Online-Donation Group Shuts Its Doors

Some major corporations and United Ways have been scrambling to fill the gap created by the sudden

shutdown last week of the San Francisco charity that processed their on-the-job donations.

PipeVine, which handled donations totaling more than $100-million a year, said in a statement that it was closing immediately because of “a severe liquidity problem” that became evident over the Memorial Day weekend.

The charity said it had informed California’s attorney general on May 30 of its decision to close.

It also said it had “a negative fund balance that will result in a shortfall in amounts payable to some charitable organizations,” but gave no estimate of how much money might be involved.

The organization laid off its entire staff of 55 employees and contractors last week.

PipeVine said it had brought in an independent accounting firm earlier this year to look into a potential shortfall, and added, “There has been no indication of theft, embezzlement or defalcation.”

Tom Dresslar, a spokesman for the attorney general’s office, said the office was investigating, and was “working with PipeVine and other parties who have an interest in the matter to make sure that the charities receive money that they’re rightly due.”

Founded a Decade Ago

Created in 1993 by the United Way of the Bay Area, PipeVine became an independent charity in 2000.

It handled the on-the-job campaigns of some two dozen companies and nonprofit groups, including ChevronTexaco, the Clorox Company, Macy’s West, and Wells Fargo, as well as United Ways in San Francisco and Seattle.

PipeVine typically received donations collected by participating companies from their employees, often as payroll deductions, and then distributed those donations to charities designated by the employees. It charged companies a fee to cover its expenses. Charities, and the attorney general’s office, are concerned about donations that may still be in PipeVine’s pipeline: money collected from companies but not yet distributed to charities.

The United Way of the Bay Area, PipeVine’s largest customer, is once again handling its donations internally, as it did before PipeVine was created, said its chief executive, Anne Wilson. It has also hired a lawyer and plans to hire a national accounting firm to assess what impact the matter will have on its operations, she said.

“We must and will stand by our donors and the nonprofit organizations that rely on our funding,” Ms. Wilson said.

She added that the United Way of the Bay Area will draw from its reserve fund, if necessary, to make good on any United Way donations that were collected but not distributed by PipeVine, which had handled about $40-million a year in United Way donations from more than 600 companies in the Bay Area.

Spokesmen for companies that had contracts with PipeVine were dismayed, but most of them said they had many more questions than answers.

“It’s a terribly unfortunate situation,” said Louis Meunier, an executive vice president at Macy’s West, in San Francisco. “We don’t have details, so we don’t yet know what it means for our company, our employees, and for United Way.”

PipeVine had also processed credit-card donations made via Network for Good, a nonprofit group run by AOL Time Warner, Cisco Systems, and Yahoo that helps visitors to its Web site find charities seeking volunteers or financial support, and enables them to make gifts online to more than 850,000 charities around the country.

“Our attention now is focused on documenting that all donations, especially those made in April and May, have been accurately and fully processed,” said Ken Weber, Network for Good’s acting president. “Network for Good is fully committed to getting every single donation to the recipient nonprofit as quickly as possible — most likely, this month.”

Numerous Efforts

PipeVine is one of a spate of companies and nonprofit groups created in the past decade or so to handle the technical side of workplace fund raising: collecting and processing donations from thousands of employees, and distributing the money to thousands of charities, while charging less than it would cost companies to do the work themselves.

Charitableway, a California company that had hoped to secure a large share of the workplace-giving market through online-giving campaigns, raised $43-million for the venture but shut down two years ago, citing slower growth and a smaller market than it had anticipated.

It’s still an open question whether any organization, for-profit or nonprofit, can build a successful operation by exploiting that market niche, said Don Sodo, president of America’s Charities, a federation of more than 100 charities participating in workplace campaigns. He said some of the business models he’s seen rely on earning interest on money being held temporarily, as banks and insurance companies do — a tactic that’s much less effective when interest rates are as low as they are today.

“It’s a shock that any organization would not see something coming that would have allowed it to get out in front of it, instead of falling off the cliff,” Mr. Sodo said.

His organization provides fiscal services similar to those offered by PipeVine to about 35 companies, he said, but keeps all money collected for charity in a separate account.

Mr. Sodo said he didn’t know the details of how PipeVine did its job, but added, “One question is, were those funds segregated that way or were they commingled with other funds to support internal operations?”

Asked to expand on PipeVine’s brief statement, its president, Frank Melcher, declined further comment.