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Cover Story October 12, 2006


  Untitled Document

Red Cross

by lyle e davis

There are a lot of people who have and still do support the American Red Cross.

One wonders why.

I will not cut a check in support of the American Red Cross. Instead, I’ll cut a check made payable to the Salvation Army.


Among other reasons, I figure if an organization can pay grossly obscene salaries like $651,957 to their CEO, they sure don’t need my financial support. In contrast, the Salvation Army pays its CEO $98,326.00, and that’s for two people, the CEO and his wife!

There are other reasons I do not support the Red Cross and haven’t for years.

Some three million unpaid volunteers for the Red Cross are an able, well-intentioned bunch… and they certainly do a lot of good. However, the Red Cross organization itself has undergone some close scrutiny, and there’s a lot to be worried about.

Obscenely high salaries, Enron-style bookkeeping, deceptive advertising and outright theft of funds have also been a big part of the Red Cross' recent history.

For many, the American Red Cross is the very embodiment of lifesaving. Its bold red emblem is imprinted on the sides of vehicles that appear at natural disasters, storms or fires, to take care of the survivors. Millions of Americans donate blood or hard-earned cash to the organization each year, or during special appeals like after the Gulf Coast hurricanes. But the real story of the Red Cross isn’t nearly as noble and humanitarian as the image.

The Red Cross' scandalous activities reach back far before Hurricanes Hugo and Katrina, or even 9/11.

After the devastating San Francisco earthquake in 1989, the Red Cross passed on only $10 million of the $50 million that had been raised, and banked the rest. (1) Similar donations after the Oklahoma City bombing in 1995 and the Red River flooding in 1997 were also greedily withheld. There was also a huge scandal involving the embezzlement of millions of dollars in donations in the New Jersey chapter in the late 1990s.

Victims of Hugo Echo S.F.: Red Cross a Disaster
By Jonathan Broder
Examiner Washington Bureau

"In its response to both disasters, The Red Cross' relief efforts ranged from barely adequate to outright failure. Virtually everywhere Red Cross help was needed, the organization's performance was plagued by complacency, unprepardness, disorganization and shortages of supplies and trained personnel, according to senior officials, disaster experts and victims in the areas affected."

"In the case of Hugo, unlike the earthquake, there was advanced warning..."

Following the Oklahoma City bombings:

“The first days after the bombing,” says one family member, “people from all over the country were sending checks in lieu of flowers and we were getting a lot of checks and cash every day hundreds, even thousands, of dollars. Then the Red Cross went down to the post office and made arrangements to collect the mail and they would deliver it to us in bulk. All the mail had been opened, and from that point on there never was a dime, even in letters that said money was enclosed.”(2)

Similar charges were made against the Red Cross following fundraising operations after the San Diego fires in 2003.

The Red Cross has been caught engaging in rampant corruption on an all too regular basis. Following 9/11 Dr. Bernadine Healy, who was appointed president of the Red Cross in 1999, appealed for donations to help survivors and the families of those killed. In record-breaking time, the organization raised nearly $543 million.

Then the controversy began. A congressional investigation revealed that--though it had promised that all 9/11 donations would all go to victims' families--the Red Cross held back more than half of the $543 million. During congressional hearings, Rep. Billy Tauzin (R-La.)declared: "What's at issue here is that a special fund was established for these families. It was specially funded for this event, September 11. And it is being closed now because we're told enough money's been raised in it, but we're also told, by the way, we're going to give two-thirds of it away to other Red Cross needs."

Healy was forced to resign, and her successors promised to allocate all of the money to September 11 survivors and their families.(3)

National Red Cross Removes Board of San Diego Chapter

"I think this is going to be damaging to the Red Cross," said board Vice President Sharon Hilliard. "Anytime you have an organization taken over by edict from Washington, D.C., you have to be concerned about local control."
By Noberto Santana Jr. and David Washburn
Union-Tribune Staff Writers
Editor’s Note: Jerry Sanders, 54, who was San Diego's police chief for six years before taking top posts at the United Way and the Red Cross and turning both troubled organizations around, was subsequently elected as Mayor of San Diego.
From CBS: Red Faces At The Red Cross - July 30, 2002 In part two of her report on the American Red Cross, CBS News Correspondent Sharyl Attkisson looks at what investigative auditors found when they visited the charity's local chapters to see what they were doing with the millions in donations pouring in.

“In the hours after the Sept. 11 attacks, a record-breaking amount of donations started pouring into more than 1,000 local American Red Cross chapters.

What donors didn't know was that some of the chapters entrusted with all that money had been identified by Red Cross headquarters just a few weeks before for having poor accounting procedures, inaccurate financial reports and for keeping national disaster contributions that should have been sent to headquarters in Washington. That according to internal documents obtained by CBS news.

The Red Cross isn't known for keeping a tight rein on its chapters. But now, it was suddenly crucial for headquarters to find out what chapters were doing with the millions in Sept. 11 donations. So the Red Cross leadership rushed special investigative auditors out to conduct surprise inspections. The results were startling.

According to documents obtained by CBS News, a dozen of the Red Cross chapters audited were marking, or "coding," donations as local funds. This means chapters like San Diego, Southwest Florida, and Gateway Area, Iowa, would keep the money instead of sending it in for Sept. 11 victims.

What's more, the Savannah chapter "could not provide information regarding cash (and) checks collected." In Pine Tree, Maine "cash (and) checks (were) unlocked at all times," and in Los Angeles the chapter there had "no accurate accounting for funds received after Sept. 11," believed then to total "at least one-half $1 million."

The fact that the San Diego chapter was coding donations as local was no surprise to county supervisor Diane Jacobs, who'd been fighting the chapter for a year over lack of accountability for fire donations and issuing a doctored audit.
"The local chapters are operating independently," says Jacobs. "They're on their own. There's lack of oversight. There's lack of accountability."

Sources tell CBS News the national Red Cross singled out nearly 30 chapters for surprise audits because of their recent financial problems from sloppy accounting to worse. The Red Cross actually defended the chapters, saying they had discretion to keep the money because headquarters hadn't yet issued guidance. Also, they might have thought the money was in response to other local fundraising efforts.

The Red Cross also says it imposed a "rigorous set of additional procedures … and more national oversight" of chapters after the audits.”

Advantage: God
Why the Salvation Army Beats the Red Cross.

Sunday, November 25, 2001

The American Red Cross ran up a white flag recently, surrendering to critics who had accused it of bait-and-switch fund raising by planning to hold back more than half of the $543 million it had raised for victims of the Sept. 11 attacks. Officials pledged that just about all of the money (minus $49 million for overhead) would go to the victims for whom it had been given. Red Cross president Bernadine Healy had already resigned from her $450,010 position, but not before suffering a tongue-lashing from Rep. Bart Stupak (D., Mich.). Reporting that some of his constituents had driven to New York City to give the Red Cross a check, Mr. Stupak said, "They expected that check to be used now, not two years from now."

Red Cross officials put up a reasonable defense: They had protected their organization's ability to help in the future by placing $200 million of the donations in a reserve fund and by planning to use millions more to improve the charity's infrastructure. What the $2.5 billion organization had forgotten, though, was American charity's "just in time" tradition: Keep a very low inventory; go with all the resources you have right now; when the next emergency hits, call upon the American people once again.

Originally, that’s how things were done. And, originally, that’s how the Red Cross responded. The Red Cross charged in on April 18, 1906, when an earthquake destroyed most of San Francisco and left at least 3,000 dead and tens of thousands homeless. Jack London ended his earthquake reporting in Collier's magazine by noting, about the Red Cross-led relief effort, "thanks to the immediate relief given by the whole United States, there is not the slightest possibility of a famine."

Churches and labor unions did crucial work. Local 442 of the Plumbers, Gas and Steam Fitters' Union voted "that all members would volunteer their services on relief work." Some 500 did, working for a week to repair broken pipes.

Big businesses, particularly railroads, volunteered to get supplies in quickly. The Southern Pacific and Union Pacific railroads made free shipments to San Francisco a priority. As the San Francisco Chronicle reported, "Passengers on fast trains saw flying freights, every car labeled 'relief,' go by, while the passengers took the sidetrack."

But then things changed, over time . . . and dramatically. By the time of San Francisco's 1989 earthquake much of American charity had become bureaucratic. Particulary within the American Red Cross.

According to Richard M. Walden (president and CEO of Operation USA), it is estimated that 70% of the $1.2 Billion donated to Katrina-related donations went to the Red Cross. Repeatedly, the Red Cross has run into trouble for spending much less on disaster recovery than they collect, shuffling the extra funds into their "national disaster account," where it can be used for purposes other than that it was collected for.(4)
Last year the Red Cross spent $111 million in fund raising, and their CEO Marsha Evans made just under $652,000. It seems the the main value they offer is the free help of their volunteer force.

And it's hard to escape the organization's warning of Armageddon if you don't donate blood (which it resells to the tune of more than $1.5 billion annually, part of its $3 billion in income).

Recently, the LA Times reported:

“The Red Cross expects to raise more than $2 billion before Hurricane Katrina-related giving subsides. If it takes care of 300,000 people, that's $7,000 per victim. I doubt each victim under Red Cross care will see more than a doughnut, an interview with a social worker and a short-term voucher for a cheap motel, with a few miscellaneous items such as clothes and cooking pots thrown in.”

Giving so high a percentage of all donations to one agency that defines itself only as a first-responder and not a rebuilder is not the wisest choice. Americans ought to give a much larger share of their generous charity to community foundations, grass-roots nonprofit groups based in the affected communities and a large number of international "brand name" relief agencies with decades of expertise in rebuilding communities after disasters.

So has the Red Cross become little more than a massive PR engine which takes advantage of millions of well-meaning volunteers, and capitalizes on disasters? It's an unpleasant conclusion, but it may just be the truth.

Founded in 1881 by American humanitarian Clara Barton, the American Red Cross (officially named The American National Red Cross) was first chartered by the U.S. Congress in 1900. A second charter, still in force, was granted in 1905.

The Red Cross is specifically mandated, according to its Congressiona charter, to "carry out a system of national and international relief in time of peace, and apply that system in mitigating the suffering caused by pestilence, famine, fire, floods and other great national calamities, and to devise and carry out measures preventing those calamities." The organization was also to carry out its work in accordance with the Geneva Conventions concerning the treatment of prisoners of war. Later, the Red Cross would also be entrusted with control of a large part of the nation's blood supply.

People who think of the Red Cross as a "private charity" would be shocked to discover its actual legal status.

Congress incorporated the Red Cross to act under "government supervision." Eight of the 50 members of its board of governors are appointed by the president of the United States, who also serves as honorary chairperson.

This unique, quasi-governmental status allows the Red Cross to purchase supplies from the military and use government facilities--military personnel can actually be assigned to duty with the Red Cross. Last year, the organization received $60 million in grants from federal and state governments.

The evidence shows you don't have to be as heavily bureaucratized as the Red Cross (or the United Way, which has also been scandal-ridden) to be effective in the crunch.

Before you are asked to reach into your wallet to support efforts dealing with the next national or local emergency you may want to consider:

The $2.1 billion Salvation Army USA shows a different way to help. Peter Drucker has called the army the "most effective organization in the United States. No one even comes close to it with respect to clarity of mission, ability to innovate, measurable results, dedication, and putting money to maximum use."
The Salvation Army's response on Sept. 11 was impressive. Army officers and volunteers by the hundreds headed to New York City without even being asked. The army quickly set up 21 mobile feeding stations in Manhattan that served 300,000 meals during the 72 hours after the disaster. Worth magazine reported that the Salvationists were thoughtful enough to bring "hundreds of teddy bears to comfort the children of the victims, and Vicks VapoRub for the rescuers to smear inside their nostrils to cover the acrid stench of death and burning metal."(5)

While the Red Cross practiced organizational damage control over the past month, and the Salvation Army got things done, several reporters noted that the Salvation Army pays its top executive considerably less than the Red Cross (and others). Here are the most accurate figures for the major charity executives I could find in reliable sources:

Marsha J. Evans, President and CEO of the American Red Cross ... salary for year ending 06/30/03 was $651,957 plus expenses. (She has since resigned, under pressure.)

United Way, Ralph Dickerson Jr., president of the United Way of New York City, $420,000.

Goodwill Industries, George W. Kessinger, $386,575

Catholic Charities USA, Thomas A. DeStefano, $116,362.

Salvation Army Commissioner W. Todd Bassett and his wife Commissioner Carol Bassett: together their combined compensation includes basic living allowances and grants totaling $64,210.00 and housing valued at $34,116.00. For two individuals the total compensation is approximately $98,326.00.

This is for two in Alexandria, Virginia, a suburb of Washington, D. C. $100K is considered minimum wage. (for one person).

The tag line for the Salvation Army is, "Doing The Most Good"

And they should add, "For The Lowest Cost."

(Source: Major George E. Hood, the National Community Relations Secretary, from the National Headquarters)

The Army, with no marketing department and a slim public-relations staff, relies on attention generated by its well-known red shield and press coverage of its high-profile efforts. Army officers work long hours for little material reward, largely because of the attitude.
Among the charities we've evaluated, the average CEO salary is $144,521 within the non-profit industry.

Improvements Noted

Following a variety of wide spread scandals, including those within the San Diego area, the board of directors was dismissed, a new board put in its place, headed by former San Diego Chief of Police Jerry Sanders (and now Mayor) new staff hired, and changes began to take shape

New San Diego Red Cross CEO Meets The Challenge

Jeffrey Wiemann was hired to help restore trust in the local chapter. Unlike other executives heading up chapters his compensation appears to be more than reasonable. He is paid $195,990.08 per year, which includes his benefits.

Jeffrey C. Wiemann describes his work as “one of the hardest jobs I’ve ever done…rebuilding trust in the community.” He’s talking about his role with the San Diego County/Imperial Valley chapter of the American Red Cross.

Wiemann was hired in 2003 as COO and CFO of a team to restore the reputation locally of the Red Cross chapter, which had been beset with allegations of an excessive salary for its CEO and misdirecting donor contributions. He did his job so well that in April of this year, at the age of 38, he was named chief executive of one of the 10 largest of the nation’s 815 chapters.(6)

Religious initiatives like the Salvation Army are growing these days, in part because they offer a striking alternative to bureaucracy-based hesitancy. The Red Cross can respond quickly to emergencies, but mayors and many others have criticized its understandable unwillingness to bet the farm every time out. Other charities, however, have a higher purpose than organizational survival. They, like others, need good management, but what gets them moving fast is their faith.

From the Union-Tribune: May 2, 2004

At least 67 percent of funds spent by the local chapter of the American Red Cross during October's wildfires went to fire victims, a preliminary analysis by The San Diego Union-Tribune indicates.
That is in contrast to the Alpine fire in 2001, where an audit showed 10 percent of the funds raised went to victims.

The Union-Tribune's examination showed that $3.9 million of the $5.8 million the local chapter spent went directly to fire victims in the form of cash assistance or immediate shelter.

The Red Cross continues to release detailed figures of its aid expenditures after October's fires in an effort to rebuild trust lost three years ago when spending scandals forced an overhaul of its management.

In response to the Southern California wildfires, donors throughout the country gave $7.5 million. Of that, $5.3 million was designated exclusively for San Diego County.

The Red Cross' current attempts at clarity are far different from the decisions the chapter made three years ago.

When a fire left 27 Alpine families homeless in January 2001, victims complained that they had seen little of the money, about $400,000, that was raised for them.
An audit bore them out and was so critical that officials tried to edit out damaging portions before releasing it.

The report showed that less than 10 percent of the funds had been spent to help victims rebuild their lives. Chapter staff spent much of the rest of the money on administration and telecommunications upgrades.

The scandal inspired pressure to clean house, and the public's disgust became evident as the chapter dealt with a fire in Julian in 2002. Donations for victim aid plummeted to $8,000.

The Hurricane Katrina catastrophe on the Gulf Coast has revealed the same old problems with the Red Cross. In late September, the organization was ordered out of a suburban Atlanta relief center because, according to the New York Times, its "application process had resulted in long lines and the group had made false promises of financial payments." (7)

Bill O'Reilly: Hurricane Katrina, 9/11.

The details are brief. The Red Cross responded to 9/11 by opening a few shelters to which no one came; tried to trace missing persons but were pushed aside when the World Trade Center site was dubbed a crime scene and police and FBI took over identification of missing persons; and, served coffee and donuts to rescue workers at the World Trade Center site only to be accused of charging for them.

(It later paid Daniel Bouley, New York's star chef, to cook for them after the news about charging for coffee was made public.)

The Red Cross' own 9/11 Liberty Fund indeed shows only $336,000 in US or state government reimbursement for what little it did do as a "first responder," a designation equal to police, fire and emergency medical service personnel.

Jogging your memory a bit -- Red Cross was the flavor of the month following 9/11. Celebrities, corporations and foundations wrote million-dollar checks and performed or sponsored TV and live events ad infinitum; ad campaigns were rewritten as Red Cross appeals; media outlets pushed their name across the airwaves and online. FEMA did not put out a preferred list of agencies helping 9/11 victims, thus precluding groups like Pat Robertson's Operation Blessing and Rev. Larry Jones's Feed The Children from infiltrating legitimate lists of agencies as now being done via the White House's Faith-Based Initiatives Office.

New York's own charities and foundations were given equal space on How To Help lists and Red Cross' $1 billion was just under half of all funds given to help families of 9/11 victims. Those foundations wisely made grants to a host of small community-based programs or directly to victims' families. Red Cross did no such thing ... at least not immediately.

Trust is essential for nonprofits. The purchasers or donors are not the ones receiving or benefiting from the nonprofit organization's services and programs. Since the purchasers cannot directly evaluate the quality of these services and programs, they rely on the reputation of the nonprofit and the belief they have that the organization is doing, and will continue to do, good work.
One charity has stayed above all this for 137 years.

The Salvation Army should be first among your charities during financial support drives for local and national disasters. Out of hundreds of non-profit organizations, they consistenly show one of the lowest administrative cost burden. A larger percentage of funds raised by them goes to the victims.

• • • • •


(1) Advantage: God
Why the Salvation Army beats the Red Cross.
Sunday, November 25, 2001
(2) Insight Magazine, September 3 2005
(s) Socialist Worker Online Magazine http://www.socialistworker.org/2005-2/562/562_04_RedCross.shtml
(4) http://www.religionandsocialpolicy.org/news/alito_nomination.cfm#354.0
(5) Ibid - Marvin Olasky- Advantage God 11/25/01.
(6) San Diego Metropolitan Report
September 2006
(7) Counterpunch Newsletter http://www.counterpunch.org/allen





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