Wednesday, October 14, 2015
Attorney General Swanson Issues Compliance Report on Nation's Largest Car Donation Charity, Based in Minnesota
From 2011-2014, nearly $36 million was paid to for-profit vendors owned by the charity’s two founders and co-managers
Minnesota Attorney General Lori Swanson today issued a Compliance Report questioning the payments and solicitation tactics of the nation’s largest car donation charity—Car Donation Foundation—which solicits charitable vehicle donations nationwide under promotional agreements with local chapters of Make-A-Wish Foundation. From 2011 to 2014, the Car Donation Foundation paid almost $36 million to two for-profit corporations owned by the executives who founded and manage the charity. Approximately 80 percent of the revenue that Car Donation Foundation received from charitable vehicle donations was spent on these payments and other fundraising and administrative costs during these years, with only about 20 percent going to charity.
“Donors need transparency to make informed decisions, including who they are donating to and how their donation will be spent. They haven’t been given that here,” said Attorney General Swanson.
Car Donation Foundation solicits donations of used vehicles, which donors may deduct on itemized tax returns as charitable contributions. Car Donation Foundation then sells or scraps the donated vehicles and pays a fraction of its revenue—an average of about 20 percent during the four year period from 2011 to 2014—to local Make-A-Wish chapters.
The Car Donation Foundation, based in Minnesota, was founded by William Bigley and Randy Heiligman. It uses National Fundraising Management, Inc., a for-profit Minnesota company which is exclusively owned by Bigley and Heiligman, as its national fundraising company. In Minnesota, it uses Metro Metals Corporation, another for-profit Minnesota company which is exclusively owned by Bigley and Heiligman, as its scrapyard and auction house. As noted above, Car Donation Foundation paid these two for-profit corporations almost $36 million between 2011 and 2014. These relationships are depicted in the following chart:
The Compliance Report found that the Car Donation Foundation’s solicitations were misleading because they did not disclose that Car Donation Foundation (rather than Make-A-Wish) was the recipient of the donated vehicles. Solicitations instead featured “Wheels for Wishes” name in conjunction with the Make-A-Wish name, as depicted in newspaper and Internet ads like these:
Minnesota law prohibits charitable organizations from using names or symbols closely related to another charity so as to confuse the public about the recipient of the donation and requires a charity to affirmatively disclose its name in solicitations.
In 2014, the Car Donation Foundation was placed on the “Scrooge List” of the South Carolina Secretary of State and the “Worst Charity List” of the Oregon Attorney General.
Until mid-2013, Bigley and Heiligman controlled the Car Donation Foundation as board members. When the IRS raised concerns about overlapping control of the charity and the for-profit corporations, Bigley and Heiligman resigned from the Foundation board but thereafter continued to manage the charity as “co-executive directors.” The Foundation has no employees.
The Attorney General stated that one of the most disconcerting aspects of the Compliance Report is the simultaneous management and ownership by Bigley and Heiligman of the network of non-profit and for-profit organizations. She stated that the interlocking relationships raise questions about the arms-length negotiations by the charity with the for-profit vendors. Under federal tax law, a charity must operate exclusively for tax-exempt purposes and may be sanctioned by the IRS if it improperly benefits private individuals. The Attorney General’s Office forwarded the Compliance Report to the Internal Revenue Service with a request that it investigate the 501(c)(3) status of the Car Donation Foundation.
Taxpayers may only deduct charitable donations on their taxes if they file itemized tax returns, which only about 30 percent of taxpayers do.
Car Donation Foundation’s revenue more than doubled in four years from $14.4 million in 2011 to $37.3 million in 2014. It received approximately $108 million in total revenue from vehicle donations from 2011 to 2014.
The Compliance Report was issued to the Car Donation Foundation and the local chapter of the Make-A-Wish Foundation. The Attorney General noted that the local Make-A-Wish chapter has already started taking some affirmative steps to address problems identified in the Compliance Report. The Attorney General’s Office has requested the two charities to file a report with the Office within 30 days documenting the steps they have taken to correct the problems identified in the Report. Based upon the reports received from the charities, the Office will determine any additional action that is warranted by the Office under the laws regulating charitable institutions and their for-profit vendors.
The Attorney General’s Office has a flyer—Donating Your Vehicle To Charity—which offers advice to people who may be interested in donating a vehicle to charity.
The Attorney General’s Office is conducting reviews of several other charitable vehicle donation programs.
View the flyer Donating Your Vehicle To Charity.