service providers.

Instead of streamlining operations, however, the AIDS service industry has created yet another layer of jobs. Several cities, including D.C., invented a new service category called "Access Advocates," employees to assist patients confronting the vast AIDS bureaucracy in gaining access to "Case Managers," employees assigned to assist patients confronting the vast AIDS bureaucracy.

There is a method to this madness. Groups receiving funds have a strong incentive to invest more in staff and overhead than in patient care, so that they are ready for the next grant cycle where infrastructure counts more than effectiveness.

San Francisco's Bay Area Reporter wrote last year about a man with AIDS suffering from chronic diarrhea, Terry Leone. Leone was denied a 95-cent adult diaper as he left San Francisco General Hospital and traveled home on a bus, soaked in his own excrement. He did have five CARE-paid case managers who, instead of giving him a diaper, sent letters insisting he return in person to their offices to fill out forms to be "recertified" as a client. Leone didn't live long enough to meet the agencies' bureaucratic requirements. He died five months later.

Foxes Guarding the Hen House

AIDS agencies' burdensome emphasis on paperwork, often in lieu of services, is not surprising. People living with HIV/AIDS have little say in how their CARE dollars are spent.

When the Ryan White Act was first drafted in 1990, Congress created Title I planning councils, composed of locally appointed community members, to establish critical service priorities and oversee the allocation of federal dollars.

The councils were then mandated to reflect the demographics of the local infected population by including at least 35 percent people living with HIV/AIDS---an important win for AIDS activists who have long insisted that affected communities are their own best advocates.

The promise of full community participation and oversight in the allocation of federal funds never materialized, however. For the past 10 years, planning councils have been packed almost entirely with salaried employees, board members, and consultants to groups receiving Ryan White funds. They determine everything from funding priorities to who gets approved to join the council.

Council meetings can often resemble an episode of "Survivor," especially when the time comes to divide up the money. Competition is cut-throat, as members fight for their own service categories, sometimes forming alliances with other providers. It's usually clients who get voted off the island. Out of the 60 appointees on the D.C. planning council, there have been as few as three non-aligned members, i.e., people who aren't board members or employees of groups receiving the funds. Conflict-of-interest rules are rarely enforced, so that what could be an effective body of local watchdogs has become more like a group of hungry foxes guarding the hen house.

Health Care for Dead People

The annual local wrangling over who gets the biggest helping at the AIDS gravy train was mirrored last year during congressional re-authorization, pitting large, entrenched first-wave cities against new areas facing the rising tide of the AIDS epidemic.

Since 1990, Ryan White funds have been distributed according to a complicated formula that counts the cumulative number of AIDS cases within a jurisdiction, not the current number of living clients. As a result, San Francisco, which experienced a devastating death toll early in the epidemic, still receives twice the funds, per patient ($5,980), than other cities with a comparable caseload such as Chicago ($3,123) and the District of Columbia ($2,869), according to a General Accounting Office (GAO) report last year.

"The U.S. taxpayer has been funding health care services for dead people," said GAO Assistant Director Jerry Fastrup at last year's congressional hearing on the Ryan White CARE Act.

Funding inequities particularly impact African-American and other minority communities now facing the full brunt of the AIDS epidemic. HIV/AIDS patients in 17 states are on waiting lists or have restricted access to potentially life-saving medications under the AIDS Drug Assistance Program.

While thousands of patients have no access to life-saving pills, the CARE Act subsidizes frills programs such as San Francisco's AIDS Health Project, which, with $977,701 in Ryan White grants for FY 2000, features flirting classes and HIV bowling nights. In New York, the nation's oldest and largest AIDS service organization, the Gay Men's Health Crisis, provides hair styling and art classes.

Patients vs. Providers

A grassroots network of activists is fighting for greater equity in the distribution of AIDS funds and other reforms so that resources are targeted where they're needed most. The argument that geography should not determine an HIV/AIDS patient's ability to access medication and other services, however, faces fierce opposition.

After two decades of the epidemic, the bulk of the AIDS movements' political muscle is concentrated, not with patient groups, but with firms lobbying for AIDS service providers. Nonprofit AIDS agencies have invested millions of dollars in operations like AIDS Action and the CAEAR Coalition (Cities Advocating Emergency AIDS Response).

To compete with states and second-wave cities for funding, the CAEAR coalition hired a consulting firm called the Sheridan Group. The Sheridan Group, coincidentally, operates AIDSPAC, a political action committee that raises millions of dollars for federal candidates.

Not surprisingly, the bulk of AIDSPAC money goes to pay the Sheridan Group for its consulting services. The few campaign contributions AIDSPAC made were earmarked for CAEAR coalition allies, such as Rep. Nancy Pelosi (D-Calif.) and Sen. Edward Kennedy (D-Mass.). Both defended the specialized funding given to certain cities at the expense of HIV/AIDS patients living elsewhere.

The mass marches that once characterized AIDS funding battles in Congress didn't materialize last year during the Ryan White reauthorization. Paid industry lobbyists made their usual rounds on Capitol Hill in their Gucci loafers, pleading poverty on behalf of AIDS victims. The only opposition facing this well-oiled machine came from within.

Open warfare broke out over who gets the most money. San Francisco fought with Los Angeles, big cities with smaller cities; states fought the cities and each other, and rural areas fought urban areas.

Meanwhile, a loose-knit coalition of patient activists emerged with their own proposals, designed to bring greater accountability to the $1.7 billion federal program. Foremost among these was a proposal to cap salaries of top AIDS executives, so that no administrator of groups receiving Ryan White funds would receive a compensation package greater than that of the chief elected official of the jurisdiction wherein the group resided. In a city like D.C., where the mayor earns approximately $110,000 per year, the executive salaries of the area's leading AIDS providers would be cut by more than a third.

Such a proposal proved sufficient to unite the warring factions among service providers as only Sen. Jesse Helms could. Even a compromise version requiring just a public list of the top AIDS earners was quashed in committee.

With no PAC money, and the vigorous opposition of industry lobbyists, AIDS activists had an uphill battle to include reforms to the CARE Act. They found an unusual ally: conservative Dr. Tom Coburn (R-Okla.), co-author of the Ryan White CARE Act in the House. He was joined by Rep. Henry Waxman (D-Calif.) in incorporating accountability measures, proposed by patient activists, in the final version of the reauthorization.

These reforms require more consumers on planning councils, whose meetings would be opened to the public. New council members would receive training to ensure their effective participation, and a random sample of all Ryan White CARE Act programs will be audited annually by the federal government. These modest provisions, activists hope, will help strengthen patient participation and oversight at both the local and federal levels.

Challenges Ahead

Those who implement the CARE Act now need to place a greater priority on patients' needs, instead of the money-hungry AIDS industry. Turning that hope into reality poses significant challenges, however.

Congress, by finally providing oversight, can prove its commitment to AIDS victims by measuring their program's effectiveness, and not just its annual appropriation. Likewise, the mainstream media, now accustomed to featuring feel-good stories on fundraising events like the AIDS Rides, should follow their counterparts in the gay press by scrutinizing where the millions of dollars raised actually go.

Finally, people living with HIV and AIDS face the ultimate challenge, particularly those without health insurance and living in poverty. They can be the most effective watchdogs, yet their voices are so often silenced by a paternalistic AIDS care delivery system that seems to have forgotten just who it is meant to serve.

Wayne Turner is a co-founder of ACT UP, the AIDS Coalition to Unleash Power in Washington, D.C.


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