                          SWEEPING UP THE KRUMS:
                    CALIFORNIA STATE POLICE INVESTIGATE
                     THE BUSINESS ENTERPRISE PROGRAM 
                            by Barbara Pierce 

Anyone who has ever suffered an injury knows that, unless you take 
great care to rehabilitate and strengthen the affected part, you will 
always experience twinges of pain and weakness in the area. Unfortunately, 
the same phenomenon is also frequently true of institutions. Old habits 
of sloppy practice and impulses to cut corners and blur distinctions 
die hard in bureaucracies. New brooms must sweep very carefully and 
very zealously indeed if they are to clean up old messes.  

Early in 1977 the San Francisco Examiner ran a series of articles 
exposing to the light of public notice a number of unsavory problems 
in California's Business Enterprise Program (BEP). Briefly, these 
included overpricing of equipment and supplies, disappearance of millions 
of dollars of inventory, and misappropriation of considerable amounts 
of the trust fund intended to assist the vendors in the BEP. Despite 
the then Director of the Division of Rehabilitation Ed Roberts's
characterization of the problems as "minor administrative and bookkeeping"
difficulties, major investigations were undertaken, and heads rolled 
as a result. One Roger Krum was brought in to head the BEP, and many
thought that he was being demoted or punished (according to his own
statement in the Examiner) by being handed this assignment. But he went on
to assure the reporter that he wanted the job because he knew that 
the man who could clean up this mess and did so would have his reputation 
made. He allowed as how he welcomed the challenge, or was it the
opportunity. 
 
In the light of recent events in California, it is instructive to 
read the final article in the newspaper series. It appeared in the 
San Francisco Examiner on January 14, 1977. Here it is: 
 
                         Brown's Help to be Sought
                              on Blind Mess 
                       by Jim Wood and Larry Kramer 
 
Senator Bill Greene, D-Los Angeles, says he will go personally to 
Governor Brown in an attempt to straighten out the state's tangled 
program for blind businessmen. 

Greene also has called on the state auditor general's office for a 
full report on the Business Enterprise Program. Greene said he was
requesting action because the Department of Rehabilitation has never been
able to present an accurate, definitive accounting of the BEP trust funds. 
"For well over 10 years requests for precise figures have been 
met with evasions," he said.  

Greene also noted that there are "compelling reasons" to believe 
that accepted accounting and fiscal procedures have been violated. 
He said that disbursements have been made for purposes other than 
those spelled out in the state and federal laws concerning the BEP. 
"Some of these have been challenged and others have been arbitrarily 
continued for lack of challenge," he said. Greene met last week 
with critics of the fund's management and with representatives of 
the auditor general's office to plan the investigation. 

Greene urged that particular note be taken by the auditors of using 
trust funds for administrative purposes and consultants' fees. 
Calling the program a "morass of mismanagement," he said that 
the department had used single source vendors when competitive bids 
could have been obtained, spot purchases made for expediency, and 
obsolete equipment continued in use in the name of economy. 
"All the foregoing has been done at costs far beyond any reasonable 
standards of good business practices and management," he said. 
Greene also told the auditor general's office that "there is no 
precise central inventory of BEP equipment."
 
"Over the years, a considerable amount of BEP equipment has been 
disposed of in one way or another," he said. "The accounting 
for this equipment, if any, is very suspect."  At a news conference
yesterday, Edward Roberts, director of rehabilitation, said the "state
auditor general has been quoted as saying there is no scandal" in the fund.

John Williams, the state auditor general, said, however: "There 
is no way I can say at this time whether allegations that have been 
made are or are not true. That is the purpose of this audit." 
"We don't have any documentation at this point that indicates 
any form of scandal, but we've just barely begun our field work," 
Williams said. 

At the news conference, Roberts called reports in the Examiner 
concerning the program "false and misleading" and said he fears they may do
irreparable damage to "our service for the blind generally."  Roberts said
he was proud of the program and "regretted seeing it bruited in the public
press." "The program has minor administrative and bookkeeping problems.
These have been rectified and have been corrected" he said. The series,
quoting from taped interviews, said that Roger Krum, the program
administrator, called the problem "mind boggling" and "an eightball
situation," and former administrator Robert Melody said the program faced
"a hell of a serious problem." 
 
At the news conference Elliott Allen, deputy director for administration, 
was asked whether it was possible for an individual to misappropriate 
funds or property from the program. The series had quoted a state 
report noting such a potential. "The potential does exist" Allen answered.
"We are concerned about it. That is one of the things we are working on." 
Roberts added, however, that he is convinced that "no corruption 
exists, even though central inventory is not complete." 

Krum was asked if the existence or location of equipment could be 
verified. He replied: "The equipment in location can be verified. The
equipment in the warehouses, most of it, can be covered. One of the things
we're working on is a problem of having stuff not show up on a printout, or
show up two or three times." Roberts said that "we think of it in terms of
a problem in accounting and the inventory system. We are in the process of
rectifying these problems by establishing a new system." 
 
That's what the Examiner had to say twelve years ago. And what--it 
is fair to ask--has happened in the intervening years to rectify 
the situation? Surely with the computer revolution an inventory-management 
system has been put in place to keep track of the materials in use 
and warehoused in the nation's largest BE Program. At the very least 
the Trust Fund is now safe from sticky fingers, and the administrative 
staff has come to work with the BEP business people in an atmosphere 
of mutual respect and good will. After all, Mr. Krum came in intending 
to make his reputation for better or worse on what he could do with 
the Business Enterprise Program. And so he has!
  
His attitude toward vendors has been clear for years. The BEP vendors 
report that he refers to them as the "boys," a term which 
even the male vendors find demeaning. Mr. Krum also enjoys putting 
his feet up on his desk in his office and on tables when he is taking 
part in meetings in other rooms. Participants in these gatherings 
report that he points the toe of one shoe at the person whom he is 
addressing, particularly if he does not agree with or respect the 
individual. These are small things, but Californians find them indicative 
of his general attitude toward blind people who are not willing to 
be subservient.  

On May 5, 1989, the Vendors' Chapter of the NFB of California conducted 
a seminar for interested business people with an emphasis on issues 
of concern to those associated with the Business Enterprise Program. 
Jim Gashel, Director of Governmental Affairs for the Federation, was 
the keynote speaker, and the seminar was scheduled so that those interested
in attending the spring meeting of the California Vendors Policy Committee 
(CVPC) could do so since both events were taking place in Sacramento 
at different times on the same day. The seminar was by all accounts 
a great success, and most of the attendees went on to the CVPC meeting. 
 
The regulations that established the Vendors Policy Committee stipulate 
that the Director of the Business Enterprise Program or his or her 
designee should attend this meeting, but Roger Krum has always brought 
a crowd of staffers (six were present on May 5) to participate in 
the meeting and, many vendors feel, to keep the Policy Committee in 
line. But this time a number of CVPC members requested that Mr. Krum 
or his designee stay in the room and that the rest of the staff members 
leave. Instead of complying with state regulations, Krum, his staff, 
and several members of the CVPC (including Krum's hand-picked Chairmen 
of the Policy Committee) walked out.  

A quorum of the Committee was left, however, and John Friesen was 
elected as chairman. So the group got down to work on the agenda of 
the meeting. Without the usual help of the BE Program support staff, 
minutes were taken, duplicated, and circulated. But Krum has steadfastly 
refused to recognize the actions of the Policy Committee taken that 
day, and one more festering problem has been added to the concerns 
of blind people in California.  

Sharon Gold, President of the NFB of California, wrote a long and 
informative letter to the state's vendors on May 20, 1989. She reviewed 
for them several issues and cases of general interest to blind vendors 
and offered the Federation's assistance to those who needed it. Then, 
in an effort to prepare the ground generally for the dispute that 
was clearly on the horizon, she raised several points for vendor
consideration. 

The concluding paragraphs of her letter read as follows:  
____________________ 

As you know, the California Vendors Policy Committee (CVPC) is mandated 
by federal and state law. The CVPC is to function separately from 
the Business Enterprise Program to present the views of the vendors 
to the licensing agency and is to represent the interests of the vendors 
in the policy-making decisions of the agency. 

Recently, certain disputes have arisen between the CVPC and Roger 
Krum, the Administrator of the Business Enterprise Program. Throughout 
California vendors are being prevailed upon to pass judgment and take 
sides. Information from both sides has come to me as well, and I have 
considered the following: Has the CVPC been functioning separately from the
Business Enterprise Program as mandated by federal and state law? 
Have members of the CVPC been free to express their concerns during 
committee meetings without a threat of reprisal? 

Do vendors want a committee which is free to present the views of 
vendors to the BEP administration or a committee which is expected 
to transmit to the Business Enterprise Program policy suggestions 
which have been planned and solicited by the BEP administration and 
which rubber stamp the actions of the administration? Are the elected
delegates taking an active part in the Vendors Policy Committee meetings? 
Does the Business Enterprise Program administrator have a moral or 
legal right to declare a CVPC meeting concluded when the delegates 
have not chosen to adjourn the meeting? 

Should the elected delegates be required to submit to the orders of 
the administrator and leave a CVPC meeting without carrying out the 
business on the agenda? To whom do the set-aside fees belong, and should
the Policy Committee or the Administrator of the Business Enterprise
Program have control over the expenditure of these funds? Do the delegates
to the CVPC have authority to choose the chair of the Committee, or does
the chair serve at the pleasure of the Administrator of the BEP, to be
automatically accepted by the committee? 

These questions sent me to reread federal and state statutes relevant 
to the Business Enterprise Program. For the Vendors Policy Committee 
to function properly, it must be free to hold its meetings and conduct 
its business without undue influence of the licensing agency. It is 
not an accident that neither federal nor state statutes or regulations 
mandate that the licensing agency send a representative to the meetings 
of the Vendors. Policy Committee Bylaws (as amended January 17, 1989) 
do not mandate the presence of an agency representative but state 
that "(m)eetings of the Committee may be attended by the Director 
or his designated representative..." [not Directors or representatives]. 
The responsibility of the Licensing Agency is to provide to the Vendors 
Policy Committee such information as may be necessary for the Committee 
to make reasonable and educated decisions on behalf of the blind vendors. 
Further, the Licensing Agency must consider and respond to the
recommendations of the Vendors Policy Committee. Where a licensing agency
makes an effort to intimidate or otherwise to control the process of the
functioning of the Vendors Policy Committee, it is almost certain that
vendors will eventually notice the development of dissension between the
administration and the vendors. 

A final note: following the May 5th CVPC meeting and under dates of 
May 8th and May 9th, letters were sent to Westley Whitelaw [the CVPC 
Chairman who walked out of the May 20 meeting] stating the Department's 
position concerning the chair of the Vendors Policy Committee. One 
letter was signed by Roger Krum, Administrator of the Business Enterprise 
Program, and one was signed by Hao Lam, Deputy Director, Program Management
and Support Division. In reading the two letters, one finds much identical 
language. One also finds that the letters were prepared by the same 
secretary and that they were both printed on letterhead bearing the 
telephone number of the Office of the Business Enterprise Program. 
The program for blind vendors is an old and respected business opportunity 
for blind persons. The National Federation of the Blind of California 
stands firm in support of this program and the California vendors 
who are striving to bring their program into conformity with federal 
and state statutes and regulations. 
 
                                  Cordially, 
                                  Sharon Gold, President 
                                  National Federation of the Blind
                                     of California 

____________________ 

That is what Sharon Gold wrote on May 20, in the wake of the high-handed 
actions of Roger Krum and company. Life in the Business Enterprise 
Program apparently went on pretty much as usual across the summer. 
Then, on September 2, the Friday of the Labor Day weekend, the California 
State Police blew the whistle on what had been going on under the 
table. Officers escorted Krum and three others from their offices 
and off State property, and they changed all the locks on the warehouse 
doors so that no one could tamper further with the equipment and supplies 
supposed to be available for vendors. A Department of Rehabilitation 
spokesman repeatedly assured the Braille Monitor that the disappearance 
of 1.2 million dollars worth of inventory had been discovered during 
an internal Department audit and not by the police. Given the department's 
track record in identifying fraud, embezzlement, and payoffs in the 
past, perhaps the fact that the 1989 problems were discovered through 
an internal audit is worthy of commendation, but it hardly generates 
confidence in the objective observer or the vendor whose livelihood 
depends in significant measure upon the honesty of the Business Enterprise 
Program managers. Regardless of who discovered the discrepancy, however, 
the fact of the missing material was of real importance to California's 
blind vendors, so the NFB of California circulated a letter to them 
that weekend. Here it is:  
  
                                   September 2, 1989 

Dear California Vendors: 

An investigation has been launched in Sacramento which is of great 
importance to blind vendors in the Business Enterprise Program (BEP). 
According to the Sacramento Bee, Channel 3 News, and other informed
sources, on September 1, 1989, four executives of the Business 
Enterprise Program were escorted from the Department of Rehabilitation 
BEP Office by State Police after an internal audit revealed that part 
of the Program's multi-million dollar equipment inventory is missing. 
While the news reports did not cite names, informants have identified 
the officials as Roger Krum, BEP Administrator; Jim Flint, Assistant 
Administrator; Joe Parlio, Supervising Business Enterprise Consultant 
(SBEC); and Tony Budmark, Property Manager. The four officials were 
placed on administrative leave until State Police can complete their 
investigation. During the investigation Hao Lam, Deputy Director, 
Program Management and Support Division of the Department of
Rehabilitation, is serving as Acting Administrator of the Business
Enterprise Program. 

The investigation reportedly involves 1.2 million dollars worth of 
allegedly missing BEP equipment--equipment purchased with California 
Vendor Trust Fund monies. The National Federation of the Blind of 
California has received anonymously a copy of the Conference Notes 
concerning the missing equipment, which outlines eight findings concerning 
BEP equipment:  
 
1. Physical Inventories 
2. Correction Documents 
3. Decal Tagging 
4. Surveys and Dispositions 
5. Transfers to Outside State Agencies 
6. Lack of Monthly Reconciliation 
7. Volunteer in Los Angeles Office 
8. Notification of Alleged Theft of Equipment 
 
For your information a copy of the Conference Notes is included herewith. 
All five Business Enterprise Program equipment warehouses have been 
searched, and State Police have changed the locks on each warehouse 
to prevent tampering. The Department has announced that the BEP officials 
have been notified not to return to their BEP offices until further 
advised, not to go to BEP locations, and not to communicate with BEP 
staff, vendors, and contractors. 

A similar situation was discovered in 1976, shortly before Roger Krum 
became Administrator. During the week of January 10, 1977, a series 
of articles which revealed much about the 1976 investigation was published 
in the San Francisco Examiner. For your information, the 1977 
series of articles is included with this letter. It is amazing how 
easily one could shift the date from 1977 to 1989 and have the content 
of the articles apply to the many problems which continue to plague 
the Business Enterprise Program today. 

For some time there has been rising dissension throughout the Business 
Enterprise Program between the vendors and the administrator. Blind 
vendors throughout the state have expressed concern about the unwillingness
by the BEP Administration to disclose information relevant to the 
Vendors Trust Fund, into which each blind vendor pays the monthly 
six percent set-aside fee. An increasing number of vendors have been 
speaking out about irregularities and unfair practices in the Selection 
Committee process used to assign vendors to locations. 

The California Vendors Policy Committee Bylaws (as amended January 
17, 1989) do not mandate the presence of an agency representative 
but state that "meetings of the Committee may be attended by the 
Director or his designated representative..."  (not Directors 
or representatives). Therefore at the May California Vendors Policy 
Committee meeting, the delegates insisted that the Bylaws of the Committee 
be followed and invited Mr. Krum or his designee to remain in the 
meeting and instructed that the remaining six staff members leave--in 
the past there have been as many as 8 staff members present at a given 
CVPC meeting for which there are 14 elected delegates. When Roger 
Krum tried to cancel the meeting, an intimidated few Policy Committee 
delegates followed Mr. Krum's orders and left the meeting, leaving 
behind a quorum to conduct the May business of the CVPC. Since the 
Committee meeting, Roger Krum has failed to recognize the CVPC's selection 
of its new Chairman, John Friesen. He has refused to address the new 
Chair or to recognize the other Committee-elected officers. 
This is a critical time for the Business Enterprise Program. If there 
was ever a time for vendors to unite, it is now! Inquiry should be 
made as to the management of the Vendor Trust Fund monies and the 
management of the equipment purchased with these monies. If a new 
administrator is to be chosen, vendors should insure that they play 
a role in the selection process. Some vendors have suggested the
establishment of an Escrow Account to handle Vendor Trust Fund monies until
the completion of the current investigation and until vendors receive 
assurances from the Department of Rehabilitation that proper audit 
controls are established for the Vendor Trust Fund and the equipment 
purchased from the Fund. 

Vendors wishing to join the Merchants Chapter of the National Federation 
of the Blind of California or to make a donation to help with the 
distribution of these materials may send $10.00 annual dues and/or 
donations to Nick Medina, Treasurer, Merchants Chapter, NFB of California, 
2018 Newton Way, Concord, CA 94518. Vendors may also contact Frank 
Rompal, Jr., President of the Merchants Chapter of the NFB of California, 
at 415-236-3800. 
 
                              Cordially, 
                              Sharon Gold, President 
                              National Federation of the Blind
                                of California 
____________________ 

That was the news that the NFB of California communicated to the vendors 
around the state the day after the police escorted Roger Krum and 
his minions off State property. Federationists were pleased to know 
that state government was prepared to hunt for the missing inventory 
and assign responsibility for the disappearances, but there were very 
real fears that the trouble ran still deeper. As in the late Seventies 
there was worry about the trust fund. Vendors pay a monthly charge 
(six percent of net proceeds in the case of California). This is called 
a set-aside, and out of this pool the Department of Rehabilitation 
pays certain costs of conducting the Business Enterprise Program. 
With so much else going wrong in the BEP, Vendors were naturally worried 
about the safety of the trust fund. Blind people began asking whether 
it wouldn't be prudent to appoint a conservator to manage the trust 
fund until the investigation was completed.  

Sharon Gold approached Congressman Robert Matsui's staff with our 
concerns, and they too were alarmed. As a result, on September 11 
Congressman Matsui's office asked the Attorney General of California 
to appoint a conservator, and he agreed to do so within ten days. 

Meanwhile, the NFB called a meeting of all interested parties for 
September 22 so that vendors could hear from everyone involved and 
make up their own minds about what was happening. A staffer from
Congressman Matsui's Sacramento office came, as did Sharon Gold and other
Federationists; John Friesen, the newly elected chairman of the California
Vendors Policy Committee; and concerned vendors--approximately fifty in 
all. Some of these were concerned about Department practices, and 
some (about ten in number) were there to cause trouble and stir up 
ill-feeling any way they could. The one group that was conspicuous 
by its absence was the Department of Rehabilitation. Neither Hao Lam 
nor those whom he appointed to administer the Business Enterprise 
Program during the crisis were available to explain things to the 
vendors or reassure desperately worried people that the Department 
wanted to preserve their livelihoods--perhaps no one in the Department 
was prepared to give such comfort. 

An attorney representing the Department of Rehabilitation did try 
to slip in unobserved, but he was forced to introduce himself and 
admit who he was and whom he represented. According to Federation 
participants, at one point during the meeting the Matsui staffer said 
to the Department's attorney that he was glad that the attorney had 
come because he had a message he wanted carried back to the Department. 
He said that he, as Congressman Matsui's representative, found it 
"outrageous" that members of the Department of Rehabilitation 
staff were not present, and he then announced that the Attorney General 
had indicated that he intended to appoint a conservator for the trust 
fund very soon.
  
This article is being completed in late October. The California Attorney 
General has changed his mind about appointing a conservator, having 
decided (with who knows how much externally-applied encouragement) 
that, since the Department of Rehabilitation is undergoing an
investigation, he will wait until it is completed before determining
whether or not a conservator is necessary. There is no way of telling how
long the investigation will take. The State Police recently told Sharon
Gold that it would probably be eight months to two years, during which 
time the trust fund continues to be vulnerable. And in the meantime, 
the people of California will pay Roger Krum's salary and those of 
his cronies sharing his administrative leave. No one can know with 
certainty whether the trust fund is safe, and no one is looking into 
the question of whether funds have disappeared from it in recent months 
or years.  

But Roger Krum is keeping busy despite his paid leave from state
employment. Again this year he is the director of a local jazz festival,
for which he receives a hefty salary of some $43,000, according to sources
in the community. It is comforting to know that his cultural work this 
year runs no risk of interfering with his state job. In the past some 
people have expressed concern that a man who was holding down two 
full-time jobs might be tempted to short-change one employer or both, 
but the festival people, at least, seem satisfied with Roger Krum's 
performance.  

In many ways the saga of the California Business Enterprise Program 
is a disturbing story. It is far from over, and the vendors of California 
are very far from being able to count on their state agency to help 
them or protect their interests. The good news is that the National 
Federation of the Blind is still on the job, working with the State 
Police, attempting to persuade the Attorney General to protect the 
trust fund, and informing vendors about what is happening and what 
their rights are.  

In the midst of all this, the affiliate goes right on doing all the 
other things that Federationists should be doing week in and week 
out. In September the state organization contacted Governor Deukmejian 
to request his annual proclamation of October 15 as White Cane Safety 
Day. The Governor wrote the proclamation, but he also wrote a letter 
to the NFB of California. It is clear that the work of the organized 
blind movement is not going unnoticed, and it is good to know also 
that at some levels of state government our efforts are receiving 
the recognition they deserve. Here is what the Governor of California 
spontaneously and without solicitation wrote:  
____________________ 

                                October 4, 1989 
 
TO: National Federation of the Blind 
of California 
 
On behalf of the citizens of California, I would like to commend your 
dedicated efforts to provide services and programs to meet the special 
needs of visually impaired citizens throughout our state. 

Visually impaired citizens rely on organizations such as the National 
Federation of the Blind of California to provide counseling and support, 
job training, and employment opportunities so that they may realize 
a greater sense of independence and self-sufficiency. As October 15, 
1989, is White Cane Safety Day in California, I would like to join 
in this celebration by honoring your many contributions to the health 
and productivity of blind and visually impaired citizens throughout 
our state. 
Your efforts are most commendable and have earned the respect and 
appreciation of all Californians. Please accept my best wishes for 
every future success. 
 
                               Most cordially, 
                               George Deukmejian 
                               Governor of California 
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