Red Cross, and its Liberty Disaster Relief Fund, has come under a storm of criticism for allegedly delaying aid to the victims' families, failing to cooperate with other charities and government agencies that are trying to coordinate relief, and diverting a large portion of the funds for use in future, unrelated disasters.
Less than two months after the attacks, and after more than $564 million had already been raised, Red Cross spokeswoman Dana Allen admitted that Liberty Fund donations would not all be used for the September 11 attack victims. "We also need to make sure we're ready to help as the nation engages in military action, and as we respond to more terrorist threats."
Former Red Cross President, Dr. Bernadine Healy, echoed the response. "We have been so straightforward in saying what we are using the money for," Healy told BusinessWeek. "The disaster relief involves this entire country, and its readiness for future terrorist events, for healing, for grieving."
Stacy Palmer, editor at the Chronicle of Philanthropy, was skeptical: "One of the biggest mistakes the American Red Cross made was they didn't move fast enough to say what they're going to do with all the money," Palmer told the Los Angeles Times. "And so far, there aren't a lot of explanations coming that the average person who donated money is going to be happy about."
Daniel Borochoff, President of the American Institute of Philanthropy, says there is nothing in principle wrong with the Red Cross using major disasters to subsidize other relief efforts - just tell donors beforehand. "If they are going to do that, they have to say so explicitly. It can't be in the fine print," says Borochoff. The Red Cross has a long history of diverting donations, and has been criticized before for not using donations specifically raised for particular disasters - some requiring intervention by local officials to require them to pay up on donations the public intended their contributions to be used for.
In 1995, the Red Cross raised $13 million to aid victims and families of the Oklahoma City bombing. But when this proved to be far more money than it said it needed - it spent $2.6 million on victims - the charity earmarked the surplus to fund other less-publicized disasters.
In 1997, the Red Cross collected $16 million to aid victims of the Red River flood in Minnesota and North Dakota. But state officials were angered to find out that more than a year later the organization still had not spent $4 million of the contributions to benefit victims.
Minnesota's then-Attorney General Hubert Humphrey III held harsh public hearings that resulted in a scathing 40-page report to push for the release of the unspent victim funds. Humphrey did not accuse the organization of fraud, but said it was not candid enough with donors: "When you make appeals at a time of great emotion and stress, you have a significant responsibility to see to it that you use the funds for the purpose you state."
As the Red Cross controversy heated up, Bill O'Reilly, of Fox News' O'Reilly Factor jumped all over the story. Acting more like a pit bull than a news analysis anchor, O'Reilly chewed and clawed through every major charity organization. A few weeks after the September 21, 2001 national telethon, America: A Tribute to Heroes, - which raised $128,167,000 - O'Reilly got his second wind and went after the celebrities that he felt were not sufficiently pressuring the charities to deliver on their promises.
O'Reilly can be credited for doing much to expedite charitable distributions, through on-air pressure, emotional appeals from many of the families of the victims, and constant calls for a government investigation.
Washington was apparently listening. On November 6, 2001, a congressional hearing of the House Energy and Commerce Committee's oversight panel was convened to determine donor intent and whether the Red Cross misled donors.
With former Red Cross President, Dr. Bernadine Healy in attendance, New York Attorney General Eliot Spitzer testified: "I see the Red Cross, which has raised hundreds of millions of dollars that was intended by the donating public to be used for the victims of September 11 - I see those funds being sequestered into long-term plans for an organization."
The hearing was contentious at times, with Representative Billy Tauzin (R-LA) saying, "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 are told enough money's been raised in it, but we're also being told, by the way, we're going to give two-thirds of it away to other Red Cross needs."
Dr. Healy testified that the Red Cross always made clear that some of the money would be used for "future critical priorities." Tauzin interrupted saying, "What's at issue here is that a separate fund was established for these families," he said, pounding the table. "We are hearing from families that their needs are not being met."
Eight days after the hearings, the Red Cross reversed its position and announced that all donations to the Liberty Fund would go to aid the victims and their families. Said interim president Harold Decker, "Americans have spoken loudly and clearly that they want our relief efforts directed at the people affected by the September 11 tragedies."
After a November, December 2001 surge in payouts to more than 55,000 individuals and family members, the Liberty Fund has only distributed $15 million since the previous three-month report dated April 30, 2002 - and still has almost $400 million remaining to be distributed.
According to the American Red Cross' (ambiguous) six page Liberty Disaster Relief Fund Quarterly Report dated August 1, 2002, the distribution of funds continues to move at a snail's pace.
Liberty Fund officials say it expects to eventually pay out a total of $943 million overall, including a $133 million budget for continued disaster relief over a three-to-five year period, based on demonstrated need, primarily in areas of mental health and uncovered health care, as well as long-term family support and service coordination.
Liberty Fund
Total Contributions $ 988,000,000
Total Distributions to Date $( 458,000,000 )
Immediate Disaster Relief ( 95,000,000 )
Fund Stewardship ( 37,000,000 )
Total Funds Spent
$ ( 590,000,000 )
Balance Remaining $ 398,000,000*
* The Quarterly Report dated August 1, 2002 states that the Fund expects to distribute a total of $708 million to the families of the deceased or missing, persons seriously injured in the attacks, displaced residents and economically impacted individuals, and disaster responders - and a total of $943 million overall.
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