Blood money An Arkansas prison-plasma business protected by Clinton cronies led to a scandal that almost toppled the government -- of Canada.

E ven the residents of Grady, Ark., call it "godforsaken." It's an enclave of poverty where rampant drug dealing contributes at least as much to the bleak economy as the main legitimate business -- farming -- does.

But looming among the rows of cotton outside this dismal Arkansas River Delta town, there used to be a more profitable form of agriculture: human plasma farming. At the Cummins Unit of the Arkansas penal system during the 1980s, while President Clinton was still governor, inmates would regularly cross the prison hospital's threshold to give blood, lured by the prospect of receiving $7 a pint. The ritual was creepy to behold: platoons of prisoners lying supine on rows of cots, waiting for the needle-wielding prison orderly to puncture a vein and watch the clear bags fill with blood. Administrators then sold the blood to brokers, who in turn shipped it to other states, and to Japan, Italy, Spain and Canada. Despite repeated warnings from the Food and Drug Administration, Arkansas kept its prison plasma program running until 1994, when it became the very last state to cease selling its prisoners' plasma.

Advertisement:

In a year when Arkansas scandals dating back to his governorship have returned to haunt Clinton, this one nearly toppled the government -- of Canada. Arkansas' prison-blood business created a health crisis in Canada that nearly brought down the Liberal Party government last spring. At least 42,000 Canadians have been infected with hepatitis C, and thousands more with the HIV virus, thanks to poorly screened plasma. Some of it has been traced back to the Cummins prison in Arkansas. More than 7,000 Canadians are expected to die as a result of the blood scandal.

The Canadian Krever Commission, established in 1993 to investigate the tainted-blood epidemic, concluded the government did not adequately supervise the Red Cross of Canada, the agency responsible for making sure that blood suppliers maintained adequate screening standards. As a result of the scandal, the Red Cross has been stripped of responsibility for the blood system. Compensation was offered to 1,000 people with AIDS, but the Toronto Star estimates nearly 2,000 are suffering. More than 20,000 tainted-blood victims with hepatitis C filed a class-action suit against the Canadian government, alleging that sloppy screening protocols allowed tainted blood products from Arkansas prisons and elsewhere to make their way into Canada. Last week the Canadian government established a $1.1 billion (Canadian) fund to compensate some hepatitis C victims, but advocates say the fund won't be enough.

Former Arkansas inmates who claim they contracted hepatitis C and AIDS as a result of improper procedures are also planning to bring a lawsuit against the Arkansas Department of Corrections, Health Management Associates Inc. (HMA), Pine Bluff Biologicals -- the two companies that held the prison's plasma contracts -- the state of Arkansas, Clinton and his administration at the time. The White House did not return calls seeking comment on the lawsuits.

Advertisement:

The scandals have received little media attention here, but they tainted Clinton's years as governor. Some newspaper columnists at the time said it could jeopardize his reelection. Two longtime friends of Clinton's were embroiled in the mess: Leonard Dunn, a former Pine Bluff banker and now chief of staff for Lt. Gov. Winthrop Rockefeller, served as HMA's president; and Richard Mays, a Little Rock lawyer, judge and Clinton ally, was hired in 1985 as an "ombudsman," an ill-defined position that was supposedly created to help bring the prison medical system into compliance with state standards. The exact payment Mays received, or what his duties were, was never established, and became the subject of a state police investigation because of allegations that it was actually a "bribe" paid to a Clinton supporter to allow the program to continue.

Problems with the prison plasma program were well known to Clinton throughout the 1980s. The FDA cited HMA for safety deficiencies and shut it down for over a year in 1983, following a recall of hepatitis B-tainted products that had been shipped to Canada and distributed to hemophiliacs. In 1984, the FDA revoked the center's license to operate, and in 1985, an inmate filed a lawsuit against HMA for inadequate medical care. In 1986, Clinton's state police investigated problems at the prison and found little cause for concern, while an outside investigator looked at the same allegations and found dozens of safety violations.

Now, more than a decade later, those old Arkansas scandals are getting new attention, thanks to lawsuits and agitation in Canada. To date, the scandal has gotten almost no media attention in the United States. While reporters are riveted by the Monica Lewinsky mess, they've ignored a real Clinton scandal, maybe because it involves two groups no one cares much about -- people who aren't Americans, and prisoners.

Advertisement:

- - - - - - - - - -

T he Arkansas prison system has been in near-perpetual crisis since at least 1970, when the U.S. Supreme Court found its solitary confinement practices unconstitutional. Inmates lived in a "dark and evil world," Justice John Paul Stevens wrote in 1978, the year Clinton was first elected as governor. At the same time, a federal judge referred to the influence of "evil men" in authority in the prison system.

Advertisement:

The plasma program began in the 1960s as a way for inmates and the prison system to make extra money. Dr. Francis "Bud" Henderson, a Pine Bluff pediatrician, formed Health Education Consultants in 1972, which became HMA in 1978 when the company entered the prison plasma business. At that time, Henderson persuaded John Byus, the prison system's medical director, that HMA needed to run both the medical and the plasma programs. Arkansas became the only state to have a private agency running its prison medical program.

Byus and Henderson say the motive for the plasma program was two-fold: The inmates needed money to buy gum and toiletries, and the destitute prison system needed medical equipment. Arkansas is also one of the only states that refuses to pay prisoners for their labor. Each unit of plasma was sold by HMA, which was running the program under the prison's FDA license, for at least $50, and half was handed over to the prison system. With hundreds of prisoners donating once, sometimes twice a week, plasma became a profitable enterprise.

But Mike Galster, who worked at Cummins as a medical practitioner between 1979 and 1983, calls the prison plasma program "a crime against humanity." Galster grew up in Pine Bluff, a small Southern city swirling in secrets, where business deals were often finalized in either the stately country club or a shady nightclub called Nina's Penthouse, which burned down years ago. His father was a state trooper, and Galster knew HMA's Henderson as a youth, when he was the doctor to Galster's junior high school football team.

Advertisement:

The plasma program always bothered Galster. "I could see [prisoners] were being given illegal narcotics -- several indicated that this was how they were being paid for their plasma," he recalled. State investigations later confirmed this allegation, though the prison claimed it cracked down on illegal dispensation of pharmaceuticals. Galster says he saw inmates who "appeared jaundiced and very sick. When I would ask if they had just had a blood test, they would say, 'No, I've just given plasma.' It was clear they were sick."

But while he knew the prison had problems, Galster never imagined that tainted plasma would find its way into the blood supply of other countries. "I assumed, stupidly, that our people selling this plasma had some process of cleaning it up," Galster says.

Prisoners say they weren't adequately screened for disease. "The prison program they had was pretty shoddy," says John Schock, a burly ex-con with an assortment of tattoos who regularly gave blood at Cummins. "They had inmates doing things they shouldn't have been doing. They would let people who was sick bleed ... ain't no telling what they had. They didn't check all the time."

Advertisement:

Sitting in a lawn chair in a lower-class North Little Rock neighborhood, Schock resembles a bloated, jaundiced Robin Williams with facial hair. He lifts up his blue shirt and shows the jagged triangle of raised flesh -- a liver transplant scar -- stretching across his protruding belly. Since his release, doctors have told him a dirty needle from the plasma program could have infected him with hepatitis C, the disease that cost him his liver. He isn't surprised.

"I am damn sure I got it (hepatitis C) in the prison," Schock says. "I didn't have it before I went in. I have never had needles stuck in my arm that wasn't suppose to be there. I have never interacted with homosexuals. I love women too much. I didn't get it those ways." Hepatitis C often leads to liver failure, requiring a transplant. Victims suffer chronic fatigue and illness and are frequently unable to work.

Schock says he gave blood at Cummins for nearly two years and was only sporadically checked for hepatitis. Finally, after he'd gone a month between tests and had given blood at least weekly, he was tested again, and prison doctors discovered hepatitis. A doctor looked at Schock, told him his eyes weren't yellow, and he didn't look too bad. "He said, 'If you start feeling bad, come back and see me,'" Schock says. "That's just the way they were. They don't care because you are dirt down there anyway."

Most prison plasma programs shut down in the early 1980s, when the FDA and the Centers for Disease Control alerted the public about AIDS. In December 1982, the FDA asked companies that made blood products not to purchase prison plasma, since many inmates have either injected drugs or engaged in homosexual acts, making them high risk for AIDS. The large pharmaceutical companies that were buying from Cummins stopped buying inmates' plasma, a once-valuable commodity because of the large volumes produced each week.

Advertisement:

But AIDS didn't scare Henderson. "There was a mentality that we didn't have any AIDS in the central part of the country. The department (of corrections) said for years we didn't have any AIDS cases. There was a subconsciousness that we just didn't want to think we had those people around us." Still, Henderson would later tell police investigators, "Historically, this [was] the worse possible time to [sell plasma]. I called all over the world and finally got one group in Canada who would take the contract." That group was Continental Pharma Cryosan Ltd., the biggest blood broker in Canada.

- - - - - - - - - -

I n 1983, the FDA initiated an international recall of plasma that might have been tainted with hepatitis B, which can also be an indicator of HIV infection. Several prisoners who had previously tested positive for hepatitis B were allowed to donate blood at Cummins, and the tainted units had been sold by HMA to Cryosan. Cryosan in turn sold the plasma to corporations in Switzerland, Spain, Japan and Italy, as well as to Toronto-based Connaught Laboratories, which pooled the plasma with other blood products needed by hemophiliacs to make their blood clot, and sold the blood throughout Canada.

It was only then, during the crisis over the recall, that the Canadians learned they were buying plasma collected from prison inmates. "The shipping papers accompanying the plasma had not revealed that the centre was located in a prison," the Krever commission report revealed. "They had simply referred to the source as the 'ADC Plasma Center, Grady, Arkansas,' without any indication that 'ADC' stood for 'Arkansas Department of Corrections.'"

Advertisement:

After that screening lapse, the FDA shut down the plasma program for several months. During the shutdown, it was discovered that an inmate clerk in the plasma center had been selling the "right to bleed" to fellow inmates who otherwise would have been excluded because they were likely infected with hepatitis B.

In 1984, the FDA found that Health Management Associates had prematurely and improperly distributed plasma contaminated with hepatitis. Twelve ineligible donors had given blood in a breach of screening processes, and an international recall resulted. The FDA then revoked the center's license to operate. An investigation revealed that the program allowed disqualified donors to bleed, altered records and stored plasma in ways that didn't prevent contamination. It also found that plasma center staff wasn't well-supervised, and discovered attempts by people in HMA "management positions" at the center to hide from FDA inspectors the fact that they had either "initiated or condoned the destruction or alteration of records concerning these activities."

Within months, after promising to clean up its act, HMA applied for a new license. Henderson and Byus blamed the recall on a corrupt inmate clerk who'd been paid off by potentially infected donors. The inmate was removed, and some employees were fired. The program continued for "the good of the inmates," Henderson says. "The prison needed money, too, you have to understand." HMA got its license approved again.

But the plasma program wasn't the only source of scandal within the Arkansas prison system. In 1985 inmates began complaining loudly about prison medical care and rights abuses, including rape. That year Arkansas prisons had the highest number of inmate complaints of any state in the country. State Rep. Bobby Glover, a Democrat, became a champion for prisoners with stories of abuse. His office collected a raft of allegations, ranging from rape and other forms of abuse to bid rigging, theft of state property and the use of state property for private work and gambling.

Advertisement:

Glover pushed for answers, and eventually the Arkansas Board of Corrections hired the independent Institute for Law and Policy Planning in Berkeley, Calif., to conduct an investigation of HMA. Fifteen days after that announcement, Gov. Clinton ordered the state police to investigate reports of criminal conduct within the prison system. The results of these two inquiries would offer a case study of the difference in the way Arkansas insiders and independent evaluators viewed the prison system's problems.

The state police prison investigation resulted in two misdemeanor charges and one felony charge for employees running a gambling operation. Only a few weeks into it, Clinton himself urged a speedy end to the probe. "I told them to get it done and get it over with," Clinton told reporters. Complaints about poor health care and the plasma program resulted in no action, and Arkansas Department of Corrections director Art Lockhart, who had been at the center of the allegations, was not punished. Clinton said the prison system had been "studied to death" and refused to oust Lockhart.

But investigators with the Institute for Law and Policy Planning reached very different conclusions. ILPP executive director Dr. Alan Kalmanoff highlighted 40 areas where HMA violated its state contract, including a conflict of interest in HMA's operating both the medical department and plasma program. The report showed that HMA and the department of corrections had only recently developed procedures for handling AIDS cases, and were "only then developing a refined approach to AIDS screening and testing."

The report also charged that HMA had failed to meet many significant professional standards. It had hired a large number of unlicensed, uncertified or legally unqualified medical staff. Tuberculosis was rampant in the prison. Eight inmate deaths were reviewed, and while the report said that the deaths probably could not have been prevented, it did note that "regular health assessment" and "complete" record-keeping had not occurred. And HMA director Henderson had not been spending the hours that he should on the medical program, the report alleged.

- - - - - - - - - -

T he Arkansas Board of Corrections, run by a Clinton appointee, was repeatedly informed of problems with the prison medical program, including the plasma business. But it continued to return the contracts to HMA, despite other bidders.

How did HMA hold on to the contracts, despite the repeated scandals? It had the help of many high-profile Arkansans, including Leonard Dunn, who became HMA's president. Dunn, a Pine Bluff banker, has deep roots in Arkansas politics. He worked closely with Arkansas political legends, including former U.S. Sen. David Pryor and Clinton. In fact, Dunn was a senior member of Clinton's 1990 gubernatorial reelection team. While in the financial business, Dunn worked at several banks in Pine Bluff and Hot Springs, which served as HMA's lenders. In 1990, he purchased Jim McDougal's Madison Guaranty Savings and Loan, the notorious S&L whose involvement in an obscure land deal led to an investigation that culminated in President Clinton's impeachment.

In recent interviews, Dunn has downplayed his role in HMA. Twelve years ago, he didn't. In the state police investigation, an investigator wrote that Dunn "advised that he had been a former member of the State Claims Commission under Governor Pryor and that he was close to Governor Clinton as well as the majority of state politicians presently in office. Mr. Dunn explained that he was very fond of politics." Dunn added that he was "the financial portion of the corporation as well as the political arm." But in a recent interview, Dunn insisted, "I never took an active role in the company on a day to day operational basis."

Yet Dunn took the lead in negotiating with state officials to get HMA's contract renewed in 1985. One unique feature of that negotiation was the decision to hire an "ombudsman," or compliance coordinator, to smooth problems between HMA and the state. During the state police investigation, however, the ombudsman contract was repeatedly described as a "bribe." Arkansas Board of Corrections Chairman Woodson Walker told investigators that the ombudsman was his idea. "The governor [Clinton] was deeply concerned with HMA's past performance," Walker told investigators, and Clinton said "that I would be held personally responsible for the performance of whatever medical provider was chosen." Woodson recommended renewing HMA's contract, but with an ombudsman position added as a "safeguard" to ensure HMA's good performance.

Both Walker and Clinton suggested HMA hire Richard Mays, an Arkansas lawyer and Clinton-appointed judge, HMA president Dunn told investigators. "Dunn stated that Walker advised him that Mays was black (a plus in a system where most of the inmates are black), had good qualifications and was an outstanding attorney," according to investigators' notes.

Mays is no stranger to Clinton scandals. He was accused of trying to quash the federal case against David Hale, Kenneth Starr's key Whitewater informant whose personal credibility has been repeatedly challenged. Mays is also credited with leveraging Little Rock restaurateur-turned-international businessman Charlie Trie's first $100,000 donation to Clinton's 1992 presidential campaign. Trie, whose Chinese and Indonesian connections have been the subject of controversy and investigation, has been a conduit for several controversial donations to the Democratic National Committee.

Mays' ties to Clinton continued in Washington. A former finance vice chairman of the DNC, Mays and his wife, Jennifer, stayed in the Lincoln Bedroom and attended White House state dinners. Mays did not return repeated calls from Salon about this story.

Dunn told investigators that HMA hired Mays for a two-year contract of $25,000. But during the investigation, no contract could ever be found, and the ombudsman position was considered by many within the prison system as a bribe. When asked about Mays' contract, prison Health Services Administrator Sam Jordison "appeared to be quite uncomfortable," investigators wrote. Jordison didn't call the Mays contract a bribe, but he did say, "I've talked to Mr. Mays on two or three occasions, and I never really knew what the hell he wanted. I do feel there was something here between Mr. Walker, Mr. Mays and HMA."

Henderson disputed that. He admitted to investigators that he "agreed to include the ombudsman so as not to endanger the continuing contract." In fact, the only work Henderson recalls Mays doing was helping create an affirmative action program and an employee handbook -- although affirmative action issues had not been at the center of allegations against HMA.

"[Mays] has met with us on three or four occasions and has mediated in some problem areas we have had," Henderson told investigators. "For a person who I would really not have hired on my own, Mr. Mays had been an asset in the overall operation of HMA." Ultimately, however, investigators were never able to find the contract that detailed Mays' official duties, or any record of how much money he received. But whatever Mays' official duties, hiring an ombudsman got HMA the contract, once again.

Not for long, however. The critical report by ILPP eventually drew blood. HMA was placed on probation following the report's release, and a few months later, the firm lost its contract to provide prison health care. HMA dissolved in 1986. Henderson says he wanted out of the plasma business. "It was getting too difficult to sell," he says. He still lives in Arkansas and works for a company that provides medical care in several Pennsylvania prisons.

- - - - - - - - - -

T he plasma contract then went to Pine Bluff Biologicals, which took over the program and even expanded it, opening bleed units at the Wrightsville unit and the Diagnostic Unit -- the prison's hospital. "There is this whole thing about the high-risk population. I disagree with that. There's no scientific proof to that," says Jimmy Lord, former owner of Pine Bluff Biologicals.

Lord insists he had no connections with scandal-tainted HMA. "I never worked for HMA. I never had anything to do with HMA," Lord says adamantly. "That center was shut down under HMA, and the center pulled some strings. Somehow they got it reinstated. I know how, but I wouldn't say. Good Old Boy Network." But documents show that in the early 1980s Lord did have connections with HMA, which shipped blood in the same trucks as Pine Bluff Biologicals. And Lord admits to selling blood to HMA.

"Yeah, I sold some street [non-prison] blood to him. There was an overabundance of Type O one year," Lord says. "Instead of me cutting my donors off and losing them, I found an outlet through HMA. That was before they got in trouble. I had a good friend who worked for them, and he made sure I got paid. It was always a shaky thing dealing with them."

Problems continued in Lord's plasma program. In 1988, the red blood cells of one inmate were accidentally infused into the wrong person, the Arkansas Times reported. The next year, an FDA inspector said the center had inadequate control over screening new donors to prove they were not on a permanent reject list. Record keeping was also inadequate. As for AIDS, Lord says that it wasn't a big concern in Arkansas -- he thought it was an issue in places like New York and California -- when he was running the program. "If anyone got caught in a homosexual act, we took them off the roster," Lord says.

Prison system administrators never wanted to shut down the program. In 1991, Byus told a local reporter: "We plan to stick with it to the last day, to the last drop we're able to sell." That year, a group from New York took over the plasma program from Pine Bluff Biologicals.

In 1992, a new series of state police investigations into the system resulted in department of corrections director Lockhart's resignation, after a barrage of allegations, including nepotism in the plasma program. He was found to have asked Lord to hire Lockhart's son to work in the plasma program. A Little Rock grand jury charged Lockhart with four counts of mail fraud, but he turned state's evidence, testified against then-state Rep. Lloyd George and was not convicted.

Prison medical director Byus, who still works for the system, stated in a police interview that Lockhart showed "an inordinate amount of concern for the success of Pine Bluff Biological in their plasma unit program," and would even have security officers "recruit" inmates to give plasma. Byus said that Lockhart "was interested in seeing large numbers of inmates participate in the program."

Finally, in 1994, the plasma program ended.

But Mike Galster, the medical practitioner, never forgot the grim images he witnessed in those years. Galster used the pseudonym Michael Sullivan to write "Blood Trail," a thinly veiled fictional account of tainted blood in the Arkansas prison system. In Canada, the book has become a bestseller and fueled more investigations into Cummins. "In so many ways it reminds you of Nazi Germany," Galster says. "If it had been the typical Arkansas scam, where we are talking about pigs, tractors, even land, that would be one thing. These guys had the power over a captive audience to make money from human beings."

Galster left HMA in 1983 after he rejected a typical Arkansas ploy -- a demand by an HMA associate that he kick back part of his earnings. "The way Arkansas works is that once you are working within the system, the people in charge make it clear that it is a privilege to have that state contract," Galster says. "Ultimately, you are expected to pay for that privilege."

"This I know," Galster continues. "Without the governor's support and protection, this disease-riddled system would have been shut down by 1982."

In Canada, Michael McCarthy, a hepatitis C sufferer from Stratford, Ontario, is understandably bitter. "I think it is devastating to the victims of the blood disaster in Canada," says McCarthy, who is married with one child and can no longer work thanks to third stage liver failure. "It shows it wasn't God that was running the blood system. It was people who were making bad decisions based on money."