AT the time it hit the newspapers and magazines, the photograph, in all its silent horror, shocked the sensibilities of an America that was not used to seeing emaciated, agonized children living within its bountiful borders. Biafra, yes. Ethiopia, yes. But not in America. Equally shocking, however, came the news that Eugene D., the severely handicapped child in the photo, never weighed more than 19 pounds, 11 ounces, during the entire 8 years he had spent in foster care.

Eugene had been taken as an infant from his mother, but no judicial finding of abuse was ever made against her. Now the pair is reunited at home - and in the courtroom. They have filed suit against the state, charging Eugene was injured in a state-licensed foster home in Louisville.

Almost four years after the lawsuit was filed, the quest for accountability remains out of reach. Still unanswered is a crucial question: When things go wrong for children in state care, who is ultimately responsible?

A federal appeals court is currently considering this very issue. The lawsuit filed on Eugene's behalf is a civil-rights action, charging that state officials violated the boy's constitutional right to be free from harm while in state custody.

``One of the biggest problems was figuring out who to sue,'' says Allen Button, the lawyer who filed the lawsuit for Eugene and his mother, Marie D. ``You can't sue the state [for damages] because it has immunity, so we sued 10 state workers individually. But if they lose, and have to pay, all the state's social workers will probably quit'' because of liability concerns.

On the other hand, if the lawsuit had sought only to force the state to change its policies, Eugene would be left without recourse for redress, Mr. Button says.

``We contend that through intentional actions or deliberate indifference, they allowed this child to be harmed - and he suffered as a result.'' Eugene's condition after 8 years in foster care ``was unbelievable to me,'' he adds. ``I couldn't believe that a kid, absent some reason he can't keep food down, should look like that - bones sticking out and skin flaking off.''

Kentucky officials refuse to comment on the case directly because litigation is going on. In its legal documents, however, the state argues that Eugene received ``loving, competent care'' while in state custody and that caseworkers complied with all regulations to monitor his care. Further, because of the boy's extraordinary physical and mental handicaps, which don't allow him to feed himself, talk, or walk, the state said that it ``relied upon and followed the reputable medical and professional advice in his care and treatment.''

Whatever the outcome, a closer examination of Eugene D.'s case provides an illuminating glimpse into the world of child welfare. The vision that emerges, however, is amorphous - a shapeless bureaucracy where decisions about children's lives are made by faceless ``teams'' with changing memberships because of high staff turnover.

Eugene came to the attention of state child-protection workers in February 1974, when his 17-year-old mother brought him to a Louisville hospital. Comatose and suffering from head injuries, the infant was subsequently diagnosed as having sustained brain damage that left him mentally retarded with spastic cerebral palsy. While no judicial finding of child abuse was made against Eugene's mother, the court decided to remove him from her care and place him in the custody of the state Cabinet for Human Resources.

In May, the state placed Eugene in a foster home of an older Louisville woman who had not received any state training on children with physical and mental disabilities. During the next 8 years, Eugene had at least six different caseworkers, only two of whom had some experience working with disabled children.

By 1976, according to court records, state workers who reviewed the foster home reported that the foster mother ``is elderly and thus not considered a good potential for long-term placement.'' They also noted a difficulty communicating with her, noting that ``she seems to be listening to what is being said but doesn't really hear or forgets quickly.''

IN the next six years, during which time Eugene remained in the same foster home, the following reports were made about his health:

In no fewer than nine instances, doctors, nurses, or school personnel expressed concern about Eugene's low weight gain, about whether he was getting enough to eat, or about whether his foster mother knew how to properly feed him.

Eugene missed numerous medical appointments because his foster mother failed to bring him in.

A broken leg Eugene sustained in foster care in 1976 went untreated for 10 days. The hospital notified a state worker that the break was probably not accidental.

Eugene frequently missed school. In some quarters, he was absent more days than he was present. Between 1978 and 1980, he was present a total of 244 days and was absent 164 days.

Nevertheless, in November 1980 the Cabinet for Human Resources entered into an agreement for Eugene to remain permanently in foster care with the foster mother.

Again in 1982, the social worker assigned to the case received complaints about the foster mother's care of Eugene and two other special-needs children living in the home, according to the worker's deposition.

Three times in the spring of 1982, the school nurse told the social worker that Eugene had been brought to school dirty and that basic hygiene was a recurring problem. That summer, medical staff noted that Eugene had a sore on his genitals, insect bites on his eye, and bleeding gums. In September, after learning that Eugene had lost two pounds over the summer and that the foster mother failed to follow instructions to get supplemental formula for him, the social worker recommended closing the home and moving the children.

The home was not closed and Eugene was not removed until December 1982. When he was removed from the foster home at age nine, he weighed just over 17 pounds.

This case - together with another case in which a state-licensed foster parent was accused of sexually abusing girls in his care - sparked a public outcry over Kentucky's foster-care system.

Inevitably, the governor appointed a committee to study the problem. The committee found that Kentucky had lost $18 million in federal and state funds available for children's services between 1980 and 1984 - a time when reports of child abuse and neglect had doubled.

``The system for protecting children from abuse and neglect is so inadequate that the state fears for the safety of some children in its care,'' the governor's committee concluded.

Extra money was appropriated and new social workers were hired. The caseload average dropped from 35 per worker in 1984 to 27 per worker in 1987. Staff training was beefed up, and an internal quality-assurance team was established.

FOR Eugene, it's a whole new world. A state district judge rescinded state custody in March 1984, finding the boy had been subject to state abuse or neglect in late 1982.

Before she could get her son back, Marie was required to be interviewed by three psychologists. She also underwent extensive training for Eugene's care.

After complying with all the regulations, Marie says she was upset to learn the state wanted her to wait two more years before taking Eugene home. ``I said, I want my child back, and that's when we went to court.''

The state judge, in terminating state custody, released Eugene to Marie and a guardian from the local Council for Retarded Citizens. Within a year, the guardian's role was phased out. Now, just turned 15 and weighing in at a relatively whopping 50-plus pounds, Eugene lives with his mother in Louisville.

Although Gene, as she calls him, has never been able to speak, mother and son apparently have no trouble communicating. Marie can easily coax a grin out of him, says he loves soul music, and reports that he gets upset when she has to work late.

``I'll tell you, I'm never going to let him get away from me again,'' says Marie. ``I'll be 65 and he'll be 50, and we'll be sitting right here together.''

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