The thrift-store behemoth anchored by Value Village shops has been accused by Minnesota’s attorney general of underpaying some of its charity partners, misleading donors of goods about what’s tax- deductible, and poorly documenting its activities.
Bellevue-based Savers, the parent of Value Village, has built a 330-store international chain using alliances with 150 nonprofits, which locally include Big Brothers Big Sisters of Puget Sound.
Savers operates U.S. stores under the names of Value Village, Savers, Unique and Valu Thrift; in Canada, it’s known as Value Village and Village des Valeurs. It has more than 20,000 employees in the United States, Australia and Canada.
The AG’s report, issued Monday, also faults Savers’ nonprofit partners in Minnesota — the Courage Kenny Foundation, Lupus Foundation of Minnesota, Vietnam Veterans of America and True Friends — for not keeping a close eye on their contracts with the company.
Most Read Business Stories
- Stunning messages from 2016 deepen Boeing's 737 MAX crisis
- Economists identify an unseen force holding back affordable housing
- Americans now need at least 500,000 a year to enter top 1 percent
- Gig Harbor, other cities feel steamrolled by FCC rules on accepting 5G cellular technology
- Oracle co-CEO Mark Hurd is dead at 62
Savers didn’t comment on the specific allegations of the report but issued a statement saying it “will continue to work closely with the Attorney General’s Office along with our partners to address any concerns quickly and constructively.”
The company’s website describes the way it operates: It forms “alliances” with local nonprofits that solicit and collect donations of used clothing and household goods, and are paid by Savers according to the volume of goods contributed.
Those nonprofits also get paid when donors bring items directly to Savers stores.
Savers’ stores sell the goods that are in better shape; the rest are shipped to developing nations.
Last year, Savers paid its nonprofit allies more than $180 million, the company’s website says.
The privately held company is partly owned by two private equity firms, Leonard Green & Partners and TPG.
But the Minnesota attorney general’s report criticized several aspects of the Savers operation.
Savers, the report says, contracts with charities to use their names while it actually handles everything — from soliciting via telemarketing and mailers, to picking up items directly at donors’ homes.
But Savers and its subsidiary Apogee don’t always identify themselves as a “professional fundraiser” that’s separate from the charities they represent when soliciting from customers, as required by Minnesota law.
Also, the company’s financial reports to the attorney general don’t disclose details about how much money it pockets from the donations collected in name of the charities.
The difference between the price at which Savers sells an item and what it pays to a charity can be huge: The report pointed to an example of a dress sold for $6.99 at a thrift store while the charity gets 40 cents per cubic foot of clothing.
Savers, as a professional fundraiser, should have reported the difference between market value and fees paid to charities to the state Attorney General’s Office, the report says.
The state attorney general also alleged improper accounting for donations, saying that Savers “has commingled goods” that donors intended for one charity with another. That breaks a key principle of charity giving, which is the donor’s right to determine where a donation goes.
Also, the investigation determined that Savers didn’t always accurately report the amount of donations collected, even if they were fully itemized in its truckers’ logs.
Savers also didn’t report to the four Minnesota charities that it gathered over 9,541 carts of what it described as non-clothing items, from jewelry to electronics; Savers told state investigators it doesn’t pay the charities for such items.
The Attorney General’s Office estimates that underreporting, combined with the non-clothing items that were not credited to the charities, resulted in an underpayment of $1.16 million in 2013.
The fact that Savers solicited donations of non-clothing items and distributed tax-deduction receipts to donors even as it kept all the profits is misleading, the AG report says.
And it could land the company in hot water with Uncle Sam, the AG says, as the practice results “in taxpayers claiming deductions for donated goods for which the charities receive no payment.”
The office said it sent a copy of its findings to the Internal Revenue Service, which oversees federal tax issues tied to charitable giving. An IRS spokesman declined to comment on any discussions between the AG and the federal agency.
After a query seeking comment on the Minnesota report, a spokeswoman for the office of Washington Attorney General Bob Ferguson said that she couldn’t “confirm or deny” any investigation.
Swanson’s office asked each charity to report back within 45 days with documentation showing what they’ve done to fix the issues described in the report. Based on that, the Minnesota AG will decide whether to take any additional action.
The Courage Kenny Foundation, which supports a rehabilitation institute, said in a statement it has used outside vendors for opportunities that are hard for its internal staff to handle, such as soliciting and collecting clothing donations.
“We share the Attorney General’s concerns about the lack of transparency in Savers and Apogee’s current practices, and will closely review our arrangement with them to determine next steps,” the statement said.
A spokeswoman for True Friends, which runs outdoors programs for people with special needs, said the organization is reviewing the report.
“We fully support the efforts to protect charities and donors from poor practices of professional fundraising,” she said.