The state attorney general asked the courts to take control of Blind Industries and Services of Maryland yesterday, charging that there were administrative and financial abuses in the quasi-public agency and "evidence of misspent and misapplied funds."
The attorney general acted in Baltimore Circuit Court after a state audit found that the organization ran up hundreds of thousands of dollars in losses at a time when it dramatically increased pay and benefits for its top executives. Among the benefits was $2,000 toward a golf club membership for the president.
The audit also said that BISM's president, Richard J. Brueckner, and the chairman of its board of directors, Frederick Puente, attempted to set up an Eastern Shore soft-drink enterprise -- which ultimately did not get off the ground -- that would have been in direct competition with BISM's own soda vending division.
Blind Industries and Services of Maryland is a non-profit organization designed to provide employment and training for blind persons. It gets $1.2 million in state funds annually and is governed by an 11-member board of trustees appointed by the governor.
After reviewing a 10-page complaint by the attorney general, Baltimore Circuit Court Judge Joseph H. H. Kaplan asked deputy attorney general Ralph S. Tyler III and Stanford D. Hess, lawyer for BISM, to agree on the appointment of a temporary receiver for the company. A receiver is an independent manager, appointed by a court, who takes control of a company or organization whose affairs are in disarray and whose assets are in danger of being dissipated.
Judge Kaplan said that if the two sides do not agree, he will hold a hearing Monday to decide whether he should appoint a receiver. Meanwhile, the judge ordered that all the company's records be secured and that none be destroyed or removed from its buildings. He also issued an order limiting BISM's operations to paying salaries and benefits until next Monday.
The audit, which was completed in early November for the Division of Vocational Rehabilitation of the Maryland Education Department, uncovered a variety of "administrative and financial problems," according to a statement issued by the office of Gov. William Donald Schaefer.
"We want to ensure that there are services and employment opportunities for Maryland's blind community. That is why this -- case must be pursued," Mr. Schaefer said in the statement.
Mr. Brueckner, BISM's president, said he could not comment on the audit and referred all questions to Mr. Hess. But he was quoted by the Associated Press as saying that if the attorney general's office had discussed the audit with BISM, "we could have given them a logical explanation of what was going on."
Mr. Hess said the company's board has not had a chance to review the audit. He said the board is scheduled to meet tomorrow to review the audit and "decide what course of action to take."
"There are no allegations of fraud in the audit," Mr. Hess said. He said Mr. Brueckner was trying to run BISM as if it were a private corporation and that therefore many of his spending practices were similar to those in private industry.
However, the attorney general's complaint filed in court yesterday referred to "abuses and evidence of misspent or misapplied funds or funds not properly accounted for . . ."
The audit, performed by two Vocational Rehabilitation Division auditors, pointed out that the salary for the president has increased 63 percent -- to $97,200 -- since Mr. Brueckner took office in January 1988. His pay is to increase to $101,000 on Jan. 1. In contrast, BISM's lowest-paid hourly workers are being paid $4.30 an hour.
During the same period that Mr. Brueckner's pay was increasing, BISM went from an annual profit of $655,730 to a loss of $793,908, the audit said.
BISM, with sales of $13 million last year, manufactures yellow legal pads and prison uniforms and has some defense contracts.
"The salaries of other members of BISM's management, i.e., vice president, controller, plant manager [Salisbury], director of sales and marketing and director of personnel similarly have increased dramatically," the audit said.
The audit also revealed that BISM paid for a $144.98 repair to Mr. Brueckner's car, and that BISM credit cards were used to charge meals, hotel rooms, golf fees, and tickets to baseball games and cultural events.
Last January, Mr. Brueckner received a check for $2,000 to pay for a portion of his country club membership, according to the audit. Mr. Hess said the membership was used to entertain customers of BISM.
The audit also said that Mr. Brueckner and Mr. Puente, chairman of BISM's board of trustees, attempted to purchase assets of the Seven-Up Bottling Co. of Salisbury, "in breach of their fiduciary .. responsibility to BISM." The audit said that Seven-Up Bottling of Salisbury is a "direct competitor of the newly established vending services division of BISM."
Last year the state gave BISM a $1.2 million grant that is intended to pay for training and employment centers for the blind. One of the conditions for receiving the grant is that BISM must maintain a ratio of 75 percent blind employees and 25 percent employees with sight.
For fiscal year 1991, 38.5 percent of BISM's employees are blind and 61.5 percent have sight. From June 1989 to October 1991, the number of employees with sight increased at a rate of 37.2 percent compared with 24.7 percent for the blind.
TTC In addition, the audit said that the total number of hours worked by the blind amounted to 61.2 percent, which is lower than the 75 percent required by federal regulations.