Savers, a Thrift Chain, Said to Pocket Money Meant for Charity

Minnesota's attorney general has accused Savers Thrift Stores of pocketing more than $1 million that should have gone to charities including the Lupus Foundation of Minnesota and Vietnam Veterans of America.

The legal office said that Savers, a privately held company based in the Seattle area, routinely misrepresented how much money it raised for nonprofit groups through clothing drives and other donations from customers. Savers would keep nearly all the money it raised from the sale of such items, the attorney general said in a report released on Monday.

The attorney general’s office is also holding the charities accountable for what it says is a failure to properly oversee how the stores raised money on behalf of the groups.

"My impression is, they sort of sign the contracts with this organization and then really largely turn a blind eye to the manner in which the contracts are being administered," Lori Swanson, the Minnesota attorney general, said in an interview. "They have a responsibility to police the relationship."

In an email, a spokeswoman for True Friends, Julie Fasching, said the group was still reviewing the report.

"In response to the Minnesota attorney general's news release, we fully support the efforts to protect charities and donors from poor practices of professional fund-raising," she said.

And David Kanihan, a spokesman for the Courage Kenny Foundation, said, "Protecting our donors' intent and continuing to earn their trust is of utmost importance to us. 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." Apogee is a subsidiary of Savers.

Sarah Gaugl, a spokeswoman for Savers, said in an email, "Savers remains dedicated to working openly, honestly and transparently with all of our nonprofit partners. We will continue to work closely with the attorney general's office along with our partners to address any concerns quickly and constructively so that we can focus our efforts on helping communities connect through a shared commitment to the common good."

According to Ms. Swanson's office, Savers had agreed to solicit donations from customers for the lupus and veterans organizations, as well as for True Friends, which runs camps for people with special needs, and the Courage Kenny Foundation, which supports an associated rehabilitation institute.

But the company misled consumers about just how much would be donated to charity, according to Ms. Swanson. While customers would be handed tax deduction receipts for donating household goods, for example, Savers did not donate any of the money it made from the sale of such items. The company also violated state laws by commingling funds intended for specific charities with those of others, according to the attorney general's report.

The report on Monday examined contracts and donations for 2013. Many customers may have already written such donations off on their taxes, and Ms. Swanson said her office has already referred the investigation to the Internal Revenue Service.

"Presumably you've got a lot of people taking tax write-offs for those donations," she said. "Fixing the problem is going to take a lot of heft and effort."

The state has given Savers and the charities 45 days to come up with a solution. If they do not, the attorney general could bring civil suits against those involved. Ms. Swanson's office has already referred the issue to other attorneys general.

"I haven't seen anything to indicate that somehow Minnesota's unique," Ms. Swanson said. "We’ve certainly seen evidence in our investigation that they seem to have a national business model."

Savers operates some 300 stores in more than two dozen states, under the names Savers, Value Village, Unique and Valu Thrift, and is owned by the private equity firm Leonard Green & Partners and Tom Ellison, the son of the Savers founder William O. Ellison.

The elder Ellison opened his first thrift store in San Francisco in 1954, according to Savers' website.