Wisconsin-headquartered Industries for the Blind has agreed to pay $1.9 million to settle claims that they defrauded the U.S. by passing off China-made products as manufactured by the blind to secure lucrative government contracts.
The federal government hired Industries for the Blind, Inc. (IBI) to manufacture a wide array of products to incentivize the creation of jobs for disabled Americans. But instead of creating those much needed opportunities, the company allegedly bought the goods from China and employed sighted workers, pocketing hundreds of millions of dollars in the process.
With an unemployment rate of approximately 60 percent, one thing blind Americans don’t need is to have employment opportunities taken away, and yet, that is exactly what IBI did, a company insider claims.
Industries for the Sighted?
According to whistleblower Paul Inzeo, Industries for the Blind “imported $40 million dollars of goods a year from China and sold them as American blind-made products to the U.S. government.” Although the company’s sales brochures depicted blind employees, Inzeo claims he saw “sighted part-time workers handling the relabeling of Chinese goods as Made in America.” When he asked a warehouse manager why the work was not being carried out by blind workers, he was told that “it was easier to hire sighted workers because it took too long to teach the blind how to do the work.”
Although the government had hired the company precisely to “teach the blind how to do the work” and to empower them as individuals, Industries for the Blind allegedly used its privileged status as a preferred government contractor to generate hundreds of millions of dollars in illegal profits.
“IBI has exploited [the blind] and used them to expand their business into one that has generated nearly half a billion dollars is gross revenues over the last five years according to 2013 IRS filings. This is no ordinary nonprofit organization,” the lawsuit states.
CEO, Former CEO, SVPs, and Others Named as Co-Defendants
The defendants in the lawsuit are: Industries for the Blind; Chuck Lange, who served as IBI’s CEO until 2015; his son Charles “CJ” Lange Jr., the company’s current President and CEO; Deborah Lucas, IBI’s Senior Vice President of Business Development, who has been with the company since 1993; Richard Weigold, Senior VP of Product Development & Channel Management; and Karen Walls, IBI’s former Vice President-Administration/CFO. The settlement is only with defendant Industries for the Blind.
JWOD, AbilityOne and The FCA
Originally enacted in 1938, the Javits-Wagner-O’Day Act (JWOD) provides that if a government entity intends to procure goods or services included in a specific “procurement list,” it must procure them “from a qualified nonprofit agency for the blind or a qualified nonprofit agency for other severely disabled.”
The procurement list includes:
- “Aircraft, Vehicular and Electrical Equipment and Supplies,
- “Clothing, Textiles and Individual Equipment,
- “Food Processing, Packaging and Distribution,
- “Medical & Dental Supplies,
- “Office Supplies and Furnishings, and
- “SKILCRAFT® products”
IBI’s CEO, CJ Lange, states on his Linkedin profile that the company was “founded in 1948 as. . . a nonprofit organization with the goal of attracting federal government businesses, who are mandated by [the JWOD Act], to buy products and services from manufacturers and organizations that hire blind and visually-impaired professionals and expand blind employment opportunities.”
While Inzeo claims IBI resorted to fraud to expand its business, Lange sees things in a very different light, stating that “From humble beginnings, [the company] has moved from a simple purveyor of brooms and brushes to a highly innovative $100+ million organization.” This flattering self-description did not prevent the company from agreeing to a sizable FCA settlement.
The AbilityOne Commission is a federal agency charged with certifying products as blind-made. Companies that employ blind Americans and manufacture AbilityOne-certified goods are granted special access to lucrative procurement contracts. Falsely claiming that a product was made by blind workers is a violation of the False Claims Act (FCA) and taints any related government payments. Misrepresenting foreign-made goods as U.S.-made is both a violation of the Buy America Act and the FCA.
Depriving the Blind
Once a marketing manager for IBI, Inzeo was represented by Brian Mahany, a seasoned whistleblower litigator.
“Exploiting the blind to perpetrate a scheme to defraud the government is arguably the most outrageous conduct I have seen in a decade of whistleblower cases,” Mahany commented. The statement becomes more significant when one considers the attorney’s track record, which includes at least one multi-billion-dollar settlement.
Based in West Allis, IBI is purportedly a nonprofit. Operating since 1948 with the lofty mission of creating “jobs for the blind and visually impaired,” IBI has, however, spectacularly increased its earnings over the past five years largely thanks to its products’ AbilityOne status.
According to Inzeo’s complaint, “Instead of providing much needed employment and training opportunities for America’s blind and disabled that Congress strived to accomplish, IBI and its officers have orchestrated a complex scheme designed to mislead the U.S. government and American taxpayers and further deprive the blind and disabled, all while enriching themselves by exploiting their position as certified contractors of blind made products.”
The AbilityOne program facilitates the employment of 45,000 blind/severely disabled Americans, including about 3,000 veterans. Whistleblowers are instrumental in exposing procurement fraud and the exploitation of disabled Americans. Plaintiffs in successful FCA cases can receive up to 30 percent of any resulting recoveries as a whistleblower award.
In the case of Inzeo’s lawsuit, filed in 2015, the government promptly decided to intervene. After a thorough investigation, prosecutors concluded that IBI did not only misrepresent “the amount of direct labor hours performed by people who are blind… [and fail] to actually use the required amount of direct labor performed by people who are blind,” but also engaged in anti-kickback violations in connection with government furniture contracts.
“We are very satisfied with the case outcome,” Mahany commented. “IBI is paying $1,938,634.09 in full settlement and the case is dismissed as to this party. The settlement, however, does not release any individual liability, criminal liability or lRS liabilities.”
Industries for the Blind, Inc. is now Industries for the Blind and The Visually Impaired (IBVI). Its website currently states, “IBVI provides the best, most cost-effective industrial supplies and services for all government supply needs while creating jobs for the blind and visually impaired.” In the light of the whistleblower’s revelations, many a blind person would disagree.
Statement from IBVI
"Upon learning of serious accusations from a former employee several years ago, IBVI and the United States Department of Justice worked together to conduct an extensive investigation. None of the initial accusations were verified, and no proof of guilt was found. However, during our internal investigation, we found that two of our employees were engaged in inappropriate activity, and those two employees were fired. We then brought our internal findings to the Department of Justice, and we reached a settlement based on our own investigation. This settlement is not related to the initial accusations from the former employee.
We take very seriously the role we play in the employment and empowerment of people who are blind or visually impaired, as well as the relationship we have in producing quality supplies for the United States government. These settlement negotiations have provided an opportunity for us to strengthen our relationship and trust with the United States government, while also ensuring that our staff is working towards our mission of blind employment."
UPDATED October 1, 2020 with a statement from IBVI President & CEO, CJ Lange.
ORIGINAL POST September 29, 2020