CONCERNING INTEGRITY, MONOPOLY, AND TELESENSORY by Kenneth Jernigan and Barbara Pierce "In Pittsburgh," as more than one person told us, "it doesn't matter how good your technology is or how low your prices. It doesn't matter about the quality of your service or the support you give your technology. If you aren't selling products made by TeleSensory, you can't do business with the state rehabilitation agency"-- which is known as BVS, or the Bureau of Blindness and Visual Services. This is what we were told by a frustrated vendor of high-tech equipment for the blind and what we heard echoed by many others. What this vendor of technology did not say (but everybody knows) is that the TeleSensory sales representative in Pittsburgh, Mary Ann Sember, is married to Tom Sember, a counselor in the state agency's Pittsburgh office. In New Jersey the TeleSensory sales representative has a daughter who works for the state agency. The family relationship is different, but the pattern is the same. State business goes to TeleSensory regardless of cost, performance, or quality of service. The arrangement is cozy for those who are part of the inner circle, but if the same situation occurred in military procurement, it would be front-page scandal with everybody crying foul. Here, however, only blind clients are being hurt--along with small business operations (mostly owned by blind people). Since those who are being denied the right to compete are not big-time operators with major bucks and political clout, such complaints as have surfaced have largely been ignored. At least on the surface, the situation in New York is a little different. Family ties don't appear to be involved, but TeleSensory still seems to manage. Vendors report that in many parts of New York TeleSensory has the state agency technology market pretty much locked up. These vendors say that they are rarely successful in getting orders despite better prices and superior service. How has all this come about? At a time when rehabilitation money is in short supply everywhere in the country for the purchase of technology that blind people need to become or remain competitive, why do so many state agency counselors insist on buying equipment from a company with a nationwide reputation for slow and unresponsive support service and prices higher than those of the competition? Why is this done even when blind clients request alternative technology that they think will serve their needs better? Some say that the answer lies in a combination of history, sloth, and inertia--the fact that TeleSensory (formerly TSI) has been in the field longer than most of its competitors and is bigger than the rest of them. Others (whether correctly or not) cut through the niceties and call it collusion and skulduggery. When high-tech for the blind first began to make a real impact (some twenty years ago), the world of technology for the blind was tidily divided among the various producers. (See the January, 1992, issue of the Braille Monitor.) TeleSensory Systems, Inc., (known then, and still generally referred to today after its merger with VTEK, as TSI) brought out the Optacon, which gave a tactile image of the letters on a printed page, and also the first of the talking calculators. In addition, TSI produced the VersaBraille, which was a portable device that permitted word processing and used movable pins to display computer-stored text in what was called refreshable Braille. When state and private agencies or the federal government wanted this type of technology, they generally turned to TSI. It wasn't necessarily that TSI gave better service or better prices than others but that very often nobody else was in that particular corner of the market at the time. The talking calculator is a good example. It was priced at almost $500, but it worked--and it was all there was. A few years later when the Sharp calculator hit the market with a smaller size, more versatility, and a tenth the price, the TSI calculator was history. This is not to criticize the TSI calculator or even its price but only to say that even while some of the blind were buying and using it, TSI was the recipient of a good deal of resentment and ill-will because of what was perceived to be the exorbitant charge--especially since it was generally felt that a great deal of TSI's research and development costs for a number of its products had been paid for by government and other grants. In short, a number of the products were good (if expensive), and by and large the support staff had a reasonably satisfactory reputation for providing service and doing something about problems when they occurred--but TSI was heartily disliked, not only by many other vendors but (more important) by a steadily growing number of the blind. One more factor which must be added to the equation is Jim Bliss, TSI's controversial chief executive and driving force. From the beginning Bliss has proved himself to be a man of ability and unflagging energy, but he has also proved himself to be a veritable genius at bad public relations. Wherever he has gone, he has created hostility and made enemies. Whether justified or not, stories persistently circulated (and, for that matter, still do) of sleazy conduct, questionable practices, cutthroat tactics, and the determination to squeeze every penny from a deal. There is something more: Even with Bliss's reputation for cutting corners and squeezing pennies, sources tell us that TeleSensory is in financial trouble. The report from TeleSensory's auditors dated May 11, 1990, contains interesting material and says in part: Note B - Acquisition On January 27, 1989, the Company acquired all the stock of Visualtek, Inc. (VTEK) in exchange for 480,528 shares of its common stock. VTEK is engaged in the development, manufacture and sale of electronic equipment for visually impaired individuals throughout the world. The results of operations of VTEK since January 28, 1989 are included in the accompanying consolidated financial statements. In connection with the acquisition, the Company entered into noncompete and consulting agreements with VTEK's founder and majority stockholder in the amount of $4,250,000. These agreements were prepaid by the Company, are each for five years and are amortized ratably over this period. The Company has also agreed to pay $30,000 of annual nonaccountable expenses in each of the five years relating to the consulting services. Note E of the report of the auditors says in part: In January 1989, the Company entered into a working capital line of credit with a bank which enables the Company to borrow up to $2,500,000 at an interest rate of prime (10.5% at December 31, 1989) plus 1.5%. The Company paid a commitment fee to the bank equal to 3% of the maximum borrowings. The line of credit expires in May 1990; however, the Company is currently negotiating an extension of the line. In December 1989, the Company executed a promissory note with the same bank due June 1990. The note bears interest at the bank's prime rate plus 1.5%. These bank borrowings are guaranteed by the Company and its subsidiaries and are subject to certain restrictive covenants, including the maintenance of minimum working capital ratios and tangible net worth, profitable operations, and a maximum debt to net worth ratio. The Company was in violation of the profitability covenant at December, 1989; however, the Company has obtained a waiver from the bank. In December 1989, the Company borrowed $1,000,000 subordinated to bank borrowings and collateralized by the Company's assets, from a material supplier at an interest rate of 12%. Principal repayments of $200,000 at March 31 and April 30, 1990 have been made. The $600,000 balance is due May 31, 1990. This is what the auditors say for calendar year 1989, and reports are widespread that 1990 was a very bad year for TeleSensory. Some even say that the company's very existence is in danger. However, when we discussed the matter with Jim Bliss, he said that while 1990 had admittedly been bad, 1991 had been good. He said that the report of the auditors to the stockholders would not be ready for several weeks and that he was, therefore, not at liberty to give specific data. But he emphasized that the company was in good condition and that prospects looked good for 1992. Without more specific data we are not in a position to evaluate Bliss' statements or the rumors that contradict them. We are only in a position to say that TeleSensory continues its stormy and controversial course. As technology evolved in the blindness field through the 1980s, competing products began to emerge--and in the effort to reduce prices, technical support began to suffer. Even brief conversation with anyone who uses technology for the blind will turn up ghastly stories of malfunctioning systems and confused experts. TSI is by no means the only object of these anecdotes, but blind users certainly do complain steadily on computer bulletin boards of TSI unresponsiveness and equipment down-time. Yet, the large-volume purchasers (like state rehabilitation agencies and the federal government) have continued to buy TSI products. Some say that it is simply momentum and habit, an apparent feeling on the part of the agencies that they know what they are getting and with whom they are dealing. Moreover, TeleSensory has always billed itself as producing a complete line of products designed to work together, and TSI sales representatives have used this argument as a selling point. As we have said, the 1980s saw changes in the technology world. Suddenly TSI had competition, and these competitors were developing exciting new products at lower prices. While TSI continued its traditional pattern of hiring sales representatives throughout the country who were primarily concerned with selling TSI products, a number of the newer producers began to establish professional relationships with regional vendors--many of whom, as blind people, were themselves using the technology they sold. These sales people were prepared to hustle for business and provide their own equipment expertise as a start-up service in order to make sales and create happy customers. They were often willing to give assistance with related technology which was not part of their line of merchandise. In addition, they recognized that they would have to undersell TeleSensory if they were to establish their own niches in the market. Talking to these vendors, one is reminded of the old Avis rent-a-car "We try harder" commercials. These new vendors are working very hard indeed, and while they are getting business from the private sector and from institutions outside the state rehabilitation agency structure, some very strange things seem to be going on in a number of state agencies. The usual practice in state government is to seek bids from vendors when substantial amounts of money are to be spent. From what we can gather, this practice is not followed by the New Jersey Commission for the Blind, and until fairly recently most of the district offices of the Pennsylvania state agency did not bother with bids either even though Pennsylvania law requires state purchasing agents to seek them. Sometime early in 1991, however, a memo was apparently circulated to the Pennsylvania BVS offices stipulating that in future three bids must be sought before placing any sizable equipment order. We are told that the Philadelphia office had been following this practice as far back as anyone can remember but that most other regional offices had not. One might be pardoned for assuming that enforcing this bid policy would resolve the acknowledged problem of staff purchases of overpriced or inappropriate equipment for clients, but apparently such has not been the case. For example, one Pittsburgh vendor currently sells the Arkenstone reading system for $3,500. The OsCaR, TeleSensory's almost identical system, sells for $3,895. A ten-percent difference in price would seem to make the Arkenstone attractive to conscientious professionals in Pittsburgh trying to make their funds stretch as far as possible. But if one is determined to give the business to the less competitive company, all one has to do is write the bid specifications in such a way that (regardless of the facts) only the more expensive product fills the stipulated requirements. This is precisely what we are told most BVS counselors in Pittsburgh seem to be doing. Bob Jakub, the local Arkenstone dealer, says that he has to date been awarded two contracts for the Arkenstone reading system even though during the last several years he has sought to provide a number of others to BVS clients. Jakub says that in September of 1991 a client requested an Arkenstone as soon as permission was given for purchasing a reading system for him, but the counselor insisted on providing the OsCaR. According to Jakub the client (an attorney, who was not in the habit of lying down meekly and letting people walk over him) continued to demand the Arkenstone, which he eventually got. In recent weeks Jakub says he has bid on and received another contract for an Arkenstone. But for the most part we are told the Pittsburgh counselors buy TeleSensory equipment. And the only TeleSensory representative in the area is Mary Ann Sember, the wife of one of the office counselors. No one has suggested that money is changing hands, but old habits are hard to break--and pressures to conform to established practice do not have to be overt in order to be effective. Sources close to the Pittsburgh office report that one counselor was named as acting District Manager some time ago. He decided to put an end to the practice of giving all the office's technology business to TSI, and as a result, this source suggests, the acting manager is once more a counselor. Meanwhile the list of unhappy clients who have been given TeleSensory products grows. We are told that one woman was given the Vista computer screen enlargement system, the TeleSensory product. We are further told that she experienced great difficulty getting it to work for her and that in the midst of this prolonged struggle she moved to another state. Her new counselor professed himself astonished to find that she had been given Vista. He volunteered that in his agency no one had ordered that product for years. In fact, our interviews indicate that many TSI product users become dissatisfied in the months and years following the initial purchase. In the beginning TeleSensory sales representatives seem to work hard to sell and install TSI systems. When the equipment develops problems or the client needs additional help to get started, or the system does not perform as promised, we are told that the TSI personnel are suddenly hard or impossible to find and pin down. As one disgruntled customer said, "As long as they need you, they are right there to help, but as soon as you need them, you might as well forget it." In Pittsburgh there is a disturbing history of clients' getting TSI equipment regardless of their own preferences or professional recommendation. We are told that one BVS client was evaluated by the Pittsburgh Guild for the Blind, that the Optelek closed circuit television system was recommended, and that training on the system was provided. We are further told that despite the fact that the state agency paid for the evaluation and recommendation, the state counselor ordered TeleSensory's Vantage System. Only after strong objections were raised by the Optelek vendor was the excuse offered that a mistake had been made and the Optelek system purchased instead. Another vendor confided to one of our reporters that he had lost three orders in which his equipment had been recommended but TeleSensory technology substituted. In the weeks preceding the 1991 convention of the National Federation of the Blind of Pennsylvania, the rumblings concerning the improprieties in the Pittsburgh office of the Bureau of Blindness and Visual Services grew so loud that the organization passed a resolution on the matter. Subsequent to the convention Ted Young, President of the National Federation of the Blind of Pennsylvania, wrote a letter to the state's Auditor General outlining the problems and enclosing the resolution. Here are both the letter and the resolution: Philadelphia, Pennsylvania November 18, 1991 Ms. Barbara Hafer Auditor General Harrisburg, Pennsylvania Dear Ms. Hafer: The National Federation of the Blind of Pennsylvania is a state affiliate of the National Federation of the Blind, which has over fifty thousand members and an affiliate in every state of the nation. As blind people organized to promote the social and economic well-being of all the blind, we are naturally interested in and concerned about improprieties in any district of the Pennsylvania Bureau of Blindness and Visual Services (BVS). Although we understand that some of the following concerns may have been brought to the attention of others in state government prior to this time, we believe that you--given your promises of cleaning up state government made in your recent campaign--will take all necessary actions to resolve these issues. It has come to our attention that the Pittsburgh district office and some other district offices of BVS have not followed the required state practice of sending out bids before purchasing electronic adaptive equipment for clients. This is particularly troublesome in the case of Pittsburgh, given the following facts and allegations which, if true, suggest illegal practices. 1. Tom Sember, a counselor at the Pittsburgh district office of BVS, is married to Mary Ann Sember, a sales representative for TeleSensory, which is a major distributor of adaptive electronic technology for blind persons, including speech hardware and software, Braille printers, scanners with adaptive software, and equipment allowing computer screen output to be enlarged for persons with low vision. 2. There are a number of other producers of similar equipment. Much of this other equipment is less expensive and performs the same functions with the same quality as that produced by TeleSensory. 3. Despite higher prices TeleSensory has been the main source of equipment purchased by the Pittsburgh district office. 4. Other equipment vendors have cited cases in which a given brand of less expensive equipment was recommended and TeleSensory equipment was delivered. This was true even when the client had been evaluated on the recommended equipment. 5. It is alleged that, when clients request other brands of equipment, they are dissuaded with the intimation that, if they do not accept TeleSensory equipment, they may not get any at all. 6. It is alleged that, when adaptive electronic equipment is recommended for Tom Sember's clients, the case is transferred to another counselor and that TeleSensory equipment is automatically provided. 7. It is alleged that, even when a rehabilitation supervisor of the Pittsburgh district office was advised that he could get the same equipment at a lower price, he ignored this source. 8. One vendor has alleged that, when he complained about some of the above practices, the Pittsburgh district office stopped buying other products he sells which do not compete with TeleSensory. Having learned of these factors shortly before our state convention, we passed the attached resolution. As you can see, it requests that you investigate this matter. It is our understanding that portions of this matter may have been raised a year ago and that at the time it was referred to the Pittsburgh district office, where it was promptly rationalized. Given the possible illegal nature of the above practices, the cost to the taxpayers, and the failure of rehabilitation to consider the best way of meeting the client's needs and preferences, we hope that your office will investigate directly. Even as we write this letter, we are in the process of gathering more facts. We will be happy to meet with you at your earliest convenience to provide names of persons who would be willing to give you further information concerning this situation. Thank you. Sincerely, Ted Young, President National Federation of the Blind of Pennsylvania Resolution 91-03 WHEREAS, it has come to our attention from some blind persons and some equipment vendors in the Pittsburgh area that there is a definite bias on the part of the Pittsburgh district office of the Pennsylvania Bureau of Blindness and Visual Service toward the purchase of equipment produced and sold by TeleSensory; and WHEREAS, we understand that this bias may extend to changing authorizations for other equipment to similar products made by TeleSensory; and WHEREAS, we know that the wife of one of the rehabilitation counselors works as a sales representative for TeleSensory; and WHEREAS, the Vocational Rehabilitation program is the largest purchaser of technical equipment for blind persons, and this relationship to TeleSensory may constitute a conflict of interest; Now, Therefore, BE IT RESOLVED by the National Federation of the Blind of Pennsylvania in convention assembled this tenth day of November, 1991, that the National Federation of the Blind of Pennsylvania request the Auditor General to investigate this situation and rule on whether this relationship constitutes a conflict of interest and whether it violates any other laws. ____________________ There you have the letter to the Auditor General and the resolution, and clearly these documents were received at the Auditor General's office with great interest. Here is the letter written to Ted Young by one of Attorney General Hafer's assistants: December 15, 1991 Ted Young, President National Federation of the Blind of Pennsylvania Philadelphia, Pennsylvania Dear Mr. Young: Auditor General Barbara Hafer has asked me to respond to your letter of November 18, 1991, with respect to alleged irregularities at the Pittsburgh District Office of the Pennsylvania Bureau of Blindness and Visual Services. We have reviewed the information provided by you and have determined that some follow-up is appropriate. In connection with your complaint, the information provided by you will be forwarded to the appropriate audit bureau for the purposes of review during the next scheduled audit of the entity in question. Additionally, we will begin to make a preliminary inquiry into the allegations as soon as possible, given existing personnel and workloads. We will be in touch with you with respect to our progress and findings. I want to thank you, on behalf of Auditor General Hafer, for coming forward with the information that you have provided. It is only by reviewing the conduct of the affairs of state government that those affairs can be conducted as efficiently and properly as possible. Very truly yours, Charles P. Mackin, Jr. Deputy Auditor General cc: Bureau of Departmental Audits Office of Special Investigations ____________________ That was the letter Ted Young received just before Christmas of 1991. Members of the National Federation of the Blind of Pennsylvania are working with legislators to encourage the Auditor General to press forward with her investigation as expeditiously as possible. The situation in other states is not as clearly defined as it is in Pennsylvania. Vendors consistently report that the New Jersey Commission for the Blind does not place orders for any equipment that competes directly with TeleSensory technology. Al Blumenthal has been the TeleSensory dealer in New Jersey for years. His daughter Donna is an employee of the state commission for the blind, and we are told that the Commission purchases an overwhelming proportion of TeleSensory equipment. Is there any connection? It would be nearly impossible to prove, but the very fact of the family tie makes it difficult to believe that there is no favoritism. One would think that the Commission might see the wisdom of doing business with other vendors if for no other reason than to avoid the appearance of impropriety. The fact that it would save money in the process would suggest to the citizen in the street another advantage in doing so. But the New Jersey Commission continues to dance with virtually one partner only, TeleSensory. Blind consumers in New York say flatly that TeleSensory has the market sewed up tight. This does not appear to be an accurate perception, at least in some parts of the state. C-Tech (a company that sells a number of technology products for the blind and visually impaired), for example, reports that in the area around its headquarters outside of New York City it gets state agency business. This seems reasonable since, according to company officials, its prices are five percent below TSI's across the board. The company picks up and delivers equipment and also provides loaner products when they are available. It does not have entire computer systems to lend while equipment is being repaired, but it says it tries to supply components when problems develop with equipment that it has sold. The company has recently expanded into the western part of the state. Company officials report that they are getting business in the new area from every sector but the state agency. It is clear that agency personnel are hesitant to leave the familiar, even when the price is right. And what about TeleSensory? It is the largest company in this corner of the technology market. Through merger, take-over, and its own product development, it manufactures and sells the widest array of technology for blind and low-vision consumers in the country. By size and market penetration TeleSensory has a dominant position in the blindness field, and this disturbs many, not all of whom are TSI competitors. For the record James Bliss denies that TeleSensory has locked up any segment of the market. When asked whether he knew about Mary Ann Sember's relationship to the Pennsylvania state agency's Pittsburgh office and Al Blumenthal's connection to the New Jersey Commission for the Blind, he at first said that he did not know about the family ties. When the relationships were explained, he then admitted that he was familiar with the situation but explained that "They both have some clearance from those agencies, that there is not a conflict of interest." He went on to say, "It is my understanding that it is well known, and everyone understands the situation. At least," he continued, "that is what I was told." It seems evident that everyone does understand the situation, but perhaps not in the way that Jim Bliss and the state officials in question do. One can only hope that the Pennsylvania Auditor General will consider carefully the problems that have been brought to her attention and force open the bidding process in Pittsburgh. That would be a start and might serve as a warning in the other state agency offices in which competition for technology business seems to have been an unpopular concept. Though all this would help, it leaves unaddressed an area of TeleSensory behavior which elicits almost universal comment in discussions of vendor conduct in the field of technology for the blind. The feeling is widespread and deeply held that TeleSensory officials do not respect blind people and that this disrespect permeates all aspects of TeleSensory's dealings. Blind officials in several organizations report that TeleSensory representatives in discussions and negotiations prefer to deal with sighted conferees even when the blind individual with the power to make decisions is in the room. There is no objective way to measure this perception, but the general and strongly held conviction remains that TeleSensory officials do not respect blind people. Another more easily demonstrated criticism is that outside of its technical support and marketing departments TeleSensory hires almost no blind employees. More particularly, there are very few blind sales representatives. Jim Bliss named two and said that there were others but that he could not come up with names without a list in front of him. Since TeleSensory is a major company in this field, one might have hoped for a larger commitment to employing technology consumers than the record demonstrates. Virtually every other company in the field has a better hiring record. Indeed, one of the two sales representatives cited works (by choice) only part-time and limits her activity to selling Braille-connected technology. When asked directly about allegations that blind applicants for sales jobs have been told they need not apply, Bliss stated that it is TeleSensory policy to comply with the spirit as well as the letter of the law surrounding employment. Bliss said that TSI has just undergone a Department of Labor affirmative action audit, and, as he put it, "came out in good shape." He also said that TeleSensory just won the Employer of the Year Award from the California Governor's Committee for Employment of the Handicapped--all of which may mean much or little or nothing. Be that as it may, the rumors persist; the perception continues; and the TeleSensory sales force is dominated by sighted representatives. And what is the consumer left to think? TeleSensory designs, produces, and markets workable and expensive software and hardware that are made to perform best with other TeleSensory products. Its sales force, we have been repeatedly told, is hard-driving and, if a sale is in the balance, not above promising things that no current technology can yet deliver. Moreover, as one agency director told us, "This sales force would sell you a Mercedes for $65,000 if you were in the market for a car that would get you to work. A Mercedes will get you to work, of course, but it is intended to do a lot more." TeleSensory representatives seem to be good at convincing would-be consumers that the TSI product is what they need and that they shouldn't let anyone make them settle for anything less. This causes problems for state agency counselors who are conscientiously trying to save money while getting quality products. It leads to wholesale waste when the counselors themselves, for whatever reason, are committed to buying TeleSensory no matter what. As we move into the final decade of the twentieth century, one thing is clear in the field of technology for the blind. Major changes are underway. TeleSensory is not the only game in town, and the blind users of technology will no longer settle for having their informed views ignored. When unsavory business practices exist, we will do our best to put an end to them. It is not appropriate to funnel state business to one producer, whose prices are high and whose service is slow to nonexistent. When that producer's sales representatives have direct family ties to the agencies of government that make the purchases, then the consumers, the competing vendors, and the general public will inevitably draw their own conclusions about what is happening. We who are blind face enough discrimination, narrow-mindedness, and inertia among the general public without having to put up with it closer to home. We intend to end second-class treatment in the larger community, and we are likely to tolerate it even less in our own field of work with the blind--including the production and distribution of technology. It is no longer sufficient for governmental and private agencies (or, for that matter, vendors of technology) to rely on old solutions just because they are familiar. Increasingly the blind of this country know what they are entitled to and what they want and are prepared to fight to get it. Empowerment is the current watchword, and we who are blind have not only been at it for a long time but fully understand what it means and how it works.