Former blood bank foundation leader files whistleblower complaint

January 8, 2019

The former executive director of the Blood Center Foundation of the Inland Northwest filed a whistle-blower complaint alleging she was fired for opposing a deal that could benefit board members while reducing grants suppporting the local community.

The Blood Center Foundation was founded in 2013 by the board of directors for Spokane-based Inland Northwest Blood Center to maintain local control of $3 million in investment assets after the local blood bank affiliated with Scottsdale, Arizona-based Blood Systems Inc. according to the complaint filed with the Washington Attorney General’s Office.

Loreen McFaul, who was hired as the part-time executive director for the foundation in 2014, said in her whistleblower complaint that the organization’s goal is to dispense funds to the community by providing grants to regional organizations for scholarships, research and technology.

“I think the reason that the foundation exists in the first place is due to decades of generous blood, platelet and organ donors,” she said. “That is the reason the foundation was launched.”

The Inland Northwest Blood Center merged into Blood Systems in 2016, one of the nation’s largest blood transfusion organizations.

Blood Systems recently rebranded asVitalant, a nonprofit with more than $382.5 million in assets according to its 2015 tax filings with the Internal Revenue Service. It receives more than 1.8 million donations a year and has a network of more than 127 donation centers providing blood to patients in 40 states,

The INBC’s board of directors disbanded after the merger two years ago.

Jeff Bryant, president and CEO of Vitalant, is now on the separate foundation board along with William Dittman Jr., who also serves on the board of Blood Systems.

As a result of the merger, the foundation’s assets doubled to more than $6 million. Under the merger terms, the foundation also would receive a $250,000 donation each year for a decade from Blood Systems.

Spokane-based accounting firm Moss Adams, who prepared tax forms for the foundation, notified the board in 2017 it would be required to switch status from a public charity that typically has many small donors, to a form of private foundation that receives most of its support from one entity because it was receiving most of its funding from Blood Systems.

During a foundation board meeting in April, the board discussed three options: increase fundraising in the community and maintain its public charity status, switch to a private grant making foundation, or change into a type 3 supporting organization for Blood Systems.

McFaul said she was terminated after distributing a comparison sheet to board members that outlined potential conflicts from converting the nonprofit to a type 3 supporting organization, which has less regulations and restrictions and typically exists to fund one organization.

A private foundation would be required to distribute 5 percent – or around $370,000 annually – of investment assets in grants, while a type 3 supporting organization would require distribution of 3.5 percent of investment assets.

McFaul raised concerns in the complaint that conversion to a type 3 supporting organization could give control of foundation assets to Vitalant, separating the foundation from its original mission instead of providing grants to the community.

The complaint states Bryant and Dittman had conflicts of interest that should have required their recusal from policy discussions. Bryant could benefit financially if grant funds boost Vitalant’s local operating budget. Bryant receives annual bonuses based on Vitalant’s performance.

“The Blood Center Foundation of the Inland Northwest became a private foundation, but has engaged in discussions about being a Type III supporting organization to Vitalant to support the blood center operations historically served by Inland Northwest Blood Center,” the foundation said in a statement. “The Board has not made any decisions and is evaluating what is in the best interest of the Foundation and the community to fulfill its missions.”

McFaul said she received a legal bill in September 2017 from Workland Brajcich McPhee – the law firm advising the board through nonprofit conversion discussions. The bills revealed meetings and emails regarding her foundation employement through the lens of age and gender as it pertains to federal employment discrimination law.

“This is where I realize that it is highly likely I will be fired for doing my job and doing it well,” she wrote, adding she was subsequently terminated on Nov. 1, 2018.

The foundation said in a statement that it “wholly disagrees with the characterizations and allegations asserted” in McFaul’s complaint.

“The Blood Center Foundation of the Inland Northwest cannot go into the details of the personnel issues involved with its former executive director, but maintains that the basis of separation of employment was legitimate, lawful and non-retaliatory,” according to the statement.

McFaul said she filed the complaint with the state attorney general’s office to hold the board accountable.

“I want the public to be aware and want the attorney general and the state of Washington to understand the greed and under-handedness that’s happening,” she said. “I hope the attorney general will hold them to being a grant-making private foundation.”

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