Firms cashing in on charities

For more than 20 years, a company in Kent, Wash., used the name of Spokane’s chapter of the National Multiple Sclerosis Society to raise millions of dollars in contributions.

The company, Unique Equity Inc., paid the Spokane chapter $1 for every donation – whether the caller agreed to donate a mink coat or a broken appliance. The company had a similar agreement with United Cerebral Palsy of South Puget Sound, according to state records.

In 2003, the company received $2.6 million in contributions and passed on $91,000, or 4 percent, to the two charities, according to filings with the Washington secretary of state.

That sent it to the bottom of rankings released this week by the state office, which urged people to educate themselves before donating to commercial groups that earn money while acting as fund-raisers for charities.

Secretary of State Sam Reed, in a press release, said “education is the most effective weapon against fraud.”

In the past 18 months, the state’s Office of the Attorney General investigated several allegations against commercial fund-raisers, according to Lori Takahashi, spokeswoman for the AG’s office. As a result of those investigations, Takahashi said, seven commercial fund-raisers have stopped operating in the state.

This year, commercial fund-raisers in Washington received $368 million in donations and sent about half of that money to the charities they represented. Since 1995, the amount raised by the groups has quadrupled, but only a fraction of that goes to the charities, according to the state report. In this year’s report, 33 companies gave 25 percent or less of their contributions to the charities.

“It’s a very lucrative business for these professional fund-raisers,” said Erin May, spokeswoman for the Better Business Bureau in Seattle. “They see it as an opportunity.”

But the story of Unique Equity is more complicated than the state report would indicate, said Robert Hansen, president of the Inland Northwest Chapter of the National Multiple Sclerosis Society.

Hansen said his group audited the company twice and found no problems. He said the low return was due in part to the fact that Unique Equity operated a thrift store, which had high overhead costs for picking up donations and hiring workers to run the store.

In return for allowing the company to use the chapter’s name to solicit funds, the group has received about $25,000 to $30,000 each year, Hansen said.

“We feel like we were getting a fair shake,” Hansen said. “We were not liable for or involved in running the store. We were just the benefactors.”

Unique Equity did not return phone calls this week.

Hansen said the Spokane chapter ended its association with the Kent company in 2003, in part because of concern about the public’s perception of the company. Last year, the secretary of state reported that Unique Equity received $2.7 million in contributions but sent only 4 percent to the charities – almost identical to this year’s figures.

The secretary of state’s office said federal court decisions prohibit the state from setting limits on how much money must be returned to the charities.

“It’s a buyer-beware industry,” said Rebecca Sherrell, charities program manager for the secretary of state’s office. “It lies with the consumer to do the research.”

The report reviewed 110 commercial fund-raisers registered in Washington state. On average, the companies sent 49 percent of their contributions to the charities they represented – up from 45 percent last year.

The list included out-of-state companies such as Nationwide Fundraisers Inc., of Phoenix, Ariz., and Veterans Accredited Projects of West Sacramento, Calif., which both sent only 10 percent of their contributions to charity.

Another company, Professionally Speaking of Milwaukee, Wis., raised nearly $3 million in contributions across the state but sent only $319,000 to its charities. In 1995, the Wisconsin attorney general sued the company for allegedly violating the state’s charitable solicitation and false advertising laws, according to media reports. The company agreed to pay fines to settle the case.

Coinstar Inc., of Bellevue, Wash., ranked first in the annual report. It sent 94 percent of the contributions it received to charities such as the American Red Cross, the Fred Hutchinson Cancer Research Center Foundation in Seattle, and the Muscular Dystrophy Association Inc.