July 24, 2003 | Read Time: 3 minutes
Nonprofit organizations and the California attorney general’s office continue to deal with the fallout from the shutdown of PipeVine, a San Francisco nonprofit group that processed donations totaling more than $100-million a year for companies that run on-the-job fund-raising drives, United Ways, and other charities.
PipeVine shut down in June, citing a “severe liquidity problem” and saying that it would be unable to pay charities all they were owed (The Chronicle, June 12).
This month, California Attorney General Bill Lockyer asked the San Francisco County Superior Court to dissolve PipeVine and appoint a receiver to run the organization, secure its assets, account for donations handled by PipeVine, and compensate charities that did not receive contributions that were earmarked for them.
The attorney general stated in the suit, “By improperly commingling and diverting charitable trust funds into general operating revenues, officers and employees in control of PipeVine have knowingly countenanced persistent and pervasive mismanagement and abuse of authority.”
Tom Dresslar, a spokesman for the attorney general’s office, says that the state’s investigation into PipeVine’s operations is continuing, and that the attorney general can amend the complaint to include “specific allegations of violations of charitable trust laws, including breach of fiduciary duty.”
PipeVine has said it first learned in February of a potential accounting problem. After investigation by its outside auditors, it hired a second independent accounting firm in March to review its books. That review indicated that PipeVine’s financial statements “masked a serious shortfall in revenue,” the charity said. PipeVine was charging fees averaging 7 percent of the donated dollars it processed, whereas its actual costs were closer to 8 or 9 percent.
David A. Bradlow, a certified bankruptcy trustee in San Francisco, has been appointed to serve as receiver for PipeVine. The attorney general’s office says that Mr. Bradlow has experience administering nonprofit organizations. He is scheduled to make his first report to the court in September.
No date has been set for a hearing on the attorney general’s motion that PipeVine be dissolved.
Meanwhile, Network for Good, a San Francisco nonprofit group whose Web site allows donors to make online gifts to more than 850,000 charities, has said it is working to pay the $2.8-million in contributions that were made through its system but not paid out to the designated charities by PipeVine. Network for Good says charities should receive that money by August 15.
To meet that promise, the technology companies that founded Network for Good — AOL Time Warner, Cisco Systems, and Yahoo — have agreed to advance grant payments to the organization that were scheduled to be made over the next 12 to 24 months, and to guarantee loans that Network for Good is taking out. In addition, Network for Good will be making budget cuts, although the group does not expect to lay off any of its seven employees.
Ken Weber, president of Network for Good, calls the steps his organization is taking to compensate charities “painful,” but says he doesn’t think they will jeopardize Network for Good’s future. “We’ve done it in such a way that our founding partners are lending us a lot of the strength, and so we think that it is a manageable level of debt,” says Mr. Weber. “The budget cuts are aggressive, but again, manageable.”
Mr. Weber says he hopes the state-appointed receiver will recover some of the money charities are owed by PipeVine. But “we didn’t think that nonprofits could wait for that legal and political process to unfold,” he says. “Nonprofits need their money now for programs and rent and salaries.”
