Donation-Processing Charity Lost at Least $17.7-Million in Gifts

More than $17.7-million in charitable donations never made it to the intended recipients as a result of last summer’s implosion of PipeVine, a San Francisco nonprofit group that processed on-the-job contributions for companies, according to a court-ordered report.

In a separate document, the receiver in the case said that he had entered into an agreement with the United Way of the Bay Area, PipeVine’s founder and largest customer. The United Way agreed to provide $3.45-million to those owed money in exchange for being released from future claims in the case.

During its existence, PipeVine handled donations totaling more than $100-million a year for companies that run on-the-job fund-raising drives, United Ways, and other charities. The organization shut its doors abruptly on June 2, citing “a severe liquidity problem” and saying that it had “a negative fund balance that will result in a shortfall in amounts payable to some charitable organizations.”

California Attorney General Bill Lockyer asked the San Francisco County Superior Court to dissolve PipeVine and appoint a receiver to secure its assets, account for donations handled by PipeVine, and compensate charities that did not receive contributions that had been earmarked for them.

In his lawsuit, the attorney general accused PipeVine of “improperly commingling and diverting charitable trust funds into general operating revenues.” The court appointed David A. Bradlow as receiver in July.

Documenting Finances

In a report filed with the court last month, Mr. Bradlow said that PipeVine failed to pass on $9.4-million designated for the United Way of the Bay Area, in San Francisco, and $8.3-million designated for other charities. He also stated in the document that PipeVine may owe an additional $1.4-million to the United Way of King County, in Seattle, more than $700,000 to an employee pension plan, and more than $1-million in unemployment benefits.

The receiver also reported that thus far he had “found no evidence of embezzlement or improper personal enrichment by any individuals.”

“The receiver’s report is distressing,” said Attorney General Lockyer in a statement. “The numbers clearly demonstrate the substantial harm caused by PipeVine’s conduct to donors, charities, and the crucial services they provide in our communities.”

The attorney general’s office says that its investigation into PipeVine’s demise is continuing and that its primary objective is to recover the lost contributions and turn them over to the organizations for which they were intended.

Created in 1993

PipeVine was formed by the United Way of the Bay Area in 1993 and spun off as a separate nonprofit organization in 2000, although the United Way remained PipeVine’s largest customer and landlord.

The $3.45-million that the United Way has agreed to pay the receivership will come out of the charity’s unrestricted reserves. In its agreement with the receiver, the United Way also maintains a $3.5-million claim for its losses, although that claim can only be paid after PipeVine’s other creditors receive their money because the United Way has agreed to go to the back of the line when the receivership begins paying out claims against PipeVine.

“The receiver’s actions advance the process of getting funds flowing to charities hurt by PipeVine’s closure, and also allow the United Way of the Bay Area to fulfill our pledge to stand by our donors and the nonprofit community,” said Anne Wilson, the United Way’s chief executive officer, in a statement.

She said that the United Way agreed to be among the last charities to be repaid because it wanted other, smaller nonprofit organizations to be paid first.

Ms. Wilson also added, “As the organization that helped establish PipeVine, we deeply regret its failure and are sorry for the impact its closure has had.”