Turmoil at the Red Cross

The American Red Cross and its president, Bernadine P. Healy, are under fire

for the way in which the charity has raised more than $500-million to help victims of the September 11 terrorist attacks and for the plans that Dr. Healy has made to spend the record amounts of money that continue to pour in.

Questions are growing over whether the Red Cross and Dr. Healy have been candid about how much of the money will really go to victims, their families, and rescue workers, and whether the charity can spend the dollars in a way that will be consistent with the desires of the public, the charity’s Board of Governors, and the 1,000 local Red Cross chapters around the country.

What’s more, rumors have swirled at the charity’s national headquarters that Dr. Healy’s management of the Red Cross is being very seriously questioned by the charity’s board, even as board members prepared to come to Washington for a regular meeting last weekend.

Many people, both inside and outside the Red Cross, are voicing concerns that Dr. Healy has focused more on raising extra money to expand the Red Cross’s reach through long-term blood and anti-terrorism programs than on accurately evaluating the needs of September 11 disaster victims and communicating them clearly to the public.

“Dr. Healy’s attitude seems to be, ‘If the money is there, we’ll find a program to spend it on,’” said one former Red Cross employee, who, along with many of the more than two dozen other people interviewed for this article, requested anonymity because of fear of retaliation from Dr. Healy or her close advisers.

Critics also worry that Dr. Healy’s leadership style, which they describe as autocratic and arrogant, is preventing her from working effectively with local Red Cross chapters and with other nonprofit groups on a response to the terrorist attacks. Observers say that Dr. Healy’s actions have caused morale at the national organization to drop to an all-time low, and have contributed to the departures, voluntary or forced, of several key employees since Dr. Healy took over the charity’s helm two years ago.

Dr. Healy did not respond to repeated requests by The Chronicle for an interview. But in an internal memorandum to Red Cross officials in which she announced the creation of the Liberty Disaster Fund, Dr. Healy talked about some of the concerns. “Some have suggested that we might raise more than we need to respond to this attack on America’s spirit, liberty, and national security, and that contributions should be placed in our general disaster fund,” Dr. Healy wrote. “I can assure you that we will only raise more money than we need if we do less than we should.”

In a national television interview last week, Dr. Healy for the first time wavered about asking for more money for the Liberty Fund and made a point to leave that choice to her board. “We are at just about $500-million, which is what we need,” she said. “We are not now probably going to go beyond that specifically for the Liberty Fund. But of course our Board of Governors will decide what to do.”

History of Liberty Fund

The charity’s Liberty Fund has a complicated history.

Immediately following the terrorist attacks on September 11, the Red Cross told the public that money raised by the charity would be spent to respond to the attacks and for future disaster-relief efforts, reflecting the charity’s standard policy, painstakingly formed, of making sure that funds can be used in a flexible way for more than one crisis.

But Dr. Healy soon took the unusual step of creating the Liberty Disaster Fund to earmark all donations received by the Red Cross since September 11 for terrorism-related relief efforts. Some observers think Dr. Healy may have broken board policy by forming the special Liberty Fund without consulting with or gaining approval from the Board of Governors itself.

In fact, some maintain that Dr. Healy erred when she created the Liberty Fund separate and distinct from the Disaster Relief Fund, which traditionally is used to help victims of disasters such as hurricanes and floods. According to the Red Cross Web site, the Liberty Fund “will support the immediate and emerging efforts of the American Red Cross to alleviate human suffering brought on by the attacks of September 11. All donations received since September 11, 2001, will be placed in this disaster relief fund.”

Tthe Red Cross board wants the organization to keep about $50-million on hand in its regular Disaster Relief Fund, because dealing with a major natural calamity can cost that much within a couple of weeks. One Red Cross official told The Chronicle last month that the fund contained about $50-million before September 11; another charity source said that the fund’s balance had recently dropped to about $30-million, low enough to alarm many charity workers.

Some observers remember — and do not want to repeat — a controversy in 1998 when the attorney general of Minnesota accused the Red Cross of failing to spend millions of dollars in donations that had been raised and earmarked for flood victims. The Red Cross denied the charges. Yet the organization carefully made sure thereafter to not ask donors to give to specific relief efforts but to the general Disaster Relief Fund so that money raised could go where it was needed.

“The Red Cross made such an effort to build an understanding of the general fund in the public’s mind that to arbitrarily set up a new fund really upset people” in the charity, said one former employee.

Bill Blaul, American Red Cross’s senior vice president of communication and marketing, acknowledged that “it is a concern that the national Disaster Relief Fund is below what we believe to be an optimal level.” But, he said, “the American Red Cross has such a strong combination of public awareness, of brand identity, and community presence that with an appropriate amount of effort we can fund raise the cost of every and any disaster-relief job that we would encounter in the future.”

Credibility With the Public

No one affiliated with the organization doubts the intense dedication — and high quality — of services provided by the legion of Red Cross employees and volunteers throughout the country.

But some say that the response of the charity’s national headquarters and Dr. Healy since September 11 threatens to undermine the institution’s credibility with the public.

Critics charge that Red Cross headquarters has been intentionally fuzzy in describing how money donated after the recent terrorism attacks would be spent on victims. Until recently, the Red Cross and Dr. Healy did not make clear that most contributions to the organization’s Liberty Fund will not ultimately go directly to victims and their families or to rescue workers.

Instead, huge sums will go to help the charity “expand into new programs of aid never before required,” according to the Red Cross’s Web site, including plans to handle terrorist attacks involving weapons of mass destruction and a new way to make blood supplies last longer.

Some say that the Dr. Healy’s big plans for the future may have much merit. But, said the head of a mid-sized Red Cross chapter, who asked not to be named, “donors must be fully informed before reallocation of their funds — and Web site announcements just don’t do the job.”

Meanwhile, Dr. Healy herself has given differing descriptions of how the money raised will be spent.

In videotaped appeals that have appeared widely on television, Dr. Healy describes what the Red Cross is doing to help people affected by the terrorist attacks and makes a general plea for donations of blood and money without specifying their use. “Together we can save a life,” she says.

Earlier last month, Dr. Healy, in a radio interview, provided a broader description. “Recognizing the scope, the intensity, and the fact that virtually every one of our lines of work is going to be involved,” she said, “we immediately created what we call our Liberty Disaster Fund, which is specific to this particular disaster and its aftermath. And all of the funds go in there and are related to our priority activities.”

Mr. Blaul said that “there is no confusion whatsoever” in the way the Red Cross has depicted its plans. “Yes, of course, the Liberty Fund is different,” he said. “It’s different because what happened on September 11 is exceptionally different than a hurricane or a tornado or an earthquake or a flood. The organization had to look in the mirror and say, ‘Are we ready for other weapons of mass destruction events or terrorists attacks?’ — and then act.”

Details of Spending

For the first time, on October 15, the Red Cross on its Web site offered a partial detailed explanation of how it intends to spend a large chunk of the money that goes into its Liberty Fund for “near-term response costs.”

The charity said that it would devote $300-million to $320-million “to provide ongoing disaster relief” following the terrorist attacks, including $100-million for a Family Gift Program to help families that have lost a breadwinner as a result of the terrorist attacks, and to cover their near-term financial needs such as food, clothing, utilities, transportation, mortgage or rent, tuition, funeral, and related expenses, “and other time-sensitive expenses.”

As of last week, the charity had spent about $40-million on the program, and recently ran advertisements in newspapers encouraging qualified people to call a special charity phone number to request assistance. Dr. Healy has said that she thinks many people who qualify for money have not understood that the help was available and that she expects many more requests to roll in.

While the Red Cross offers no further detailed public explanation of its long-term plans, a memo obtained by The Chronicle, which Dr. Healy recently wrote to chapters and volunteers, says that the Red Cross will need “several hundred million additional dollars” over the next 18 to 24 months “to prepare for future terrorist attacks.”

Dr. Healy said that the additional money would be used to “invest in our chapters” to do such work as developing “preparedness standards” that would include “training and development in responding to weapons of mass destruction.”

Another program would focus on “assuring blood readiness” through the strategic reserve, while others would focus on creating “a whole new level of volunteer recruitment, screening, training, and development, continued engagement, retention, cultivation, re-training, and deployment,” and on being prepared as an organization to respond to “future terrorist attacks and catastrophic events which may be multifaceted and which may occur concurrently in multiple cities and regions.”

Some observers worry that Dr. Healy’s overall plans are too ambitious and way beyond what many donors are prepared to endorse — or even understand, based on the Red Cross’s descriptions of the plans.

“I question if they will support capital purchases for a blood-training program and/or our staff expansions for a war that is likely not to be, as we would normally label, a ‘war,’” Terry J. Sicilia, chief executive officer of the Mile High Chapter of the Red Cross in Denver, told a top Red Cross official in a letter that was obtained by The Chronicle.

Mr. Sicilia said the national organization was in danger of becoming its own “worst enemy” by hurting local chapters that seek to raise money for their own needs. In the days following the September 11 disasters, chapters have had to send all gifts they received to the Liberty Fund unless the money was designated for local efforts.

“At minimum, our chapters’ biggest competitor for charitable dollars is our national organization — how much money can we ‘take’ before the well dries up?” asked Mr. Sicilia, who made clear he was speaking only for himself. “Let’s remember that over the coming years, these donors will be among the heart and soul of local United Way employee campaigns and our own monthly fund-raising efforts. How we treat their gifts of time, money, and blood now will directly impact their support of chapters down the road.” He added that “a recovery plan may be needed — for both chapters and the national sector.” Mr. Sicilia wrote his letter just before the national headquarters sent chapters its breakdown of how it plans to spend funds in coming months. He could not be reached to elaborate upon his letter.

Mr. Blaul discounted fears that local chapters and other charities would be hurt financially because so much money had been given to the Red Cross Liberty Disaster Fund. “The American public regards September 11 as an exceptional, unique occasion in which we all give a little more, do a little more, reach a little deeper,” he said. “Will people simply stop giving because they feel they have already provided some financial assistance for that disaster? No, and I don’t think there’s any evidence or data to support that.”

Decline in Morale

Turmoil and confusion now exist within the Red Cross, some observers say, in part because of what they describe as Dr. Healy’s imperious management style. “She has single-handedly brought about the complete decline in the morale of an otherwise wonderful organization,” said one current employee, who asked not to be identified. “The American Red Cross is such a great place, and it is being stood on its head by a single person and her group of cronies.”

Some members of the charity’s board are also worried about Dr. Healy’s leadership abilities. One reason for their concern, sources said, was the charity’s sudden firing last month of two well-regarded top officials (each with 30 years or more of Red Cross experience) who ran the Red Cross’s Disaster Operations.

The firings came just days after the September 11 attacks and followed the departure of a number of Red Cross employees during Dr. Healy’s tenure, including a top aide to Dr. Healy, several key fund-raising staff members, and officials involved with blood, chapter, and volunteer services.

Dr. Healy allegedly explained the firings of the disaster workers by personally telling the departed employees’ co-workers at the operations center, “Welcome to corporate America.” Red Cross officials could not be reached for comment on the episode.

David T. McLaughlin, chairman of the charity’s board, said the firing of the disaster operations officials stemmed from “operational difficulties” and “problems responding to the Pentagon disaster” in the days after the terrorist attacks on September 11, although he said that the charity was still able to provide undiminished services to the public.

Mr. Blaul said that, despite the firings, morale at the charity is high, the result of Dr. Healy’s management style that matches a clear vision with close consultations with coworkers. “She acts professionally and with speed,” he said. “That’s what she’s brought back to the Red Cross. A lot of passion, yes. And toughness and dedication to the mission.”

Chris Thomas, a spokesman for Dr. Healy, said that Dr. Healy is “a visionary leader and a change agent who really has turned this organization around. She has made it relevant in America again and made our services relevant to the public.”

Mr. McLaughlin said last month that the board had “total” confidence in Dr. Healy’s abilities.

Need for Coordination

Dr. Healy’s leadership style has become an issue in recent weeks because the national organization increasingly will have to coordinate its work with others as it continues to respond to the terrorist attacks.

Some Red Cross insiders said that steps Dr. Healy has taken recently suggest that she prefers to go it alone. The charity refused, for privacy reasons, to provide detailed financial information for a database of aid recipients set up by New York Attorney General Eliot Spitzer, contending that the computerized system would lead to people not seeking services. The Red Cross later said it would ask its clients if they wanted to sign a waiver and participate in the database.

In his letter to the Red Cross official, Mr. Sicilia of the Denver chapter urged national headquarters to take care not to erode public credibility in the organization. He referred to criticism that the Red Cross suffered in 1989 for an allegedly slow and inadequate response to a major earthquake near San Francisco.

“We observed first-hand what happened locally and nationally when the public, at best, questions, and at worst, loses confidence, in our ability to properly expend the funds they have entrusted to us,” wrote Mr. Sicilia. “I fear we are in real danger of the same today.”

HOW THE AMERICAN RED CROSS SAYS IT WILL SPEND MONEY RAISED FOR SEPTEMBER 11 RECOVERY