-Caveat Lector- http://www.washingtonpost.com/wp-dyn/articles/A50540-2001Nov18.html
WJPBR Email News List [EMAIL PROTECTED] Peace at any cost is a Prelude to War! Red Cross Has Pattern Of Diverting Donations Practice Was Used At Least 11 Years By Mary Pat Flaherty and Gilbert M. Gaul Washington Post Staff Writers Monday, November 19, 2001; Page A01 In at least a half-dozen disasters over the past decade, local officials have had to pressure the American Red Cross to give victims the donations the public intended for them. The Red Cross came under criticism months after the 1995 Oklahoma City federal building bombing for spending only one-fourth of the $13 million it had collected for victims and their families. When the Red River flooded parts of Minnesota and North Dakota in 1997, nearly $16 million was donated, yet the Minnesota attorney general had to resort to stinging public hearings and a 40-page report to prod the release of nearly $4 million in unspent victim funds. In the San Diego area, a recent audit of collections for victims of a January wildfire found money improperly used for vehicles and a telephone system upgrade while burned-out families waited for money earmarked for them. "They went out and raised money on the backs of fire victims here and put it to other uses," said Dianne Jacob, a San Diego County supervisor who has been battling the Red Cross over its handling of the disaster in Alpine, about 20 miles east of downtown San Diego. "They got caught big-time in New York because it was big-time money, but it was the same pattern." After the Sept. 11 terrorist attacks, the Red Cross collected $543 million in the Liberty Fund, saying the money would go to victims and emerging needs. Last week, responding to harsh criticism, the organization said it had not realized how strongly donors objected to allocating any of that money for long-term projects. The Red Cross backed off those plans and promised that donations would be used only for victim relief. The pledge had a familiar ring to civic leaders in some cities. They say that in other major drives, the Red Cross has been equally unclear about how it will use donations. When disaster strikes, the Red Cross launches emotional appeals to tap into a huge charitable outpouring. But if a donor does not specify that a contribution must stay in a community, the Red Cross might put it into a fund for other relief efforts. Chastened by the public outcry over its management of the Liberty Fund, the Red Cross will be more direct in its appeals and be explicit about intentions for contributions, said Harold Decker, interim head of the American Red Cross. "There was a breakdown in communications both inside and outside the organization" about how the money should and would be used, he said. Red Cross appeals are supposed to say money will be used for "this disaster or similar disasters," Decker said. He intends to look at whether that message is clear enough, prominent enough and followed consistently. Decker said the Red Cross and many other charities with a broad mission find themselves in a "straitjacket," trying to follow the wishes of donors who often want every penny to go to a specific need. Decker said nonprofits need latitude to be able "to service more than the event that gets lots of media attention" and build financial reserves to respond -- in the case of the Red Cross -- to 60,000 smaller emergencies each year. The Red Cross's earlier problems across the country foreshadowed the conflicts over the Liberty Fund and highlight questions about how forthcoming charities are in their solicitations, charity experts say. The demands on many large charities cause them to operate as businesses, with millions and even billions in annual revenue and executives pulling down six-figure incomes -- a situation that can mean "donors are viewed as just another source of capital," said Harvard University professor Peter Dobkin Hall, an expert on charities. Executive salaries at the Red Cross topped $2 million in fiscal 2000, according to federal filings. However, the organization has said it will hold overhead costs for the Liberty Fund at 9 percent, which is considered modest. Important -- yet largely unnoticed -- shifts in laws and regulations governing charitable giving have placed charities and donors on a collision course over how contributions are used. In numerous cases, courts have sided with a charity's executives, saying they have the final say because they are professionals. But while the changed laws shield charities legally, "changing people's expectations is a lot harder," Hall said. Red Cross use of large national disasters to subsidize other relief efforts is "fine. But if they are going to do that, they have to say so explicitly. It can't be in the fine print," said Daniel Borochoff, president of the American Institute of Philanthropy, a watchdog group. Criticism of Red Cross disaster relief efforts date to at least October 1989, when a devastating earthquake toppled sections of San Francisco. Within an hour, Mayor Art Agnos (D) was visited by a Red Cross representative. But he "wasn't talking about disaster relief," Agnos recalled recently. "He asked me to cut a commercial to raise money." Agnos said he declined. The Red Cross advertised for donations for earthquake victims, noting in small print that some funds could be used for other disasters. The charity raised about $55 million, with about $12 million going to the relief effort. To Agnos, the public outpouring seemed like an opportunity to help rebuild. He asked the Red Cross for $7 million for homeless shelters but was turned down, he said. "I asked, 'Where the hell are you putting all of this money?' When I asked, they gave me some generalities" similar to the explanations initially offered over the Liberty Fund, Agnos said. "Finally, it dawned on me they were stonewalling me." Agnos decided to complain publicly while the news media were focused on the earthquake. He accused the Red Cross of using bait-and-switch tactics -- soliciting earthquake donations, then putting the money in its general disaster relief fund. The charity reacted to the criticism by announcing that it would increase spending in Northern California and provide Agnos with $5.4 million for homeless shelters. The effort in Minnesota for Red River flood victims had similar problems. The Red Cross collected $16 million, but more than a year later, about $4 million was unspent, according to a critical review of the effort by then-Attorney General Hubert Humphrey III (D). "You don't have someone who is outright trying to defraud people in this process," Humphrey said. "But when you make appeals at a time of great emotion and stress, you have a significant responsibility to see to it that you use the funds for the purpose you state." Bobbi Cordano, a former assistant attorney general who worked on the Minnesota report, said she understands that the Red Cross needs the funding boost that major disasters attract to help support its larger mission. "My problem is how they do the fundraising and how they explain what the benefits will be to the public and victims -- and what the benefits will be to Red Cross," she said. The charity is "very, very difficult" to deal with, she said, and it would not have cooperated if the state had not increased scrutiny through public hearings and its report. In Oklahoma City, after terrorists bombed the federal building, the Red Cross knew within two days that it had collected more money than it would need. It took in more than $13 million and had $3 million in expenses. A Red Cross spokeswoman said that donors had earmarked only about $2.6 million of the money. The rest would help address less-publicized disasters, she said. A recent controversy in San Diego has local officials berating the Red Cross over collections taken after the January wildfire across 11,000 acres in Alpine. Thirteen families that lost homes, equipment and other property did not receive most of the money donated for them, an audit of the fire account showed. Mary Fritz was among the victims. Her garage and machine shop were embers, as were her guest house and the clothing and jewelry she stored there. "The tires on the tractor were still smoldering" when the Red Cross arrived at her door, Fritz recalled. The charity promptly solicited donations and within two weeks told its board and San Diego news media that $400,000 had been collected. "I knew something was off," said Fritz, a retired bank employee. The Red Cross had given her a $110 voucher for clothing at Kmart and $365 toward a new shed, she said. In talking with neighbors, she found no one who had received a large stipend. In response to complaints, Red Cross headquarters conducted a confidential audit. It showed that as of September, the San Diego chapter had spent $123,000 on fire relief. Less than $10,000 of that amount had gone directly to victims. Yet donors had designated nearly $188,000 in donations for the Alpine victims, the audit showed. The chapter's use of fundraising language that "may appear misleading to donors" -- because it failed to say donations might be used elsewhere -- leaves unclear whether even more of the announced $400,000 total was intended for Alpine aid. A copy of the audit provided to The Washington Post shows that Red Cross headquarters questioned or disallowed $112,000 in local expenses charged to the Alpine fund, including vehicle use and a telephone system upgrade. The local chapter did not open a service center, appeared not to have contacted everyone with major home damage and did not supervise services to ensure that needs were adequately met, the audit said. San Diego chapter staff did not respond to specific questions and requests for interviews from The Post. Despite its limited assistance to victims, the chapter quickly wrote to one major donor -- San Diego Padres owner John Moores -- asking whether it could move the $100,000 he designated for the Alpine fire into the local disaster fund for other emergencies. The Jan. 23 letter to Moores said the charity had already addressed the Alpine victims' immediate needs. Moores's office "told them to use it for what we gave it for -- the Alpine fire," said Beverly Stengel, Moores's executive assistant. "I was really angry." Responding to local demands for an accounting of the fire money, the San Diego chapter released an edited version of the headquarters audit that omitted several critical passages, only to have the full version later provided anonymously to the San Diego Union-Tribune newspaper. Said the Sycuan Band of the Kumeyaay Nation, a Native American tribe that donated $50,000, "It appears [the local Red Cross chapter] has at best mismanaged the funds collected and at worst exploited a tragic situation." The local furor erupted the same week that the Liberty Fund came under heavy attack. The San Diego board chairman has since apologized and said more money will be set aside for victims such as Fritz, who said she has an appointment tomorrow with Red Cross staff. As part of those reviews, Fritz and another victim said, they have been asked to document not just their losses but their financial worth. The day she received the clothing voucher, "I said thank you and didn't think any more about it until they started patting themselves on the back and bragging. That's what tore it," Fritz said. Decker, the interim head of the charity, said he recently became aware of the San Diego problems. "It was plain foolishness to edit the audit. . . . 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