Minnesota AG Targets Car Donation Insiders
October 14, 2015 Mark Hrywna
One of the nation’s largest car donation charities paid almost $36 million over four years to two for-profit companies owned by executives who founded and manage the charity, raising a red flag for one state charity regulator.
Minnesota Attorney General Lori Swanson flagged the Car Donation Foundation, doing business as Wheels for Wishes, issuing a compliance report and referring the matter to the Internal Revenue Service (IRS) after questioning payments and solicitation tactics. The report was issued to the foundation and the local chapter of the Make-A-Wish Foundation. The local chapter already has started taking “affirmative steps to address problems identified in the report,” Swanson said.
The attorney general’s office requested the two charities to file a report within 30 days documenting the steps they have taken to correct problems identified in the report. The office will determine any additional action that is warranted. It also is conducting reviews of several other vehicle donation programs.
Ben Wogsland, a spokesman for the Attorney General’s Office, said a compliance report is one of the tools the office has as the regulator of charities in Minnesota. The report lays out findings of its investigation and allows charities some time address the deficiencies.
The foundation solicits charitable vehicle donations nationwide under promotional agreements with local chapters of Make-A-Wish Foundation. About 80 percent of the revenue that the foundation received from vehicle donations was spent on payments and other fundraising administrative costs between 2011 and 2014, with about 20 percent going to charities.
The Car Donation Foundation shared the same St. Louis Park, Minn., address as National Fundraising Management, a for-profit company owned by William Bigley and Randy Heiligmann, who also were directors of the foundation. The charity also used Metro Metals Corporation, another Minnesota company owned by the duo, as its scrap yard and auction house.
The compliance report called the foundation’s solicitations misleading because they did not disclose that Car Donation Foundation was the recipient of the donated vehicles. Solicitations featured “Wheels for Wishes” in conjunction with the Make-A-Wish name. Minnesota law prohibits charitable organizations from using names or symbols closely related to another charity to confuse the public and requires charities to affirmatively disclose their names in solicitations.
Bigley and Heiligman controlled the foundation as board members until mid-2013, according to the report. When the IRS raised concerns about overlapping control of the charity and the for-profit corporations, Bigley and Heiligman resigned from the board but continued to manage the charity as “co-executive directors.” The foundation’s tax form indicates that it has no employees.
The Car Donation Foundation and National Fundraising Management both issued statements disagreeing with the compliance report but said they would not be doing media interviews. In a statement provided by an attorney, foundation leaders said the groups operate “in a highly ethical manner” and plan to respond to the report “in great detail.” Car donation programs, the statement continued, are expensive to administrate and the AG’s report cites old numbers relating to the percentage donate to charities. The foundation has contributed more than $1.5 million to Minnesota charities and more than $30 million to charities across the country since 2011, according to the statement, with more than 50 percent of gross proceeds in Minnesota donated to charities this year.
In a statement provided through its public relations firm, National Fundraising Management said it generates the largest amount of funds for its charity partners as compared to “any other car donation program.” Its statement also faulted the AG for failing “to recognize the significant marketing, operation and compliance costs involved in any car donation program.”
The connected relationships between the entities “raised questions about the arm’s length negotiations by the charity with the for-profit vendors,” Swanson said. Under federal law, a charity must operate exclusively for tax-exempt purposes and may be sanctioned by the IRS if it improperly benefits private individuals.
The foundation’s revenue has grown from $14.4 million in 2011 to more than $37 million in 2014, receiving about $108 million in total revenue from vehicle donations during that time.
Bigley, who serves as president, and Heiligman, vice president and treasurer, both were paid $266,874, according to the most recent Form 990 for Fiscal Year Ending 2013. Bigley was compensated for an average 30 hours per week while Heiligman was compensated for an average 10 hours per week. Heiligman’s wife, Roberta, was paid $106,632 as secretary, also for an average of 10 hours per week, according to the tax form.
The 2013 tax form, prepared by Edina, Minn.-based Abdo Eick & Meyers, lists 45 Make-A-Wish chapters as having received grants and other assistance for the 2013 tax year. Assistance ranged from as little as $1,868 (Make-A-Wish Foundation of Wyoming) to $561,716 (Make-A-Wish Foundation of Northern Illinois). Make-A-Wish Foundation of Minnesota, in Minneapolis, received $187,464 in assistance, according to the 990. Make-A-Wish Foundation, headquartered in Phoenix, Ariz., and the local Minneapolis, Minn.-based chapter, did not return phone calls seeking comment by presstime.
The nearly $31 million raised by the foundation that year breaks down into five expense categories on the organization’s Form 990:
- 52 percent, or $15.95 million, in professional fundraising services;
- 21 percent, or $6.365 million, in grants and other assistance;
- 14 percent, or $4.423 million, for advertising and promotion;
- 13 percent, or $3.9 million for management; and,
- $53,065 for legal.
Virtually all of the money raised, some $30.7 million, was from the sale of 39,784 cars donated that year. Contributions have grown each year since 2010:
- $2.15 million in 2010;
- $14.3 million in 2011;
- $25.7 million in 2012; and,
- $30.7 million in 2013.
The latest Form 990 listed two business transactions involving interest persons: $172,078 for administration and auction services to St. Paul, Minn.-based Metro Metals Corp., and $19.95 million for administration and commissions to National Fundraising Management.
The Car Donation Foundation last year was placed on the “Scrooge List” of the South Carolina secretary of state and the “Worst Charity List” of the Oregon attorney general.