Updated: 5:09 p.m. | Posted: 12:20 p.m.
Attorney General Lori Swanson is pushing for changes to the nation's largest car donation charity, which allegedly mismanaged millions of dollars intended to go to Make-A-Wish foundation.
St. Louis Park-based Car Donation Foundation, which has a promotional agreement with some local charities, solicits people to donate their cars to benefit charities such as Make-A-Wish. Car Donation Foundation then sells or scraps donated cars at a for-profit scrapyard owned by the charity's founders.
The charity's website says "proceeds from donated vehicles go to Wheels For Wishes, a tax-exempt charity...." (Car Donation Foundation does business as Wheels For Wishes.) However, from 2011 to 2014, the charity's founders, William Bigley and Randy Heiligman, pocketed $36 million, or about 80 percent of the gross proceeds, Swanson said in a compliance report.
Swanson says the money was routed through two for-profit companies owned by Bigley and Heiligman. Car Donation Foundation used National Fundraising Management, Inc. to solicit vehicle donations and to manage its Wheels for Wishes program. Metro Metals Corporation, a St. Paul scrapyard, sold or scrapped vehicles donated to CDF.
"One of the most troubling aspects of today's compliance report is the simultaneous management and ownership by two individuals of a network of non-profit and for-profit corporations," she said at a press conference Wednesday.
The foundation has a presence in about 40 states.
The Internal Revenue Service also raised concerns about Bigley's and Heiligman's simultaneous management of a charity and the two for-profit companies. As a result, Bigley and Heiligman resigned from the foundation's board of directors, but they continued to run Car Donation Foundation because it didn't have employees and an office as of June 2015, Swanson said.
Last year about 5,000 vehicles were donated to Car Donation Foundation nationwide, generating $37 million revenue, Swanson said. In the same year, 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.
"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," Swanson said in a statement. "Solicitation instead featured the 'Wheels for Wishes' name in conjunction with the Make-A-Wish name, as depicted in newspaper and Internet ads."
Car Donation Foundation spent a significant amount of money on promotional and advertising campaigns, according to the compliance report. Between 2011 and 2014, the organization spent more than 30 percent of gross vehicle sales, or a total of $35 million, on advertising, the report said.
Swanson's compliance report included an email message from Heiligman to Bigley and National Fundraising Management's marketing staff, which said, "This is pure and simply a marketing business we are in. The best marketer will win!!"
Car Donation Foundation's revenue more than doubled in four years from 14.4 million in 2011 to $37.3 million in 2014, the attorney general said. The foundation also received about $108 million in total revenue from vehicle donations in those four years.
In a statement, Car Donation Foundation rejected the attorney general office's findings and said it will respond to the report.
"Since 2011, Car Donation Foundation has contributed more than $1.5 million to Minnesota charities and more than $30 million to charities across the country," the statement said. "The Attorney General's report cites old numbers relating to the percentage donated to charities. In 2015, more than 50 percent of our gross proceeds in Minnesota have been donated to charities."
The watchdog group Charity Watch would still give that a grade of C minus.
Charity Navigator says the most efficient charities spend less than 25 percent of their revenue on fundraising and administration.
Car Donation Foundation paid more than $70,000 to the chief executive officer of the Minnesota chapter of Make-A-Wish, who was a "key promoter for CDF in landing these contracts with other Make-A-Wish chapters," according to the compliance report.
The CEO resigned on June 15. A day later, the board of directors of Make-A-Wish of Minnesota met to investigate the payments that the CEO received from CDF's two for-profit companies.
Swanson said she asked the IRS to review the tax exempt status of the CDF. She has also sent her findings to both charities and requested them to report back within 30 days detailing the steps they have taken to address the concerns. The local chapter of Make-A-Wish has already taken steps to fix the problems, she said.
"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," she said in a statement.
Erica Schaps, a Twin Cities middle school teacher, joined Swanson at a news conference. Schaps donated her 2005 Chevrolet Cobalt to Car Donation Foundation in late 2013 after she crashed it in an accident. She searched online for charities that accept donated cars. She said she clicked on first search result, which had the Make-A-Wish logo, and filled out a form.
"It's a super slick process," Schaps said. "If I had known that Car Donation Foundation wasn't actually going to give $1,700 to Make-A-Wish foundation, I would have found a different way to donate my car."