AG Questions Thrift Chain’s Deal With Charities

November 25, 2014       Zach Halper      

The Minnesota affiliates of a chain of for-profit thrift shops are under investigation by the State Attorney General’s Office for allegedly misleading donors and shortchanging charities on the value of donated items.

Savers LLC, based in Bellevue, Wash., operated 330 thrift stores in the U.S., Canada, and Australia, 15 of which are located in Minnesota. According to a Compliance Report issued by Minnesota Attorney General Lori Swanson, these stores offer a fundraising service in which the stores — using the name of a local charity — solicit donations of clothing and household goods, picks up the donations, sorts the donations, and brings them to Savers for-profit retail stores, where they are sold to the public.

According to the report, part of the issue lies in how Savers discloses information to the public on how these donations are used. By mixing its identity with that of the partnered charities – which include The Lupus Foundation of Minnesota, Courage Kenny Foundation, Vietnam Veterans of America, and True Friends – and failing to disclose the amount of a donor’s donation that is received by the charity versus the amount that is retained by the company, Swanson alleges that Savers is violating Federal and Minnesota law.

“Three bedrock principles of charities law are to respect the intent of the donor, protect charitable assets, and be transparent.  This report identifies deficiencies in all three areas,” said Swanson.

An even bigger issue is how Savers is compensating the charities for the donated items. Swanson wrote that the organizations’ contract with Savers states that the company will collect the donations and pay the charities a specific rate for used clothing – often times as little as 40 cents per cubic foot. However, the report alleges that Savers will sell each dress at its retail stores for $6.99, keeping about 98 percent of the value.

In response to the report, Savers issued the following written statement: “We will continue to work closely with the Attorney General’s Office along with our partners to address any concerns quickly and constructively so that we can focus our efforts on helping communities connect through a shared commitment to the common good.”

Multiple attempts to reach the associated charities for comment were not successful as of this writing.

The report also found that Savers might be violating Minnesota law in a variety of ways, including:

  • Savers does not disclose that its solicitations are being made by a professional fundraiser;
  • Savers financial reports submitted to the AG’s office fail to disclose gross revenue received from and expenses incurred in conjunction with each fundraising campaign;
  • Savers has failed to register as a professional fundraiser with the AG’s office; and,
  • Signage at Savers’ donation drop locations indicate that donations benefit multiple charities, which the report states is misleading as the company cannot identify the charity to which the donation is being made.

Based on the findings, the AG’s office made a series of recommendations to the charitable institutions partnering with Savers. Those recommendations include monitoring the activities of Savers and to audit their records and establish safeguards and controls. It was also recommended that steps be taken to ensure that the donations made actually benefit the intended charity. The charities have 45 days to report to the AG’s office on how they will monitor Savers as a professional fundraiser acting on their behalf, and ensure donations are properly handled. After that time the AG’s office will determine whether to file a lawsuit against Savers and the associated charities.