From time to time you may hear of a charity that accepts the donation of older, used vehicles that owners simply no longer have use for, promising to donate the profit of the future sale to a charitable program. While it might seem like a fairly straightforward operation, the state of California claims two such groups weren’t keeping their promises, instead using the funds to pay for their own expenses.
California Attorney General Kamala Harris, along with the District Attorneys for Los Angeles County and Venture County, filed civil lawsuits against People’s Choice Charities (PCC) and Cars 4 Causes (C4C) accusing the organizations of violating state law by misrepresenting their charitable programs and improperly profiting from charitable activities.
“These charities exploited the goodwill of generous donors by misrepresenting their charitable programs, misappropriating donations and accruing excessive administrative costs,” Harris said in a statement. “These lawsuits hold People’s Choice Charities and Cars 4 Causes accountable for breaking the law and give California consumers greater confidence that their donations go toward the intended charitable cause.”
Car donation organizations like PCC and C4C work by soliciting car donations, selling the vehicles, deducting all their costs, and then using what is left to fund a charitable program — which they choose or allow the donor to choose.
Investigations by Harris and the District Attorneys’ offices found this was not happening with PCC and C4C.
According to the lawsuit [PDF] against PCC, filed along with the Los Angeles District Attorney’s office, audits found that from 2007 to 2012, the organization reported that it had donated over $700,000 to other nonprofits, while it actually only donated $174,000.
The discrepancy is a result of the company failing to properly disclose how it spent the net proceeds from sales, the complaint alleges.
While Los Angeles-based PCC claimed to donate 100% of net proceeds from the sale of donated cars toward donors’ chosen charities, the AG’s office found that 97% of those funds were spent on administrative costs, such as towing and car repairs, and advertising.
PCC claimed that towing was free and that it employs experienced staff to repair and sell the cars at minimal cost. However, in reality, the complaint claims, PCC charged the charities for towing expenses and has no repair staff; instead they pay outside vendors hundreds of thousands of dollars to do this work.
In some cases, a “cash back” program offered by the organization provided donors with up to 50% of the vehicle’s value, essentially turning the company into a used car dealership, and further depleting funds meant for charitable donation, the complaint alleges.
Once PCC deducted its numerous and undisclosed expenses, only a small fraction of the vehicle’s sale price is forwarded to a nonprofit.
Similarly, the complaint [PDF] against Cars 4 Causes, filed in conjunction with the Venture County DA, claims the organization used 87% of its donations to pay for things such as advertising and administrative costs, including staff salaries. Only 13% of the funds meant for donation were directed to actual charities.
According to an audit by the AG’s office, from 2009 to 2014, C4C reported that $15.9 million was donated to charity, but in reality, only $5.4 million made it to nonprofits.
Additionally, the complaint accuses C4C of taking money from the charities it promised donors it would support.
C4C’s records show it misappropriated about $2 million from thousands of charities including $600,000 that should have been given to charities serving the sick and providing medical research, $250,000 to children’s and education charities, $100,000 to veterans’ organizations, $230,000 to religious organizations, and $200,000 to charities serving the poor.
The California AG’s office warned consumers on Tuesday to donate directly to the organization they want to benefit.
“If a car donation organization is used, call the beneficiary organization you designated to confirm that they received your donation,” Harris said in a statement. “If they did not, call the car donation organization and demand that they forward your donation.”
Earlier this fall, Minnesota Attorney General Lori Swanson accused one of the country’s largest car donation groups — known as “Wheels for Wishes” — of raking in tens of millions of dollars by allegedly misleading donors about its connections to the Make-A-Wish Foundation, and about how much money that legitimate organization was going to receive from the donated vehicles.
