Charity Fraud Written Statement from the American Red Cross

http://www.redcross.org/press/disaster/ds_pr/011106statement.html

Written Statement from the American Red Cross

Robert Bender, Jr.
Executive Officer, Greater New York Chapter

Michael Farley
Vice President, Chapter Fundraising

Hearing on "Charitable Contributions for September 11th:
Protecting Against Fraud, Waste and Abuse"

U.S. House of Representatives
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
Tuesday, November 6th, 2001

Introduction

Within moments of the first plane tearing into the World Trade Center on that terrible morning of September 11th, 2001, the tragic events that transformed this nation also began the largest disaster response in the history of the American Red Cross - our nation's oldest, most experienced and most trusted humanitarian organization. A terrorist event is unlike any other disaster and requires the American Red Cross to be prepared to serve the American people in accordance with our Congressional Charter.

The American Red Cross, along with each of us here today, could not possibly have anticipated the scope of such an event nor have been fully prepared for the impact this would have on the lives and families of those affected. As we always do, the Red Cross immediately began providing emergency relief and emotional support to a nation stunned by the brutality of an unprecedented attack on American soil. We, like all other first responders, were overwhelmed in those first chaotic and uncertain hours following the attack. By 10 a.m. there were hundreds and thousands missing at ground zero in New York, at the Pentagon and at the Pennsylvania crash site. All of American was on edge. Rumors flew. No one knew what would happen next. At the World Trade Center, there was Red Cross staff unaccounted for, we were without phones, and our emergency response vehicles couldn't get to the site.

Chartered by Congress in 1905 to maintain a system of national and international relief, it is the mission of the American Red Cross to help people prevent, prepare for and respond to emergencies. The Red Cross is an essential partner with federal response agencies during disasters through its lead role for mass care under the Federal Response Plan. Our primary focus is on the human needs of those affected, and we respond to both the physical and emotional devastation experienced by people during and after a disaster. Our duty yesterday, today and tomorrow is to serve humanity with dignity, valor, and compassion.

Immediate Response to the Events of September 11th, 2001

The New York Times on October 21st described part of the scene immediately following the attack on the World Trade Center: "The survivors, blanketed in the gray mist of urban disaster, headed north and east. The attack's human spores bearing their stories, their fear, throughout the city." In the initial hours and days, we took the steps necessary to establish order out of chaos and support those whose world had just been torn apart -- those in New York walking out of the gray dust to nowhere, those at the Pentagon fleeing from the intense heat and flames, and those families urgently wanting to hear about loved ones whose planes never arrrived. First at the scene in some 67,000 disasters each year, the Red Cross goes to where the people are - be it at bus stops, subway stations, the East-West highway in New York City, the Pentagon parking lots or a pasture in Pennsylvania. Thousands of times over, in New York, Washington and Pennsylvania, we met the needs of those affected with a compassionate presence. This presence was possible because the Red Cross has build a nationwide network of chapters that we can draw from, we are staffed with dedicated employees, and rely on a vast "Army of Mercy" in the words of FDR—our millions of volunteers.

We do not wait for people to come to us, but reach out to find those in need. Our immediate disaster response efforts have served 25,000 families by providing direct assistance for food, shelter, and clothing. For example, in apartment buildings surrounding the World Trade Center, we found elderly people afraid to venture beyond their rooms. Many were absent their health care assistants. Red Cross workers filled prescriptions and made sure that their daily needs were met. Since the attack, we have provided more than 9 million meals — 100,000 meals a day -- to families and rescue workers. We found firemen, police, emergency medical crews and responders of all sorts who needed water, shelter, a change of clothes, a place to rest, or a place that could provide silence and solace.

Our Air Incident Response Teams, always on immediate alert, were dispatched to each departure site and every scheduled arrival site for the four flights hijacked that day. We also provided teams to the United Airlines' Headquarters in San Francisco and American Airlines' Headquarters in Dallas. Mental health, grief counseling and spiritual support and other referrals were extended in each location. Dozens of Red Cross chapters nationwide mobilized to help travelers stranded at airports across the country. It truly has been a tragedy that has reached across America.

In a time of tremendous uncertainty, we ensured that blood would be available wherever needed. We mobilized our national blood system to preposition stocks around the New York metropolitan area, to meet a need, which unfortunately never came. But we had to be ready. And we were.

Outpouring of Support by the American People

As always in the face of tragedy, the American spirit is indestructible. Just as this heinous act was unprecedented in its destruction, the response from the people of America is inspiring -- people waiting hours in long lines to donate blood, flooding phone lines to volunteer their time in any way that was needed, and personally delivering financial contributions. There was a need for people to connect with other people and to do something, anything, to help. We have been deeply honored by the examples of selflessness: American Airlines flight crews giving blood in honor of their colleagues who perished, school children taking collections and organizing car washes, coins collected in bags, and volunteers coming to our door by the thousands. Even Congress set new records for blood donations two days after the attacks.

The generous financial and in-kind assistance that the American Red Cross has received from individuals, companies, foundations is unprecedented. This is being handled with utmost openness, accountability and integrity. Therefore, we established the Liberty Disaster Relief Fund, a separate, segregated account that was created to hold and disburse funds related to the September 11th attacks, its aftermath, and other terrorist events. This fund is structured to ensure that every dollar raised will go to help people who are and will be affected by acts of terrorism as well as to ensure the Red Cross will help people whenever and wherever terrorism strikes. We believe the establishment of this account is the best way to assure absolute transparency, clear accountability and demonstrate our commitment to donor intent.

The tremendous outpouring of support by the American people has enabled the Red Cross to fulfill its mission following these attacks. In just 7 short weeks, the Red Cross has received pledges and contributions totaling $564 million. To date $154 million has been spent or committed, $120 million for direct assistance to 25,000 families in the form of cash and vouchered assistance to cover their emergency needs including food, clothing and temporary shelter. While we have a balance of funds uncommitted at this date, we will hold aside these contributions to be made available for emerging needs. We have adapted quickly to the level of support and generosity demonstrated by the American people. To have responsibly disbursed $120 million to 25,000 families in less than 7 weeks is extraordinary and is unprecedented in the nonprofit world.

Included in these figures is assistance provided under a new initiative for families who lost loved ones on September 11th. For families who lost breadwinners, a family gift program has been established to cover 3 months of financial needs — rent, mortgages, childcare, and food. To date, Red Cross has spent or committed $47.9 million to more than 2,300 families who have been helped through the receipt of emergency gift checks. We will continue to work with these families beyond the initial period to evaluate how else we might support them in the months ahead.

All of America is grieving. The wife of a Red Cross employee in Washington, D.C. is constantly haunted by visions of her husband being killed in an attack on the nation's capital. The father of a nine-year-old in Memphis, Tennessee wonders how he can stop the nightmares of his child who dreams about planes crashing into buildings. For these people and others, we have had close to 135,000 mental health and grief counseling contacts.

All of our financial assistance is being provided in the most expeditious way possible. A simple one-page gift form is the only paperwork required, which is processed promptly with checks issued overnight. The forms can be done by fax, phone or electronically, and are available through the Family Assistance Center and at other family assistance sites in New York City, or any one of our 1,000 chapters located in communities nationwide.

We do not wait for families to contact us for this assistance. We have implemented an aggressive outreach program. Early in October, we placed advertisements in major newspapers appealing to families to come forward and receive assistance. We've also contacted employers of the World Trade Center, floor by floor, to reach out to their employees, searched hospital lists and the list of confirmed deceased. Forty Red Cross employees and volunteers are dedicating their days to calling and contacting families who might qualify for cash or other assistance. All told, we've contacted about 3,300 families, and the number grows daily.

Because this tragic event also injured and killed foreign nationals, the Red Cross has extended its reach to families across the globe through our International Family Assistance program. To date, we have opened more than 169 cases involving the families of foreign nationals. The Red Cross international aid package includes: financial assistance for travel to and from the United States, lodging, meals, local transportation, crisis counseling, advocacy and referral with U. S. agencies, repatriation of remains, funeral expenses, tracing services, and information about embassies and consulates. We are being assisted by our partner Red Cross and Red Crescent societies the world over.

Financial Stewardship and Charitable Fraud

The American people have rushed to support our efforts with an unprecedented surge of generosity. In response, the Red Cross has put in place stringent accounting measures at both the National Headquarters and throughout our chapters to ensure stewardship of these funds. Our internal audit staff and KPMG, our external auditors, began reviewing and testing control processes and procedures for donations and disbursements the week following the terrorist attack. That testing continues. National Headquarters has instructed the corporate external auditor, KPMG, to begin fiscal year 2002 audit testing of contributions immediately, and have directed chapters to require the same of their auditors and independent CPAs.

Federal statutes prohibit the use of the American Red Cross name and emblem by commercial concerns and unauthorized solicitations (Title 18 USC §706) and provide for fines and imprisonment (Title 18 USC § 917). In order to ensure that all donations are collected on behalf of the Red Cross is received and properly acknowledged for tax purposes, we have established formal agreements with groups and businesses that have helped to raise funds. A third-party group can conduct a fundraiser provided their local Red Cross chapter approves it and a signed letter of agreement has been received.

This committee has provided leadership in the area of protecting charitable organizations from fraudulent use of the Internet and other media in soliciting funds. We applaud your efforts to prevent such activity. As one of the country's largest non-profit organizations, we have effective firewalls and tight security protocols in place to detect and trace these activities. On September 14, the Red Cross sent an e-mail message to 30,000 previous online donors. This message included a URL link to an official, secure online donation site. The American Red Cross and its online partners (aol.com, yahoo.com, paypal.com, libertyunites.com, and wellsfargo.com) accept credit card information only through a secure portal on a Web site, not through an e-mail message. When Internet scams have been detected, we have worked closely with the Federal Trade Commission and the Department of Justice, and taken aggressive steps taken to shut them down.

Symantec, an information technology security firm, retained by Red Cross notified us on October 17, 2001, about the Septer.Trojan computer virus for potential credit card donors. The virus came in the form of an executable file attached to an e-mail message that appears to come from the American Red Cross, United Way and the September 11th Fund. The American Red Cross Office of General Counsel contacted law enforcement authorities immediately about this fraudulent act.

Coordination of Relief Efforts

We typically lead and champion cooperation with other relief agencies to insure we don't duplicate efforts and to protect against any gaps in services. The Red Cross leadership and the Attorney General of New York, Eliot Spitzer, have been engaged in a constructive dialogue on a means of improving access to the vast disaster relief resources now marshaled to help the victims of the September 11th attacks. We are hopeful that a system will be established to enable disaster relief recipients to maximize the relief resources available to them.

The Road Ahead

The American Red Cross will be with the survivors and families affected by this tragedy for as long as it takes. Our decades of experience with disaster victims tell us that assistance will be needed for years to come. We need to ensure that the resources entrusted to us by the American people will be available to meet these future needs.

Family Assistance Centers were established for the loved ones of those lost in the World Trade Center and the Pentagon. The Center is still operating at full strength in New York City. A one-stop relief center, families can avail themselves of the full breadth of Red Cross services in an environment where confidentiality, dignity and compassion are the hallmark attributes. We are committed to this outreach, and will work with those affected for years after this event.

In other ways, our work has just begun. The site of the World Trade Center, now called "The Pile", is emblematic of the work ahead and the human needs we will serve. There, work that is physically arduous, always dangerous and emotionally draining will continue for another 9 to12 months. Construction workers, firemen, police, and emergency medical technicians are not forgotten. We are operating special respite centers on-site. It is a place away from the noise and the dirt, where workers can come to find food, shelter, a change of clothes, a place to sleep, or to read a card written with special care from a child. This is a place to refresh the body and the spirit in order to go back, once again, to their work. This is another example of a new service for us, a service we adapted to the needs of those involved in this disaster.

We now find ourselves in the grip of a biological attack. We are assisting the families of those directly affected from anthrax exposure. We have offered immediate financial assistance through our Family Gift Program, and we are contacting 16 victims who are or have been hospitalized for anthrax. Further, because the current attack has understandably created public anxiety, we are reaching out to communities with public awareness and education materials. We will continue to develop these materials to address the community education requirements regarding biological and chemical agents.

Conclusion

The American Red Cross today is helping tens of thousands of people affected by acts of terrorism in the United States. We were among the first on the scene and we will be helping people for as long as it takes. The clear focus of our Liberty Disaster Relief Fund is to ensure that every dollar raised will go to help people who are and will be affected by acts of terrorism as well as to ensure the Red Cross will help people whenever and wherever terrorism strikes. We thank you Chairman Greenwood and Representative Deutsch for holding this timely and important hearing.