The Body Brokers — Part 5: Pioneers

By Mark Katches,
Liz Kowalczyk and Ronald Campbell
April 20, 2000

Making death pay

The tissue trade thrives despite laws against profiting from the sale of human parts. Those earning a living in the field make no apologies.

A family of Russian immigrants came to America with $90 and struck it rich in the body-parts trade. Headed by patriarch El Gendler, the family grossed $24.8 million in salaries, bonuses and fees over five years turning donated human tissue into products, an Orange County Register investigation found.

Gendler co-founded the Pacific Coast Tissue Bank, a nonprofit that seeks donations from grieving families. He also co-founded with his wife a private, for-profit bone-processing firm that gets its raw materials from downtown Los Angeles-based Pacific Coast, records show. "I make a good living," wrote Gendler, who declined to be interviewed in person. "But I work hard and have a lifetime of work invested. ... I am a top scientist, and I receive compensation as such." Industry critics and ethicists say the Gendlers represent the good and the troubling in the $500 million tissue trade, which thrives on a mix of altruism and money.

More than 175 companies and tissue banks nationwide operate in this fast- growing field, despite laws against profiting from the sale of body parts. The industry does not include agencies that harvest vital organs, such as hearts, livers and kidneys for transplant.

Few in the nonprofit tissue-bank business have been as successful as the Gendlers, who now hope to gain access to the Orange County morgue. The family says its products have helped hundreds of thousands of patients live more comfortably. They also are considered mavericks who are pushing salaries and perks to new heights in the nonprofit tissue-bank field, while discounting industry safety standards, records and interviews show.

The state attorney general is probing their business ties to see if nonprofit Pacific Coast directs too much money to the family's for-profit venture. And health regulators have cited the tissue bank for its handling of human tissue, inspection records show. Lawyers for the Gendlers say the family is doing nothing illegal.

Money is made in the industry through product sales. Tissue-bank executives and the for-profit companies emphasize that they are not charging money directly for body parts. Instead, they charge marked-up fees for handling, processing and distributing the tissue. That distinction allows them to step around federal and state laws banning profits off body parts.

Pacific Coast generates an average of $26,600 from each donated body * mostly from bone, according to Gendler. The tissue bank reported $6.2 million in revenue in 1998. Part of the money is used to pay salaries and perks to Gendler. Half the proceeds go to the for-profit company, which is owned by Gendler's wife, records show.

Here's how it works: Gendler, the president of Pacific Coast, was paid $533,450 annually in salary and bonuses in 1997 and again in 1998, according to the tissue bank's federal tax reports. He is the highest-paid executive of a nonprofit tissue bank in the United States, according to a Register analysis of the industry. The average income for top executives at 50 of the nation's largest tissue banks in 1997 was $135,308. The world's largest tissue bank -- which generates 10 times more revenue than Pacific Coast -- paid its top executive $182,696 less than Gendler in 1998.

His son Eli Gendler earned $291,800 as one of the nonprofit tissue bank's two medical directors, records show.

Simona Gendler, the president's wife, runs the family business, Perfomat Inc. From 1994 to 1998, her company recorded $20.6 million in fees from Pacific Coast. The fees compensated her for grinding and processing human bone into Dembone, Lambone and other trademark products using her husband's patented methods.

Dentists use the products to treat gum disease and to fill small gaps in bone created when teeth are pulled. El and Simona Gendler formed Perfomat together, records show.

The private company lists its official address as a $2.47 million, seven- bedroom, seven-bath estate on a 22,248-square-foot lot a few blocks from Santa Monica State Beach. El and Simona Gendler own the home. Oliver Stone lives down the street. A $60,600 BMW 740i -- bought with cash -- is owned by the nonprofit tissue bank. A $34,400 Mercedes is registered to Simona Gendler's company. Both cars were bought new in 1998, DMV records show. El Gendler, 77, pays Pacific Coast $75 a month for use of the BMW, which has leather seats and a moon roof.

"I am almost 80 years old and it is difficult for me to drive unless I have a very comfortable car," wrote Gendler, adding that a Pacific Coast board member recommended the BMW. "The other alternative for me was to hire a chauffeur."

Gendler's compensation is set by a seven-member board of directors that he chairs and which includes family members and longtime associates. Board member Richard Huber, who recommended buying the BMW, said the tissue bank now needs to reassess its executive compensation, adding that Gendler's salary and perks present a public-relations problem that will be dealt with at an upcoming board meeting. "We haven't paid attention to the public perception of this, and it's going to get changed," Huber said. "It's going to come across bad, and we should have protected him more."

Huber also said the tissue bank will probably sell the BMW and buy a Lexus in the $30,000 to $40,000 range. "He hates the BMW and he wishes he had the Lexus," Huber said. "Now, he's looking bad and I'm the bad guy." Marc Richards, a Newport Beach attorney who represents Pacific Coast, conceded that the board is not aware of a better-paid tissue-bank executive in the country. But he added: "You're not going to find anybody who is as well-qualified." Richards noted that El Gendler does not have a company pension plan.

But donor families say they are troubled by El Gendler's income. "How can they call themselves nonprofit when they make so much money?" asked Rita Sullivan, a San Fernando Valley resident. The bones of her daughter, Maria, ended up at Pacific Coast in 1998. "How can they do that? I guess it's our own fault. We should ask more questions before we give away our tissue."

Medical ethicists say Gendler's compensation and Pacific Coast's ties to Perfomat can damage a fragile industry that relies on the public's good will. "Those kinds of excesses look bad when donated skin and bone is turned into things like a Mercedes," said Stuart Youngner, a bioethicist at Case Western Reserve University School of Medicine.

BONE IS THEIR BUSINESS

El Gendler was born in Lithuania to a pharmacist father and a dentist mother. The family was exiled to Siberia during World War II when Gendler was 18, Russian records show. In 1952, he graduated from the Siberian Medical Institute in Tomsk. El Gendler later returned to his alma mater to become a department chairman. Simona Gendler was a department head at the Tomsk-based Institute of Vaccines and Serums. El and Simona Gendler and their children emigrated to America in 1980.

Six years later, El Gendler and Dr. Tillman Moore, a surgeon at Orthopaedic Hospital in Los Angeles, incorporated the nonprofit tissue bank. In 1991, El Gendler won praise in the media for sending bone to a Dallas surgeon who fashioned new skulls for separated conjoined twins.

The surgeon, Kenneth E. Salyer, said Gendler sends him bone at no charge about 10 to 15 times a year for children who need surgery to correct deformities. "Any time I've called and asked him to help a child or asked him for information that would be helpful scientifically, he has been helpful," Salyer said. "He's open and cooperative and compassionate for the children I treat."

GROUND 'DENTAL DUST'

The family for-profit business, Perfomat, holds trademarks for freeze-dried and demineralized bone products. Dembone is ground bone that insiders call "dental dust." Nationwide, similar products are used in an estimated 200,000 procedures a year. The powder resembles grated parmesan cheese.

The Gendlers ship the products across the country, including to 17 hospitals and more than two dozen dentists and oral surgeons in Orange County. Links between nonprofit tissue banks and private companies are common. But the deal between Pacific Coast and Perfomat is unusual because it involves family members. Pacific Coast pays Perfomat 50 percent of its revenue for processing.

Most large nonprofit tissue banks that operate in a similar way say their processing costs are lower. At LifeNet, the nation's leading producer of dental dust, 25 percent of revenue goes to pay bone-processing costs, officials say. Other tissue banks say their fees are closer to 20 percent. In New Jersey, Musculoskeletal Transplant Foundation Chief Executive Bruce Stroever says his bank pays more than 50 percent in processing fees to Osteotech Inc., a publicly traded company. The fees cover the cost of making Grafton, a proprietary paste or putty-like substance used in spinal- fusion surgery.

The fees Pacific Coast pays to the family business are now the subject of a state probe, said Deputy Attorney General Belinda Johns, who specializes in nonprofit cases. Pacific Coast says on annual financial reports that the Internal Revenue Service and the state attorney general approved its relationship with Perfomat. "I think he means we've never called him on it," said Johns, who reviewed Pacific Coast's state file in December.

As a result of that review, Deputy Attorney General James Cordi said, the state is "auditing" the relationship between the tissue bank and the company to see if laws governing nonprofits are being broken. Pacific Coast could not exist without Perfomat, according to El Gendler. When the bank lost money in 1995, Pacific Coast borrowed $300,000 to solve "cash-flow problems," records show. The money came from Perfomat in the form of a zero-interest loan.

RUN-INS WITH REGULATORS

The Gendlers also have had a series of encounters with federal and state regulators. They have been cited for having both goat and human bone stored in the same freezer, releasing bone for transplant after it showed signs of hepatitis infection, and taking bone from a suspected intravenous drug user after it was rejected by another tissue bank, inspection records show. The Gendlers have disputed the citations, saying in most cases the Food and Drug Administration relied on inaccurate data. Pacific Coast also says that 562,000 units of its tissue have been released for implant since 1987 with no known cases of disease or infection.

An FDA regulator was concerned enough in 1996, however, to telephone the state Department of Health Services telling the agency to consider suspending Pacific Coast's license, said Clint Venable, manager of tissue- bank licensing for the state. The bank remained open because, Venable said, there was no public-health danger.

The FDA said it was unaware of the phone call, and its rules require extensive review "before any regulatory action is undertaken or referred to another regulatory agency." FDA inspectors cited some of the same hepatitis concerns this February, records show. The Gendlers say citations are a routine part of the business. But regulators have found problems at Pacific Coast that are not typical in the industry, a review of more than 60 FDA inspection reports involving other banks shows. Gendler wrote: "We have a good organization and we provide good services to the medical community at reasonable fees."

BUCKING STANDARDS

The American Association of Tissue Banks adopted standards for accredited banks that ban recovery of bone more than 24 hours after death. Pacific Coast harvests up to 48 hours after death, and the bank dropped out of the voluntary association in 1993 -- in part because of that rule, Gendler wrote.

Jeffrey Sandler, who runs Denver-based Allosource, said the industry adopted the 24-hour rule because of concerns about bacteria in tissue recovered past that point. He said the Gendlers could be in trouble if anyone gets sick from Pacific Coast tissue taken beyond 24 hours. "When 99 percent of the industry follows the same standard, and there's one renegade out there doing it differently, what do you think his liability is?" Sandler said. "It could be huge. He's going against the prevailing industry standard."

Gendler says his methods are safe. "PCTB is able to take bone up to 48 hours due to a bone sterilization process that I developed," wrote El Gendler, who considers this process his greatest contribution to the tissue banking industry. "Most other tissue banks do not go through such intense bone sterilization and this is the reason they do not take tissue after 24 hours."

Mission Viejo dentist Roger Kurthy said he has never had problems with Pacific Coast tissue, which he uses to treat root canals, tooth extractions and gum disease. He pays about $30 for a small vial containing 0.5 cubic centimeter of bone powder. He believes the products are sterile and safe. Still, when told about the harvesting methods at Pacific Coast, Kurthy said he was bothered that the tissue bank does not follow the industry standard. "It just doesn't feel good in your gut," Kurthy said. "As practitioners, it's something we should be told. We need to know these things."

Pacific Coast's main wish in Orange County, records show, is to harvest bone between 24 hours and 48 hours postmortem. Orange County Chief Deputy Coroner Jacque Berndt said El and Eli Gendler and two lawyers met with her last summer after first meeting with her boss, Sheriff Mike Carona. The Gendlers offered to open a satellite office in Orange County to appease Berndt, who said she prefers having only local banks harvest tissue.

Her office has an exclusive -- yet unwritten -- arrangement with the Orange County Eye and Tissue Bank. The bank, with offices in Santa Ana, is part of the Maryland-based Tissue Banks International chain. Pacific Coast is still waiting for an answer from Berndt, who has not decided what the county will do.

*Register staff writers Susan Kelleher and Natalya Shulyakovskaya contributed to this report.
*Copyright 1999 The Orange County Register
*Copying of this material is free for non-commercial educational and research use. Unless explicitly stated, copyright of this material is owned by the author and/or sponsoring organization, and/or newswire services. (taken from Pro-Life E-News.)

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