To resolve a Minnesota lawsuit that accused it of duping its donors, thrift store chain Savers will modify how it handles donations of used goods and pay local charities $1.8 million.
Savers said it disagrees with the allegations of Minnesota Attorney General Lori Swanson but is satisfied that the settlement filed in Hennepin District Court Thursday “has resolved her differences with us.”
Savers agreed to more clearly disclose in signs and written materials that it is a for-profit professional fundraiser, and to stop soliciting donations of furniture, jewelry and televisions whose proceeds do not benefit charities.
It also agreed to prominently display and disclose the actual amounts it pays charities when the retailer sells donated goods in its stores, and to label and track the items. That would ensure, for example, that proceeds from a shirt someone donates to a veterans group actually goes to that organization.
Savers will pay $300,000 to each of its partner Minnesota charities to compensate them for the disruptions to their fundraising: True Friends, Courage Kenny Foundation, Lupus Foundation of Minnesota, Disabled American Veterans Department of Minnesota, Epilepsy Foundation of Minnesota and Vietnam Veterans of America.
In an interview, Swanson said Minnesota is the first state to confront Savers over its business practices — a potent move, she said, because Minnesota is a top market for the Bellevue, Wash.-based company. It operates 15 stores in the state under the names Savers, Unique Thrift and Valu Thrift.
Elsewhere, Savers also runs stores under the Value Village brand, but not in Minnesota.
“Donors need transparency and disclosure to make informed choices about whether and how to donate,” Swanson said. “There are a lot of charities out there, and a lot of good causes, and donors have choices.”
The company stopped soliciting donations on behalf of charities in Minnesota after the lawsuit was filed last month, Swanson said. Before it can resume, Savers will have to file contracts and reports with her office disclosing the percentage of sales that goes to charities, and how much it earns from them.
In a statement, Savers President & CEO Ken Alterman said Savers paid more than $7.5 million to Minnesota charities last year and that it keeps tens of millions of pounds of goods out of landfill. Plus it gives bargain hunters good deals — the average price of goods in its stores is under $4.
“We believe deeply that our business has rendered enormous benefits to our charity partners and the causes they support and to the citizens of Minnesota,” Alterman said.
Company spokeswoman Sara Gaugl said Thursday that Savers has continued taking donations of clothing and household items, but only for recycling, not sales, and they’re not tax deductible. She said the company must file the required paperwork before it resumes collecting charitable donations.
Savers is a privately held company with international operations, and bills itself as the largest retail thrift store chain in the country with annual sales of more than $1 billion. It’s owned by two private equity groups as well as company executives.
The company’s thrift stores have been a popular and reliable revenue-raising tool for nonprofits. But several of the local charities cut ties with Savers after the attorney general issued a highly critical compliance report last fall.
Swanson also took the charities to task. Earlier this month the attorney general sued the Epilepsy Foundation of Minnesota claiming that it, too, was violating the state’s charities laws through its partnership with Savers. The lawsuit is pending, but foundation head Vicki Kopplin said she anticipates reaching a resolution shortly.
Money raised through Savers is critical to the foundation, Kopplin said. In any given year it generates from 38 percent to 50 percent of the foundation’s revenue.
Kris Kewitsch, executive director of the Charities Review Council, said she thinks the uproar over the allegedly deceptive practices “will help donors and nonprofits be more thoughtful about their giving.”
“I think it’s changed how nonprofits will do business in the future,” Kewitsch said.