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CHARITABLE CONTRIBUTIONS FOR SEPTEMBER 11:

PROTECTING AGAINST FRAUD, WASTE, AND

ABUSE

HEARING

BEFORE THE

SUBCOMMITTEE ON

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

NOVEMBER 6, 2001

Serial No. 107–67

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

2

COMMITTEE ON ENERGY AND COMMERCE

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

TOM DAVIS, Virginia

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

DAVID V. MARVENTANO, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

Vice Chairman

CHARLES F. BASS, New Hampshire

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

PETER DEUTSCH, Florida

BART STUPAK, Michigan

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

CHRISTOPHER JOHN, Louisiana

BOBBY L. RUSH, Illinois

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

3

C O N T E N T S

Page

Testimony of:

Amundsen, Chris, President and CEO, Interim, United Way of America ... 68

Beales, J. Howard, III, Director, Bureau of Consumer Protection, Federal

Trade Commission ........................................................................................ 88

Bender, Robert, Jr., Executive Director, American Red Cross in Greater

New York ....................................................................................................... 60

Bollon, Vincent J., General Secretary-Treasurer, International Association of Fire Fighters ...................................................................................... 75

Bove, Joyce M., Vice President for Grants and Special Projects, September 11 Fund New York Community Trust ........................................... 71

Farley, Michael, Vice President, Chapter Fundraising, American Red

Cross .............................................................................................................. 65

Healy, Bernadine, President, American Red Cross ....................................... 33

McLaughlin, Elizabeth ..................................................................................... 22

Spitzer, Hon. Eliot, New York State Attorney General ................................ 25

Steiner, Russa, wife of William R. Steiner, employee of Marsh, Inc.,

97th floor of North Tower, World Trade Center, accompanied by Robert

O. Baldi .......................................................................................................... 12

Taylor, Herman Art, President and CEO, Better Business Bureau Wise

Giving Alliance .............................................................................................. 95

(III)

(1)

CHARITABLE CONTRIBUTIONS FOR SEPTEMBER 11: PROTECTING AGAINST FRAUD,

WASTE, AND ABUSE

TUESDAY, NOVEMBER 6, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:30 p.m., in room

2123, Rayburn House Office Building, Hon. James C. Greenwood

(chairman) presiding.

Members present: Representatives Greenwood, Stearns, Burr,

Whitfield, Bass, Tauzin (ex officio), Deutsch, Stupak, and DeGette.

Also present: Representative Markey.

Staff present: Jennifer Safavian, majority counsel; Casey

Hemard, majority counsel; Ann Washington, professional staff

member; Brendan Williams, clerk; Chris Knauer, minority investigator; and Bruce Gwinn, minority professional staff member.

Mr. GREENWOOD. Good afternoon. This hearing of the House

Oversight and Investigations Subcommittee will come to order. The

Chair recognizes himself for 5 minutes with an opening statement.

No people in the world are more cheerful givers than the people

of the United States. This generosity springs from our enduring

legacy of volunteerism and self-reliance. As early as 1831, Alexis de

Tocqueville in his celebrated work Democracy in America observed

that a citizen of the United States is taught from infancy to rely

upon his own exertions in order to resist the evils and the difficulties of life. He looks upon the social authority with an eye of mistrust and anxiety, and he claims its assistance only when he is unable to do without it.

More than 70 percent of American households make annual charitable contributions to an astonishing array of worthy causes.

Equally remarkable is the fact that more than 100 million Americans volunteer their time on behalf of their less fortunate neighbors. The monetary value of the time devoted to volunteer work is

equally as staggering, an estimated $225 billion a year.

Following the horrific events of September 11, the people of our

magnificent Nation have extended their hands to help those in

need in a measure unprecedented, even for Americans. Millions of

our fellow countrymen, many of them children, have given freely of

their time, their talents, their wallets, pocketbooks and piggybanks.

We have given freely not only our money, but also our blood. More

than $1.2 billion has been collected by organizations working on reVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 76307.TXT HCOM1 PsN: HCOM1
2

lief and recovery efforts. To put this number into some context,

contributions following the Oklahoma City bombing totaled $45

million. Hurricane Andrew evoked $110 million in donations for

the American Red Cross. Again, we are at $1.2 billion for the September 11 event, and still the donations pour in.

All of us in Congress owe a profound and heartfelt gratitude to

the patriotic American people who have responded to our Nation’s

greatest tragedy with an unprecedented charity. We have met the

true test of giving, which John Wesley, the founder of the Methodist Church, described in these words: Do all the good you can, by

all the means you can, in all the ways you can, in all the places

you can, at all the times you can, to all the people you can, as long

as ever you can.

Distributing the proceeds of this generosity both efficiently and

fairly, however, poses unparalleled logistical challenges never before confronted by even the most experienced aid officials. It is for

this reason that it is important to hear directly from the charitable

organizations that have raised this unprecedented amount of

money, to discuss their efforts to distribute these funds.

We will hear today from a representative of one of America’s

most honored organizations, the American Red Cross, including

from its president, Dr. Bernadine Healy. You will also hear from

representatives of the United Way and the New York Community

Trust, two organizations that have worked together to create the

September 11 Fund. And we will hear from the International Association of Firefighters.

The most donations to date have been received by the American

Red Cross, which has received pledges and contributions totaling

$564 million, with at least $437 million of that total already received. The September 11 Fund has received $337 million in

pledges and contributions, with $250 million of that having been

received so far. The International Association of Firefighters has

raised almost $51 million. To date, they have distributed $20,000

to each family of the 340 firefighters, 3 EMS workers and 1 fire patrol officer who lost their lives in the line of duty on September 11.

With so much money raised and with so many charities involved,

it is critical that the trustees who serve as stewards of these gifts

provide the public with an accounting of how they will be distributed and to whom, for it is equally important that everyone who

needs financial assistance receives that assistance and no one is

overlooked.

All of us who hold public office appreciate the daunting task of

determining how to distribute public funds equitably and efficiently. The shared responsibilities of these charities in managing

these vast amounts of charitable contributions is no less a public

trust. Unfortunately, recent reports have raised a number of concerns regarding the distribution of these funds. Accounts continue

to surface of individuals who are either unable to obtain monetary

assistance from any of the disaster organizations, nonprofit groups,

foundations, government agencies and corporations involved, or

who find the processes that are required to navigate to obtain the

assistance too lengthy and too complex.

Mrs. Russa Steiner is just such an individual. I am sorry to say

that Mrs. Steiner lost her husband of 32 years in the attack on the

3

World Trade Center. Mrs. Steiner has graciously offered to provide

the subcommittee with her story and to explain to us what she has

had to go through in an effort to receive the financial assistance

she will need to keep her home and to educate her children. I wish

she were appearing before us today under happier circumstances,

and I am grateful that she has mustered the courage to testify so

that others may gain from her efforts.

We will also hear from Liz McLaughlin. Tragically, Mrs.

McLaughlin lost her husband Robert in the World Trade Center.

Mrs. McLaughlin’s experience with the various charitable organizations is different from Mrs. Steiner’s, and I hope the two perspectives will assist us in getting a better picture of what victims’ families are going through.

I am also pleased that Eliot Spitzer, the attorney general of the

State of New York, is here today to explain his efforts with the relief organizations to ensure equitable fund distribution. And he has

already started a public Website that describes what various charities are doing to provide relief. It can be located at

www.wtcrelief.info. That is www.wtcrelief.info. We look forward to

learning more about this site as well as a creation of a data base

that these relief organizations can use to coordinate assistance to

victims with other organizations. His vision and his leadership

were the impetus for its creation.

We are also interested in reports of fraudulent solicitations that

Attorney General Spitzer and others have had to contend with in

aiding the victims of September 11. Sadly, I understand that there

have been reports of potential scams targeting donors. As painful

as it may be to acknowledge that there are people so lacking in

human compassion that they would try to capitalize on the suffering of others, it is essential that any reports of fraudulent solicitations be investigated thoroughly and immediately. Anyone found

to be responsible for these despicable acts must be swiftly brought

to justice. That is why I am pleased that we have also before us

today the Federal Trade Commission and the Better Business Bureau’s Wise Giving Alliance. They are here to speak about complaints received and their investigations into these potential scams

and abuses. They are also here to help us be aware of the potential

for this type of fraud and to know how to guard against becoming

victims of these scams.

I hope the testimony from today’s witnesses will encourage the

public to continue its outpouring of support while providing renewed confidence in charitable fund-raising. I hope that the information provided to us today can assist families of victims who are

still in need of assistance. I thank our witnesses for their testimony.

And now I recognize the ranking member of the subcommittee,

the gentleman from Florida, Mr. Deutsch, for his opening statement.

Mr. DEUTSCH. Thank you, Mr. Chairman.

Just to share a couple of thoughts. Up until September 11, I represented a community in south Florida that had the distinction of

having the largest, at least in terms of monetary value, disaster in

the history of America, which was Hurricane Andrew. And I think

when we think about the disaster of Hurricane Andrew, even

4

though I represent south Florida, it obviously pales in comparison

in order to many, really, if not thousands, literally tens of thousands of magnitude compared to what America and what New York

in particular is facing and individuals are facing because of the

September 11 disaster.

I think one of the things that has hit us in terms of September

11 is, again, just the magnitude, incomprehensible magnitude, of

what occurred and has affected so many of us directly, personally.

Five thousand people at least who perished—just on a personal

note, my wife lost a cousin by marriage, a firefighter, who actually

passed away at the World Trade Center on that date. But as someone who originates from New York and had the distinction actually

to be a high school classmate with the attorney general from New

York, so many Americans and people around the world feel they

are New Yorkers now. Some of us are New Yorkers by birth. Some

of us are New Yorkers by circumstance since September 11.

I happened to be in New York just this past weekend and been

there previously since September 11 to visit Ground Zero, but I

was there this weekend on some family issues and was in the Soho

area. And it was a very bizarre experience because you can still

smell the World Trade Centers. It is very, very eerie a number of

weeks later. And just in a sense, our job in terms of this committee

is really hopefully going to be constructive at this hearing today.

I think that much has been raised, and it is probably not enough.

I spoke with someone involved in President Clinton’s efforts in

terms of scholarship funds, and the actuarial numbers for the children who lost a parent is probably going to be at least $100 million,

and that they are continuing to raise money—only about one-tenth

toward their goal. And I think so many other needs are there. So

I hope that no one leaves this hearing, even with the astronomical

support of the American people that has occurred, to think that we

have met those needs.

Obviously, there is a lot to learn in terms of just distributing the

effort, but as someone who up to this point came from a community

that had experienced, as I said, the largest disaster in American

history—in fact, it is interesting, our slogan was the same slogan

as has been so often stated now: United we stand. That was the

name of the community organization in south Florida. And I am

sure we will be successful. And I believe that this hearing hopefully

will be a constructive effort in those regards.

Mr. Chairman, I would like to submit Mr. Dingell’s statement for

the record as well and yield back the balance of my time.

Mr. GREENWOOD. Without objection, the statement of the ranking

member of the full committee Mr. Dingell will be incorporated into

the record.

[The prepared statement of Hon. John D. Dingell follows:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Chairman, I want to thank you for holding this hearing. In the aftermath of

the cowardly attacks on innocent citizens on September 11, we all watched in awe

at the bravery of the firefighters, emergency personnel, and police officers who, in

selfless acts of heroism, rushed into the center of danger to save as many as they

could. Immediately thereafter, we saw the American people also rush to the forefront and respond with a level of generosity and compassion as great as at any other

time in our history.

5

Not only has the amount of money collected broken all records, but the fact that

this money was collected largely without solicitation demonstrates the tremendous

depth of caring and resolve that Americans feel. I am pleased to have learned that

the Federal Trade Commission (FTC) has found no evidence of fraud in connection

with funds collected to help victims of the September 11 atrocities. All complaints

received by the FTC have been investigated and not a single case of fraud has been

substantiated.

At the same time, I understand some have found the process of applying for assistance to be unduly burdensome. Therefore, I am very interested to know what

the charities and other officials are doing to get needed assistance to people in the

most efficient manner possible.

These tragic and horrific events have tested many of our institutions. None have

been more tested than those charged with initial and early response, including charitable organizations. The American Red Cross, for example, operates under a congressional charter which holds it responsible for maintaining an adequate, safe supply of blood and blood products. Recognizing that its supply of blood is not adequate

to deal with mass casualties from terrorist attacks, the Red Cross has begun to set

up additional facilities. However, some have raised questions about the appropriateness of using contributions to its Liberty Fund to fund a program that will allow

it to freeze and store blood for up to 10 years. Charities such as the Red Cross certainly must be prepared to provide all needed services should a terrorist attack

occur in the future, and increasing the supply of frozen blood is a necessary and

useful step. The only question is how best to fund these important programs.

Mr. Chairman, again I thank you for holding this hearing. The American public

deserves to know that its generosity and benevolence is not being misdirected, and

how their donations are being allocated to help those in dire need.

Mr. GREENWOOD. The Chair recognizes the chairman of the full

committee, the gentleman from Louisiana, Mr. Tauzin.

Chairman TAUZIN. Thank you, Mr. Chairman.

Mr. Greenwood, I want to deeply express to you the appreciation

of the committee for holding this very timely hearing. This public

forum will allow charitable organizations, law enforcement authorities and other charity experts and members to explore several important issues surrounding the massive outpouring of contributions

arising from the September 11 attacks upon our country, issues

that are meaningful to tens of thousands of Americans who have

sought to help many victims of these attacks. It also provides us

an opportunity simply to appreciate this enormous heartwarming

generosity of the American people.

Think about it with me. Since September 11, America has given

more than $1.2 billion—$1.2 billion to charitable organizations

working on the relief and recovery efforts related to these attacks.

This amount dwarfs contributions following any previous disaster

in our Nation’s history. As others have mentioned, this is more

than 25 times that which was generously provided to the victims

of the Oklahoma City bombing and more than 10 times the amount

of monies that were donated in the wake of Hurricane Andrew, a

hurricane that we in Louisiana were familiar with as it tore

through the heart of my district after ripping up the Florida communities. These figures do not account for the many, many ways

that Americans are otherwise giving unselfishly of their time and

effort to lend support to the victims’ families.

Of course, this immense and sudden outpouring of relief efforts

also creates some rather large logistical problems. Today we hope

we can examine and perhaps ease many of the concerns related to

making certain that the money goes to where people intended it to

go. What mechanisms, for example, are being created to assure

that funds directed to relief and recovery are distributed as effiVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
6

ciently as possible; how the charity is keeping track of victims to

ensure that nobody in need of assistance is left out.

There is no doubt that the charitable organizations at the heart

of this influx of donations are providing very valuable and necessary services, yet questions have been raised about the disbursement of funds, particularly by charitable organizations that have

many nonrelated projects to fund. So how can Americans be sure

that the money they send out of the enormous generosity of their

hearts is being distributed as they intended?

And finally, sad to say there is the ever present temptation for

fraud in circumstances like these. Our responsibility as members

of this committee is to help head off any scam artists in the marketplace who always show up and prey on America’s best intentions with their own evil designs. So we look forward to the discussion about measures that guard against deception and scams: What

people need to know to avoid the high-tech fraud schemes that everyone seems to be faced with these days, and what are the law

enforcement authorities doing to protect against this and other

types of charity fraud.

Some of the questions and discussions here today will touch an

area troubling to donors, yet the hearing should be seen in the end

as an effort to strengthen our trust in the charities that are doing

so much to help Americans express a wonderful spirit of giving.

Again, Mr. Greenwood, I want to thank you on behalf of the committee for the hearing, and we look forward as always to the testimony of the witnesses who have generously given their time to explore these serious questions with us. Thank you, Mr. Chairman.

[The prepared statement of Hon. W.J. ‘‘Billy’’ Tauzin follows:]

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

Thank you, Chairman Greenwood, for holding this very timely hearing today. This

public forum will allow charitable organizations, law enforcement authorities, other

charity experts, and Members to explore several important issues surrounding the

massive outpouring of contributions arising from the September 11 attacks—issues

that are meaningful to the tens of thousands of Americans who have sought to help

victims of these attacks. It also provides us an opportunity simply to appreciate this

heartwarming generosity of the American public.

Think about it. Since September 11, American’s have given more than 1.2 billion

dollars—1.2 billion dollars—to charitable organizations working on relief and recovery efforts related to the attacks. This dwarfs the contributions following any previous disaster.

As others have mentioned, this is more than 25 times what was generously provided the victims following Oklahoma City, more than 10 times what was donated

in the wake of Hurricane Andrew. And these figures do not account for the many,

many ways Americans are otherwise giving unselfishly of their time and effort to

lend support to the victims’ families.

Of course, the immense and sudden outpouring of donations to relief efforts also

creates an immense logistical problem. Today I hope we can examine, and perhaps

ease, many of the concerns related to making certain the money goes where people

intended it to go.

What mechanisms, for example, are being created to assure that funds directed

to relief and recovery are distributed as efficiently as possible? How are charities

keeping track of victims to assure nobody in need of assistance is missed?

There is no doubt that the charitable organizations at the heart of this influx of

donations are providing valuable and very necessary services. Yet questions have

been raised about the disbursement of funds, particularly by the charitable organizations that have many other, non-related projects to fund. So how can Americans

be sure the money they send to a general relief organization is distributed as they

intended it to be?

7

Finally, sad to say, there’s the ever-present temptation for fraud in these circumstances. One responsibility of the members of this Committee is to help head

off scam artists in the marketplace who prey on American’s best intentions with

their own evil designs.

I look forward to our discussion today about measures that guard against deception and scams. What do people need to know to avoid the high-tech fraud that

seems so easy to pull off these days? What are the law enforcement authorities

doing to protect against this and other types of charity fraud?

Some of the questions and discussion today will touch on areas troubling to donors. Yet this hearing should be seen, in the end, as an effort to strengthen our

trust in the charities that are doing so much to help Americans express their wonderful spirit of giving.

Again, I thank you Mr. Greenwood for holding this hearing, I look forward to an

open discussion with the witnesses that appear before us today.

Organization Amount Raised Amount Disbursed

New York Times 9/11 Neediest Fund ............... $43 million ...................................................... $9,500,258.26

American Red Cross ......................................... $564 million pledged ($505 received) ............ $154 million

Families of Freedom Scholarship Fund ........... $30 million ...................................................... $0 1 (Awards begin 1/2001)

United Way September 11th Fund ................... $337 million pledged ($250 received) ............ $47 million

New York State WTC Relief Fund ..................... $32 million ...................................................... $0

NYC Firefighters 9/11 Disaster Relief Fund .... $51,972,262 2 .................................................. $6,880,000 3

Savation Army .................................................. $62,470,786 .................................................... $8,500,000

1 Given students’ financial aid process, awards begin in January 2001.

2 As of 11/5/01.

3 They have sent $20,000 checks to 344 families. One $10,000 check was sent out on 9/25. Another $10,000 check was sent out on 10/19.

Mr. GREENWOOD. The Chair thanks the chairman of the committee and recognizes the gentleman from Michigan Mr. Stupak for

an opening statement.

Mr. STUPAK. Thank you, Mr. Chairman, and thank you for holding this hearing.

Since September 11, countless Americans have reached in their

pockets in response to the horrors perpetrated on our country by

terrorists. They reached into their pockets and have given more

than $1.2 billion. This is by far the biggest charitable contribution

response ever to an event, and we must make sure that the donor

intent is honored. Hundreds if not thousands of people in my own

district in northern Michigan have held dozens of fund-raisers and

have made huge efforts to give money, food and equipment to those

affected by the events of September 11. Ed Janisse of WCUP Radio

and Mr. Paul Tesanovich representing the Keweenaw Bay Indian

community drove over 19 hours from my district here to Washington, DC, to hand-deliver a check to the Red Cross. They drove

all the way down here because they wanted to be absolutely sure

that the money went straight into the hands of those directly involved with assisting the victims.

In making sure that victims are getting what they need, the

Trial Lawyers of America have established Trial Lawyers Care, a

nonprofit organization that will provide free legal services to victims and their families who file claims with the September 11 victims compensation fund. Over 1,500 attorneys throughout the

country have volunteered to represent fund claimants throughout

the process without a fee. That is the level of dedication and care

we Americans are showing.

But where is the money going? American Red Cross has raised

most of the money of all the charitable organizations. Through

their Liberty Fund they have received pledges and contributions totaling $564 million, over half a billion dollars. How can we be sure

8

the money is being used to benefit those most in need? Those are

the questions we should be asking today throughout this hearing.

I look forward to hearing the testimony of today’s witnesses to shed

some light on this urgent question.

Mr. Chairman, I thank you holding for this hearing and yield

back the balance of my time as I look forward to hearing the witnesses.

Mr. GREENWOOD. I thank the gentleman for his statement and

for yielding, and recognize the gentleman from Florida Mr. Stearns

for 5 minutes for his opening remarks.

Mr. STEARNS. Mr. Chairman, thank you for holding this hearing,

and I think all of us, given the outpouring of support for Americans

since the tragedy of September 11, we as Members of Congress

have a fiduciary responsibility to ensure that the contributions that

are made by the American people are expressly for the purpose of

aiding the fellow citizens in the wake of these attacks.

In my home State of Florida, we had Hurricane Andrew, and that raised about $110 million, and that has been dwarfed by the

contribution by Americans for this tragedy on September 11. And

I would like to say, Mr. Chairman, publicly that there is a direct

correlation or relationship between the degree of charitable contributions that this Nation has provided because of September 11

and the goodness of this Nation. And the goodness of this Nation

is recognized by this outpouring.

Mr. Stupak mentioned he had a constituent who came down with

a check. That is the kind of involvement the Americans have.

When people look at this tragedy, there is goodness coming out

through the Americans’ hearts and its outpouring and a generous

amount, and that alone should establish this Nation, throughout

history, we have been charitable. But this is another case that

we’re charitable for ourselves.

As I mentioned earlier, we do have responsibility to look at some

of the complaints perhaps from watchdog groups that have expressed alarm at the Red Cross that the money is not getting to

the victims and their family members. And as the chairman Mr.

Greenwood and Mr. Tauzin has indicated, there is a possibility of

fraud, and we want to make sure that doesn’t occur.

When you look at the average contribution from the American

family, it is roughly about 3 percent of their income, and so there

is an outpouring. There is a desire to help out.

Mr. Chairman, I have a bill involving charitable foundations,

which I introduced to abolish an antiquated excise tax on nonprofit

foundations’ pay on their net investment income. But basically, if

my bill passed, it would give the charitable foundations more

money to help more Americans. And I hope my colleagues will help

me pass this part of the stimulus package.

As I mentioned, one of our biggest challenges perhaps in this

hearing is to understand—because the intentions of people are not

being impugned, we are just trying to understand in a large measure this enormous amount of goodness and outpouring by the

American people, how is it efficiently and effectively being used.

And with our ability of telecommunications software and the like,

we are able to focus that and understand where the money is

going.

9

We have had, obviously, reports of scam activities, and we should

get to the bottom of that. The FTC has indicated in its testimony

that, ‘‘today the findings of fraud are few and far between.’’ So we

cannot let the few and far between overwhelm the goodness that

is occurring here. So with the three panels, keep that in mind, because I’m heartened that the Federal Trade Commission is going

to continue to aggressively monitor and investigate these reports.

The findings of fraud are few and far between, but this hearing

is very important, Mr. Chairman, as Mr. Tauzin has mentioned.

You ought to be commended for bringing this to the forefront in allowing the American people to understand this. I look forward to

the hearing, and I yield back the balance of my time.

Mr. GREENWOOD. I thank the gentleman from Florida, and I recognize the gentleman from New Hampshire Mr. Bass.

Mr. BASS. And I thank the chairman for holding this timely hearing and wish to associate myself with the remarks of my colleagues

on this subject so as not to repeat myself.

I would add that, having read over the last week or 2 articles

that begin to intimate that much of the generosity and outpouring

of concern and compassion for those who were victims of September

11—I see, for example, today in the Wall Street Journal an article

entitled ‘‘Giuliani’s Fund for Uniformed Survivors Has Yet to Disburse Any of the $100 Million.’’ We are beginning to hear stories

about that many survivors—we may hear some today—have yet to

receive anything from any charitable organization beyond what

their insurance company may have paid.

This is all very disturbing to me and certainly justifies this hearing, because the obligation that we have as the committee of jurisdiction and oversight here to assure that the public trust is held

and that there is tremendous generosity that has been shown that

has really unified this country doesn’t turn to cynicism and mistrust of government and charitable institutions is really paramount. And I hope that we can reassure America through this

process that these funds that are really American peoples’ funds

are going to be put to good use and going to wind up helping the

victims of this horrible tragedy that occurred on September 11.

Now, as most of my colleagues and some of the witnesses may

know, my friend from Florida Mr. Stearns, and Mr. Tauzin, and

Mr. Deal and I and some other members of the committee introduced a bill called the American Spirit Fraud Prevention Act on

October 2. The bill has been marked out of this committee. It

would double penalties that the FTC may impose for violations of

the FTC Act that aim to take advantage of emergencies and disasters, and this would apply to those fraudulently posing as charities

and those perpetrating more commercial traditional scams.

In preparing the legislation, I was surprised to find that the

FTC, which is the Federal Government’s principal consumer protection agency, actually has very little authority to protect citizens

from false, misleading or deceptive practices involving organizations that might claim a charitable purpose. These organizations

must, of course, answer to the IRS, but their focus is and should

be the tax treatment and status and not consumer protection.

These organizations are also regulated to a varying degree by State

law, but it is not hard to imagine that one could easily file papers

10

with the State to create a shield for consumer protection laws while

State charity overseers and tax examiners consider the true benefit

of the organization.

I want to be clear, I believe that most charities, or basically almost every charity, do an amazing job and provide comfort and

support that allows many Americans to simply get through the

types of tragedies that we are talking about. Nevertheless, perhaps

Congress should examine changing the oversight and consumer

protection rules that apply to charities. And I am very much interested in hearing from whoever cares to comment, and I yield back.

Mr. GREENWOOD. The Chair thanks the gentleman from New

Hampshire and recognizes for her opening statement the

gentlelady the from Colorado Ms. DeGette.

Ms. DEGETTE. Thank you, Mr. Chairman. I don’t have a formal

prepared statement, and I just did get off an airplane so I could

be here for this hearing.

Let me just say that I am concerned, as all of us are, that an

unprecedented amount of contributions from everybody from multimillionaire rock stars and movie stars on down to the kids at

Adams City High School and elementary schools in my district

have contributed to this relief effort, and every single person who

contributed to this effort has done so with the best of intentions

that these funds will go to help the victims’ families of this terrible

tragedy, to help the firefighters’ funds, to help all of the caregivers

who helped. And it is our job as Congress to have ongoing oversight

to make sure there is no fraud or abuse.

I think that the agencies, to my knowledge, have acted remarkably well and in an orderly fashion today. But the thing we need

to balance is on the one hand getting relief to the families of those

who died and getting it quickly. As the mother of two young daughters, I can only imagine what it must be like to suddenly lose the

main breadwinner of the family and then to have to go around begging hat in hand even to pay the mortgage payment or to pay for

Halloween costumes or Thanksgiving dinner or anything that constitutes the fabric of a family. On the one hand, we need to expedite those payments. On the other hand, we need to make sure

that the processes that we put into place are not fraught with

waste or abuse, which would be so easy because we are talking

about such large sums of money.

I commend you for having this initial hearing. I am not sure

what we will learn today in substance, but maybe we can get some

parameters, Mr. Chairman, for future hearings of this subcommittee. And I look forward both to the testimony today and also

for our future oversight of this issue and yield back the balance of

my time.

Mr. GREENWOOD. The Chair thanks the gentlelady and recognizes the gentleman from Kentucky Mr. Whitfield for an opening

statement.

Mr. WHITFIELD. Mr. Chairman, I also want to thank you for having this timely hearing. I think, as has been said many times already today, the American people have shown they are a compassionate people by contributing over $1.2 billion to this incident

alone. And all of us know and have read and have followed and

have been admirers of the Red Cross, the United Way, Salvation

11

Army and many other charitable organizations throughout our

country, and all of them have really good reputations, and I don’t

think that any of us think that they have involved themselves in

any deliberate wrongdoing. However, I do think it is imperative

with the amount of money involved—and I can imagine the complexity of distributing that much money, that it is a difficult process, and I hope today we can focus on those difficulties. And I am

glad that the attorney general of New York is here today because

I know that he was in the forefront of establishing a data base to

help prevent duplicative payments and to help charitable organizations have a better understanding of who is receiving funds and

who is not receiving funds, and I would like to hear about that.

I also saw a recent survey that said many if not most Americans

have trouble finding the information they need to evaluate charities and make decisions about giving, and I think that is another

area we can look in. But, as I said, I don’t think this is a hearing

that anyone is being accused of anything, but all of us hope that

from the information gathered we can come out with a more effective system that will provide the necessary help for people who

need it desperately at this time. And I yield back my time.

Mr. GREENWOOD. The Chair thanks the gentleman and thanks

all the members for their opening statements.

[Additional statement submitted for the record follows:]

PREPARED STATEMENT OF HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF FLORIDA

Mr. Chairman, I want to commend you for holding this hearing today to examine

charitable giving in the wake of the September 11th terrorist attacks and to discuss

ways in which charitable organizations deliver promised assistance to the victims

and their families.

Since the devastating events of September 11th, Americans young and old have

opened their hearts and their pocketbooks to help the victims of this terrible tragedy. To date, over $1 billion has been raised for relief efforts, proving once again

that Americans are the most compassionate and generous people in the world.

Mr. Chairman, I am alarmed at reports which suggest that charitable organizations are not acting in good faith to use the contributions of generous Americans

to deliver timely assistance to the victims of September 11th and their families.

How do we explain to elementary school children that their hard-raised contributions may not actually be used to help the families in need?

Today I am wearing a pin made by the students of Cypress Woods Elementary

School in Tarpon Springs, Florida. These students sold patriotic pins for $1 each

and raised a total of $3,500. This amount was matched by a corporation for a total

of $7,000. Another elementary school in Tarpon Springs, Brooker Creek, raised

$2,300 for relief efforts.

It would send a terrible message to these children and the community if charitable organizations do not use their contributions to directly aid the victims and

their families.

I have introduced a resolution—H. Con. Res. 259—praising the people of the

United States for their patriotism and generosity in donating their money, time, and

blood to support the victims of September 11th. The resolution also commends charitable organizations for their hard work in providing assistance but urges them to

use the funds collected for the purposes for which the money was given. H. Con.

Res. 259 also urges charities to limit the extent to which donations are used for administrative costs and condemns individuals or groups that fraudulently use contributions for their own personal gain.

Mr. Chairman, I look forward to hearing from our witnesses today to assess the

current situation and to determine what actions we may all take to improve the delivery of aid to those who need it most: the victims and families of September 11th.

Many Americans lost their lives by the hands of terrorists on September 11th, and

their memory and sacrifice for their country should be honored by providing for the

needs of their families in a timely and effective fashion.

12

Mr. GREENWOOD. I would like to introduce the first of three panels. We have with us Mrs. Russa Steiner from New Hope, Pennsylvania, my constituent, and Ms. Elizabeth McLaughlin of Pellham,

New York. And let me say it is an extraordinary thing to have witnesses here just 8 weeks after their loss. And this committee

thought long and hard about even inviting victims such as yourself

to be with us, and let me honor your presence by noting for the

record that it was only because in each of your cases you thought

you might be able to speak for and help other victims that you

have agreed to come and testify, and we thank you for that.

Mrs. Steiner is accompanied by her attorney Mr. Robert Baldi.

And we also welcome the Honorable Eliot Spitzer, New York

State attorney general. And we welcome Dr. Bernadine Healy, the

president of the American Red Cross. And thank you for joining us

today.

I believe you are aware that this committee is holding an investigative hearing, and in doing so, it is our custom to—it is our practice of taking testimony under oath. Do any of you have any objections to offering your testimony under oath?

Seeing no objections, I would also advise you under the rules of

this House and rules of this committee you are entitled to be represented by an attorney. Mrs. Steiner has her attorney with her as

much for moral support as anything else. Do any of the others of

you wish to be represented by an attorney?

Seeing no such concern, I would ask you to rise and raise your

right hand.

[Witnesses sworn.]

Mr. GREENWOOD. So saying, you are now under oath and may be

seated.

And, Mrs. Steiner, we will begin with you. You are recognized for

your statement. And, again, thank you for your courage in being

with us today.

Mrs. STEINER. Thank you.

Mr. GREENWOOD. If you turn on your microphone and pull it very

close, because it is rather directional.

TESTIMONY OF RUSSA STEINER, NEW HOPE, PENNSYLVANIA,

WIFE OF WILLIAM R. STEINER, EMPLOYEE OF MARSH, INC.,

97TH FLOOR OF NORTH TOWER, WORLD TRADE CENTER,

NEW YORK, ACCOMPANIED BY ROBERT O. BALDI, ESQUIRE;

ELIZABETH McLAUGHLIN, PELLHAM, NEW YORK; ELIOT

SPITZER, NEW YORK STATE ATTORNEY GENERAL; AND

BERNADINE HEALY, PRESIDENT, AMERICAN RED CROSS

Mrs. STEINER. Tuesday, September 11, began for me like any

other. My husband awoke at 4:30 a.m. to prepare for a commute

to a job that he loved. He left at 5:30 a.m. to get a head start on

his workday, which had been his practice throughout his career. I

fell back to sleep, which was my routine.

Since it was a beautiful Tuesday morning on my way to work at

a nonprofit mental health facility, I stopped off at Rice’s Outdoor

Market. While walking through the aisles, I overheard a news bulletin on the radio which prompted me to ask a vendor to please repeat what I thought I had just heard, a plane hit the World Trade

13

Center. I remember saying to this vendor, my husband works

there, and noticed her horrified expression.

I proceeded immediately to my car to phone my husband. Unsuccessful in my attempt, I went home and tried again to reach him,

to no avail. I called work and explained that I would be in as soon

as I heard from my husband. I next put on the television in our

family room with the phone by my side and witnessed the second

plane hit the South Tower, saw both towers crumble, and watched

in disbelief as the horrors of that infamous day unfolded.

After speaking with our three children, my daughter Meredith,

23, who was at work in Philadelphia, my son Jordan, who is 21,

attends the University of Delaware, and my youngest son Darren,

18, at Penn State, our two older children came directly home to be

with me and to await the revelations.

While dealing with the confusion and shock of what was transpiring, we held out hope for a miracle not unlike 5,000 other families. We frantically took turns calling hospitals, radio and television

stations, coworkers of my husband and researched the Internet to

obtain information. In our desperation, we filed a missing person’s

report with the FBI and notified New York State and local police

departments. We gathered and submitted dental records for my

husband, DNA samples, and presented them to the authorities. We

created missing posters, which family members placed around New

York and on the Internet asking for any information on my husband’s status.

After 3 weeks of being in shock and frozen at home, the status

of the missing persons from the Ground Zero area changed from

missing to missing, presumed dead. It was at this time that I realized that I had to address the extensive amount of mail that I had

thrown in a box on September 11. As my husband customarily handled the mundane chore of family maintenance, I was both inexperienced and overwhelmed by the enormity of this task. In my attempt to manage our affairs, I forwarded a letter to our creditors

explaining the situation, asking for consideration and extensions, if

possible, without penalties.

As my children attempted to resume regular life, I continued at

home by following all leads for assistance by calling numbers which

would appear in the newspapers, on CNN, on MSNBC, and any referrals that were offered to me.

On Saturday, October 6, at 7:30 a.m., I left the house for the first

time since September 11, along with an advocate from NOVA, who

picked up my family for a trip to New York. She took us on an appointment to the New Jersey Family Assistance Center at Ground

Zero. After the site visit, I left our three children at the family center in the company of volunteer companions because I did not want

to subject them to the continuing pain of retelling our story, explaining our financial status or be subjected to asking for handouts.

I visited the trailers with advocates who assisted me in navigating

me through the mazes of service, charities and organizations that

potentially we would qualify for, along with addressing the legal

necessities. We returned home that day at 11:30 p.m.

As my husband was the sole supporter of our family and kept all

records on his computer, I attempted to reconstruct documentation

to satisfy all obligations and handle accessing benefits by myself in

14

order not to incur any additional expenses. As the majority of creditors have shown some compassion, I have also had to deal with

threats to incur additional collection activities.

During this time, I have felt supported and been deeply moved

by family, friends, neighbors, community members and total

strangers. I was especially touched by an organization at the New

Jersey Family Assistance Center, a Taiwan Buddhist Compassion

Relief Organization, Tzu Chi Foundation, USA, who donated

$1,000 to my family on the spot. Additionally, Penn State University donated a scholarship for my younger son Darren, a freshman

at their Altoona campus. Another act of kindness shown to us was

by the Count Your Blessings Fund established by a Bucks County

builder, C.W. Schrenck, who offered to pay a semester’s tuition for

my older son Jordan.

After 32 years of a successful and happy marriage, I am struggling to adjust to my new life situation both emotionally and financially. By sharing my personal experience with this committee, I

hope it is beneficial to your investigation. I have requested that

Robert Baldi assist me in sharing the specific information regarding details of all donations. Thank you.

[The prepared statement of Russa Steiner follows:]

PREPARED STATEMENT OF RUSSA STEINER, WIFE OF WILLIAM R. STEINER

Tuesday, September 11th began for me like any other. My husband awoke at 4:30

a.m. to prepare for a commute to a job that he loved. He left at 5:30 to get a head

start on his workday which had been his practice throughout his career and I fell

back to sleep, which was my routine. Since it was a beautiful Tuesday morning, on

my way to work at a non-profit mental health facility, I stopped off at Rices Outdoor

Market. While walking through the aisles, I overheard a news bulletin on the radio,

which prompted me to ask a vendor to please repeat what I thought I heard. ‘‘A

plane hit the World Trade Center’’. I remember saying, ‘‘My husband works there’’ and noticed her horrified expression. I proceeded immediately to my car to phone

my husband. Unsuccessful in my attempt I went home and tried again to reach him,

to no avail. I called work and explained that I would be in as soon as I heard from

my husband. I next put on the television in our family room with the phone by my

side and witnessed the second plane hit the south tower, saw both towers crumble

and watched in disbelief as the horrors of that infamous day unfolded.

After speaking to our three children; Meredith (23) at work in Philadelphia, Jordan (21) at school at the University of Delaware and Darren (18) at Penn State,

our older two children came directly home to be with me and await revelations.

While dealing with the confusion and shock of what was transpiring, we held out

hope for a miracle, not unlike five thousand other families. We frantically took turns

calling hospitals, radio and television stations, co-workers of my husband and researched the Internet to obtain information. In our desperation, we filed a ‘‘missing

person’s’’ report with the F.B.I. and notified New York State and local police departments. We submitted dental records and D.N.A. samples to the authorities. We created ‘‘missing’’ posters, which family members placed around New York and on the

Internet, asking for any information on my husband’s status.

After three weeks of being in shock and frozen at home, the status of the missing

persons from ‘‘ground zero’’ changed from ‘‘missing’’ to ‘‘missing, presumed dead’’. It

was at this time that I realized I had to address the extensive amount of mail that

was thrown in a box since September 11th. As my husband customarily handled the

mundane chore of family maintenance, I was both inexperienced and overwhelmed

by the enormity of the task. In my attempt to manage our affairs, I forwarded a

letter to all creditors explaining my situation, asking for consideration and extensions, if possible, without penalties.

As my children attempted to resume life, I continued at home by following all

leads for assistance by calling any number which would appear in the newspapers,

on C.N.N. and M.S.N.B.C. and any referrals offered to me.

On Saturday, October 6th at 7:30 a.m. I left the house for the first time since September 11th with an advocate from N.O.V.A. who picked up my family for a trip

to New York. She took us on an appointment to the N.J. Family Assistance Center

15

and ‘‘ground zero’’. After the site visit, I left our three children at the family center

in the company of volunteer ‘‘companions’’, because I didn’t want to subject them

to the continuing pain of retelling our story, explaining our financial status or be

subjected to asking for ‘‘hand-outs’’. I visited the trailers with advocates who assisted me in navigating through the maze of services, charities and organizations

that potentially we could qualify for, along with addressing the legal necessities. We

returned home at 11:30 p.m.

As my husband was the sole supporter of our family and kept all records on his

computer, I attempted to reconstruct documentation to satisfy all obligations and

handle accessing benefits by myself in order not to incur additional expenses. As the

majority of creditors have shown some compassion, I have also had to deal with

dunning notices and threats to incur additional collection activities.

During this time, I have felt supported and been deeply moved by family, friends,

neighbors, community members and total strangers. I was especially touched by an

organization at the N.J. Family Assistance Center, a Taiwan Buddhist Compassion

Relief Organization (Tzu Chi Foundation, USA), who donated $1000 to my family

on the spot. Additionally, Penn State University donated a scholarship for Darren,

a freshman at their Altoona campus. Another act of kindness shown to us was by

the ‘‘Count Your Blessings’’ fund, established by a Bucks County builder, C. W.

Schrenck, who offered to pay a semester’s tuition for my older son.

After thirty-two years of a happy and successful marriage, I’m struggling to adjust

to my new life situation, both emotionally and financially. By sharing my personal

experience with this committee, I hope it’s beneficial to your investigation.

I have requested that Robert Baldi assist me in sharing specific information regarding details of all donations.

Mr. GREENWOOD. Thank you, Mrs. Steiner.

Mr. Baldi, you are recognized to add additional remarks.

Mr. BALDI. Thank you, Mr. Chairman. I have some statements

that I prepared in writing, and I will try to go through them quickly because I don’t want to take up too much of your time.

It was my understanding that you wanted very specific information in terms of the process that a victim would go through in trying to get help from charitable organizations, so I met with Mrs.

Steiner and tried to gather this information for you.

First of all, my name is Robert Baldi, and I am a lawyer who has

had the honor of representing both William Steiner and Russa

Steiner prior to the tragic events of September 11, 2001. I am here

today not as Russa Steiner’s lawyer, but as a spokesperson whose

purpose is to help provide you with information concerning the impact that the terrorist attack had on her life. She has asked me to

speak because she still finds it difficult to discuss many of the

events that are relevant to your investigation.

Russa and her family live in a community located close to Philadelphia. Some people would consider it a bedroom community of

New York City. Many people commute from Bucks County to New

York City. She and her husband Bill have been married 32 years

at the time of his death. He was a successful executive with Marsh,

Inc., a large insurance company with offices located on the floors

93 through 99 of the Twin Towers at the World Trade Center.

The first terrorist attack hit close to the 90th floor in the North

Tower. For obvious reasons, nothing has been recovered associated

with Bill, not a shred of DNA nor any personal effects. From what

we can tell, most of Bill’s personal records were destroyed. Bill kept

a lot of information on his laptop computer, which he took to and

from the office. Russa has tried to gather information to help her

get through this time.

Because Bill was a successful businessman, the children were

able to afford the college of their choice. The Steiners have been

paying the entire cost of the education for each of their children.

16

Because of Bill’s income tax bracket, the children were not entitled

to any financial assistance, and, therefore, the full tuition was

being paid by the Steiners.

Their older daughter is a graduate—recent graduate of college.

She is living with Russa and had been planning to go to law school.

Bill and Russa were planning to pay her tuition. In fact, they told

her that would be her gift when she graduated from college. Jordan

is 21 years old and a senior at the University of Delaware, and

Darren is a freshman at Penn State.

If you try to calculate the tuition that the Steiners paid in aftertax dollars, you can begin to appreciate the responsibility that Bill

Steiner was carrying with him every day he went to New York.

Russa’s financial future is now fragile and uncertain. She has

had to seek the assistance of others, a situation which makes her

extremely uncomfortable even today as we present this testimony

to you. When the status of Bill went from missing to missing and

presumed dead, Russa realized that bills had to be paid and then

began the process of taking over the management of the family’s

finances, a task previously performed by Bill. As she mentioned,

she wrote letters to creditors and got extensions of time. Neighbors

and friends gave her newspaper articles and information that they

came across to help her locate charitable organizations which

would be able to provide her with assistance. There is an agency

in Bucks County known as NOVA. This agency has appointed an

advocate by the name of Mia Alan to help Russa.

Russa has spent many, many hours writing letters and making

phone calls to various agencies. I have provided copies of some documents with some written material giving you some idea of some

of the things she was doing. But to give you a sense of what the

victim goes through, on October 6, 2001, Russa spent the day visiting Ground Zero. She was there with other victims’ families. An

advocate took her on that same day to trailers which are located

on Liberty State Park, which were set up to help people such as

Russa Steiner. She was escorted from trailer to trailer where she

would wait in line to talk to someone to schedule an appointment.

She then went to the next trailer to wait in line to schedule another appointment and ultimately returned to the various trailers

at the appointed time to meet with representatives to tell and retell the story over and over gain.

One of the trailers was sponsored by a Buddhist compassion relief fund known as the Tzu Chi Foundation. Russa knew nothing

about this organization; however, when she went and told them her

story, they issued her a check on the spot for $1,000. This money

was available to her immediately, no strings attached. I have supplied you with a copy of a letter which identifies the organization.

Russa also spent many hours visiting other trailers. Some of

them were charitable organizations, some of them were government agencies. She went to the Salvation Army trailer, and she

was told she would receive a holiday meal. We assume that at

some point in the future someone will contact her from the Salvation Army to provide her family with a meal over one of the upcoming holidays.

She went and visited the Red Cross trailer. She brought with her

copies of bills. She had contacted the Red Cross previous to this to

17

apply for the emergency family gift. She received a case identification number for that specific application. Separate and apart from

that application that Russa had made by telephone, when she arrived in New York, her advocator told her to bring with her actual

bills to be considered by the Red Cross. When she arrived on this

day, she brought with her about 20 bills. The representative went

through the bills and selected certain ones that the Red Cross

agreed to pay. A separate disbursement order was then issued for

each separate item selected by the Red Cross representative. Russa

was then provided the disbursement order to be used as if it were

a check to pay the specific bills.

I provided copies of the disbursement orders, which have been

added as an exhibit to this statement. For your information, the

Red Cross on that day provided the following disbursements to her

in response to the 20 some bills that she gave them. They gave her

a disbursement order for $60 for a trash bill for services in Bucks

County. You pay for your trash personally. And this was for about

a 3-month period. They gave her $227.50 for an electric bill for the

month of September. They gave her a disbursement order for

$99.07 for one of the phone bills. She had several bills and they

picked out one of them and gave her a disbursement order of whatever the name of the phone company was. They gave her a disbursement order for $138 for the security company who had just

recently repaired the burglar system in her home. They provided

her with two separate disbursement orders made payable to a local

grocery store in the amount of $135 each and gave her another disbursement form which advised her they would be sending her $450

at a later time. Several days later, she received a check in the

amount of $450, which was then for her to use for family maintenance.

Now, up until—and I say this, by the way—this information is

being provided to you to give you facts and information. I offer this

to you in a neutral fashion. I am just telling you the manner in

which it came through to us. The total sum received from the Red

Cross up until this morning had been $1,244.57. This afternoon,

shortly before this hearing, Russa Steiner was presented with a

check in the amount of $27,507.12, which I understand is the cash

gift, which was in response to the application that I referred to

that she had made earlier. In a document that I have provided to

you was a list of charities contacted. I supplied to you the date that

she originally contacted the charity and the response. This particular response of the $27,000 is not on that because we received

that this afternoon, but she is very grateful and wishes to thank

the Red Cross for that and appreciates it very much.

She was told—and I think it becomes important just to put

things in perspective, again, as a way of information-gathering—by

a representative from the Red Cross that because she was able to

obtain additional time from her creditors, they did not feel that her

personal situation at that time was an emergency, and therefore

she did not require funds on an emergency basis.

Russa had made many applications to organizations over the

phone and by letters. One of the organizations is her local United

Way. On September 28, 2001, she applied by phone to the New

York City United Way September 11 Fund. On November 2, 2001,

18

that was last Friday, a representative from her local Bucks County

United Way arrived at her house and presented her a check in the

amount of $1,500 from the local United Way. Now, I was coincidently in the office when this arrived, and as I understand it—

and this is the information that he provided to me—he did not

have any idea that she was coming to testify here today, and we

did not tell him that she was about to.

The gift from the local United Way was unprecedented. Normally

the local United Way only provides assistance to agencies. The gentleman who delivered the check to Russa explained that the Bucks

County local United Way is applying to or applying for the victims

of—let me stop and explain. There are about 20 individuals identified in Bucks County, residents of Bucks County, who died in this

tragedy. There may be more, but so far that is the number that the

United Way is aware of. They are applying, we are told, for funds

from the September 11 Fund. He explained that the September 11

Fund is the fund raised by the United Way of New York. It is our

understanding that these funds will be distributed to the local

United Way organizations. He advised me that 20 families were

identified from Bucks County, and that they made a request for an

initial grant, which, if they receive it, would provide Russa Steiner

with $3,000 per month for 3 months. The $1,500 payment that the

local organization has given to her from their own funds would be

part of that ultimate $9,000 grant, if, in fact, they receive that

grant from the other organization.

By no means am I qualified to speak for the local United Way

in terms of what their intent is or in terms of what their efforts

have been. The gentleman who brought the check to Russa was

very kind and gracious. The funds being provided to her were unrestricted. We have no information which tells us when or if the full

$9,000 grant would be approved, and we have no information to

suggest if there would be any more money that would be distributed to her.

Russa has contacted many potential sources of aid. She promptly

called the Families of Freedom Scholarship Foundation after hearing President Clinton and Senator Dole talk about the fund on television. She called September 29, 2001, to register her children.

They called her back on October 5 and explained that the application would be sent out sometime close to the end of the year.

However, no money would be available for this year, and ultimately it would be based on financial need. This has been a very

painful process for Russa and her family. People have been very

kind. However, the Steiner family financial situation remains fragile. As she mentioned, Penn State was kind enough to provide a

$2,500 scholarship for the one young man who is in Penn State.

Congressman Greenwood connected Russa Steiner with a local

builder who raises money for charitable organizations. They have

an organization they call Count Your Blessings. Micky and

Margery Shrank, the creators of the foundation, have told Russa

that they are going to pay one semester’s tuition for one of the children at the school. Congressman Greenwood asked that she contact

them. She faxed information to them, and they called back immediately and said that they were going to provide that support.

19

She and her family have monthly mortgage payments which

have to be met. Though her mortgage company has given her a 6-

months’ reprieve while she tries to straighten out the finances, she

will ultimately have to meet these financial obligations, or she and

her children will have to remove themselves from their home where

their children have been raised and where, of course, their closest

connection to Bill remains.

Today—up until today, the money she has received from charitable organizations are as follows: The initial payment from Red

Cross in the amount of $1,244.57, the payment made—or that contribution made by Red Cross today in the amount of $27,507. The

United Way has provided her with $1,500, and the Tzu Chi Foundation has provided $1,000. The Count Your Blessings Tuition

Fund has agreed to pay a semester for Russa Steiner.

Thank you.

[The prepared statement of Robert O. Baldi follows:]

PREPARED STATEMENT OF ROBERT O. BALDI, ESQUIRE ON BEHALF OF RUSSA STEINER

Good afternoon, my name is Robert Baldi. I am a lawyer who has had the honor

of representing both William Steiner and Russa Steiner, prior to the tragic events

of September 11, 2001. I am here today, not as Russa Steiner’s lawyer, but as a

spokesperson whose purpose is to help her provide you with information concerning

the impact the terrorist attack had on her life. She has asked me to speak because,

she still finds it difficult to discuss many of the events which are relevant to your

investigation. I have agreed to help her provide you with some of the details.

Russa Steiner and her family live in a pleasant community located close to Philadelphia. She and Bill had been married 32 years at the time of his death. He was

a successful executive with Marsh, Inc., a large insurance company with offices located on floors 93 through 99 of the Twin Towers at the World Trade Center. The

first terrorist attack hit close to the 90th floor of the North Tower. For obvious reasons, nothing has been recovered associated with Bill. Not a shred of DNA, nor any

personal effects. From what we can tell, most of Bill’s personal records were destroyed. Bill kept a lot of information on his lap top computer, which he took to and

from the office.

Because Bill was a successful businessman, their children were able to afford to

go the college of their choice. The Steiners have been paying the entire cost of the

education for each of their children. Because of Bill’s income tax bracket, the children were not entitled to any financial assistance and therefore, the full tuition was

being paid by the Steiners. Meredith, their oldest daughter, is 23, a graduate of the

University of Delaware. She is living home and was planning to go to law school.

Bill and Russa were planning to pay her tuition. Jordan, is 21 years old and a senior at the University of Delaware. Darren is 18 years old and a freshman at Penn

State. If you calculate the tuition that the Steiners paid in after-tax dollars, you can

begin to appreciate the responsibility Bill Steiner was carrying with him everyday

he went into New York. Russa’s financial future is now fragile and uncertain. She

has reluctantly had to seek the assistance of others; a situation which makes her

extremely uncomfortable.

Since Bill’s death, Russa spent most of her time, sitting at home looking at the

television set watching news reports, as events have unfolded. When the status of

Bill went from ‘‘missing’’ to ‘‘missing and presumed dead’’, she realized that bills

had to be paid and then began the process of taking over the management of the

family’s finances, a task previously performed solely by Bill. She wrote to her creditors and asked them for extensions of time while she tried to straighten things out.

She copied down telephone numbers shown on television, advising her of sources of

assistance. Neighbor’s and friends gave her newspaper articles and information that

they came across. Ultimately, the local Network of Victim Assistance Agency, known

as NOVA, provided her with a wonderful advocate by the name of Mia Alan. Mia

has helped her with this process. Russa has spent many, many hours, writing letters and making phone calls to various agencies searching for assistance for her

family.

On October 6, 2001, Russa spent the day visiting Ground Zero with other victims’

families and then an advocate took her to trailers located on Liberty Island, which

have been set up to help victims of this horrible tragedy.

20

She was escorted from trailer to trailer where she would wait in line to talk to

someone to schedule an appointment. She then went to the next trailer to wait in

line to schedule another appointment and ultimately, return to the various trailers

at the appointed time to meet with representatives to tell and retell her story. One

of the trailers was sponsored by a Buddhist Compassion Relief Fund known as the

Tzu Chi Foundation, USA. Russa knew nothing about this organization, however,

when she told them her story, they issued a check to her in the amount of

$1,000.00. This money was available to her immediately, no strings attached. We

have supplied a copy of the letter that was given to her by this most generous organization, along with their check. On October 6, 2001, Russa visited many other trailers, some of them were charitable organizations, others were government agencies.

Russa went into the Salvation Army trailer. She was told that she would receive

a holiday meal. We assume that at some point in the future, someone will contact

her from the Salvation Army to provide her family with a meal over one of the upcoming holidays.

While visiting the trailers, she was able to submit an application to the New York

State Victim’s of Crime Compensation Board, as well as the New York State Work- er’s Compensation Board. Approximately one week later both of the State agencies

contacted her, each advising that she qualified for State Funds.

When she visited the Red Cross trailer she brought with her copies of actual outstanding bills. She had contacted them previously to apply for the Emergency Family Gift and received a case identification number for that specific application. Her

advocate told her to bring actual bills for consideration by the Red Cross for emergency vouchers. This request was separate from her first phone application. The

representative onsite at the trailer from the Red Cross, reviewed the bills and selected certain ones that they agreed to pay. A separate disbursement order was then

issued for each separate item. Russa was then provided the disbursement order to

be used as if it were a check, to pay the specific bills. Copies of the disbursement

orders have been provided as an exhibit to this statement. The Red Cross has provided her the following disbursements:

1. $60.00 for a trash bill for services 10/1/01-12/31/01—this is the cost for her to

have her trash picked up at her house. 2. $227.50 for the Steiners’ electric bill for the month of September 3. $99.07 for the Steiners’ telephone bill for 9/15/01-10/14/01. The Steiners have several different phone bills. The Red Cross picked one of the monthly bills and

issued the disbursement order.

4. $138.00 for the Security company that provides a security service for the burglar

alarm system in the Steiner house. 5. $135.00 and $135.00 (two separate disbursement orders) for food made payable

to the Giant, Russa’s local grocery store.

6. Several days later, a check arrived in the mail from the Red Cross to Russa in the amount of $450.00. This money was made payable to Russa to use at she

deemed fit for family maintenance. The total sum received from Red Cross to date is $1,244.57.

Russa was led to believe that there may be some additional money coming from

the Red Cross from her phone application of September 28, 2001, for the Emergency

Family Gift. There has been no suggestion of the amount or when it will come. A

representative said to her that because she was able to obtain additional time from

her creditors, they felt that she did not qualify for assistance on an emergency basis.

Russa has made many applications to organizations over the phone and by letters.

One of those organizations is her Local United Way. On September 28, 2001, she

applied by phone to the New York City United Way September 11th Fund. On November 2, 2001 a representative from her local Bucks County United Way arrived

at her house and presented her a check in the amount $1,500.00 from the local

United Way. This gift from the local United Way was unprecedented. Normally, the

local United Way only provides assistance to agencies. The representative explained

that the Bucks County Local United Way is applying for money, for victims of Bucks

County, from the September 11th Fund. He explained to us that the September 11th

Fund is the fund raised by United Way of New York. It is our understanding that

these funds will be distributed through the local United Way Organizations. I have

been advised that 20 families have been identified from Bucks County. An initial

grant has been requested which would pay to the Steiners a grant of $3,000.00 per

month for 3 months. The $1,500.00 payment, just recently received, would represent

a portion of the grant which has been applied for. By no means am I qualified to

speak for the local United Way, in terms of what their intent is or in terms of what

their efforts have been. The gentlemen who brought the check to Russa was very

kind and gracious. The funds being provided to her were unrestricted. We have no

information which would suggest when she will know if the full $9,000.00 grant was

21

approved, or if and/or when there will be any consideration for providing her with

additional money over and beyond the outstanding request for $9,000.00.

Russa has contacted many potential sources of aid. She promptly called the Families of Freedom Scholarship Foundation after hearing President Clinton and Senator

Dole talk about the Fund on television. She called September 29, 2001 to register

her children. They called her back on October 5, 2001 and explained that the application would be sent out sometime close to the end of this year. No money would

be available this year and ultimately, it would be based on financial need.

This has been a very painful process for Russa and her family. People have been

very kind, however, the Steiner family financial situation remains fragile. Penn

State was gracious enough to provide a $2,500.00 scholarship for Darren. Congressman Greenwood connected Russa Steiner with a local builder, whose family has created a Foundation called ‘‘Count Your Blessings’’ tuition fund. Mickey and Marjorie

Schrenk, the creators of the Foundation are arranging to pay a semester’s tuition

for Jordan at the University of Delaware. Nonetheless, the children’s educational future is uncertain. Russa’s ability to remain in her house is uncertain. She has

monthly mortgage payments which have to be met. The mortgage company has

given her a 6 month reprieve while she tries to straighten out finances. She will

ultimately have to meet those financial obligations, or she and her 3 children will

have to move from the home where her children have been raised, and where their

closest connection to Bill remains.

By no means do I offer this comment in a judgmental way, but I would simply

state that Russa’s financial position right now is precarious. Russa has never had

to ask people for assistance. Russa would never say to someone, that she needs financial help on an emergency basis. Nonetheless, part of the trauma associated

with this horrible tragedy is not only the loss of her dear husband, but the financial

uncertainty which now plagues the Steiner Family. To date she has received the following financial assistance from the following charities:

Red Cross ............................................................................................................................................... $1,244.57

United Way ............................................................................................................................................. $1,500.00

Tzu Chi Foundation ................................................................................................................................ $1,000.00

Count Your Blessings Tuition Fund ....................................................................................................... 1 semester of tuition

We will be happy to try and answer any questions that you may have for us.

LIST OF CHARITIES CONTACTED BY RUSSA STEINER

1. Red Cross

Russa Steiner applied over the phone on September 28, 2001 for what she was

told was the ‘‘emergency family gift’’. She was assigned a case number and she immediately faxed her family expenses for their consideration. She has not received

any response to date with respect to this request.

On October 6, 2001, she applied in person for disbursement orders with the help

of her advocate. She received $794.57 in disbursement orders on October 6, 2001.

Several days later she received a check from the Red Cross for family maintenance

in the amount of $450.00.

Total sum received from the Red Cross to date: $1,244.57

2. Tzu Chi Foundation

Russa Steiner applied in person at a trailer located at the New Jersey Family Assistance Center on Liberty Island. She received a check in the amount of $1,000.00

Total sum received from the Tzu Chi Foundation: $1,000.00

3. United Way

Russa Steiner applied over the phone for a United Way grant from the September

11th Fund on September 28, 2001.

On November 2, 2001 a check in the amount of $1,500.00 was delivered to her

from the Local United Way. The Local United Way has applied for additional funds

from the New York United Way-September 11th Fund.

Total sum received from the Local United Way: $1,500.00

4. Salvation Army

Russa Steiner applied in person at a trailer located in Liberty Island on October

6, 2001. She was told that she would be provided with a holiday meal at some time

in the future.

22

5. New Jersey Realtor’s Housing Relief Fund

Russa Steiner applied in person on October 6, 2001 at a trailer located at Liberty

Island. During a follow-up phone call on October 15, 2001 she was told that they

would forward her request to the National Branch in Chicago, because they only

cover New York and New Jersey. She has heard nothing further from them.

6. Families of Freedom Scholarship Foundation

Russa Steiner called this foundation on September 29, 2001 after hearing Senator

Dole and President Clinton discuss it on the television. She received a telephone call

back October 5, 2001 advising her that applications would be sent at the end of the

year. She was told that there would be no money available for this year and that

future grants would be based on financial need.

7. Twin Tower Fund

Russa Steiner learned of this fund from television and made a telephone call to

the organization on September 30, 2001.

8. Sylvan Learning

Russa Steiner applied by phone on September 28, 2001. She received a telephone

call back on October 5, 2001. They suggested that she contact the Families of Freedom Scholarship Foundation.

9. Count Your Blessings Tuition Fund

This is a foundation created by Mickey and Marjorie Schrenck. At the suggestion

of Congressman Greenwood, Russa Steiner applied October 29, 2001. She heard

back the same day that they would be providing one semester tuition payment for

one of the children.

Mr. GREENWOOD. Thank you, Mr. Baldi.

Mrs. McLaughlin?

TESTIMONY OF ELIZABETH McLAUGHLIN

Mrs. MCLAUGHLIN. Thank you, Chairman Greenwood and the

subcommittee, for inviting me here today. Honestly, I feel an awesome sense of responsibility to the nearly 4,700 families whose

loved ones died on September 11. I think it is important that this

committee and the millions of generous contributors across America know the unnecessary, and at times overwhelming, obstacles

the surviving victims face when trying to receive assistance from

the government and charities.

I hope that my testimony and the work of this committee will aid

the victims’ families in our efforts and improve upon the current

system.

First and most importantly, I am absolutely amazed at the outpouring of support and generosity from the American people. When

I drive through New York and elsewhere and I see flags raised, I

feel like they are raised for me. I know if my husband Rob had died

any other way under any other circumstances, that I would not

have this kind of support, and I would not be here today. Rob was

29 years old, and our only child Nicholas was 9 months on September 11. We had just moved into our first home. It was a fixerupper, and we sank our life savings into it. Rob worked at Cantor

Fitzgerald on the 104th floor of the North Tower, and like most of

the world, I watched the towers tumble that morning.

The events of September 11 have changed our lives forever, but

now, Mr. Chairman, I am tired, and I want to spend time with my

son. Shortly after the attacks, I saw news reports and telethons

that continuously mentioned the fund-raising efforts for the families of the victims of September 11. I asked friends and family to

see what funds were available. No one really had much information, but we were all hopeful that these organizations would help.

23

Rob was the sole source of income for our family, and I thought for

the first time maybe I can keep my house. But then the real work

began. You have to really focus, which some days is very hard to

do, to satisfy the various registration requirements, qualifying criteria, keep up with policy changes, find out what groups sent

money where, determine what documents need to be sent and to

whom, speak to uninformed representatives and volunteers, repeat

my story to the same organizations, sometimes 4, 5 and 6 times,

countless faxings, sending e-mails and traveling in person, at least

once a week, to reapply to the same organizations.

Before when I had friends and family helping me full-time, the

task did not seem so daunting. We have contacted over 40 organizations. I have received some emergency funds. I have a different

experience from Russa, and I thought I was doing everything right.

I have an 18-page spreadsheet on all the charities and government

organizations that we started on September 12, and it is updated

every day. It has registration information, contacts, documentation

required, follow-up required, but now as time goes on and my

friends have less time to devote to this effort, the responsibility and

pressure increased as my bills mount.

Ironically, I have a master’s degree in not-for-profit management.

I do understand the magnitude of this project for charitable groups

is unprecedented. I appreciate the work they are doing for me and

for thousands of other families. And I do think my situation could

have been worse. But I don’t think contributors to the various September 11 funds thought that their donations would be caught up

in so much red tape and become such a source of frustration for

the families. It seems this process could have been better streamlined and centralized so that families can move on with their lives.

That is why I am here today. It is not too late. Mayor Guiliani

and the city of New York very quickly set up the Family Assistance

Center in Manhattan, Pier 94. They gathered the charities, government organizations, legal assistance, translators, volunteers, food,

counseling. Why then haven’t these charities been able to get together and agree on one uniform application? Why haven’t they

been able to get together and develop a quicker way for families

to receive these funds? We all have the missing person’s reports,

death certificates and any other proof needed to avoid fraud, but

the charities are not sharing these documents or information with

each other. The system is not believing—it is not working the way

I believe it was intended. I know a family in my town of four children who lost their father on September 11. Their mother has to

support all of these children now, both emotionally and financially.

How can she spend each day making these phone calls, visiting

these organizations and following up? Many charities are giving

out funds on a first-come, first-served basis. Does that mean she

will not receive the donations that she and her family will need?

Sadly, a friend of mine whose husband worked also at Cantor

Fitzgerald who was 6 months pregnant told me yesterday morning,

I give up. And that is one of the reasons I came today. I don’t want

to let her down, and you should not either. There are too many people who need help, and I think that is why these charities were set

up in the first place.

24

Mr. Chairman, the American people have shown time and again

that they are kind and generous. Because of the unspeakable tragedy to my family on September 11, I now am forever grateful to

be experiencing firsthand this kindness and generosity, but as I

testified, it has not been easy, and many people are not getting the

help they need. I sincerely hope this committee will do everything

it can to help the thousands of families suffering across this Nation

more quickly and more easily receive the generosity that millions

of Americans intended they receive. Thank you.

As I said—sorry—I have several different experiences and information that I would be happy to submit. I didn’t decide to do this

until about 11 o’clock last night. So I don’t have—I am not quite

as organized. But thank you.

[The prepared statement of Elizabeth McLaughlin follows:]

PREPARED STATEMENT OF ELIZABETH MCLAUGHLIN

Mr. Chairman. Members of the Subcommittee. My name is Elizabeth McLaughlin.

Thank you Chairman Greenwood and the Subcommittee for inviting me to speak at

this hearing today. Honestly, I feel an awesome sense of responsibility to the nearly

4,700 families whose loved ones died on September 11th. I think it is important that

this Committee and the millions of generous contributors across America know the

unnecessary—and, at times, overwhelming—obstacles the surviving victims face

when trying to receive assistance from the government and charities. I hope that

my testimony and the work of this committee will aid the victims’ families in our

efforts and improve upon the current system.

And, I think—with all due respect to their fine team—that the Arizona

Diamondbacks should have thrown the World Series for New York.

First and most importantly, I am absolutely amazed at the outpouring of support

and generosity from the American people. When I drive through New York and elsewhere and I see American flags raised, I feel like those flags are raised for me. I

know if my husband Rob had died under any other circumstances, I would not have

this additional level of support—and be able to be here today.

Rob was 29 years old and our only child, Nicholas, was 9 months old on September 11th. We had just moved into our first home, a fixer upper where we sank

our life’s savings. Rob was a partner at Cantor Fitzgerald on the 104th floor. Like

most of the world, I watched the World Trade Center towers fall down that morning.

The events of September 11th have changed our lives forever. But now, Mr.

Chairman, I am tired—and I want to spend time with my son.

Shortly after the attacks, I saw news reports and telethons that continuously

mentioned the fund raising efforts for the families of the victims of September 11th.

I asked friends and family to help see what funds were available. No one really had

much information, but we were all hopeful that these organizations would help.— Rob was the sole source of income for our family, and I thought, ‘‘Maybe I can keep

our house.’’ But then, the real work began. You have to really focus—which some days is very

hard—to satisfy the various registration requirements; qualifying criteria; keep up

with policy changes; find out what groups sent money where; determine what documents need to be sent and to whom; speak to uninformed representatives; repeat

my story to the same organization four, five and six times; countless faxing, sending

emails, and traveling in person each week to reapply.

Before, when I had friends and family helping me full-time, the task did not seem

so daunting. We have contacted over 40 organizations. I have received some emergency funds, and I thought I was doing everything right. We developed an 18-page

spreadsheet to organize the registration, contacts, proper documentation and required follow-up. Now, as time goes on and my friends have less time to devote to

this effort, the responsibility and pressure increase as my bills mount.

Ironically, I have a Masters degree in not-for-profit management. I understand

the magnitude of this project for charitable groups is unprecedented. I appreciate

the work they’re doing for me and the thousands of others families. I think my situation could have been worse. But I don’t think contributors to the various September 11th funds thought that their donations would be caught up in so much red

tape and become a source of frustration to the families. It seems this process could

have been better streamlined and centralized so families can move on with their

lives. That is the main reason I am here today. It is not too late.

25

Mayor Guiliani and the city of New York very quickly set up a family assistance

center in Manhattan that gathered the charities, government organizations, legal

assistance, translators, volunteers, food and counseling. Why then, haven’t these

charities been able to get together and agree on a uniform application? Why haven’t

they been able to get together and develop a quicker way for families to receive the

funds? We all have missing persons’ reports, death certificates, and any other proof

needed to avoid fraud, but the charities are not sharing these documents or information.

The system is not working the way I believe it was intended. I know of a family

with four children who lost their father on September 11th. Their mother has to

support all of these children both emotionally and financially now. How can she

spend each day making the necessary phone calls, visits and follow-up to these organizations? Many charities are giving out funds on a first-come, first-served basis.

Does that mean she will not receive the donations that she and her family need?

Sadly, a friend told me yesterday, ‘‘I give up.’’

I don’t want to let her down, and you should not let her down either. There are

too many people that need help. Isn’t that why these charities were set up in the

first place?

Mr. Chairman, the American people have shown time and time again that they

are kind and generous. Because of the unspeakable tragedy to my family on September 11th, I now am forever grateful to be experiencing firsthand this kindness

and generosity. But, as I testified, it has not been easy, and many are not getting

the help they need. I sincerely hope that this Committee will do everything it can

to help the thousands of suffering families across this Nation more quickly and more

easily receive the generosity that millions of Americans intended they receive.

Thank you. I will happy to answer any questions the Committee may have.

Mr. GREENWOOD. Thank you, Mrs. McLaughlin. Thank you for

being here.

And again, Mrs. Steiner and Mrs. McLaughlin, you are courageous, indeed, to come and be with us this afternoon, and we will

do everything that we can to honor your presence and your efforts

by making sure that the families—the other families for whom you

speak—also are given what they need for them and for their children to make it through.

Mr. Spitzer, thank you for being here as well and you are recognized for 5 minutes for your testimony.

TESTIMONY OF HON. ELIOT SPITZER

Mr. SPITZER. Thank you, Mr. Chairman, Congressman Deutsch,

distinguished members of the subcommittee. Thank you for inviting me to testify here today. The physical and emotional impacts

of the events of September 11 are staggering, as we have just

heard. Several thousand people lost their lives on that day. Thousands more were wounded, and thousands lost family members,

jobs or homes as a result of this terrible attack. Virtually all of

these individuals will require some form of temporary or long-term

assistance, ranging from medical care to financial aid, to mental

health counseling. As a result, our response to this tragedy must

be guided by a single focus: addressing the needs of the victims and

their families as promptly and coherently as possible.

The American people have responded to this call by pledging

more than $1.2 billion to the relief effort, and the charities entrusted with these funds must spend them in a manner that fulfills

the will of the donors. In particular, the donations made specifically in response to September 11 attacks must be used exclusively

for the benefit of those who have suffered as a result of those attacks. Moreover, the funds should be distributed in an equitable

manner, ensuring that no victim is left unassisted.

26

Indeed, if this singularly important task is not performed well,

then the public will lose faith in the entire not-for-profit sector. As

New York’s attorney general, I am charged with overseeing the

charitable organizations that solicit funds or hold assets in our

State, which includes the vast majority of the charities involved in

the relief effort. Most of these organizations must register with the

State and comply with annual financial reporting requirements. In

addition, my office helps to ensure that the interests of the public

are protected when charitable funds are raised and spent. Nevertheless, the essence of charity is its voluntary nature.

My office does not and cannot tell the charities how to spend

money, and most Americans probably agree, as I do, that government should not control this private giving, which is a uniquely

American phenomenon. Very soon after the September 11 disaster,

it became clear to me that we needed to improve the coordination

of the terrible response to the tragedy, and I have been working

ever since to achieve that goal. While there was some initial resistance from some charities, that resistance has been largely overcome, and my office is now working cooperatively with many of the

charities involved in this effort.

In particular, my office identified five critical areas that needed

to be addressed: Improving the process for victims; improving coordination among charities; providing information to the public;

preventing fraud; and addressing long-term issues. And we have

made substantial progress toward achieving all of these goals.

First, as we have heard, we need to make it easier for victims to

learn what relief is available and to access that aid. Although thousands of victims have already received aid, others are having difficulty obtaining the relief they need. Many of these victims are

baffled by the process, which involves submitting a dizzying array

of forms and making daily phone calls to scores of different organizations offering assistance. We need to address these issues as soon

as possible.

The good news is that the charitable organizers are responding

positively to our efforts. For example, almost 100 charities and

other private entities have already provided my office with detailed

information about their programs and funding criteria, and we

have created a public Web site for this information,

www.wtcrelief.info. This Web site helps victims and their families

locate charities that are providing aid, assists donors in deciding

which charities to give money to and helps charities learn more

about their colleagues’ efforts.

In addition, I hope in the near future to develop a mechanism

enabling individual victims and families to use this Web site to

send information about their needs directly to the listed charities

so that those charities can contact them more promptly.

At the same time, however, we must remember that many victims and their families do not have computers or are not proficient

in English, and thus any Internet-based assistance can only fill a

part of the existing needs, as a result, with need to streamline the

written application process to the greatest extent possible. There is

no reason why those affected by the September 11 tragedy must

complete dozens of different applications for dozens of different organizations.

27

Instead, I have urged the major charities to work together and

develop a single, uniform application available in as many languages as possible that all organizations will accept. We must

strive to make the application process as easy for the victims as we

possibly can.

A second goal has been encouraging the charities to work together to expedite the provision of aid, avoid duplication of services, and ensure fairness in providing relief. With over 200 major

charities raising funds for September 11 relief, the challenge of coordinating will not be an easy undertaking, but it is an essential

one. Fortunately, we are making substantial progress on this front.

Last week, I announced a team of private firms, including

McKinsey & Company, IBM, SilverStream Software, Qwest Communications and KPMG, that are working pro bono to create a private, secure listing of the grants that have been provided to victims

and their families. This effort is modeled on a similar approach developed after the 1995 bombing of the Murrah Federal Building in

Oklahoma City. Their jointly managed data base served a crucial

case management role, helping ensure both the integrity of the

process and the equitable distribution of relief.

Over the past several weeks, many of the largest charitable organizations, including the American Red Cross, the Salvation Army,

the September 11 Fund, and Safe Horizon, which together account

for approximately 80 percent of the charitable pledges, have agreed

to participate.

My office is in the process of working with the charities to finalize the details of the data base, which will become an essential

component of the efforts to prevent duplication and will also help

them to reach and serve the broadest range of victims. I am pushing aggressively to get this data base created, and Congress similarly should express its desire that the data base be created quickly

and utilized to the fullest extent possible.

The third critical goal is to ensure that the charities provide information about the use of the funds that they have received. Charities can provide assistance to the victims of the September 11 attacks only because of the long-standing generosity of the American

people. The American people in turn expect to see that these funds

are provided to those in need promptly and equitably. Services are

still being provided to victims of the Oklahoma City bombing, even

though more than 6 years have passed since that tragic event, and

so we know that the needs of the September 11 victims and their

families will continue for many years.

While the charities, therefore, should not spend all of the money

immediately, they still must demonstrate to the American people

that they are fulfilling their charitable mission. I am thus urging

each charity to publicize on a regular basis the amount of money

it has received, detailing how much it has spent and identifying the

purposes for which its funds have been targeted. My office has volunteered to collect and aggregate the data and to place it on our

Web site so that updated information is readily available in a central location.

Fourth, we must be vigilant in our efforts to prevent the diversion of funds from the victims through fraud, waste and abuse. We

have already seen a few instances of individuals raising funds with

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little assurance that the money will reach the victims of the September 11 attacks, and we have even seen isolated cases of unscrupulous individuals falsely claiming to be victims of this tragedy.

Our responsibility in government includes the obligation to move

swiftly and aggressively to enforce the laws against those who engage in fraud, and there are ways that Congress can help. In particular, Congress should modify those provisions of the Internal

Revenue Code that impede disclosures to State law enforcement

authorities regarding IRS audits and enforcement actions and

should encourage greater disclosure of charitable fund-raising practices.

Finally, I have called for the creation of a permanent working

group of the major charitable organizations and victim groups,

which can meet on a regular basis to address the needs of victims

who have not been assisted and to solve other problems in the process as they arise.

A similar working group was created in Oklahoma City and was

extremely helpful in the response to that tragedy.

This kind of focused collaboration is especially crucial for the retail level charities, which are actually delivering cash assistance

and services to individual beneficiaries. In addition to addressing

the needs of individual victims, the working group can focus on

some of the difficult questions that all charities are facing, such as

balancing the desire to provide assistance quickly against the need

to keep funds in reserve for the future; deciding how to allocate

funds among the many survivors of a single victim; guarding

against the prospect of individuals who may try to defraud the

charities; and determining how to help undocumented aliens and

other victims who are afraid to come forward.

On balance, the charitable organizations have done an excellent

job in responding to the events of September 11. On behalf of all

of us in New York, I wish to express our tremendous gratitude to

all Americans—to all Americans and indeed people throughout the

world who have contributed to this remarkable relief effort. Nevertheless, we must recognize the events of September 11 demand a

team response. Only through an ongoing cooperative effort can we

possibly hope to ensure meaningful and sustained care for the victims of this terrible tragedy. This cooperation is essential if the

charities are to earn and keep the confidence of the American people. Faith not only in wise use of the donations raised for this crisis, but also faith in the integrity of our great tradition of private

philanthropy. Thank you.

[The prepared statement of Eliot Spitzer follows:]

PREPARED STATEMENT OF ELIOT SPITZER, ATTORNEY GENERAL, STATE OF NEW YORK

Chairman Greenwood, Congressman Deutsch and distinguished Members of this

Subcommittee, thank you for inviting me to testify before you today on the important issues that face us in the wake of the September 11th attacks and the charitable outpouring that followed that tragedy.

The physical and emotional impact of the events of September 11th is staggering.

Several thousand people lost their lives at the World Trade Center, the Pentagon

and in Pennsylvania, and so the relief effort plainly begins with an understanding

of the thousands of grieving families and friends they have left behind. Many children will grow up without a parent, and thus families may need support for years.

In addition, thousands of people were injured as they fled the World Trade Center

or tried to rescue others. Many will require years of medical treatment and other

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assistance. Thousands of others in New York lost homes, jobs, businesses and sense

of security. The individual and aggregate physical, emotional and economic losses

are huge. The need for services ranging from education and training to mental

health counseling is equally enormous and will endure for years to come.

Our response to this tragedy must be guided by a single overriding principle—

the needs of the victims and their families must be addressed as promptly and coherently as possible.

The American people have already responded to this call, by opening their hearts

and wallets in an unprecedented way. Charitable institutions have collected more

than $1.1 billion in donations and pledges, making appeals to their donors that directly cited the need for relief of this disaster. Collectively, the American public has

great expectations that this outpouring of relief will make a difference for those who

are suffering, both on an immediate basis and over the long haul.

As a result, the charities that have been entrusted with these funds must spend

them in a manner that fulfills the will of the donors. In particular, the donations

made specifically in response to the September 11 attacks must be used exclusively

for the benefit of those who have suffered as a result of those attacks. Moreover,

the funds should be distributed in an equitable manner, ensuring that no victim is

left unassisted. Indeed, if this singularly important task is not performed well—with

dignity, fairness, equity and justice for all of the victims—then the public could lose

faith in the entire not-for-profit sector.

As New York’s Attorney General, I am charged with overseeing those charities

that solicit funds in our state, as well as the charitable organizations, including

foundations and charitable trusts, which are created in or hold assets in our state.

It is my duty to help ensure that the interests of the public are protected when

charitable funds are raised and spent. I consider it a privilege to perform this important function, especially in this time of great need.

Nevertheless, the essence of charity is its voluntary nature. Americans decide individually, often in a manner closely linked to our individual views and faiths, how

to make contributions to charities that serve our shared goals. There are many diverse ways in which relief can be provided effectively, in keeping with our country’s

strong tradition of private philanthropy.

In New York, most not-for-profit groups (other than religious organizations and

certain other exempt entities, such as the Red Cross) are required to register with

the state and comply with annual financial reporting requirements. My office makes

those reports public, so that donors can make informed choices as they plan their

contributions. We oversee not-for-profit groups, including those that are exempt

from registration and reporting rules, to ensure that they use their charitable assets

in ways that fulfill the intent of the donors and further the public interest. My office

tries to ensure that charitable solicitations are truthful, that charities invest their

funds carefully and that the officers, directors and trustees who manage not-forprofit institutions uphold their fiduciary duties to the beneficiaries of the charities

they run.

But my office does not and cannot tell the charities how to spend money—and

most Americans probably agree that government should not control this private giving process.

As regulators, our goal in general has been to help donors’ efforts to obtain information more easily concerning what each charity has done and pledges to do with

the funds it collects from the public. Here, with the magnitude of the September

11th tragedy, and the huge numbers of its victims, we must also pay special attention to helping those individuals and families obtain the information they need to

locate the assistance they deserve.

Very soon after the disaster, it became clear to me that we needed a coordinated

charitable response, and that we could not afford to wait for that coordination to

evolve over an extended time period. I therefore have tried to use my office to jump

start the necessary collaboration. While there was some initial resistance from some

charities, that resistance has been largely overcome, and my office is now working

very cooperatively with many of the charities involved in this effort.

In particular, my office identified five critical areas that needed to be addressed,

and we have made substantial progress toward achieving all of these goals:

1. making it easier for victims to learn what relief is available, and to access that

aid;

2. creating a victims database, to facilitate coordination, avoid duplication and ensure fairness in the aid distribution process;

3. providing the American public with information about the amount of donations

received and expended, and the purposes of those expenditures;

4. investigating and prosecuting any instances of fraud and abuse that arise; and

30

5. ensuring that a working group of charities and victim advocates is established,

to solve problems as they arise and swiftly identify gaps in the services required

to meet victims’ needs in the future.

I will devote the remainder of this testimony to a more detailed discussion of each

of these initiatives.

Victims’ Need for Access to Information and Streamlined Process:

The government agencies and charitable organizations that have stepped in first

to meet victims’ most immediate and acute needs have distributed tens of millions

of dollars in aid, but already reports of delays and gaps in service are emerging.

Although thousands of victims have already received aid, many others are still in

need. Moreover, almost all are baffled by the process, which involves a dizzying

array of forms and scores of phone calls, ever-changing assistance personnel, perceived delays in receiving relief and, as yet, very little explanation of how to go

about accessing relief for longer-term expenses. These problems are very troubling.

The lack of coordination also affects the charities, particularly those seeking to

support longer-term needs of the victims, which are finding it difficult to identify

the victims they have pledged to serve. It is certainly reasonable for those charities—as well as charities whose relief focuses on broader, community-wide losses—

to take additional time to assess the needs, consult with other charities and develop

effective service plans, but that process should be as open as possible, so that the

victims and donors can monitor progress. As yet, we know very little about the

plans for this portion of the charitable dollars raised.

One of my top priorities has been to bring all of the various charities together

in an effort to address these issues—particularly the problems faced by the victims—as quickly as possible. The good news is that the charitable organizations are

responding positively to our efforts. For example, almost 100 charities and other private entities have already provided my office with detailed information about their

programs and funding criteria, and we have created a public website for this information: www.wtcrelief.info.

This website—which has been up and running for more than a month—contains

a search function which helps victims and their families locate those charities that

are providing the precise type of assistance the victims need. Increasingly, as more

data is accumulated each day, this website also includes contact information and

other guidelines, so that victims will find it easier to obtain relief.

The website can also easily be used by donors in deciding which charities to give

money to. Donors can find the charities that are providing the specific kinds of assistance they wish to support, can link to those charities’ financial reports on an

independent website (www.GuideStar.org), and in many instances can link directly

to the charities’ own websites to get more information or donate on-line.

The www.wtcrelief.info website also provides charities with a vehicle to learn

more about their colleagues’ efforts, so that they can work closely with those serving

the same goals as their own, and can identify those needs that may be receiving

less attention.

I hope in the near future to work out with the charities a mechanism enabling

individual victims and families to use our www.wtcrelief.info website to send information about their needs directly to the listed charities, so that those charities can

contact them more promptly. My goal, which I know the charities share, is to facilitate outreach by the charities to the victims, especially those who are frustrated,

fearful or otherwise experiencing barriers to assistance.

We must remember, however, that many victims and their families do not have

computers, or are not proficient in English, or both, and thus any Internet-based

assistance can only fulfill a part of the existing needs. As a result, we need to

streamline the written application process to the greatest extent possible. Although

it is wonderful that so many organizations are stepping forward to provide assistance, this outpouring of support can result in confusion and reams of paperwork for

the victims. While many of the victims who lost a close family member or were injured or displaced by the tragic events of September 11th have completed extensive

applications in seeking their initial emergency relief grants, there is no reason why

they must be required to chase down and complete multitudes of different applications for dozens of different organizations in order to have their longer-term needs

met.

Instead, I have urged the major charities to take the lead in developing a single,

uniform application—available in as many languages as possible—that all organizations will accept. We must strive to make the application process as easy for the

victims as we possibly can.

31

Importance of a Victims Database to the Charities’ Coordination:

With over two hundred charities raising funds for September 11th relief, the challenge of coordinating this effort began eight weeks ago and will continue for many

years to come. The charitable organizations that have tapped the reservoir of public

generosity so successfully must now work together as never before to expedite assistance, avoid duplication of services, prevent fraud and ensure fairness in providing relief. This will not be an easy undertaking.

That is why I have recruited talented professionals from the private sector to create a victims database, which can maintain a private, secure listing of the grants

that have been provided to victims and their families. Just last week, I announced

a team of private firms, all of whom are providing services and products for this

database effort on a pro bono basis. The team is coordinated by McKinsey & Company, and includes IBM, SilverStream Software, Qwest Communications and

KPMG. I greatly appreciate the willingness of these entities to assist in this important effort.

My role in the creation of this database has been as a catalyst, setting forth the

parameters and seeking to have the database up and running as quickly as possible.

In particular, the database must include strict security measures to protect the privacy of the victims and their families from unauthorized disclosure.

This effort is modeled on a similar effort developed after the 1995 bombing of the

Murrah Federal Building in Oklahoma City. I am grateful to the staff of Oklahoma

City’s charities, including the United Way and the Oklahoma City Community

Foundation, for sharing their wisdom, expertise and experience to aid us in developing our database. Despite the magnitude of the tragedy in Oklahoma City, because most of the victims worked directly for the government and the number of

families impacted was smaller, the charities could meet around a table on a regular

basis and work through the issues family-by-family. Their jointly-managed database

served a crucial case management role, helping ensure both the integrity of the

process and the equitable distribution of relief.

In contrast, the scale of the September 11th disaster—with thousands killed and

tens of thousands suffering severe physical, emotional and economic losses—is much

more vast. Our challenge is to find a way for the charities to work together smoothly

and with the same sense of shared purpose as their Oklahoma City counterparts.

Over the past several weeks, many of the largest charitable organizations—including the American Red Cross, the Salvation Army, the September 11th Fund (the

joint venture of United Way and the New York Community Trust) and Safe Horizon, which together account for approximately 80% of the charitable pledges—have

agreed in principle to participate. These charities have acknowledged the need for

the database, and indeed have expressed a desire to operate it themselves, rather

than having it run by a government entity. It is important to emphasize, however,

that the cooperation of the charities is essential to the success of the database, because only they have the information necessary to make it work, and the level of

commitment varies among the many different charitable entities.

My office is still in the process of working with the charities to finalize the details

of the database, which will become an essential component of their efforts to prevent

duplication and fraud, and will also help them collectively reach and equitably serve

the broadest range of victims. These are very important goals, and as a result I am

pushing aggressively to get this database created as soon as possible. Congress similarly should make clear that it is demanding a coordinated response to this tragedy,

and should urge the charities to create the database quickly and utilize it to the

fullest extent possible.

Obligation to the American Public:

The charities must recognize that they are only able to provide assistance because

of the overwhelming generosity of the American people, and that the American people, in turn, expect to see that these funds are provided to those in need promptly

and equitably. There have been several publicized cases of victims who have not

been able to obtain needed relief, and unfortunately this has overshadowed the fact

that tens of millions of dollars have already been provided to thousands of individuals.

One of the other lessons of Oklahoma City—where services are still being provided to victims more than six years after that tragic event—is that the needs of

the victims for services and funds will continue for many years. This clearly will

be true in the aftermath of the September 11 disaster as well, and thus programs

must be carefully designed and funds prudently managed so they remain available

to meet evolving needs. The charities cannot and should not spend all of the money

immediately. A coordinated process by which the charities account for their progress

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will demonstrate that they are fulfilling their mission and remaining faithful to

their public trust.

I am thus also urging each charity to publicize, on a regular basis, the amount

of money it has received, detailing how much it has spent and identifying the purposes for which its funds have been targeted. My office has volunteered to collect

and aggregate the data, and to place it on the www.wtcrelief.info website, so that

updated information is readily available to the American people in a central location. Over the long term, I will work to expedite and improve the charities’ disclosure of their programs, priorities and finances in other ways, to better inform and

empower the donating public.

Vigilance Against Fraud and Abuse:

As if the challenges ahead were not enough, we have seen evidence of a few individuals whose commitments to charity are questionable at best. Some of these have

sought to raise funds from the public, making references to September 11th, but

with little assurance that the funds raised will in fact serve that goal. Likewise, a

handful of unscrupulous individuals have falsely claimed a connection to the tragedy—a supposedly lost loved one, for example—and have sought to profit from the

generosity of an unsuspecting public.

Thankfully, only a trickle of such fraud has emerged thus far. With the scale of

this tragedy and the corresponding scale of the charitable outpouring, however, we

must remain vigilant against fraud and waste if we are to preserve public confidence in the charities doing the work so desperately needed.

Our responsibility in government includes the obligation to move swiftly and aggressively to enforce the laws against those who mislead the donating public or defraud the charities trying to serve the real victims here, and there are ways that

Congress and the state legislatures can help.

At the federal level, Congress should modify those provisions of the Internal Revenue Code that impede disclosures to state law enforcement authorities regarding

IRS audits and enforcement actions, and should encourage greater disclosure of

charitable fundraising practices. At the state level, I have recommended changes to

New York State law to facilitate enforcement actions against those who engage in

fraudulent charitable solicitations. Our existing law enforcement tools, together with

the legislative and policy changes I have proposed, will better serve our goal of ensuring truthful solicitation and trustworthy distribution of funds.

Need for Ongoing Working Group:

Because of the unprecedented scope of the September 11 tragedy, the process of

delivering aid to victims will be long and complex, and many problems will arise.

As a result, I have called for the creation of a working group of the major charitable

organizations and victims groups, as occurred in Oklahoma City, which can meet

on a regular basis to address these problems as they occur. Indeed, I have been encouraged by the charities’ efforts to develop their own working group during the

past two weeks. This kind of focused collaboration is particularly crucial for the ‘‘retail’’ level charities, which are actually delivering cash assistance and services to individual beneficiaries.

Such a working group—which must include victim representatives—will be able

to coordinate their relief effort, and discuss the many thorny issues that all charities

are facing. For example, the charities:

• must balance the desire to provide assistance quickly against the need to keep

funds in reserve to cover other future needs;

• must decide how to allocate funds among the many ‘‘survivors’’ of a single victim,

which can include spouses, ex-spouses, children, grandchildren, domestic partners, parents, siblings and others;

• must also guard against the prospect of individuals who may try to defraud the

charities (and thus defraud the public which has relied upon them to provide

relief and not waste their donations on the undeserving); and

• must determine how to help undocumented aliens and other victims who are

afraid to come forward.

There are no ‘‘right’’ answers here but, as the guardian of charitable assets in

New York, I believe that it is essential for the charities and victims to sit down and

coordinate their approach to these types of major issues. In addition, I believe that

all of us—government officials, charities, victims and their advocates—will benefit

from a structure that can respond quickly when it becomes evident that a particular

victim or category of victims has somehow been missed by the system and needs

immediate help.

On balance, the charitable organizations have done an excellent job in responding

to the events of September 11th. On behalf of all of us in New York, I wish to exVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 76307.TXT HCOM1 PsN: HCOM1
33

press our tremendous gratitude to all of the Americans, and indeed, people throughout the world, who have contributed to this remarkable relief effort. However, the

charities must understand the importance of coordinating their response to the disaster without further delay.

Although each charity involved has its own unique mission, they must recognize

that the events of September 11th demand a team response. Only through an ongoing cooperative effort can we possibly hope to ensure meaningful and sustained care

for the victims of this terrible tragedy. This cooperation is essential if the charities

are to earn and keep the confidence of the American people—faith not only in wise

use of the donations raised for this crisis, but also faith in the integrity of our great

tradition of private philanthropy.

Mr. GREENWOOD. Thank you, General Spitzer. We appreciate

your presence and your testimony.

Dr. Healy, thank you for being with us, and you are recognized

for your testimony.

TESTIMONY OF BERNADINE HEALY

Ms. HEALY. Well, it is clear that life in America changed forever

on the morning of September 11. The events were extraordinary,

and we responded in a way actually not seen since the world wars,

and the historical point during the world wars, the American Red

Cross raised in today’s dollars in excess of several billion dollars,

the same kind of level of philanthropy. Immediate and emerging efforts to alleviate the human suffering brought on by these hard attacks required activation of most of our lines of service. Disaster

relief and recovery, blood services, international work and our

Armed Forces emergency work. We sought blood, we sought financial donations, and we recruited volunteers to meet those needs.

Early on and in lockstep with our board, we defined what we

needed to do. We also created an entirely new fund, a separate

fund, the Liberty Fund, as an independent separate segregated account created wholly to hold and disperse funds for this new kind

of disaster, which clearly still engulfs our Nation today and surely

for tomorrow. The Liberty Fund was borne out of a strong and immediate recognition that the victims of September 11 were those

lost, their families, the relief workers, those displaced from their

homes, and those victims of terrorist attacks yet to come, such as

the anthrax victims.

The victims were also citizens grieving, healing and in search of

preparedness, and our military suddenly called to serve in a new

theatre of war. There is no question that the immediate response

and highest priority, as it always is of the American Red Cross, is

to move in very quickly to assist those in need at Ground Zero, and

we had three Ground Zeros: in New York, in Pennsylvania and at

the Pentagon.

We did our usual disaster kind of work on relief and recovery at

the sites, mainly a kind of social service, shelter, food, mass care,

but we also developed an entirely new program called the family

grant program, a gift to families like Mrs. Steiner, like Mrs.

McLaughlin. We did it immediately, quickly, and our purpose, even

though we only had about $50 million in the bank at the time to

cover what we knew was at least a $200 million effort initially, we

said, we are going to get a family gift program out, get this money

out the door, and we developed a one-page sheet of paper that had

to be filled out and that required no receipts, and I am terribly distressed about Mrs. Steiner’s experience, required no receipts and

34

was purely based on the need of that family up to roughly $30,000,

with a letter going with that check that said, if you need more,

come back to us.

This was intended for the first 3 months. I do know that Mrs.

McLaughlin told me just before that she was pleased that she received almost $27,000 from the Red Cross, applying in September

24, getting her check on September 26, cashed on October 1. That

is the way it was supposed to happen, a quick turnaround, in this

case, within 48 hours. Unfortunately, we failed Mrs. Steiner, and

there is no excuse for that.

Clearly, proper stewardship of the Liberty Funds, when we are talking about $100 million, $200 million, now $500 million or more,

was one of our highest priorities from the very beginning. A strict

allocation of the money that was raised was put into the separate

account, but also with a very clearly defined categories of use that

were put under the oversight of a team of external auditors from

KPMG, and one of those senior partners had experience in fraud— was experienced in fraud and abuse.

Let me address a few issues that have been raised recently that

I think should be clarified. First, the American Red Cross, to my

knowledge, has never described its work as limited only to those

people who were lost on September 11 and their family, in New

York, and Pennsylvania and the Pentagon. We worked with them

vigorously. Everything that we thought we could do, everything

that was within our mission, we did.

Now, other charities have said that, that it is only for the people

who were lost on that day. We heard that background noise, so we

repeatedly communicated to the public our range of service,

through our chapter network, through PSAs, through contacts with

donors, Web sites, in numerous TV appearances, press releases, in

several—in full-page ads in several major newspapers listing the

range of services, how much money we have raised and what it was

being spent for. Very much along the lines of what Attorney General Spitzer has outlined. Perhaps not everyone heard it, but we

certainly have tried, and we will continue to try and get that message out.

Another issue that we must clarify is that we have helped over

25,000 people, and we have not flip-flopped on whether or not we

could put personal information on these people that were helping,

whether it be spiritual or mental health counseling, whether it be

a cash grant, into an open common data base that could be accessible to numerous other groups, either from government or from

charities. We have delayed participation because of a long-standing

board policy protecting confidentiality of those victims, of those we

helped. And as of today, that confidentiality policy has not

changed. We will provide names, however, as we have said all

along, if the victims, if the Mrs. Steiners and if the Mrs.

McLaughlins, sign a waiver of confidentiality, which is the same

process that we used in Oklahoma City, or a similar process that

we used. You must have the confidentiality. If someone does not

want us to release the help that we gave them, we will protect

them if they wish us to.

I think the third issue is that from the very first attack, blood

preparedness loomed large. Sadly, because of the high mortality,

35

significant blood needs did not materialize. We had already determined, however, we had determined months, if not a year before,

that preparedness for terrorism in this country requires a strategic

blood reserve of frozen O-type blood. Frozen blood lasts up to 10

years, and such reserves can be created when you have high levels

of blood donations, as we have seen recently in the wake of September 11.

We moved quickly on a scaled-up freeze program in order to

amass what we hope will be 100,000 units of frozen blood, which

means the next terrorist event will not put the entire medical system at risk if we suddenly need 50,000 units of blood. We cannot

choose between the victims of a terrorist attack and those suffering

throughout the country in hospitals everywhere. The blood reserve,

the frozen blood reserve will also be available if it is needed for our

military, particularly in the face of a ground war.

The Liberty Fund is being used for phone banks, 800 numbers,

outreach to victims, for auditing costs and for other functions, but

all must be related—again, all expenses disbursed from this fund

must be related to the designated purposes of the fund, related to

September 11 and its aftermath, preparedness of this country as

well.

And those purposes alone, September 11 and its aftermath, we

created separate funds under external auditor scrutiny to assure

that no unrelated disbursements would be made and to assure that

all of our communications on those disbursements will be accurately reported to the public and to anyone who wishes to have

that information on a moment’s notice, including you, Mr. Chairman.

In summary, our responsibility throughout this horrible national

disaster, one that we have in the American Red Cross never seen

before on our homeland, has been to see that the resources marshalled are spent wisely and caringly. We exercised judgment— some people may not agree with some of the categories of use that

we have outlined, but we have experience in these areas, and exercised our judgment in the best interest of what we thought was

wise and caring stewardship of these precious resources.

I believe that they have been and will continue to be used wisely

and caringly. This is what the American Red Cross Liberty Fund

is all about.

[The prepared statement of Bernadine Healy follows:]

PREPARED STATEMENT OF BERNADINE HEALY, PRESIDENT, AMERICAN RED CROSS

Life in America changed forever on the morning of September 11, 2001. We realized that what has taken place is extraordinary, and the American Red Cross was

called upon to respond in an extraordinary way, and in a way we had not been

called on to serve for many decades. The immediate and emerging efforts of the

American Red Cross to alleviate human suffering brought on by the attacks of September 11 required activation of many lines of service—disaster relief and recovery,

blood services, international, armed services emergency services—and we sought

contributions of blood and financial donations to meet those needs. The generous

contributions of blood and money came in for victims: victims of the opening salvo

of this new kind of war, victims fearing and grieving across America, and victims

yet to come.

Early on and in lockstep with the Board we defined those response requirements

and created an entirely new fund, the Liberty Fund, as a separate and segregated

account to hold and disburse funds related to this ongoing new kind of disaster.

Why did we believe it necessary to establish a new fund? For many reasons. This

36

is a disaster unlike any other in U.S. history. This is not a ‘‘regional’’ disaster; it

is not only about the hideous events that occurred in New York City, Pennsylvania

and at the Pentagon. Rather this is a disaster that continues to affect our entire

nation, at this time and as we look ahead. This account from the outset has been

open to public review. We want it to stay that way and we believe the American

public wants it as well.

Proper stewardship of the Liberty fund was our highest priority. Strict allocation

of money raised nationally and across the country into this separate account with

clearly defined categories of use was placed under the oversight of a special team

of external auditors, KPMG. The team included prominently one partner who was

skilled in fraud and forensic auditing. (They also reviewed disbursement methods

for the large cash gift program.) The discrete categories of use of these funds was

articulated in our earliest telephonic meetings with the Board, fund raising directives throughout our nearly 1100 chapter and blood units across the country,

through personal and written contacts with major donors, on our fund raising web

site, through PSA’s, and numerous TV appearances, press releases, during a press

conference and through full page ads in three major newspapers. Our activities were

communicated in formal and informal meetings with the United Way and the Salvation Army.

The American Red Cross has come through a time of heroic service to our country.

The outpouring of support by the public has been unprecedented, and a statement

of their support for the work we have been doing. When one is dependent on contributions for support of that work, no one ever knows whether the blood or financial donations will be adequate to meet the task. We believed we needed over 300

million dollars for our immediate response and have laid out details for that use.

We estimated that roughly 200 million dollars would likely be needed over the next

year to eighteen months beyond that to prepare the organization for readiness for

an ongoing new kind of war. Those investments—in volunteer mobilization, chapter

development for response to weapons of mass destruction, expanded blood security,

and continuity of operations efforts—are still under discussion. Also, we have not

decided as to how large a reserve of funds the Liberty Fund should hold to assure

the same kind of response to another attack that could involve as many or more

victims.

In the world of charitable contributions one never knows how fast and how large

donations will be. I can assure you that the level and rapidity of contributions has

far surpassed any persons imagination. Already we have 500 million dollars contributed and some additional pledged. Donations that have been specifically pledged for

families, for blood, for help with international victims, or for other uses have been

applied accordingly.

Donors must be fully aware of the work of the organization they donate to and

the range of their services, and the challenge for all charities—service organizations

like the Red Cross or grant makers like United Way—is to find the perfect vehicle

so that ever donor making spontaneous gifts are know the purposes for which their

gift might be used. .

This new kind of war engulfing America that started on 9/11 is evolving; the responsibilities of the American Red Cross to the communities we serve is evolving.

As long as we keep the public fully aware of our work to the best of our ability,

the trust with the American pubic will be secure.

National Obligations and Historical Responses:

The American Red Cross draws its authority from a Congressional charter, functions as an auxiliary to the government in times of great national calamity, and has

defined and broad based responsibilities to this nation as part of the Federal response plan in times of national mobilization such as war or weapons of mass destruction preparation and response at the local and federal level.

In recent time most of our disaster responses have been one dimensional self-limited responses within the silo of our disaster operations group. The vast majority

of the 60,000 disaster responses are single family fires within local communities.

The large hurricanes or floods that require a national coordination and a national

appeal are still local disasters with a self limited group of victims and a definable

time line. They virtually never require the mobilization of other Red Cross established lines of service such as Blood, Armed Forces Emergency Service, or International services.

The events of September 11th and its aftermath is a true national disaster with

no clear end in sight. The present yet unfolding bioterrorist attacks on innocent civilians occurring now, and the reported threats of further biological, explosive, nuclear and chemical attacks that convulse our TV screens follow that first series of

events of 9/11. Most horrifically, Americans wherever they live face an uncertainty

37

and vulnerability that was simply not perceived as real two months ago. In this context, the American Red Cross under its mission draws heavy responsibility.

Many have described the attacks on the World Trade Center, the Pentagon and

the downing of an airplane in Pennsylvania as the opening battle in a new kind

of war. For us, our response today does more closely mimics our responses during

World War 1 and World War II . During those times our American Red Cross mobilization also involved multiple lines of service at both the local and national level.

We oversaw major volunteer mobilization of nurses to serve in the theaters of war,

nurses and health aids visiting families at home; physiatrists, ambulance drivers,

and family assistance workers. We carried out extensive armed forces emergency

services, and worked internationally with our allies and civilian populations displaced or harmed by battle.

In World War II we also took on the vital and new effort of providing blood services, blood drawn from American volunteers which was sent overseas for our own

military those of our allies (‘‘Blood for Britain’’ program). We served as part of

America’s civil defense effort and almost every family had a Red Cross volunteer.

Fund raising during that time was the largest in the history of any charitable organization and in today’s dollars exceeded several billions of dollars.

The Liberty Fund in support of September 11th and its aftermath:

The Liberty fund was borne out of a strong and immediate recognition that the

victims of 9/11 were those lost, their families, the relief workers, those displaced

from their homes, and those victims of terrorist attacks yet to come. The victims

were citizens grieving and healing and in search of preparedness. The victims were

our military and their families suddenly called to serve in a new theater of war.

Immediate Disaster Response

Our first priority was to the immediate disaster response in three different cities; and that work continues. Early on we estimated that we needed at least $200 million to meet those obligations to victims and their families and made commitments

before even a quarter of that amount was in hand. As it turns we have already carried out the largest response we have ever made directly to victims in the recent

history of the organization, with over 120 million dollars of the 200 million estimated already spent or in process.

Our response also included emotional and spiritual counseling contacts that exceeded 100,000 carried out by thousands of volunteers; over 10 million meals and

snacks; manning respite centers for rescue workers and compassion centers for social service support for the grieving families. Ground zero labor included help with

evacuation and mass care. Early on we developed program to get cash gifts quickly

into the hands of families who had just lost breadwinners and who confronted cash

flow short falls. These gifts, on behalf of the American people, are intended to tide

families through until other resources such as life insurance or longer term assistance would become available.

So far more than 25,000 people have received some kind of help, and. the work

continues. Our relief efforts extend to victims of anthrax, and must be there as well

to others who might suffer in the uncertain time ahead. The latter costs which are

not factored in the 200 million dollars should be covered by reserves in the Liberty

fund after other designated distributions are made.

Blood Services

Blood service and preparedness is another vital responsibility of the American

Red Cross that has been challenged by the unfolding events of 9/11. For over a year

we had been developing plans for our response to weapons of mass destruction attack, attacks which we had previously designated the ‘‘disasters of tomorrow’’ In our planning for response to a WMD attack we determined that we would need

a strategic reserve of frozen blood, the universal O type, screened and tested and

available for transfusion within a matter of hours. Frozen blood is good for ten

years, and can be stored at depots throughout the country. After the 9/11 terrorist

attacks, we not only positioned existing blood products near the attack sites, but

also responded to the thousands of additional volunteers that came forward to give

blood donations—even when they knew that there were almost no survivors who

needed it. In the long waiting lines we suggested a return at a later time but most

wanted to give then. They did it to ‘‘do something’’ and they did it for needs of tomorrow. Working closely with the FDA we quickly scaled up our plans to freeze the

extra O blood which was now becoming available to be ready for the period of uncertainty in which other WMD events were being threatened.

During peacetime our inventory of blood is razor thin: on average 2 days, roughly

40,000 units. This level so quickly fluctuates that it is not even adequate for peace

time. I can assure you such inventory levels are woefully inadequate in times of unVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 76307.TXT HCOM1 PsN: HCOM1
38

certainty and this new kind of war. Were there a sudden need for 50,000 units of

blood, our customary inventory would be more than wiped out—and its diversion

would essentially shut down medical care for the thousands of other Americans

needing blood for elective operations, trauma, cancer therapy, transplants, chronic

anemia, and other life threatening illnesses.

It takes roughly 2 days or more to obtain, screen and test blood for use, too late

for those who need blood now. We cannot afford for this nation to face a shortage

of ready safe blood as some fear we might face now with supplies of certain antibiotics or vaccines.

Recovery and Preparedness in our Communities:

American Red Cross work includes preparedness within our communities: grieving and healing services; information about weapons of mass destruction, including

bioterrorism; and about family preparedness. To be ready for the uncertainties of

weapons of mass destruction we have to mobilize a new kind of volunteer. This

would include what we have termed the Mercy Battalion of trained medical personnel skilled and willing to respond under our Federal Response Plan as auxiliary

to the federal government in such settings as quarantined mass care shelters, immunization settings or caring for patients in a hospital overflow shelter. Our Armed

Forces Emergency service work has expanded nationally and at the chapter level

as reservists were called up and our troops deployed for a possible ground war.

In the setting of the huge outpouring of donations for the September 11th terrorist attacks, it is essential that there be strong public review. With so many different charities receiving donations for very specific purposes and in some cases

more limited designation than our Liberty Fund—such as those solely for rescue

workers, or those solely for families of victims or for college scholarship programs

for children of those lost—it is not surprising that confusion develop in the minds

of the public over exactly what each group is doing. For this reason coordination

among charities is important, as is public clarification of the different efforts.

Let me address a few issues that have come up recently:

• The American Red Cross to my knowledge has never believed or stated that its

work or its request for donations were limited only to those who were lost on

9/11 and their families. Other charities have said that. Our messages referred

to the broad range of services in which service to the direct victims of the 9/

11 attack was our highest priority. In fact within days of the attack when we

had some $50 million available our goal was to get needed cash into the hands

of those victims who needed it as soon as possible. But we also had other work

to do in terms of the uncertainty of the times ahead with regard to future attacks and the need for preparedness. • We have provided assistance to over 25,000 people. We must set the record

straight on one frequently repeated misstatement in the press and that is that

we have flip-flopped on whether to participate in a New York data base by including the names of those recipients. Let me quote from a November 2 letter

written by the Red Cross Chairman of the Board of Governors and the Interim

CEO to The New York Times correcting their reporting to the contrary: ‘‘The

American Red Cross has an organization-wide policy protecting the confidentiality of those we serve. The American Red Cross President Dr. Bernadine

Healy, by declining to participate in the New York Attorney General’s database

of relief recipients, upheld this Red Cross Board of Governors Policy. The Red

Cross operated under the same policy after the tragedy of Oklahoma City: Recipients’ names were not released without a signed waiver providing permission

to release this information. As of November 2, 2001 this confidentiality policy

has not changed.’’ (copy attached)

• Blood preparedness has always been of high priority for us, and that was apparent from the very first attack on the World Trade Center. Even though the

blood demands that we might have expected did not materialize because so few

survived, we believe that preparedness for another attack requires a strategic

blood reserve of frozen O type blood. Such a reserve can only be created when

there are high levels of blood donation as we have seen in the aftermath of 9/

11. Since red blood cells outdate in 42 days, we accelerated our investment in

a scaled up freezing program to assure that we could begin freezing the ‘‘extra

O’s’’ immediately. In our judgement this is one of our finest investments towards national preparedness in the wake of 9/11.

• The Liberty fund is being used for telecommunications, phone banks, auditing and

other support functions but they must be related to the 9/11 purposes of the

fund and those purposes alone. The reason for creating a separate and clearly

identified fund under external auditor scrutiny was to assure that no unrelated

or unspecified disbursements be made.

39

After the attacks of September 11th we worked tirelessly to respond to these hideous attacks and their aftermath, and set about raising the blood, the money and

the volunteers necessary to respond. We laid out the work we needed to do and the

resources we needed to accomplish them in as precise a way as we could as the

emergencies were evolving. Our responsibility throughout has been to see that the

resources marshaled are being spent wisely and caringly. I believe they have been

and will continue to be used wisely and caringly. This is what the American Red

Cross Liberty Fund is all about.

Mr. GREENWOOD. Thank you very much, Dr. Healy. Appreciate

your testimony as well.

And the Chair recognizes himself for 5 minutes for purposes of

inquiry, and let me address my first question to you, Dr. Healy,

and let me ask the $564 million question, if I can. And that is this:

In the 8 weeks since the events of September 11, thousands and

thousands of Americans have reached into their pockets and their

checkbooks and written—given their money to the Red Cross. Can

you assure them today that every dime of those contributions will

go to heal the wounds that this country sustained on September

11?

Ms. HEALY. That is absolutely the commitment that I have made,

that we have made, and I know that that commitment will continue. One of the most important issues from the very beginning

is that these resources, not be put in an account in the general Red

Cross disaster account that covers floods and hurricanes and disaster requirements of our chapters, but that it be segregated, held

separately apart so that there would be no question about how well

it could be audited, there would be no question about how the

money was going to be used and there would be no question about

the fact that it would be used for the specific requirements outlined

and approved by our board, which were the events related to September 11 and to the aftermath, the healing of America, the preparation for future attacks. Already we have seen a—— Mr. GREENWOOD. And let us assume that, God willing, there are

no more future attacks, we have no way of knowing. The Red Cross

has no way of knowing. But at what point could you imagine the

Red Cross feeling sufficiently confident that the aftermath has

passed and that the—to the extent that there remains a surplus

collected in the name of September 11, that that would then be

plowed back to the existing families who you are now serving?

Ms. HEALY. We outlined, in just estimates, that the need response, the next 6 months, including our family gift program,

would be in the range of about $300 million. That is also the early

preparedness on blood. That roughly $200 million—and this is up

for discussion now. But the $200 million would cover sort of longer

term, maybe the next 18 months, dealing with preparing our Nation for weapons of mass destruction in our communities where we

have chapters, expanding the blood reserve, if we believe it should

be expanded beyond 100,000 units. Also looking at continuity of operations for the Red Cross, there are some of our facilities. If you

knock them out, we could cripple America’s medicine. And also to

make sure that all along the way our chapters are preparing and

ready to help people, including bringing in new kinds of volunteers,

a mercy battalion. We don’t have the volunteers today that can respond to shelters that need immunization, vaccination, hospice

care. We need a new kind of volunteer to prepare.

40

Now, to get specifically to your question, we have to make decisions, because the outpouring has been more than the Red Cross

expected. We were hoping for about $300 million. What we have to

determine is how much should stay in the Liberty Fund. Should it

be the $500 million, which sort of outlines a 2-year plan? Should

we have some reserves? If 5,000 people are harmed tomorrow, do

we go out and ask for another billion dollars from the American

public, or do we carefully steward the money that is here and make

sure that we do have some reserves so that we can, as equitably,

deal with the next attack if there are large numbers of people, as

we have the first?

We have extended our programs to the victims of anthrax, a

small number, but if the number is larger, do we have the reserves

to deal with this? These will be discussions. This is an evolving

issue. These will be discussions held with the board, with management, and in one press conference where I laid out all of these

range of services of the Red Cross, I was asked that question, Mr.

Greenwood, and I guess my answer hasn’t changed. And that is

after a period of time, maybe a year, 2 years—and it is not going

to be us that will determine that time. It will be what unfolds in

this country and in the world.

Perhaps after 2 years, if it appears that everything is at peace

and we don’t have these threats, if the Red Cross does no longer

have to respond almost in a war mode with a war fund, then in

its discretion, the Board of Governors will be able to take those dollars and reprogram them in some other way. What is most important is that if that reprogramming occurs, it be done in a public

way and that it be used in some way in the spirit of how that

money is collected. And as long as it is done publicly, I think we

will be okay.

Mr. GREENWOOD. Let me squeeze another question in here for

Mrs. Steiner and Mrs. McLaughlin, because I think it is related.

Could you just tell us what your long-range concerns are? Let us

assume that you receive from various organizations something on

the order of 30, 40, 50,000 dollars. That sounds like it might get

you through some portion, a year or so, at best. What are your

long-range views for your—you have a 10-month old child, Mrs.

McLaughlin. Mrs. Steiner, you have three children of college age.

What are your concerns for the long run?

Mrs. MCLAUGHLIN. The first concern of every spouse is going to

be how do you keep your home, can you keep your home? If I receive 30-, $40,000, unfortunately, I could not keep my home. I can

sell it. I can go to an apartment. My concerns really are for my

son’s future. My family and friends have—because of concerns

about the charities and because of a lot of information in the press,

especially recently, set up a private education trust for my son that

people are now donating to directly instead of to the charities. That

is the big one.

Mr. GREENWOOD. Mrs. Steiner.

Did you have something else you wanted to add, Mrs.

McLaughlin?

Mrs. MCLAUGHLIN. No. I just—about the 2-years-down-the-road

comment with the Red Cross reprogramming some of these funds,

41

does that mean that I will wait 2 years to hear from the Red Cross

again?

Ms. HEALY. I don’t think so.

Mr. GREENWOOD. Well, we are—unfortunately, we can’t do this

in an interrogatory way, but we will try and get your question answered for you. If you would just slide the microphone there to

Mrs. Steiner.

Mrs. STEINER. Similar concerns, the keeping of my home and the

education of my children to currently——

Mr. GREENWOOD. Is the microphone turned on there? Push the

button. It is on. Okay.

Mrs. STEINER. The same concerns, the keeping of the home and

the education of my children. And, again, it would be similar, the

$30,000 only goes so far.

Mr. GREENWOOD. Okay. Thank you, Mrs. Steiner.

Mr. SPITZER. Mr. Chairman, is it proper for me to make an observation with respect to an answer that Dr. Healy gave?

Mr. GREENWOOD. Certainly, with——

Mr. SPITZER. I am out of order on this. I suppose I am concerned

by what I hear, which is that I see the Red Cross, which has raised

hundreds of millions of dollars that was intended by the donating

public to be used for the victims of September 11. I see those funds

being sequestered into long-term plans for an organization not

being spent on victims.

I hear words like continuity of operations, reserves, reprogramming, and we have two victims here at this table who haven’t received the money they need. This is anathema to the—what the

American public expects. When people were writing their checks

for $100, $200 or $10,000, and sending them in in response to the

PSAs that the Red Cross was running, they believed victims were

going to get that money. I speak now as a New Yorker, and I also

speak for the victims in Pennsylvania, the victims in Virginia. They

are supposed to get this money. This is not for continuity, and it

is not for reprogramming. And this is an issue that demands our

attention.

Mr. GREENWOOD. My time has expired, but I will assure that you

have time to respond to that comment. The Chair recognizes the

gentleman from Florida, Mr. Deutsch.

Mr. DEUTSCH. Thank you, Mr. Chairman. Mrs. McLaughlin and

Mrs. Steiner, I assume at this point you are familiar with what

Congress did in terms of setting up a fund that the taxpayers of

America and all Americans will participate in. Have you thought

through—are you going to participate in that fund, or have you

thought what options you have personally in terms of the long-term

options you have? If you both can respond just about the fund. Are

you aware of it?

Mrs. MCLAUGHLIN. Are you referring to the airline bailout?

Mr. DEUTSCH. The Federal Government compensation fund that

we have actually set up as a no-fault fund for victims of the September 11 disaster. Are you familiar with it?

Mrs. MCLAUGHLIN. No.

Mr. DEUTSCH. Mrs. Steiner?

Mrs. STEINER. Me either.

42

Mr. DEUTSCH. I can tell you a little bit about it. The Congress,

in the aid package that we passed the week of September 11, set

up a system which no one has applied for yet, but a no fault compensation fund where the American people—and it might end up

being—the estimates will it will be about a $10 billion fund, where

a victim family can apply on a no-fault basis without proving any

fault of any party, get compensation effectively for the—what

would normally be through a wrongful death action, and the American people would supply that, and I guess I am disappointed that

neither one of you are aware of it. But that is the concept of a longterm solution. To Mr. Spitzer, I mean, obviously you are aware of

it. I mean, is there some, you know, effort to let people know that

the Federal Government has stepped up to the plate and said

that—as much again, the $1.2 million that was raised—this is directly for victims, would be the estimates are about $10 billion.

Mr. SPITZER. Congressman, you are absolutely correct. The largest fund will be the Federal claim fund that you create as part of

the airline bailout package. I think the reason it may not have received as much attention yet is that the Department of Justice, the

U.S. Department of Justice and Attorney General Ashcroft will

have to within, I think, the next 45 days or so, now issue regulations, appoint a special master, and I hate to sound bureaucratic,

but hopefully that process will be initiated within a 45-day timeframe, at which point every victim will, I presume, and of course

your data base of victims will be useful to contact them, will be told

of the availability of this application process, and there will be almost an unlimited reservoir of funds there for the benefit of victims. And I think you are right. There has not been sufficient attention focused on that very worthwhile fund that Congress created, and I applaud you for having done that.

Mr. DEUTSCH. And, again, I really truly am disappointed that

you are not aware of it, even with all the agencies talking to you,

that you have—that, again, what is the concept of it is that, you

know, obviously nothing that the Federal Government can do can

ever replace your loss. I mean, by any stretch of any imagination,

but I think collectively what Congress decided is that we all share

directly in this loss, and as the American people, in a sense, we

have said as the elected representatives of the American people,

that we want to do that. So effectively, we have already appropriated that for the long-term solution, and the idea is literally not

a year fix, not a 2-year fix, but really a fix that hopefully will put

you at at least a financial situation to try to make you whole.

That really is the concept of what the Federal Government is trying to do, and I know it is—I mean, hopefully this is—I mean, after

you are on the panel, I mean, either through the Attorney General,

through, you know, myself or your own Members of Congress,

hopefully someone can explain specifically how that would work.

Dr. Healy, I want to at least give you the opportunity to respond

to what Mr. Spitzer said, and I share with him a real concern, because I don’t believe anyone that wrote a check to the Red Cross,

as important as frozen blood is, you know, in terms of the September 11 fund, I don’t believe anyone who wrote a check expected

that it would be used for frozen blood. And, you know, as good as

what I describe the Federal Government, I think what is clear is

43

that effort has been pointed out, is first of all, not everyone is going

to choose to go that route for a variety of reasons, and there are

many people that are just going to fall through all sorts of cracks.

You know, how do you respond to him, particularly, and, again,

I can—unfortunately, we might be faced with other disasters of extravagant, and hopefully we won’t, but when they come, you know,

we are going to—you know, whatever we—you know, hurricane

just missed south Florida. That could have been another disaster.

It was a category 4. Andrew was a category 4. I mean, eventually

we know there will be other disasters, and when we go back to people and we ask them for support in those situations, how are you

going to respond based upon what you testified to?

Ms. HEALY. Well, first, with the other disaster fund, for example,

hurricanes, if we have money left over from one hurricane, like

Hurricane Floyd, we leave it in that fund and we will use it for the

next hurricane, and that is widely publicized. We say for this disaster and similar disasters. So in a way, this is a similar thing, except we are limiting it to this extraordinary situation, which is a

new kind of war.

With regard to whether—you know, I often think about World

War II. It was World War II, and the assistance to those who died

in World War II and the work that we did as American Red Cross,

was it limited only to Pearl Harbor, or did we have an obligation

to recognize that the event surrounding Pearl Harbor were part of

our organization as an American Red Cross. Remember, we are an

organization that is a social organization that has major responsibilities, internationally, with regard to blood services and blood

readiness. We have obligations with regard to disaster relief and

recovery on an ongoing basis, and in keeping with our general policies, if there were another disaster tomorrow and we have reserves

in the Liberty Fund, we would offer the very same services, the

same cash grant programs, the same mental and spiritual counseling, the same social services that we have offered in New Jersey—in Pennsylvania, in New York, and at the Pentagon. We

would offer that to this group. We might need to raise more money,

but we would have some reserves.

With regard to reprogramming, I think it is important to say

that we have listed, we have outlined the range of obligations the

Red Cross has to this Nation, the first of which is the first $200

million or more that is dedicated solely, solely to the victims. We

have outlined the range of services, which, by the way, also—

which—and they are there. They are articulated. They are clear,

but if we no longer needed it for those specific programs or there

was a need—for example, scholarship programs for children of the

victims, which is not a customary thing the Red Cross does, I

would—I believe that in the wisdom of the board of Governors,

they would see, if we were then at peace, that whatever money remains in there is put into programs that relate specifically to the

Liberty Fund.

We do not take money out of our disaster reserves for hurricanes

and spend them on something that is not related to those disasters.

We would not take money out of the Liberty Fund and spend it on

any of the other programs—any other program unless it is already

clearly articulated publicly in every way. I think the American Red

44

Cross has, from the beginning, gotten out in every way it could and

said, no, we are not the September 11 fund of the United Way,

which has said repeatedly only for the victims and their families

of these three attacks.

Actually, no, I think it is just New York City. We did a lot of

work at the Pentagon. I mean, we did a lot of work in Pennsylvania. You know, our enterprise, our organization, with its huge infrastructure, has obligations which go beyond what specifically

happened at the World Trade Center. That doesn’t mean that first

and foremost, we aren’t helping those people. In fact, I think the

American Red Cross was the first to get out, for example, with the

family grant program.

We have been working tirelessly at Ground Zero with the rescue

workers, as well as with the families, the compassion centers. So

we are there. We are on sight, and we are also providing the

grants. And I make one final comment, and that is, even our family

grant program is designed in a quintessential American Red Cross

way, namely, to do what we can do to get someone immediately

back on their feet with dignity and to do it in those first several

months before other agencies, other Federal agencies, life insurance, whatever, kicks in. After 3 or 4 months, other resources will

come available.

Where people are most vulnerable and where they should not be

allowed to be beggars, where they should not have to go hat in

hand to their next-door neighbor or go to their bank and say, you

know, well, we are going to dump you if you don’t pay your mortgage. We clearly develop that family grant program for that first

3 or 4 months, and in the list of things that we cover, by the way,

without any receipts. That was supposed to be just on the good

faith of the person who applied on this one-page sheet of paper.

What is your rent? What is your mortgage? We covered it for 3

months. And then we sent a letter. We said, if you need more beyond this first 3 months, ask us. It is a grant program. It is tax

free, and it is there without any strings attached, and it is there

with almost no documentation except what our auditors required,

which was Social Security numbers, addresses and, you know, very

simple demographic information.

We have been very excited by this. We have gotten fabulous, fabulous letters in response to the thousands of people we have helped

already. I still cannot excuse the fact that Mrs. Steiner had such

a difficult time, however.

Mr. GREENWOOD. Thank you. The time of the gentleman has expired. The Chair recognizes the chairman of the full committee, Mr.

Tauzin, to inquire.

Chairman TAUZIN. Thank you, Mr. Chairman. Mrs. McLaughlin,

Mrs. Steiner, let me first express to you the enormous sorrow that

we all feel for you and your families and the families of all the victims. I think we all became New Yorkers on September 11, and

Pennsylvanians and members of the Pentagon. I think that is why

Americans responded so enormously. We felt, as Americans, a

sense of—a belonging with you as you went through this. And I

think this is sort of central to the inquiry we make today. What

did Americans intend when they responded so generously to all of

45

these requests for donations and these special organizations that

were set up?

Finding the donor’s intent is not always easy, Mr. Spitzer, you

know that, but it is important in this inquiry. And so I want to

turn to you, Dr. Healy, for a brief set of questions.

First of all, did you resign your position with the American Red

Cross. Is that correct?

Ms. HEALY. That’s correct.

Chairman TAUZIN. What date did you resign?

Ms. HEALY. Last week, I think last Thursday.

Chairman TAUZIN. And you have been replaced by Mr. Decker,

is that correct.

Ms. HEALY. Uh-huh.

Chairman TAUZIN. At least temporarily.

Ms. HEALY. Yes, uh-huh.

Chairman TAUZIN. Now, part of the reasons you gave for resignation included, I understand, your decision to keep the Liberty Fund

money separate from the organization’s main relief fund, and that

was a difference of opinion you had with other members of the

board; is that correct?

Ms. HEALY. Well, initially, but they basically finally agreed with

it. There were a few people who had some issues out in the chapters, but that has been resolved.

Chairman TAUZIN. But part of the reason you resigned was that

you differed with the board on keeping this money separate for this

disaster?

Ms. HEALY. I believe that the money should be kept secret— kept—hardly secret, very public, but it has to be kept separate. It

is easier to audit. It is easier to have public disclosure.

Chairman TAUZIN. And you cited this as one of the reasons for

your resignation, a difference with the board on that point. Is that

correct?

Ms. HEALY. There was a board issue about whether or not the

creation of the separate fund would require a full vote of the board.

There was some differences of opinion about it. The chairman of

the board was completely supportive of the separate account. It

was resolved, and on the last board meeting, it was adopted fully

by the full board.

Chairman TAUZIN. The two announcements by the board, which

I know we are going to get to in a separate panel, which I want

to relate to and I want your thoughts on. The first is an announcement on October 31 that the Liberty Fund—let me read it. The

American Red Cross has raised enough money to help victims of

the terrorist attacks and will stop asking for donations, according

to Mr. Decker. The Liberty Fund held $547 million in pledges as

of Monday, and Mr. Decker, the chair’s temporary leader, said it

was known from the start that the fund was for a specific event,

the September 11 attacks, and would eventually be closed.

Do you agree with those statements, that the fund was for a specific event, would eventually be closed, and that, in fact, the Red

Cross had enough money in this account on October 31 that it

should stop raising money for that account?

Ms. HEALY. All I can comment on is that the board and management were in complete lockstep on the specific uses of this fund,

46

that the fund should be held separate, and with regard to when it

should be closed, you know, that is another decision. But I do want

to stress something, that in the first 24 to 48 hours of this horrible

attack on this country, the largest check that came in was for $3

million for the strategic blood reserve.

Chairman TAUZIN. But Dr. Healy, I don’t want to—I really want

to get to—I mean, I have limited time. The second announcement

I want to refer to is October 29 in which the American Red Cross

announced that only a portion of the funds, only a portion of the

funds of that $547 million, approximately $320 million, would in

fact be used for disaster related to the September 11 attack. That

part of the money would actually be used for other activities, including blood reserve; a telecommunications upgrade, et cetera.

Now, those two announcements seem to be in diametric opposition to one another. On the one hand, the Red Cross is announcing

that only three-fifths of this fund is going to be used for these families, as I think Americans generally intended when they saw a special fund created for September 11. Only three-fifths would be used

for that—for the families. The rest would be used for other purposes.

Ms. HEALY. Well—— Chairman TAUZIN. But wait. And then not 2 days later, the Red

Cross announces that the fund has all the money it needs for the— to help these families in this disaster and that it no longer will accept money into this account unless somebody specifically asks that

it be going into this account. Don’t you find—don’t you find that

awfully strange, that if only three-fifths of the money is going to

be used for these families and these families are telling us they are

not getting the help that was intended for them, that the Red

Cross would announce that it is got all the money that it needs for

this account and it will collect no more money for it, but by the

way, we are going to use part of it for other purposes. Isn’t that

rather strange?

Ms. HEALY. Well, what I can tell you is from the very beginning,

we put it on our Web site—in fact, I have included with my testimony the list of the priorities that are critical to Red Cross——

Chairman TAUZIN. I know that. I live in hurricane areas. I know

there are other priorities.

Ms. HEALY. No. No. These all had to do—— Chairman TAUZIN. I know all the other priorities. What I am

concerned about, and I think the representative of the New York

Attorney General’s office is equally concerned, is that if the American public responded so generously for funds created for this specific event, to have two-thirds of that money siphoned off for other

purposes around then to announce within 2 days that the fund basically is going to be closed and any other money that is going to

come in is going to go into general purposes now, because there is

enough raised for the families.

Ms. HEALY. I do not know about that final announcement, but

what must be stressed.

Chairman TAUZIN. Something is wrong.

Ms. HEALY. There is a judgment that is made about how America

must respond to the events of September 11. The American Red

Cross, from the very beginning, let that be known, in PSA anVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
47

nouncement. It was for the threats that we are facing, including

the uncertainty——

Chairman TAUZIN. Dr. Healy, if the Red Cross had announced

that it wanted Americans to donate for this and other terrorist

events and future events——

Ms. HEALY. That is what we have announced repeatedly.

Chairman TAUZIN. If the Red Cross announced that that is what

it wanted, I am sure the American Red Cross would respond. We

trust the Red Cross. We all do. We donate to it all the time. Our

Congressional families were lined up, members, their staffs, their

wives and their husbands, to donate blood and to help out, across

America. That is not at issue here. What is at issue here is that

a special fund was established for these families——

Ms. HEALY. No. It was established for——

Chairman TAUZIN. It was especially funded for this event, for

September 11, and it is being closed now because we are told

enough money has been raised in it, but we are also being told parenthetically, by the way, we are going to give two-thirds of it away

to other important Red Cross needs. And at the same time, we hear

from families here that their needs are not being addressed.

Now,——

Ms. HEALY. The American——

Chairman TAUZIN. There is a disconnect, Ms. Healy.

Ms. HEALY. But please let me try and clarify it.

Chairman TAUZIN. I know you are not with the Red Cross, and

we have got other Red Cross members who are going to testify a

little later on, and they are going to have to respond to these questions, but I wanted to raise them while you are here. Let me say,

to your benefit, thank you for insisting that the funds be kept separately. Thank you for resigning if you had a difference with the

board over that point. But I really wonder what the board is going

to tell us when they come up here on the next panel as to why

these decisions have been made to close this fund and at the same

time spend a large part of this fund on purposes other than the

September 11 event.

Ms. HEALY. But I have to—I do have to get this very clearly stated for the record, and that is, if you look even at some of the documents that I have attached to my testimony, the American Red

Cross immediately saw that for the American Red Cross to respond

to this new kind of war, for us to respond to the events of September 11 and the aftermath, whether it be anthrax, whether it be

a nuclear hit, whether it be a chem/bio attack, to respond to that,

we absolutely had to make sure that all of our lines of service were

active. We activated internationally. There were numerous international people who were involved in these attacks, and we had to

work with our international colleagues abroad. We absolutely have

to think about our military. We have major roles with the military.

Within days we were mobilizing troops. This is the aftermath of

September 11, and we said specifically and repeatedly, it is for the

events of September 11 and its aftermath, and related to terrorist

attacks on this country——

Chairman TAUZIN. But why would you close the fund——

Ms. HEALY. I didn’t make the——

48

Chairman TAUZIN. Right. Let me make the question, put it on

the record. If the fund was really about September 11 and all the

aftermath, which we don’t even know yet what the aftermath looks

like.

Ms. HEALY. Sadly, right.

Chairman TAUZIN. We know some of it. We know the anthrax attacks. We know the possibility every week we are being told that

these people want to try another event as big or bigger than September 11. Why on earth, if that is the fact, why would the fund

be closed?

Ms. HEALY. Well, first, it is a fact, and I think I have documentation that I can provide as much as you want. This is an investigative committee. We would be pleased to provide any information

that shows from the very beginning the specific things we outlined.

By the way, blood is essential. So is bone marrow, frozen bone marrow. This will be a crisis in this Nation if we are suddenly faced

with a terrorist attack that provides—that we have to provide

100,000 units of blood to. If we do not have that blood, we will shut

down American medicine overnight, people who need blood for cancer treatment, for anemias, for ruptured spleens on highways. We

cannot afford—— Chairman TAUZIN. My time has expired, Dr. Healy. I would just

ask this question, because I agree with you. If all of that is true,

why would you shut down the fund?

Thank you, Mr. Chairman.

Mr. GREENWOOD. The Chair thanks the gentleman. The gentleman’s time has expired. And the Chair recognizes the gentleman

from Michigan Mr. Stupak.

Mr. STUPAK. Thank you, Mr. Chairman.

Attorney General Spitzer, you outline a number of things that

New York does for charities, like they have to register and have to

have financial reports and things like that. Are there any time limits when they have to distribute funds to get them out there? What

I am hearing from the families today is they are waiting and waiting and waiting.

Mr. SPITZER. There is not a statutory deadline by which funds received must be distributed, but we have in our general supervisory

authority the capacity—if we see that funds are not being used for

an appropriate purpose, the capacity to step in and get appropriate

judicial relief. If an entity were merely letting funds sit in a bank

account without being distributed at all, we, of course, would take

appropriate action. There is not a requisite percentage each year

which must be allocated.

Mr. STUPAK. Is there entitlement before your State would take

action?

Mr. SPITZER. There is not a defined moment in which there is a

trigger, but we are obviously—we have, to give you an order of

magnitude, 40,000 separate charitable entities that register with

us, and so we maintain a level of scrutiny that is appropriate.

Mr. STUPAK. You indicated that since September 11, you have

been urging them to a single application. What kind of response

have you received from that idea?

Mr. SPITZER. There is interest, but it has not yet happened. And

I think it would be—as we have heard today from these victims,

49

it would certainly alleviate much of the extraneous paperwork.

There are legitimate reasons articulated by charities, different

needs, different inquiries that make it not as simple a task as one

might presume. Having said that, the concept is right. Many colleges have a common application form. There are many organizations in the world that have managed to develop a common simple

process by which people can apply, make their information available, and it’s something in this day and age that we can and should

do.

Mr. STUPAK. Dr. Healy, if I may—and I hate to keep going over

the same old area, but the reserve fund, when you testified that

some would be held in reserve, and it may be 2 years, I think everybody, at least on this side of the aisle, wrote that down and

said—I mentioned my constituents drove 19 hours to make sure

they got their checks to the American Red Cross. They expected

that check to be used now, not 2 years from now. How do you answer those people that gave to Liberty Fund and thinking now or

hearing now for the first time like we have that is being held in

reserve and may be used for other purposes.

Ms. HEALY. Well, first I think that when a charity goes out and

in this case an organization like the Red Cross, which is a huge

service organization, goes out and asks the public for funds, the

most important thing in the world to do is to try and communicate

what you’re asking funds for. In our case, we needed help in three

areas, and we shouldn’t ignore the other two. We went out right

away and said, we need blood.

Mr. STUPAK. Which you got, and now you have too much.

Ms. HEALY. We didn’t have too much. We made a decision to

drive our inventories up to wartime level.

Mr. STUPAK. Let’s keep going.

Ms. HEALY. Blood, volunteers and money to do our services. We

laid out our services, which were for the victims—— Mr. STUPAK. For the victims.

Ms. HEALY. We did not say that. What we said is for the events

of September 11 and their aftermath. We have worked for over a

year and a half on a weapons of mass destruction program, but we

have to prepare for that.

Mr. STUPAK. Dr. Healy, you didn’t get money from people in case

something in the future may happen.

Ms. HEALY. Yes, we did, for preparedness. We got money.

Mr. STUPAK. Did you solicit—when my constituents came here—

and I am sure it is like everybody else here—we didn’t come with

the idea and give you checks and say, oh, this is for the future in

case there is anthrax. We came on the heels of September 11 to

make sure the money got to the people where it was needed, not

for something that may happen like anthrax. Or you mentioned a

nuclear weapon and mentioned all kinds of things in your testimony. That is not what the people opened their hearts and their

wallets for. It’s for the families, and they opened it for now. If you

want something for in the future, now that things have settled

down—if you thought, we’ll do it on the heels of September 11 and

open up the gates and put up for everything we ever needed, then

I think you took advantage of a very tragic situation. That is the

way we see it up here—at least I see it.

50

Ms. HEALY. But we communicated from the beginning. I remember hearing the reports on the September 11 Fund in New York

that said only to the victims and their families, and that is not

what we ever communicated. Now maybe there was a lot of noise

out there that implied to the contrary, but we communicated in virtually every way we possibly could. I think I probably spoke numerous times on TV, on radio, saying that these are the lines of

service that have been activated. We must raise money for them.

Mr. STUPAK. Even in your testimony today, you said that the

American Red Cross is there to provide that bridge for 3 to 4

months before life insurance and everything else.

Ms. HEALY. And we did that.

Mr. STUPAK. Right. You did that. But then why isn’t all the

money there for the people who really need it in the first 3 to 4

months?

Ms. HEALY. You certainly could argue that the entire billion dol- lars was only for 5,000 victims, and everyone should get $200,000,

and it adds up. When the Red Cross went out to solicit contributions, we did it very specifically for these events and their aftermath. We specifically repeatedly communicated that this was also

about preparing for terrorism.

Mr. GREENWOOD. The time of the gentleman has expired.

Ms. HEALY. We have to continue to get that message out. I can

tell you that anybody who said this—— Mr. STUPAK. I don’t disagree that when you went out and solicited money—when the Red Cross actually went out and made a

personal appeal—and you said you got one check for $3 million,

that was probably a personal appeal—if you really did personal appeal, I agree you probably said, we need it for this, this, this and

whatever else comes in the future. But the people who drove like

from my district 19 hours and all the people who sent in the $5,

the $500, the 50 bucks, whatever they could afford, it wasn’t for all

these things in the future, but for these families, and that’s where

it should be, all of it; not reserve, not future, all of it.

Ms. HEALY. But actually the math adds up pretty well back at

the envelope, because basically we have solicitations of major corporate donors where we talked about the range of services always.

We have several discretionary grants for over—one for $15 million.

We also on our Website listed the whole range—and I think we

have gotten $60 or $70 million on the Website where when it pops

up, you see what we are spending those donations on. We also send

these directives out to all of our chapters across the country. They

knew exactly what we were raising money for, and they are outlined in the attachment to the testimony, which includes first and

foremost the victims.

Mr. STUPAK. The chairman has told me my time has expired. I

would just say that even on our Website, we listed the Liberty

Fund so people could donate, and it was for the victims. We didn’t

intend for all the rest of these, so if Members of Congress got it

wrong—— Ms. HEALY. But a lot went to the victims.

Mr. GREENWOOD. The time of the gentleman has expired.

The Chair recognizes the gentleman from New Hampshire Mr.

Bass for 5 minutes to inquire.

51

Mr. BASS. Thank you very much, Mr. Chairman.

Dr. Healy, you are tenacious in your spin, but the reality of it

is, and you get the message clearly from this committee, is that the

Red Cross raised a huge amount of money as a result of the events

of September 11. And I read between the lines it was really not

$500 million, it is close to a billion actually. But you used, just a

second ago you said, a total of a billion dollars. I don’t know what

that refers to, but in this Liberty Fund alone, you raised over $500

million. We have the discrepancies in statements made by Red

Cross officials over time.

The answer to Mrs. McLaughlin’s question is that she is going

to wait 2 years. The board of directors is going to reprogram the

money that is going to go to something else. It may go, it may not.

But the fact is, sad to say, that according to your own testimony,

about $200 million of the $500 million is going to go to the victims

and the victims’ issues, and the rest of it is going to go somewhere

else. And I don’t care what it says on the back of an envelope or

in a PSA and so forth. You know that if you asked Americans

where they thought the money was going when it was going to the

Liberty Fund, they thought it was going to the victims of the disaster.

The implication that we are never going to be able to raise another dime in the future for any other disaster, military or otherwise, and this is all the Red Cross is ever going to see, and the

Americans’ charity is now at an end I think is really just plain

spin. I respect what you did by resigning last week, but the fact

is this is a good example of this and perhaps other organizations

are trying to work their way out of a very embarrassing situation.

And I dearly hope that the board of the Red Cross will reconsider

its decision to divert at least the intent—and I think it was a very

specific intent—of Americans to support the victims, people like

Mrs. McLaughlin and Mrs. Steiner who are facing day-to-day tragedies in their own lives, to use the money for things other than telecommunications and frozen blood.

You have an item today on your Website that says you are going

to use $1.7 million of the Liberty Fund for telecommunications upgrade, and I would ask Mrs. McLaughlin—I’m not going to ask you

to answer this—whether or not you think that is critical to your

lives or any other people who are involved in this thing.

It is frustrating, Dr. Healy. And we are going to get more specific

information from witnesses who follow you, but I think that the

Red Cross and other charities are going to have over the coming

months a lot of explaining to do because we have raised unprecedented amounts of money in this country to help the victims, and

it is incumbent on us, our subcommittee, as oversighter of this to

make sure this money goes to those people. I am sorry that it is

hard to understand the technicalities of your argument, but the reality of it is if you give it the elephant foot test, Americans thought

they were helping people like Mrs. Steiner and Mrs. McLaughlin,

and only a small amount of those funds have gone for that purpose.

And I yield back to you, Mr. Chairman.

Mr. GREENWOOD. The Chair recognizes the gentlelady from Colorado for 5 minutes to inquire.

Ms. DEGETTE. Thank you, Mr. Chairman.

52

First of all, I would like to say to Mrs. McLaughlin and Mrs.

Steiner, I also will never be able to fully know what you are going

through, but I want to emphasize that as an American and also as

a mother, and I want to say on behalf of everybody up here and

every single Member of Congress, that as representatives of your

government, I want to apologize that many of you have been reduced to going around acting like beggars in the last few months

instead of having to spend that time with your family, and if there

is anything we can do to work with both private charitable agencies and government, we will do that.

And I have a lot of questions, and the Chair tries to limit me in

particular to 5 minutes, so I will—if we have some time at the end,

sir, I will be happy to let you answer. But I did want to let the

two of you know we all feel that way.

And I want to ask you, Mr. Spitzer, you talked about coordinating between these various charitable agencies, and you’re right.

It is not an appropriate government function so often. But I’m wondering if that our experience after the Oklahoma City tragedy has

taught us how we could expedite this coordination. You said there

was some coordination, and how far are we along toward being able

to do that?

Mr. SPITZER. The first answer is yes, we learned a great deal in

Oklahoma City, and we have used that model for—to learn those

lessons and have tried to apply it in New York City, Pennsylvania

and Virginia as well. We are not far enough along. We have, as I

said in my opening statement, encountered some early resistance

from the charities. I think we have overcome that, and we are continuing to do everything we can do. The charities most recently

have been very cooperative and sitting down together as recently

as yesterday to work on the details, but we cannot move quickly

enough.

Ms. DEGETTE. Do you have some sense of how quickly this will

be done so these humiliations aren’t visited upon the victims?

Mr. SPITZER. I would certainly hope, given the involvement of

IBM, KPMG, I would say 2 to 3 weeks we would hope to have a

template that is up and running. Again, it is contingent, though,

on getting the data and the cooperation of the charities, and we expect it. They are there, and they understand.

Ms. DEGETTE. Thanks.

In a glancing nod to the title of this hearing, protecting against

fraud, waste and abuse, have we seen very many examples, if any,

of fraud, waste and abuse in all of these charities?

Mr. SPITZER. The answer is we have seen some, but very few.

The affirmative story of the generosity of the American spirit so far

outweighs the few instances of fraud, although we are prosecuting

them vigorously. There are few so far.

Ms. DEGETTE. Dr. Healy, I also appreciate you coming today, and

I want to ask you a couple of questions following up on some of the

others that were asked. You testified that you were able to give

Mrs. McLaughlin close to $30,000, and just this morning, you were

able to give Mrs. Steiner a fairly substantial amount, at least to

get her through. Can you please tell me the numerical number of

families who you have given over $25,000 to as of this date?

53

Ms. HEALY. I do not have that specific number. We can provide

it for you.

Ms. DEGETTE. Do you have any ballpark estimate?

Ms. HEALY. I think the average number of the grants is in the

range of slightly under $20,000.

Ms. DEGETTE. How many of those have you given to date?

Ms. HEALY. The overall number is in excess of 2,500. And by the

way, we expected 5,000 people to come forward, and we have—even

had full-page ads saying, please come forward. Have your neighbor

help you fill out the form.

Ms. DEGETTE. It is your testimony today that what happened to

Mrs. Steiner would be an anomaly?

Ms. HEALY. I certainly hope so. We have had problems with the

disaster operations center. We are upgrading it.

Ms. DEGETTE. Mr. Chairman, if I could ask unanimous consent

to have Dr. Healy supplement her testimony to give us the exact—

obviously, because of confidentiality, I don’t want to know the

names of the folks—but the exact numerical amounts of money and

who they’ve gone to?

Ms. HEALY. Pleased to do that.

Ms. DEGETTE. What timeframe could you do that?

Ms. HEALY. We could probably do that within 24 hours.

Ms. DEGETTE. Mr. Chairman, if I could ask unanimous consent

to have that supplemented.

Mr. GREENWOOD. Unanimous consent is not required. The lady

of Colorado has made a request. Dr. Healy has agreed to supplement that.

Ms. DEGETTE. I would like to follow up on one last thing. Of the

funds in the set-aside fund that you talked about, how many of

them—what is the amount that was solicited by the Red Cross, and

what is the amount that was unsolicited by the Red Cross?

Ms. HEALY. I think that the American Red Cross goes out on a

general appeal. We have PSAs——

Ms. DEGETTE. I don’t need that kind of answer. Do you have a

numerical number? Of the $1.2 billion raised since September 11,

some of it is in this Liberty Fund, right?

Ms. HEALY. No. The American Red Cross has raised with pledges

about $550 million.

Ms. DEGETTE. How much of it is in this fund?

Ms. HEALY. All of it.

Ms. DEGETTE. You raised $550 million for that fund. And how

much, as best as you can ascertain, were solicited and how much

of it was sent in by people like Congressman Stupak’s constituents

and mine and everybody else?

Ms. HEALY. You mean a spontaneous donation? I think we can

get you that number based on the size of the contribution. I would

say probably at least $100 million are from larger donors. About

$70 or $80 million in that range came in from the Internet.

Ms. DEGETTE. Do you use the size of donation to determine

whether it was solicited or unsolicited?

Ms. HEALY. No. No. All of it is solicited——

Ms. DEGETTE. Oh, so your view is all of the money that came to

the Red Cross was solicited, and therefore——

54

Ms. HEALY. Maybe the way to say this is that when an event occurs, when a major disaster occurs—do you know that during

World War II, we had billions of dollars coming in. The public

knows the Red Cross. They know we are there for blood.

Ms. DEGETTE. You’ve given this answer. We’re pretty clear on

that. But what I am saying is that what you are hearing from the

Members of Congress here—in fact, USA Today quoted a Red Cross

volunteer from Ohio who said, my mother and my little sister donated money, and it was intended to go to the New York disaster

relief fund. And people I know, they thought that that money was

going to Mrs. McLaughlin and Mrs. Steiner and people who worked

in Windows on the World as busboys and everybody else. They

didn’t think it was going to the telephone system. My question

is——

Ms. HEALY. You must allow me to clarify the telephone systems.

Only ones that relate to reaching our victims. We had to have 1-

800 lines to get out and call people.

Ms. DEGETTE. I am not arguing that you need to upgrade your

telephone systems.

Ms. HEALY. Please don’t say that. We are not upgrading our telephone systems.

Ms. DEGETTE. If you will just allow me. If you can answer my

question, it would be helpful. How much of the money—and maybe

you will have to supplement your answer—is from unsolicited donations, and how much is from solicited donations? How much was

just from school kids who sent in their money to help the families?

And how much of it was it from people who said the Red Cross has

a variety of needs, telephone service to get out to victims, blood

marrow, blood, all these things that are important and we don’t

disagree with? Do you know that?

Ms. HEALY. I don’t know if we can get you that information.

Ms. DEGETTE. Thank you. That’s all I need.

Mr. GREENWOOD. Thank the gentlelady from Colorado and recognize for 5 minutes the gentleman from Kentucky Mr. Whitfield.

Mr. WHITFIELD. Thank you, Mr. Chairman.

Ms. Healy, I will go over this once more, but there is a total in the Liberty Fund that was contributed to the Liberty Fund of $550

million; is that correct?

Ms. HEALY. That is in the range of pledges. I think the actual

cash is around—well, a lot of it has been expended. I think $150

million has been expended in that range. So that has already gone

out the door, with $50 million of that going directly to the family

grant program and fairly expensive activities at the Ground Zero

operations. Remember, we are in Pennsylvania. We are at the Pentagon. We are helping in a broader range of services. I’m a New

Yorker. It wasn’t just New York.

Mr. WHITFIELD. But $50 million went to family grants, and $100

million went directly to sites to help in various ways.

Ms. HEALY. It may be less than that, but I can get you the specific numbers. But it’s in that general range.

Mr. WHITFIELD. And how was it determined the size of the family

grant?

Ms. HEALY. What we did is—and I must say it was done at a

very difficult time. It was actually Cantor Fitzgerald who came in

55

to see us and said, we are desperate and have people who have lost

their breadwinner. Eighty percent of the people who died in this

event were men in their late 30’s who had wives who weren’t working, had young families. A large number of them lost their breadwinner. They had a cash-flow shortfall.

We have never really done what we did with this family grant

program. Normally in a hurricane or another typical natural disaster, people’s homes get destroyed, but their economic well-being

is intact, their breadwinners. Here their homes are fine, but they

lost their breadwinner, and we determined immediately how can

these people grieve and mourn if they are worried about paying

their rent, paying their mortgage, paying college tuitions.

We actually started at the top of the World Trade Center and

worked down in a very proactive way to contact these companies

and say, help us get in touch with people who have lost—who are

facing these cash-flow problems, who have this need. We filled out

a very simple form that said, No. 1, how many people are in your

family; No. 2, what is your rent or mortgage; No. 3, what are your

funeral expenses. We paid up to $10,000 if they weren’t otherwise

covered. And No. 4, what other cash-flow needs do you have now?

And those have been in the category of credit card payments and

tuition, in some cases medical bills. We added all that up. We did

not ask for receipts. We wanted to turn it around in 1 to 2 days,

and we looked at that number and we wrote them a check. We

capped it at $30—only because we didn’t know if we could possibly raise enough money to meet that. At this point, we have $50 million cash on hand.

It was actually kind of a big commitment that we made because

we knew we would probably—if we did it for one person, we would do it for everybody, that it would possibly be $100 million. So we

bit the bullet, we went ahead and made a commitment to the program and made a commitment to everyone. We aggressively went

out, as I said, spoke to the employees. When there weren’t employers that we could work with, we then went and opened the compassion center. People had the forms. We would do it over the telephone. We had full-page ads asking people to help other people, a

neighbor, whomever, to come in if they lost someone. There were

a lot of people who weren’t even associated with companies.

Mr. WHITFIELD. The $550 million pledge, generally what percent

of the pledge amount do you receive?

Ms. HEALY. Of roughly 500? Roughly 500 has been received.

About $60 million or $50 million is still pledged. And most of that

money, by the way, comes in as a general contribution to this disaster. It does not come in to say for the victims. Whenever it says

for the victims, it goes right into the for the victims fund, which

is very big, $200 million.

Mr. WHITFIELD. This is for Mrs. Steiner and Mrs. McLaughlin.

If you—from your personal experiences, if you were meeting with

the board of, say, the Red Cross or the United Way or the Salvation Army or any of these charitable groups, what recommendation

would you make to them that would make it easier for you?

Mrs. STEINER. Perhaps I would say if people donated specifically

for the event, and I know the magnitude of disbursing the funds

is great, perhaps a down payment toward their livelihood or to subVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
56

stitute their financial obligations that their husbands can no longer

provide would be a good start. And then as they work out the details, they could get back to the victims with additional money.

Mr. WHITFIELD. Do you feel that the 27,000 is an adequate

amount or—— Mrs. STEINER. That is something I just received this afternoon,

so I haven’t really considered it into—— Mr. WHITFIELD. In your perspective, it was not timely. You went

through a lot. Just the time that it took for you to receive that

money was a real problem.

Mrs. STEINER. Yes.

Mrs. MCLAUGHLIN. My experience was a little different. And like

Dr. Healy said, I did indeed receive a large check from the Red

Cross very, very quickly. And it was a very easy process; probably

the easiest of all the charities, in fact the easiest of all the charities. However, I call back every 3 days to see if they’ve lifted the

cap. I understand the purpose of the cap initially for fund-raising

concerns, but it is has been almost 2 months. The money has been

raised, but the cap has not been lifted.

Mr. WHITFIELD. Which cap are you referring to?

Mrs. MCLAUGHLIN. The cap of $30,000 for this family grant pro- gram that the Red Cross pretty generally capped at $30,000. So

while the letter that arrived with the check stated that we could

come back if we needed more, that hasn’t been my experience.

Mr. BALDI. Can I say—add something for Mrs. Steiner? When I

got involved in this, and when she contacted me, I want you to

know the first thing she said to me was she was concerned about

her expenses. And I frankly was overwhelmed because I thought

there would be no problem for her expenses, because my perception, as was everybody else in my office, as I think many people,

is that all these victims are taken care of. So it wasn’t until I uncovered the information that I showed you earlier in terms of how

little or relatively little she had received up until this afternoon, I

was stunned to see what wasn’t out there when I heard constantly

the money that was being raised, the hundreds of thousand dollars.

So I would add something to the board, which is as follows: I

think there is a public perception that everyone is taken care of.

Under the wisdom of the organizations, those people are not taken

care of in a larger scope—and I am not saying if it’s right or wrong,

because other people can make that decision—then I think that the

world ought to be—they ought to know that your friends and

neighbors who you think have now been covered by all of this

money aren’t.

And I think that there is a cruel injustice that is going on. In

Mrs. Steiner’s situation, she got creditors to delay payments, but

there is going to be a time when she’s going to have to make payments to them, and they are going to be substantial.

Mr. WHITFIELD. Your point is that out of a $550 million pledge,

that Mrs. Steiner, as an example, between September 11 and

today, prior to today, had received about maybe $1,600.

Mr. BALDI. Right. But in addition, you haven’t considered the

United Way. You can keep talking about the Red Cross. The

United Way funds, as far as I know, are in the same category. And

I don’t know what’s happened at the United Way fund. And these

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people also have no sense of what to expect. I mean, the other

problem they have, if someone could sit down with them and say,

look, just so you can make your planning, I know you’re hearing that we have collected $500,000, but you should understand you

are only going to get about $20,000, or you are going to probably

get X amount, something so they can make plans. So these two

people can say to their family, look, this is what we can expect to

see over the next 6 months, over the next year.

That’s what they need is information. So I would suggest that is

what needs to come out to them. Thank you.

Mr. WHITFIELD. Thank you.

Mr. GREENWOOD. The time of the gentleman from Kentucky has

expired, and the gentleman from Massachusetts Mr. Markey is recognized for 5 minutes to inquire.

Mr. MARKEY. Thank you, Mr. Chairman, very much.

Dr. Healy, first of all, I would like to say that if reports are true

that because of your advocacy that the Israelis should have been

able to use the Star of David as part of their Red Cross symbol as

opposed to the cross or the Crescent and any way any of your board

members were angered by your efforts to accomplish that goal so

that Israel could use the Star of David, then those people should

be ashamed of themselves. And if in any way they used this incident as a way of punishing you from trying to protect Israel in its

ability to maintain its own identity, then it is truly a disgraceful

event in the history of the Red Cross, because I believe that you

and Mr. Spitzer should have been able to find some way of reconciling, along with everyone else here, the differences, rather than

having your board escalate this to a point where you are not going

to be there.

And I think that that is something that is going to be a great

loss to the country, because you are a great Public Health Service

doctor, which is what we need in this position at this time, a Public

Health Service doctor, because obviously, you were interested in

trying to extend the parameter of protections. I think that the

other people here led by the attorney general of New York, who is

a personal friend of mine, were trying to protect other legitimate

interests as well—very legitimate interests, and I think it is a sad

day when we reach a point like this where we are having a hearing

on a subject like this, because I think that everyone at the table

is as well-intentioned and sincere as Americans can be in a time

of war. There are different perspectives people are taking as to how

we should respond to that war in this particular area, and I think

that is very honorable, but I think that it really is—and again, I

go back to this first point, because reports are quite extensive

about the extent to which many of your board members opposed

your efforts to ensure that Israel have that ability to use the Star

of David.

And so I guess, Mr. Chairman, the only thing I wanted to say—

and I come here with your permission because I am not a member

of this subcommittee—that I respect Dr. Healy and Attorney General Spitzer, both in ways that reflect the seriousness of the subject

that is being discussed. And I think that a little more time should

have been given, to be honest with you, by the Red Cross board so

that efforts could have been attempted, which would have preVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
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cluded the necessity of us having this hearing. And that is ultimately what I think the attorney general was trying to accomplish.

And I think ultimately Dr. Healy would have been in that position

as well.

And so that’s all I really wanted to say. So I thank all of you for

everything that all of you are doing with millions of people in trying to deal with this state of war that we’re in, and hopefully all

other institutions can learn from what happened here so that we

try to resolve conflicts in a peaceful way.

Ms. HEALY. Mr. Markey, could I make a comment? I couldn’t

agree with you more when you say this is a war. What happened

on September 11 was the first attack in this war—the first battle

of this war. We have not won this war, and we are facing some

public health crises because every American is now vulnerable.

They are vulnerable emotionally, and they are vulnerable physically. They are vulnerable—if there is an attack tomorrow, we

must be prepared.

The American Red Cross has played a vital role in preparedness

as well as a response to disaster. It has played a vital role in the

first battle of the war and in the last battle of a war. And the

American Red Cross has a role which is separate and distinct from

United Way or some of the other charities. Our role is to operate

on our multiple lines of service to help the victims of today and yesterday, but to prepare for those Americans out there across this

country who are facing vulnerabilities because we are indeed at

war.

To that extent, the Liberty Fund is a war fund. It has evolved

into a war fund. We must have blood readiness. We must have the

ability to help our troops if we go into a ground war. We must have

the ability to be there for the victims of tomorrow, not just the victims of yesterday.

Mr. MARKEY. Let me ask you, Doctor, do you believe that given

more time that you would have reconciled the differences with the

other parties at the table today?

Ms. HEALY. Oh, absolutely, because we all have the same humanitarian purpose, Mr. Markey. With regard to Mr. Spitzer, we

were just trying to resolve the issue of getting waivers. You can’t

break confidentiality. It’s like a patient and a doctor. If the victim

will grant a waiver of confidentiality to the Red Cross, we will

share those names in a data base. They have to say we can. That

is a standing policy. We are evolving to a resolution there, and I

am very happy about that.

With regard to the issue of whether or not blood is part of our

response to this horrible, horrible war we are in and frozen blood,

which is a unique approach to dealing with the terrible blood shortages that we have faced and that we would face in a WMD attack,

we would face a shortage. There would be Americans out there who

could not get blood if we don’t respond now.

Mr. MARKEY. I would like to ask my friend, the attorney general,

whether or not he believes that if the Red Cross board had given

Dr. Healy more time, that a reconciliation of positions would have

been or could have been reached.

Mr. SPITZER. Let me challenge the premise of the question is that

there was a reconciliation between us individually that was needed.

59

I think Dr. Healy and I always got along very well. I think I would

say that there was policy dispute, and I have said this publicly before, and I don’t mind saying it again.

I traveled down to the Red Cross offices and had a meeting with

the then general counsel of the Red Cross and Dr. Healy to try to

prevail upon them to adopt the notion of a data base, which at first

Dr. Healy rejected with some rather vehement statements and

said, we will not do this. I thought at the end of that meeting that

we had an understanding that the Red Cross would proceed with

something that I thought was vital and continues to be vital for the

fair, equitable and rapid distribution of the proceeds. Subsequent

thereto, Dr. Healy again made comments outright rejecting her

willingness to participate in this.

So this is not between Dr. Healy and me individually. I think

that there was a disagreement which Dr. Healy—Dr. Healy felt

deeply, and I respect her view. I disagree with her about the viability of the Red Cross’s participation, but there is now an agreement

between the Red Cross and my office and the other charities, and

we are going forward.

So I think that whether it was an individual disagreement or not

is irrelevant to the victims sitting here who need funds. What we

need to do is get together and get this data base going, and we are

doing it with the Red Cross. And so we are doing that, and I look

forward to working with them.

Mr. GREENWOOD. The time of the gentleman has expired.

Bit of housekeeping before we dismiss and thank this first panel.

Dr. Healy, could you provide some additional information to the

committee; to wit, we would like copies of transcripts from radio

and television and newspaper advertising, copies of that that your

Red Cross used to solicit funds; any press releases that you used

for the express purpose of soliciting funds; and the application

forms that you used for the victims. And also, if you could provide

us a breakdown from the Red Cross Website. There are a number

of categories, immediate disaster relief, family gift program, international family assistance, immediate blood readiness and strategic

blood reserve, Armed Forces service, community outreach, direct

support costs. If you could give us an additional breakdown or description of what is meant by each of those subcategories, that

would be helpful to us in our deliberations as well.

[The material is retained in subcommittee files.]

Mr. GREENWOOD. Without objection, the statement of the gentleman from Florida Mr. Bilirakis will be included in the record.

Let me thank the panel for your patience and for your testimony

and your help today, particularly again to Mrs. Steiner and Mrs.

McLaughlin for the courage that you have shown to be with us. I

hope that you have confidence that your time with us will help the

other 5,000 families that have suffered as you have.

And thank you, Mr. Baldi, for joining Mrs. Steiner.

Attorney General Spitzer, thank you for your leadership in this

regard and for being with us.

And Dr. Healy, thank you for fielding all of the hardest questions

today and for being buffeted by members of the committee. I hope

that we are not guilty of the admonition against making sure that

no good deed goes unpunished. And indeed the Red Cross has

60

served this country mightily for decades, one of our finest American

institutions, and let us chalk up whatever differences there may be

within and without the Red Cross to the extraordinary nature of

these circumstances and go forward together still respecting to the

highest degree the work of the American Red Cross.

Thank you to the panel. You are excused.

And we will now call the second panel to come forward. And

allow me to introduce the second panel. Mr. Bob Bender, the Executive Director of the American Red Cross in Greater New York;

Mr. Michael Farley, the Vice President, Chapter Fund-Raising, of

the American Red Cross; Mr. Chris Amundsen, President and CEO

interim of the United Way of America; Mrs. Joyce Bove, Vice President for Grants and Special Projects, September 11 Fund New

York; and Mr. Vincent Bollon, Secretary-Treasurer of the International Association of Fire Fighters.

If you, lady and gentlemen, would take your seats at the witness

table, we will proceed. I thank you for your presence and the testimony you are about to give. Each of you, I am sure, are aware and

made aware that this is an investigative hearing, and it is the

practice of this subcommittee to receive testimony from witnesses

under oath. Do any of you object to testifying under oath?

Seeing no such objection, pursuant to the rules of the House and

pursuant to the rules of this committee, you are entitled as a witness before this subcommittee to be represented by an attorney. Do

any of you wish to be represented by an attorney?

Seeing no affirmative answers, I would ask you to rise and raise

your right hand so I may swear you in.

[Witnesses sworn.]

Mr. GREENWOOD. You are now under oath, and we will begin

with Mr. Bender. Thank you, sir, for being with us, and we look

forward to your testimony, and you are recognized for 5 minutes

for that purpose.

TESTIMONY OF ROBERT BENDER, JR., EXECUTIVE DIRECTOR,

AMERICAN RED CROSS IN GREATER NEW YORK; MICHAEL

FARLEY, VICE PRESIDENT, CHAPTER FUNDRAISING, AMERICAN RED CROSS; CHRIS AMUNDSEN, PRESIDENT AND CEO,

INTERIM, UNITED WAY OF AMERICA; JOYCE M. BOVE, VICE

PRESIDENT FOR GRANTS AND SPECIAL PROJECTS, SEPTEMBER 11 FUND NEW YORK COMMUNITY TRUST; AND VINCENT J. BOLLON, GENERAL SECRETARY-TREASURER,

INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS

Mr. BENDER. Thank you very much. Just to talk a little about

what the Red Cross is doing at this point in time, we have registered and have cases on 25,000 families. That means that we

have talked to 25,000 families. We provided assistance in most

cases when assistance was needed. We spent in the neighborhood

of $120 million in direct assistance to families in 8 weeks. We have

reached out to families in a variety of different ways, including trying to contact them if we can get names; trying to go to buildings.

I should explain that there are three types of basic assistance

that the Red Cross is providing: one to families that have either

experienced loss or serious injury; a second to the residents, the

people who are affected in the immediate area of the World Trade

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Centers because they resided there; and a third group were some

folks who were economically impacted in the immediate World

Trade Center area because of employment disruptions. And we

have tried to be helpful in all three cases.

The family grant program, which was explained earlier by Dr.

Healy, was for the families who experienced loss or serious injury.

That program was originally a stated need program, and it was for

3 months in a variety of categories. I should say that the program

has been announced to be extended, and it is going to go on for any

number of months, certainly the first year and maybe much longer

than that as needs develop in the family. And in each of these

cases, we really work with the family. We begin providing immediate assistance, and most of that is done on a stated-need basis.

And then beyond that, we begin to work with families, talk with

families, trying to identify with them their needs, and will, in fact,

attempt to either provide those needs or try to link them up with

other organizations that are, in fact, performing services that we

are not.

We have also had over 120,000 mental health contacts with people. The contact is not a casual contact. It is at least a 15-minute

interview with people, our conversation with people with a describable outcome. These are people who are both the rescuers, the families. We have worked with the rescuers and established centers for

them so they can find comfort and can find peace during a very

turbulent time and a very traumatized time for them.

So there’s a variety of things that we are doing for the rescuers

and families out of this horrible tragedy in New York and in the

other parts of the terrorist act, and we are doing those, and it’s

real, and we were there. We were there within 20 minutes after the

first plane hit. We had staff and volunteers at the World Trade

Center. We had staff and volunteers run away from the World

Trade Center when the collapses began. We lost some equipment,

damaged some equipment as those buildings collapsed. The Red

Cross has been there right from the very first. We will continue to

be there. Our commitment is to be there as long as we need to.

We’re still working with families in Oklahoma City. We expect we

will be working with families for years into the future.

And I should say, we do not know all the needs of families. We

are trying to identify those. We don’t all need—actually recognize

all the needs we are going to have in the community for mental

health and so forth. There is a lot of work trying to figure that out,

trying to talk to people, trying to interview people, trying to prepare the community for what it faces. But we do not know the full

need, the full parameters of need, and that is something we are

really investigating.

One other point, the coordination. Attorney General Spitzer indicated that we are working together. We are an organization coordinating. We are working with any number of agencies in the community to coordinate. We are working with the attorney general’s

office, and there is going to be an establishment of a data base that

provides benefits and understanding about benefits.

There is confusion about where to get benefits. The nonprofits in

the community are well aware of that and are really trying to find

ways to simplify the process to make the process known to people,

62

to find easy ways to access the process. And we haven’t been very

successful in that effort, but we are continuing.

So coordination is beginning to occur. Coordination of benefits is

beginning to occur as well as coordination of activity. There are

conversations going on to try to simplify the process because we are

well aware of that. And for all of us involved in the relief effort,

it is not an absolutely perfect effort, and that when mistakes are

made, and when we find we made an error about a family, about

a case, we try to go back and try to rectify that area as quickly as

possible because we have an enormous system that we put into

New York City in the first month, 2,000 people, actually 2,500 people from across the country. We have about 28,000 volunteers now

working in the system. And when you have that many people focusing on relief, there are going to be differences. The system is not

going to be perfect. We try to resolve that as best we can.

I think that, in fact, the Red Cross, has, in fact, done its job, and

it is going to continue to do its job for years in the future on this

event.

[The prepared statement of Robert Bender, Jr. follows:]

PREPARED STATEMENT OF ROBERT BENDER, JR., EXECUTIVE OFFICER, GREATER NEW

YORK CHAPTER AND MICHAEL FARLEY, VICE PRESIDENT, CHAPTER FUNDRAISING,

AMERICAN RED CROSS

INTRODUCTION

Within moments of the first plane tearing into the World Trade Center on that

terrible morning of September 11th, 2001, the tragic events that transformed this

nation also began the largest disaster response in the history of the American Red

Cross—our nation’s oldest, most experienced and most trusted humanitarian organization. A terrorist event is unlike any other disaster and requires the American Red

Cross to be prepared to serve the American people in accordance with our Congressional Charter.

The American Red Cross, along with each of us here today, could not possibly

have anticipated the scope of such an event nor have been fully prepared for the

impact this would have on the lives and families of those affected. As we always

do, the Red Cross immediately began providing emergency relief and emotional support to a nation stunned by the brutality of an unprecedented attack on American

soil. We, like all other first responders, were overwhelmed in those first chaotic and

uncertain hours following the attack. By 10 a.m. there were hundreds and thousands missing at ground zero in New York, at the Pentagon and at the Pennsylvania crash site. All of American was on edge. Rumors flew. No one knew what

would happen next. At the World Trade Center, there was Red Cross staff unaccounted for, we were without phones, and our emergency response vehicles couldn’t

get to the site.

Chartered by Congress in 1905 to maintain a system of national and international

relief, it is the mission of the American Red Cross to help people prevent, prepare

for and respond to emergencies. The Red Cross is an essential partner with federal

response agencies during disasters through its lead role for mass care under the

Federal Response Plan. Our primary focus is on the human needs of those affected,

and we respond to both the physical and emotional devastation experienced by people during and after a disaster. Our duty yesterday, today and tomorrow is to serve

humanity with dignity, valor, and compassion.

IMMEDIATE RESPONSE TO THE EVENTS OF SEPTEMBER 11TH, 2001

The New York Times on October 21st described part of the scene immediately following the attack on the World Trade Center: ‘‘. . . The survivors, blanketed in the

gray mist of urban disaster, headed north and east. The attack’s human spores

bearing their stories, their fear, throughout the city.’’ In the initial hours and days,

we took the steps necessary to establish order out of chaos and support those whose

world had just been torn apart—those in New York walking out of the gray dust

to nowhere, those at the Pentagon fleeing from the intense heat and flames, and

those families urgently wanting to hear about loved ones whose planes never

63

arrrived. First at the scene in some 67,000 disasters each year, the Red Cross goes

to where the people are (be it at bus stops, subway stations, the East-West highway

in New York City, the Pentagon parking lots or a pasture in Pennsylvania. Thousands of times over, in New York, Washington and Pennsylvania, we met the needs

of those affected with a compassionate presence. This presence was possible because

the Red Cross has build a nationwide network of chapters that we can draw from,

we are staffed with dedicated employees, and rely on a vast ‘‘Army of Mercy’’ in the

words of FDR—our millions of volunteers.

We do not wait for people to come to us, but reach out to find those in need. Our

immediate disaster response efforts have served 25,000 families by providing direct

assistance for food, shelter, and clothing. For example, in apartment buildings surrounding the World Trade Center, we found elderly people afraid to venture beyond

their rooms. Many were absent their health care assistants. Red Cross workers

filled prescriptions and made sure that their daily needs were met. Since the attack,

we have provided more than 9 million meals (100,000 meals a day—to families and

rescue workers. We found firemen, police, emergency medical crews and responders

of all sorts who needed water, shelter, a change of clothes, a place to rest, or a place

that could provide silence and solace.

Our Air Incident Response Teams, always on immediate alert, were dispatched to

each departure site and every scheduled arrival site for the four flights hijacked

that day. We also provided teams to the United Airlines’ Headquarters in San Francisco and American Airlines’ Headquarters in Dallas. Mental health, grief counseling and spiritual support and other referrals were extended in each location. Dozens of Red Cross chapters nationwide mobilized to help travelers stranded at airports across the country. It truly has been a tragedy that has reached across America.

In a time of tremendous uncertainty, we ensured that blood would be available

wherever needed. We mobilized our national blood system to preposition stocks

around the New York metropolitan area, to meet a need, which unfortunately never

came. But we had to be ready. And we were.

OUTPOURING OF SUPPORT BY THE AMERICAN PEOPLE

As always in the face of tragedy, the American spirit is indestructible. Just as this

heinous act was unprecedented in its destruction, the response from the people of

America is inspiring—people waiting hours in long lines to donate blood, flooding

phone lines to volunteer their time in any way that was needed, and personally delivering financial contributions. There was a need for people to connect with other

people and to do something, anything, to help. We have been deeply honored by the

examples of selflessness: American Airlines flight crews giving blood in honor of

their colleagues who perished, school children taking collections and organizing car

washes, coins collected in bags, and volunteers coming to our door by the thousands.

Even Congress set new records for blood donations two days after the attacks.

The generous financial and in-kind assistance that the American Red Cross has

received from individuals, companies, foundations is unprecedented. This is being

handled with utmost openness, accountability and integrity. Therefore, we established the Liberty Disaster Relief Fund, a separate, segregated account that was created to hold and disburse funds related to the September 11th attacks, its aftermath,

and other terrorist events. This fund is structured to ensure that every dollar raised

will go to help people who are and will be affected by acts of terrorism as well as

to ensure the Red Cross will help people whenever and wherever terrorism strikes.

We believe the establishment of this account is the best way to assure absolute

transparency, clear accountability and demonstrate our commitment to donor intent.

The tremendous outpouring of support by the American people has enabled the

Red Cross to fulfill its mission following these attacks. In just 7 short weeks, the

Red Cross has received pledges and contributions totaling $564 million. To date

$154 million has been spent or committed, $120 million for direct assistance to

25,000 families in the form of cash and vouchered assistance to cover their emergency needs including food, clothing and temporary shelter. While we have a balance of funds uncommitted at this date, we will hold aside these contributions to

be made available for emerging needs. We have adapted quickly to the level of support and generosity demonstrated by the American people. To have responsibly disbursed $120 million to 25,000 families in less than 7 weeks is extraordinary and

is unprecedented in the nonprofit world.

Included in these figures is assistance provided under a new initiative for families

who lost loved ones on September 11th. For families who lost breadwinners, a family gift program has been established to cover 3 months of financial needs—rent,

mortgages, childcare, and food. To date, Red Cross has spent or committed $47.9

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million to more than 2,300 families who have been helped through the receipt of

emergency gift checks. We will continue to work with these families beyond the initial period to evaluate how else we might support them in the months ahead.

All of America is grieving. The wife of a Red Cross employee in Washington, D.C.

is constantly haunted by visions of her husband being killed in an attack on the

nation’s capital. The father of a nine-year-old in Memphis, Tennessee wonders how

he can stop the nightmares of his child who dreams about planes crashing into

buildings. For these people and others, we have had close to 135,000 mental health

and grief counseling contacts.

All of our financial assistance is being provided in the most expeditious way possible. A simple one-page gift form is the only paperwork required, which is processed promptly with checks issued overnight. The forms can be done by fax, phone

or electronically, and are available through the Family Assistance Center and at

other family assistance sites in New York City, or any one of our 1,000 chapters

located in communities nationwide.

We do not wait for families to contact us for this assistance. We have implemented an aggressive outreach program. Early in October, we placed advertisements in major newspapers appealing to families to come forward and receive assistance. We’ve also contacted employers of the World Trade Center, floor by floor,

to reach out to their employees, searched hospital lists and the list of confirmed deceased. Forty Red Cross employees and volunteers are dedicating their days to calling and contacting families who might qualify for cash or other assistance. All told,

we’ve contacted about 3,300 families, and the number grows daily.

Because this tragic event also injured and killed foreign nationals, the Red Cross

has extended its reach to families across the globe through our International Family

Assistance program. To date, we have opened more than 169 cases involving the

families of foreign nationals. The Red Cross international aid package includes: financial assistance for travel to and from the United States, lodging, meals, local

transportation, crisis counseling, advocacy and referral with U. S. agencies, repatriation of remains, funeral expenses, tracing services, and information about embassies and consulates. We are being assisted by our partner Red Cross and Red Crescent societies the world over.

FINANCIAL STEWARDSHIP AND CHARITABLE FRAUD

The American people have rushed to support our efforts with an unprecedented

surge of generosity. In response, the Red Cross has put in place stringent accounting measures at both the National Headquarters and throughout our chapters to ensure stewardship of these funds. Our internal audit staff and KPMG, our external

auditors, began reviewing and testing control processes and procedures for donations and disbursements the week following the terrorist attack. That testing continues. National Headquarters has instructed the corporate external auditor,

KPMG, to begin fiscal year 2002 audit testing of contributions immediately, and

have directed chapters to require the same of their auditors and independent CPAs.

Federal statutes prohibit the use of the American Red Cross name and emblem

by commercial concerns and unauthorized solicitations (Title 18 USC § 706) and provide for fines and imprisonment (Title 18 USC § 917). In order to ensure that all

donations are collected on behalf of the Red Cross is received and properly acknowledged for tax purposes, we have established formal agreements with groups and

businesses that have helped to raise funds. A third-party group can conduct a fundraiser provided their local Red Cross chapter approves it and a signed letter of

agreement has been received.

This committee has provided leadership in the area of protecting charitable organizations from fraudulent use of the Internet and other media in soliciting funds.

We applaud your efforts to prevent such activity. As one of the country’s largest

non-profit organizations, we have effective firewalls and tight security protocols in

place to detect and trace these activities. On September 14, the Red Cross sent an

e-mail message to 30,000 previous online donors. This message included a URL link

to an official, secure online donation site. The American Red Cross and its online

partners (aol.com, yahoo.com, paypal.com, libertyunites.com, and wellsfargo.com) accept credit card information only through a secure portal on a Web site, not through

an e-mail message. When Internet scams have been detected, we have worked closely with the Federal Trade Commission and the Department of Justice, and taken

aggressive steps taken to shut them down.

Symantec, an information technology security firm, retained by Red Cross notified

us on October 17, 2001, about the Septer.Trojan computer virus for potential credit

card donors. The virus came in the form of an executable file attached to an e-mail

message that appears to come from the American Red Cross, United Way and the

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September 11th Fund. The American Red Cross Office of General Counsel contacted

law enforcement authorities immediately about this fraudulent act.

COORDINATION OF RELIEF EFFORTS

We typically lead and champion cooperation with other relief agencies to insure

we don’t duplicate efforts and to protect against any gaps in services. The Red Cross

leadership and the Attorney General of New York, Eliot Spitzer, have been engaged

in a constructive dialogue on a means of improving access to the vast disaster relief

resources now marshaled to help the victims of the September 11th attacks. We are

hopeful that a system will be established to enable disaster relief recipients to maximize the relief resources available to them.

THE ROAD AHEAD

The American Red Cross will be with the survivors and families affected by this

tragedy for as long as it takes. Our decades of experience with disaster victims tell

us that assistance will be needed for years to come. We need to ensure that the resources entrusted to us by the American people will be available to meet these future needs.

Family Assistance Centers were established for the loved ones of those lost in the

World Trade Center and the Pentagon. The Center is still operating at full strength

in New York City. A one-stop relief center, families can avail themselves of the full

breadth of Red Cross services in an environment where confidentiality, dignity and

compassion are the hallmark attributes. We are committed to this outreach, and

will work with those affected for years after this event.

In other ways, our work has just begun. The site of the World Trade Center, now

called ‘‘The Pile’’, is emblematic of the work ahead and the human needs we will

serve. There, work that is physically arduous, always dangerous and emotionally

draining will continue for another 9 to12 months. Construction workers, firemen, police, and emergency medical technicians are not forgotten. We are operating special

respite centers on-site. It is a place away from the noise and the dirt, where workers

can come to find food, shelter, a change of clothes, a place to sleep, or to read a

card written with special care from a child. This is a place to refresh the body and

the spirit in order to go back, once again, to their work. This is another example

of a new service for us, a service we adapted to the needs of those involved in this

disaster.

We now find ourselves in the grip of a biological attack. We are assisting the families of those directly affected from anthrax exposure. We have offered immediate financial assistance through our Family Gift Program, and we are contacting 16 victims who are or have been hospitalized for anthrax. Further, because the current

attack has understandably created public anxiety, we are reaching out to communities with public awareness and education materials. We will continue to develop

these materials to address the community education requirements regarding biological and chemical agents.

CONCLUSION

The American Red Cross today is helping tens of thousands of people affected by

acts of terrorism in the United States. We were among the first on the scene and

we will be helping people for as long as it takes. The clear focus of our Liberty Disaster Relief Fund is to ensure that every dollar raised will go to help people who

are and will be affected by acts of terrorism as well as to ensure the Red Cross will

help people whenever and wherever terrorism strikes. We thank you Chairman

Greenwood and Representative Deutsch for holding this timely and important hearing.

Mr. GREENWOOD. Thank you, Mr. Bender, for your testimony.

Mr. Farley, you are recognized for 5 minutes for your testimony.

TESTIMONY OF MICHAEL FARLEY

Mr. FARLEY. Thank you, Mr. Chairman. We have submitted a

formal written statement, and hearing the questions of the committee, I have taken copious notes, and what I would like to do is

perhaps paraphrase my formal statement, but just make a few

comments and then address some questions that had been raised

during the first panel.

66

And I would like to start by saying first and foremost how overwhelming this entire experience has been for this country and the

American Red Cross: 4 airline disasters; 5,000 people missing; mobilization of 44,000 disaster workers, 43,000 of them trained volunteers; raising of $564 million; an incredible outpouring of public

support. This was an overwhelming experience for us. We had the

discipline of years of disaster relief experience, but even with that,

we were learning in the moment and on the fly, because every element of our system was tested and stretched to be responsive to

the community.

And I guess I would like to share with you four commitments

that drive our staff and our board at the American Red Cross that

are really the foundations of how we proceed in doing our work and

showing the trust—executing the trust that you, the American public, has placed in us, which is an enormous responsibility.

The first commitment is that we first and foremost are committed to meet the needs of the victims of this tragedy. That is why

we are here. That is what we do. We are very proud of the fact that

in 7 weeks’ time, we have directed over $120 million in direct cash

assistance in a variety of forms to over 25,000 families. That is an

incredibly challenging task to do responsibly, to be flexible and yet

to be consistent. But that is our first commitment, to be there for

the victims of this tragedy.

And in addition to that, because of the very nature of this tragedy, we know that the needs of these victims will emerge for years

to come. In Oklahoma City we have the experience of seeing that

today there are still 30 to 40 families that continue to need assistance. It’s the very nature of being a victim of disaster, and all the

more so with terrorism, the elements and psychology of post-traumatic stress play out for years to come.

We were among the first agencies on the ground when the tragedy occurred. We will be among the very last until all the needs

of those victims are met to the best that we understand them in

the years ahead. And we have a responsibility to store the resources we’ve been given, to direct them to those needs of the victims as we understand them in the years ahead.

The second commitment is one of full disclosure. We want to preserve the trust of the American public and the work of the Red

Cross, because without that, we can’t do our work in disaster response. And it was for that reason that the Liberty Fund was created through the direction of Dr. Healy and endorsed by the board

of the American Red Cross. There was never a question as to

whether or not these funds should be segregated and treated differently than other kinds of disaster relief funds. The issues that

were debated internally were how exactly do we do that, what procedures do we undertake to make that work. And in order for us

to make true to our commitment to full disclosure and to be good

stewards of the outpouring of American support, we engaged an external third-party auditor, KPMG, to work with us to develop the

guidelines not only for the fund, but also how the execution of the

disaster response effort is being played out in the field among our

1,050 chapters across the country to assist them, to make sure that

their procedures are in place and consistent with what we need to

do.

67

There were questions about donor intent, and those are good

questions and important ones because it’s something that we value

very highly. If a donor has come to the Red Cross and said, I want

to restrict my gift to the New York City World Trade Center relief

operation, that designation is honored. If a donor comes to us and

says, I want my gift to be directed toward the development of a

blood reserve because I understand how critically short the supply

is of blood, and not knowing where this tragedy is going to lead us,

I think that is an important part of what we do, and you, Red

Cross, can direct our funds to toward that end. There are other

designations in play. All of those designations are honored by the

American Red Cross when we understand specifically what they

are. And for those cases when the American public, in hearing our

ads asking for support, gives us a contribution online or hands a

check to a disaster response worker, and it’s turned into a center,

then we believe that there is a general understanding that is to

support the overall work of the Red Cross, which is first and foremost directing support to victims, but also supporting those ancillary activities that make victim assistance possible in the first

place.

Like transporting our volunteers to Ground Zero and like preparing a communications system that allows the victims to call us

and ask, ‘‘Where do I go to get assistance?’’ so we are committed

to full disclosure for what we are doing.

The third commitment is that we are totally committed to collaboration. Bob Bender and Attorney General Spitzer have been

working together with our national leadership to look at ways in

which we could collaborate with other responding agencies, and the

reason for that is we need to make sure that there is a safety net

of healing in place to catch all the needs of the victims, and one

agency alone is not sufficient to meet those needs. But together we

can do, I think, a terrific job in responding to the direct needs of

those victims. So we have a commitment to collaborate with our responding agencies to ensure that the information is there about the

services available, as well as how the funds are being used and

where the clients are so that we can best connect services to clients.

There are a lot of details that go with that, but I think one of

the lessons of this tragedy is that we need to play together in a

way like we have not done before, because the entire situation of

terrorism has changed the way we live and the way we work together.

And the fourth commitment is finally to evaluate the uses and

purposes of the Liberty Fund so that we ensure that the donor intent is honored and that we are able to respond to the needs of the

victims of this tragedy and to other situations which emerge from

it so that we can make sure we are directing those funds in the

best way possible.

That commitment to evaluate what we do will be undertaken by

our board. Those are policy issues. There are also activity that

needs to be done in light of the donor intent, as we understand it,

for the use of those funds. So those are some—four ideas, commitments that we have, and I would like, I think, at this point to

open—or pass on my time to the next presenter.

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Mr. GREENWOOD. Thank you, Mr. Farley. Mr. Amundsen, we

thank you for your testimony. You are recognized for 5 minutes.

TESTIMONY OF CHRIS AMUNDSEN

Mr. AMUNDSEN. Thank you. Good afternoon. Thank you for this

opportunity to discuss how United Ways across the country have

responded to the September 11 tragedy. United Way of America is

a national service and training center for the 1,400-member United

Way system. Each United Way is independent, separately incorporated and governed by local volunteers. United Way of America’s

role is to equip United Ways as well as their corporate and philanthropic partners with the tools they need to make immeasurable

impact in the communities that they serve. In 2000, United Ways collectively raised nearly $4 billion to address the local needs of communities. But United Way is much

more than a fund-raiser. Listening to the diverse voices in their

communities, local United Ways are identifying the most urgent

needs and focusing their efforts on priority issues. These issues

vary from community to community, but United Ways across the

country are working to strengthen and support families, help children to succeed, build vital and safe neighborhoods and promote

self-sufficiencies.

This work is at the heart of the United Way mission. Communities across the country have instituted programs to address the

immediate needs and to combat the ripple effect of the September

11 attacks. As you will hear, the September 11 Fund, a crisis response effort established by the United Way of New York City and

the New York Community Trust, is currently making allocations to

agencies, providing direct financial assistance, emergency services,

counseling and other critical community supports.

On September 11, United Way of America received its first corporate gift to the response to this tragedy from the Williams Company of Tulsa, Oklahoma. Later that day this gift became the first

corporate support of the September 11 Fund. We received many

other generous gifts, as did local United Ways in support of the

fund.

Next, the United Way of America convened a group of crisis veterans from local United Ways that have dealt with terrorist situations such as Oklahoma City, natural disasters like Hurricane Andrew in Miami and other traumatic events, such as the Columbine

shootings in Colorado. This group and their lessons learned were

made available for Ground Zero, United Ways and others to advise

them on how to deal with this crisis.

Other vital programs have been launched in communities country-wide. Right here in Washington, the United Way of the National Capitol Area has brought together a volunteer governance

committee to oversee the disbursement of funds that have been

raised to benefit those affected by the attack on the Pentagon. In

addition, our hometown United Way is helping to coordinate health

and human service agencies responding to the crisis and linking

victims to those agencies so their immediate and long-term recovery needs will be met.

Included in my written testimony is the United Way in Service

to the Nation report.

69

In the wake of the September 11 tragedy, United Ways across

the country have been doing what they do best, mobilizing their

community to deal with their most urgent needs. Both United Way

donors, contributors are being—donor contributions, excuse me, are

being put to use, helping children cope with loss and fears, readying families facing military deployment, promoting tolerance and

assisting families affected by the layoffs and the economic impact

of the tragedy.

Let me give you a few examples. Dealing with the stress and

grief associated with the tragedy of unprecedented magnitude can

be a tremendous burden. We all know that a crisis like this is especially hard on our children. Many United Ways have brought their

efforts to bear on this area of concern by communicating with children through the support of counseling and other services directed

at children.

United Way in Detroit, Michigan, convened a meeting of more

than a hundred children from United Way agencies, players from

the Detroit Lions football team, and various social workers and

counselors to discuss the events of September 11.

Many employees, especially in the airline industry and tourism

industry, were laid off as a result of this economic downturn.

United Ways, especially those in high tourism areas, are acting

quickly to deal with these particular needs. The United Way in Orlando, Florida is leading an effort with local foundations to provide

immediate financial assistance to workers in the tourism and travel industries who have lost their jobs or are experiencing reduced

incomes. They will also develop long-term plans for a community

safety net for times of crisis.

Looking ahead, United Way Board of Governors is in the process

of developing a national response committee which will, among

other things, develop a national crisis response plan for the United

Way system that will ensure a swift, coordinated and effective response to any future major national crisis.

The events of September 11 will have a lasting effect on people

and communities across the country. Beyond the lives and the

buildings shattered by the attack, the images of devastation that

we have witnessed as a Nation will forever tarnish our sense of security.

United Way is a living, breathing part of the communities directly impacted by the terrorist attacks. Long after the rescue

teams have disbursed, the United Way will be there to heal lives,

families and communities.

Thank you.

[The prepared statement of Chris Amundsen follows:]

PREPARED STATEMENT OF CHRIS AMUNDSEN, INTERIM PRESIDENT AND CEO, UNITED

WAY OF AMERICA

Good afternoon. Mr. Chairman, Mr. Ranking Member, members of the Subcommittee, thank you for this opportunity to discuss how United Ways across the

country have responded to the September 11th tragedy.

UNITED WAY OF AMERICA

I am the Interim President and CEO of United Way of America. United Way of

America is the national service and training center for the 1,400 member strong

United Way system. Each United Way is independent, separately incorporated, and

governed by local volunteers. United Way of America’s role is to equip United

70

Ways—as well as their corporate and philanthropic partners—with the tools that

they need to make a measurable impact in the communities they serve. United Ways collectively raised nearly $4 billion in last year’s campaign. But

United Way is more than a fundraiser.

Listening to diverse voices in their communities, local United Ways are identifying the most urgent of needs and focusing their efforts on priority issues. These

issues vary from community to community, but United Ways across the country are

working to strengthen and support families, help children and youth succeed, build

vital and safe neighborhoods, and promote self-sufficiency. This work is at the heart

of the United Way mission.

UNITED WAY SYSTEM RESPONDS TO RECENT TRAGEDIES

Communities across the country have instituted programs to combat the ‘‘ripple

effect’’ of the September 11th attacks. As you have heard/will hear the September

11th Fund, a crisis response effort established by the United Way of New York City

and The New York Community Trust, is currently making allocations to agencies

providing direct financial assistance, emergency services, counseling and other critical community supports. On September 11th United Way of America received its

first corporate gift in response to this tragedy from Williams. Later that day, this

gift became the first corporate support of the September 11th Fund. We received

many other generous gifts, as did Local United Ways, in support of The Fund.

Next, United Way of America convened a group of crisis veterans from local

United Ways that have dealt with terrorist situations, such as Oklahoma City, natural disasters like Hurricane Andrew in Miami, and other traumatic events, such

as the Columbine shootings. This group, and their lessons learned, were made available for the ground zero United Ways and others to advise them on how to deal

with the crisis.

Other vital programs have been launched in communities countrywide. Right here

in Washington, the United Way of the National Capital Area has brought together a volunteer governance committee to oversee the disbursement of funds that

have been raised to benefit those affected by the attack on the Pentagon. In addition, our hometown United Way is helping to coordinate health and human service

agencies responding to the crisis, and linking victims to those agencies so their immediate and long-term recovery needs will be met.

Included in my written testimony is the ‘‘United Way in Service to the Nation’’

report. In the wake of the September 11th tragedy, United Ways across the country

have been doing what they do best—mobilizing their communities to deal with their

most urgent needs. Local United Way donor contributions are being put to use helping children cope with loss and fears, readying families facing military deployment,

promoting tolerance and assisting families affected by the layoffs and the economic

impact.

Let me give you a few examples. Dealing with the stress and grief associated with

a tragedy of unprecedented magnitude can be a tremendous burden. We all know

that a crisis like this can be especially hard on our children. Many United Ways

have brought their efforts to bear on this area of concern by communicating with

children through the support of counseling and other services directed at children.

• The United Way in Detroit, Michigan convened a meeting with more than 100

children from United Way agencies, players from the Detroit Lions football

team and various social workers and counselors to discuss September 11th.

Many employees, especially in the airline and tourism industries, were laid off as

a result of the current economic downturn. United Ways, especially those in high

tourism areas, are acting quickly to deal with these particular needs.

• The United Way in Orlando, Florida is leading an effort with local foundations

to provide immediate financial assistance to workers in the tourism and travel

industries who have lost their jobs or are experiencing reduced income. They

will also develop long-term plans for a community safety net for times of crisis.

Looking ahead, United Way of America’s Board of Governors is in the process of

developing a national response committee which will, among other things, develop

a national crisis response plan for the United Way system that will ensure a swift,

coordinated and effective response to any future major national crisis.

The events of September 11th will have a lasting effect on people and communities across the country. Beyond the lives and buildings shattered by the attack,

the images of devastation that we witnessed as a nation will forever tarnish our

sense of security. United Way is a living, breathing part of the communities directly

impacted by the terrorist attacks. Long after the rescue teams have dispersed,

United Way will be there to heal lives, families and communities.

Thank you for your time.

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Mr. BASS [presiding]. The Chair recognizes Joyce—is it Bove?

Ms. BOVE. Bove.

Mr. BASS. You are recognized for 5 minutes.

TESTIMONY OF JOYCE M. BOVE

Ms. BOVE. Thank you. My name is Joyce Bove, and I am Vice

President of the New York Community Trust, which together with

the United Way of New York City, created the September 11 Fund

to meet the immediate and longer term needs of victims, families

and communities affected by the events of September 11. I have

submitted formal written testimony, and at this point I am just

going to summarize three main points.

First, the September 11 Fund began immediately. In its first 8 weeks, it reviewed and awarded 80 grants totaling $47 million to

meet a range of emergency needs through established relief and

other nonprofit agencies. As a result, more than 15,000 checks have

been written, most on the spot, to individual victims and families

for rent, mortgage payments, utilities, tuition and other cash

needs. More than 4,600 people have received crisis counseling.

More than 2,000 adults and children, including 700 rescue workers,

have received disaster mental health services. More than 1,000

people who have lost their jobs have met with career advisers.

More than 500 children were counseled in bereavement groups. Replacement ambulances and training were provided. Funeral expenses, not covered elsewhere, have been met.

In order to make sure people knew what is available to them, toll

free hotlines were established, and a comprehensive resource referral guide was created for individuals, families, businesses and

agencies seeking information and assistance on disaster relief. It is

used at the Family Assistance Center and throughout the city and

is available online as well.

Second, to address longer term needs, the efforts of the September 11 Fund must be coordinated with other funders and service providers. Even though $300 million seems like a great deal of

money and is a great deal of money, it is far from enough to meet

all the needs of all of the various victims of September 11. In order

to make sure that no one is left behind, we are working and will

continue to work closely with the many government and nonprofit

organizations to understand the needs of the many different kinds

of victims, to understand which institutions will provide help and

to see where we must move in to fill the gaps.

Third, every single dollar raised by the September 11 Fund goes

directly to grants to meet the needs of victims, their families and

affected communities. We have raised all of the fund’s administrative costs separately. In addition, the fund relies heavily on the

knowledge and expertise of the United Way and the New York

Community Trust, as well as other experts on loan to us from foundations and businesses.

So much more needs to be done, but we are proud of the work

that we have done today and are working energetically with others

to develop a fair and effective response to the September 11 tragedies. We know it is important that our program be accountable,

both to the public and the millions of donors who have put their

trust in us. We invite the committee and the public to follow the

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1The Fund is made up of two funds—a general fund formed by the United Way and the New

York Community Trust, and a fund from the national telethon, ‘‘Tribute to Heroes’’, that was

broadcast on the major television networks. Both funds are intended to aid victims and their

families; the general fund also is intended to support the communities affected by the September

11th attacks.

decisions we make and the results that they generate through our

Web site, www.September11fund.org, where we post information

regularly.

In summary, the September 11 Fund is focusing on the needs of

victims, their families and the affected communities by providing

funds to experienced, front-line agencies for emergency needs. We

will continue to support coordination efforts and are working hard

with others to develop programs for longer term needs that are effective, fair and leave no one behind.

Thank you.

[The prepared statement of Joyce M. Bove follows:]

PREPARED STATEMENT OF JOYCE M. BOVE, VP, PROGRAMS & PROJECTS, THE NEW

YORK COMMUNITY TRUST

Mr. Chairman and Members of the Subcommittee: Good Afternoon. I am Joyce

Bove, Vice President of the New York Community Trust, which with the United

Way of New York City created the September 11th Fund. Thank you for holding

this hearing on an issue that concerns us all: ensuring that we provide aid and support to the victims of September 11th, their families and affected communities. I

would like to report on The Fund’s activities to date and plans for the future.

I will start by providing you with some background on who we are. The September 11th Fund was established by The United Way of New York City and the

New York Community Trust to provide a way for millions to help meet the immediate and longer-term needs of victims, their families, and the communities affected

by the terrorist attacks of September 11.

Both of these organizations have a long history of helping people help others.

They do so by finding, choosing and funding nonprofit organizations and agencies

with the expertise and ability to provide whatever help is needed. Using the expertise and experience of both organizations, the September 11th Fund was able to

move quickly, making over 80 emergency grants to meet the broad array of needs

that have arisen and will continue to arise as a result of the tragedies of September

11th.

The Fund began immediately to make grants that meet emergency needs. Thus far, we have made a total of $47 million in grants—supporting agencies that provide

cash assistance, legal counseling, grief therapy, job training and placement and

other services for victims. We believe that we’ve made it possible for over 16,000

people to find and get the emergency help they need. However, the Fund must also

help meet the longer-term needs of victims, their families and affected communities,

and we are working with others to do just that. At the core, what every one of us

wants is to help people and communities rebuild their lives.

To date, more than a million people and many corporations and foundations have pledged a total of $337 million to the September 11th Fund 1. More than $250 million has already been collected. Administrative costs of the Fund have been raised

separately by The New York Community Trust and The United Way of NYC—therefore 100% of donations to the September 11th Fund will go directly to grants to help

victims, their families and affected communities.

There are three points about the work that we are doing that I would like to

make:

First, immediate needs are being met in the fastest way possible, by experienced

disaster relief agencies. Since the first tragic days of the attack, the September 11th

Fund has been providing emergency grants to organizations directly serving immediate needs of victims and their families. We have made it possible for thousands

of people to receive cash support, legal advice, grief counseling and other emergency

needs.

Second, to address longer-term needs, the efforts of the September 11th Fund must be coordinated with other funders and service providers. Even though $300

million is a great deal of money, it is far from enough to meet all the needs of all

of the victims of September 11th. In order to make sure that no one is left behind,

we are working and will continue to work closely with the many government and

73

private organizations: to understand the needs of the many different kinds of victims, to understand which institutions will provide help, and to see where we must

move to ‘‘fill in the gaps’’.

Third, every dollar raised by The September 11th Fund goes directly to grants to

meet the needs of victims, their families and affected communities. We have raised

all of the Fund’s administrative costs separately. In addition, the Fund relies heavily on the knowledge and expertise of the United Way & The New York Community

Trust, as well as other experts on loan from foundations and businesses.

Now, please allow me to detail the relief efforts of the September 11th Fund to

date.

MEETING EMERGENCY NEEDS

On September 11th, the United Way of New York City and the New York Community Trust created The September 11th Fund as a joint response to the terrorist

attacks on America.

That very day, a web site was created to accept online donations and describe the

Fund’s purpose and goals. Over the next three days, the Fund organizers hosted a

series of meetings with disaster relief and other nonprofit agencies to anticipate

emergency needs and coordinate efforts. We received our first grant proposal on

September 19th (even before we had published a formal ‘‘Notice of Available

Funds’’). On September 22, eleven days after the tragedies occurred, Safe Horizon

began distributing checks to victims using funding from The September 11th Fund.

In its first eight weeks, The September 11th Fund has reviewed and awarded 80

grants totaling $47 million to meet a range of emergency needs through established

relief agencies. As a result:

• more than 15,000 checks have been written—most on the spot—to individual victims and families for rent, mortgage payments, utilities, tuition and other cash

needs

• more than 4,600 people have received crisis counseling

• more than 2,000 adults and children, including 700 rescue workers, have received

disaster mental health services

• more than 1,000 people who have lost their jobs have met with career advisors

• more than 500 children were counseled in bereavement groups

• replacement ambulances and training were provided

• funeral expenses that were not covered elsewhere have been met

In order to make sure people know what is available to them:

• toll-free hotlines were established and

• a comprehensive resource referral guide was created for individuals, families,

businesses and agencies seeking information and assistance on disaster relief.

It is used at the Family Assistance Center and throughout the city and is available on line, as well.

As with all established grant-making institutions, grant recipients must provide

regular reports on the use of their funds, the results of their services, and financial

accounting of their expenditures.

And while our staff—composed of individuals from the United Way of New York

City and the New York Community Trust, as well as the Ford Foundation and others—responds to hundreds of proposals and meets with countless service providers

and government agencies, we are simultaneously assessing longer-term needs.

MEETING LONGER-TERM NEEDS

Which brings me to my second point: longer-term assistance must be coordinated

in order to determine fairly and accurately the needs of victims, their families and

communities, and available sources of support.

To coordinate assistance efforts, The September 11th Fund was among the first

supporters of a central database that would both make it easier for those in need

to apply for assistance, and for charitable organizations to assess those needs and

limit the duplication of efforts. Because we are mindful of the privacy rights of individuals, we are working closely with New York State Attorney General Eliot Spitzer

and the front line providers of support to victims, the Red Cross, Safe Horizon, the

Salvation Army, and others.

Even without a database, there is a remarkable amount of coordination taking

place. Government agencies from the Federal, State and City work every day with

the front line charities, such as the Red Cross, Safe Horizon and Salvation Army.

They meet frequently to coordinate their programs and unplug bottlenecks. As an

organization that helps fund these efforts, we are encouraging even greater coordination.

74

One of our major tasks in developing a program is to understand the range of people and institutions affected by this tragedy and their needs. None would argue that

the family of someone who died, or someone who was severely injured shouldn’t receive aid, but many of our donors also recognize the needs of those who lost their

jobs, who lost their homes, or who have been traumatized as a result of helping out

at Ground Zero or the Pentagon. Others have pointed out that September 11th also

destroyed the homes of hundreds of nonprofits and small businesses.

Many of the needs of these victims can and will be provided for by others—by government programs or special purpose charities. Nonetheless, a traditional role for

philanthropy is to help those who ‘‘fall through the cracks’’. For example, what

about the second families of victims who are not eligible for government aid? And

elderly parents who are not technically dependents, but who were receiving help

with rent or mortgage payments? Should we not make sure that all victims receive

help?

Equally important, we must recognize that victims have a range of needs. Clearly

financial security is important, but so, too, is counseling and grief therapy, legal and

financial advice, and help with new jobs and restored homes.

Some of these needs may not be apparent for quite some time. It may be months,

sometimes even years, before a family realizes that they need counseling. We need

to ensure that we provide adequate resources for these needs as they arise.

We are already beginning the work necessary to develop this long-term program.

We have already established a Board of Directors, drawing from the United Way,

the New York Community Trust, the entertainment industry and others from business and civic life. That Board is chaired by Franklin Thomas, former president of

the Ford Foundation. We have hired a small staff, and will continue to rely on the

expertise of some of the best grantmakers in the country from the New York Community Trust, United Way, the Ford Foundation and others.

Over the next weeks and months we will make critical decisions about funding

priorities, analyze the needs of those who are affected by the September 11th tragedy, and seek to meet those needs that are not being met by others. We will do so,

as with the emergency grant program, by providing grants to organizations with the

expertise and ability to do so, as quickly, efficiently, and fairly as possible.

Since developing this program necessarily involves working with government

agencies and other charities, and since some of these have not yet decided how they

can and will help, the process will take some time. This is another reason we consider it so important to meet the emergency needs immediately. Our emergency

grants are helping do so.

Now, for my third and final point.

The September 11th Fund is a lean organization that relies heavily on resources

donated by The United Way of New York City, the New York Community Trust,

and others. None of our administration costs come out of The Fund. Instead, several

foundations contributed funds specifically for this purpose. The September 11th

Fund currently operates with a (tireless) staff of four. Thanks to the experts at the

NY Community Trust, the United Way of New York City and others who are donating their time and expertise, grants that normally would take 4-6 months for approvals are being researched and awarded much more quickly, sometimes within

one week. This is only possible because these staff members have years of experience in the nonprofit community, specifically funding emergency assistance and

community needs.

Our distinguished board chairman, Franklin Thomas, and our board of directors,

made up of leaders from the philanthropic, business and social service communities,

are also contributing their time, as well as resources from their institutions.

We are proud of the work that we have done to date, and are working energetically with others to develop a fair and effective response to the September 11th

tragedies. We know that it is important that our program be accountable, both to

the public and the millions of donors who have put their trust in us. We invite the

committee and the public to follow the decisions we make and the results that they

generate through our web site, www.september11fund.org, where we post information regularly.

In summary, the September 11th Fund is focusing on the needs of the victims,

their families and the affected communities by providing funds to experienced frontline agencies for emergency needs. We will continue to support coordination efforts,

and are working hard with others to develop programs for long-term needs that are

effective, fair and leave no one behind.

Mr. GREENWOOD. Thank you, Ms. Bove. Mr. Bollon, you are recognized for 5 minutes for your testimony. Thank you for being with

us.

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TESTIMONY OF VINCENT J. BOLLON

Mr. BOLLON. Mr. Chairman, thank you for the opportunity to appear before you—this subcommittee today. My name is Vincent

Bollon, and I am General Secretary Treasury of the International

Association of Fire Fighters, which represents more than 245,000

professional firefighters and paramedics who protect 80 percent of

the Nation’s population. I am also Secretary Treasurer and a director of the New York Firefighters 9-11 Disaster Relief Fund.

I have a deep personal interest in the subject of today’s hearings,

because I am and always will be a New York City firefighter. I

have served as President of the Uniformed Fire Officers Association

of New York City and the Secretary Treasurer of the Uniformed

Fire Fighters Association of New York City. I was a member of the

Fire Department Board of New York for 33 years.

The second I saw the Twin Towers collapse, I knew I had a lot

of personal friends lost. We know now that 344 firefighters and

emergency medical service personnel died in the line of duty on

September 11. To put things in perspective, the most firefighters

ever lost due to one incident prior to September 11 was 24.

We lost so many members on September 11 because they continued to climb up the stairs to evacuate the World Trade Center,

even after the second airplane struck. Their rescue efforts saved

thousands of civilian lives. The tragedy will have an enormous financial impact on the fallen firefighters’ families. Years after the

memorial services are held, hundreds of mortgages will still have

to be paid, hundreds of dependents will still need to be fed and

clothed, and hundreds of children will still need to be educated.

The IFF acted quickly to respond to these needs. Working with

the executive board of our two New York affiliates, we immediately

established the New York Firefighters 9-11 Disaster Relief Fund as

a nonprofit charitable corporation. The purpose of this fund is to

provide humanitarian aid to the families of firefighters and emergency medical service personnel who died in connection with the

destruction of the World Trade Center. It is authorized to receive

and distribute funds to provide financial aid to the families in

meeting their living expenses. These funds will go directly to the

families.

The fund has abided by the highest ethical and legal standards

governing charitable fund administration. The fund’s board of directors decided that the fund would not lend its name to any solicitation activity that even hinted at commercial exploitation of the

fund’s name, and we have employed no professional fund-raisers.

When we learned that the fund was included on several prominent

Internet Web sites, we carefully reviewed the laws of all 50 States

to determine our obligation under each State’s charitable solicitation laws, and we have applied to register the fund in each of the

States that required a charitable solicitation registration.

We also established contact with the New York Attorney General’s office regarding its efforts to both track down fraudulent

fund-raising efforts and to coordinate charitable assistance relief

for the September 11 victims.

As of this morning, the New York Firefighter 9-11 Disaster Relief Fund has raised approximately $63 million. We have made two distributions of $10,000 a piece to each of the 344 families, amounting

76

to nearly $7 million, to help meet the immediate financial needs.

We made the first of these two distributions more than a month

ago. The fund’s board of directors is now developing the criteria to

ensure that the families’ humanitarian needs will be met in a manner consistent with our fiduciary duties and applicable law, including the Internal Revenue Code.

We also have been extremely careful to ensure that the money

donated to the firefighters’ families was not wasted on unreasonable administrative expenses. I am proud to report to this subcommittee that to date less than two-thirds of 1 percent of the

money donated to this fund has been committed to administrative

costs, and as a 501(c)(3) organization and a registered charity, we

will submit publicly available reports to the Internal Revenue Service and the States detailing the amounts we have raised and paid

out.

We also continue to work on a daily basis to ensure that no one

is using our good name of our fund or logo of the IFF to defraud

the public. For instance, we recently shut down one fund-raiser

who was soliciting funds over the Internet in the name of our fund

into an account that had no connection with our fund. As the fund,

we strive to meet the humanitarian needs of the families of our

fallen firefighters with minimal administration cost and in a

straightforward and honest manner. No firefighter should have to

think about who will take care of his family when he is entering

a burning building to save your life.

I would be happy to entertain any questions from the members

of the subcommittee. Thank you.

[The prepared statement of Vincent J. Bollon follows:]

PREPARED STATEMENT OF VINCENT J. BOLLON, GENERAL SECRETARY-TREASURER OF

THE INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS AND SECRETARY-TREASURER

OF THE NEW YORK FIREFIGHTERS 9-11 DISASTER RELIEF FUND

Mr. Chairman, I thank you for the opportunity to appear before this subcommittee today.

My name is Vincent J. Bollon. I am the General Secretary-Treasurer for the International Association of Fire Fighters (the ‘‘IAFF’’), which represents more than

245,000 professional fire fighters and paramedics who protect 80 percent of our nation’s population. I am also Secretary-Treasurer and a director for the New York

Firefighters 9-11 Disaster Relief Fund, which was established by the IAFF to provide humanitarian assistance to the families of fire fighters and emergency medical

services personnel who died in connection with the destruction of the World Trade

Center on September 11, 2001.

I have a deep personal interest in the subject of today’s hearings, because I am,

and always will be, a New York City fire fighter. Prior to serving as General Secretary-Treasurer for the IAFF, I was President of the Uniformed Fire Officers Association of New York City. I have also served as an officer for the New York City

Uniformed Fire Fighters Association, and I was a member of the Fire Department

of New York for 33 years.

The second I saw the Twin Towers collapse, I knew I had lost personal friends.

We know now that 344 fire fighters and emergency medical service personnel died

in the line of duty on September 11. To put things in perspective, the most fire

fighters ever lost due to one incident prior to September 11 was twenty-four, during

an incident that occurred more than 100 years ago. We lost so many of our members

on September 11 because they continued to enter the World Trade Center and climb

the stairs as they were trained to do even after the second airplane struck. The

number of fire fighter casualties was made even worse because fire fighters both

coming off their shifts and coming on their shifts responded to the alarms. I am both

proud and humbled to tell you that their rescue efforts saved thousands of civilian

lives.

77

For our New York fire fighters, it is still September 11. I cannot find the words

to describe the impact that this event has had on the surviving members of our two

New York locals and the hundreds of widows and fatherless children that our fallen

heroes have left behind.

But I can describe the enormous financial impact that this horrible tragedy will

have on the fallen fire fighters’ families. Years after the memorial services are held,

hundreds of mortgages will still have to be paid, hundreds of dependents will still

need to be fed and clothed, and hundreds of children will still need to be educated.

And this only begins to describe part of the financial needs that will arise in the

future for the families of the fallen fire fighters.

The IAFF has always played a role in assisting the families of fire fighters who

are lost in the line of duty. The sheer enormity of the events of September 11, however, called for something more than our traditional response. As early as the afternoon of September 11, when we began to receive inquiries from around the world

about how to assist the fire fighter victims of this tragedy, it became apparent that

we would play a major role in managing this assistance. We decided that, above all,

we owed it to the memory of our fallen fire fighters to do it right.

In conjunction with the Executive Boards of our two New York affiliates, we immediately established the New York Firefighters 9-11 Disaster Relief Fund. The

purpose of this Fund is to provide humanitarian aid to the families of fire fighters

and emergency medical services personnel who died in connection with the destruction of the World Trade Center. It is authorized to receive and distribute funds to

provide financial aid to the families of the fallen fire fighters in meeting their living

expenses, including food, housing, clothing, medical care, education of children,

transportation and other similar expenses. These funds will go directly to the families of the fallen fire fighters.

Working with the assistance of top-notch legal counsel from a prominent Washington DC law firm, who donated their services on a pro-bono basis to establish the

Fund, we organized the Fund as a non-profit charitable corporation to be governed

by a six-person Board of Directors. We were granted tax-exempt status under section 501(c)(3) of the Internal Revenue Code on September 26, 2001, a remarkably

short period of time.

From the beginning, the Fund has abided by the highest ethical and legal standards governing charitable fund administration. I will give you a few examples. Out

of respect for the New York fire fighters, the Fund’s Board of Directors immediately

decided that the Fund would not lend its name to any solicitation activity that even

hinted at commercial exploitation of the Fund’s name, and we have decided to employ no professional fund-raisers. As a testament to the care with which we set up

the Fund, we were pleased to learn that it was included on several prominent internet web-sites devoted to channeling financial assistance for September 11 victims

to credible charity funds. As soon we learned of our Fund’s inclusion on these sites,

we carefully reviewed the laws of all fifty states to determine our obligations under

each state’s charitable solicitation laws,and we have applied to register the Fund

in each of the states that requires charitable solicitation registration. We also established contact with the New York Attorney General’s Office regarding its efforts to

both track down fraudulent fund raising efforts and to coordinate charitable assistance relief for the September 11 victims.

All of our hard work has paid off. As of this morning, the New York Firefighters

9-11 Disaster Relief Fund has raised $63 million. We have been extremely sensitive

to the need to distribute this money as soon as possible to the families on whose

behalf these funds were donated. In fact, we have already made two distributions

of $10,000 apiece to each of the 344 families (amounting to nearly $7 million) to

help meet their immediate financial needs. We made the first of these two distributions more than a month ago. While the Fund continues to receive money, the

Fund’s Board of Directors is now developing criteria to govern how the balance of

this money will be disbursed to ensure that the families’ humanitarian needs will

be met in a manner consistent with our fiduciary duty and applicable law, including

the Internal Revenue Code.

We have also been extremely careful to ensure that the money donated to the fire

fighters’ families is not wasted on unreasonable administrative expenses. I am

proud to report to this subcommittee that, to date, less than two-thirds of one-percent of the money donated to this Fund has been committed to administrative costs.

We have been able to keep this percentage low because so many people—both within and outside of the IAFF—have donated so much of their time and hard work to

ensuring the integrity of this Fund. And as a 501(c)(3) organization and a registered

charity, we will submit publicly available reports to the Internal Revenue Service

and the states detailing the amounts we have raised and paid out.

78

We also continue to work on a daily basis to ensure that no person or party is

using the good name of our Fund, or the logo of the IAFF, to defraud the public

in the name of our fallen New York fire fighters. For instance, we recently shut

down one fund-raiser who was soliciting funds over the Internet in the name of our

Fund into an account that had no connection with our Fund. Relying upon the constant vigilance of our Board of Directors, our 245,000 IAFF members, and the state

attorneys general offices, we will continue to make every effort to ensure that no

money is fraudulently raised in the name of our Fund.

My testimony here today provides only a glimpse into the efforts that have been

taken by the International Association of Fire Fighters to address the events of September 11. Like so many other organizations, the IAFF has worked tirelessly to respond to this horrible tragedy. As a result of the careful and meticulous efforts of

everyone involved, the New York Firefighters 9-11 Disaster Relief Fund will strive

to meet the humanitarian needs of the families of our fallen fire fighters with minimal administrative costs and in a straightforward and honest manner. No fire fighter should have to think about who will take care of his family when he is entering

a burning building to save your life. I will be happy to entertain any questions from

members of the subcommittee.

Mr. GREENWOOD. Thank you, Mr. Bollon. Thank you very much

for being with us and for your testimony.

Let me address a question to Mr. Amundsen and Ms. Bove—and

it is the same kind of question that I addressed to Dr. Healy of the

Red Cross. That is this: Can you assure us and the American people that every penny of the $337 million raised so far for the

United Way September 11 Fund is in fact going to go to the purposes for which they assumed when they wrote those checks and

put those dollars into pails, and that is to help heal the wounds

of the families who were devastated on September 11?

Ms. BOVE. First of all——

Mr. GREENWOOD. If you would pull that silver microphone, particularly, is the one that is amplifying your voice.

Ms. BOVE. $337 million has been pledged. Only $250 million has

been collected so far. But the September 11 Fund is committed that

every single dollar, every single penny is going to go to the needs

that were described, which is meeting the needs of victims, families

and communities affected by September 11.

Mr. GREENWOOD. Now, how will you coordinate that? You were

here when we had the two other witnesses here. They received

some funds. Tell us how you are going to coordinate the $250 million or $337 million if you meet—if all of your pledges come in.

How will you—in distributing those funds to families, what will

you take into consideration? Will you take into consideration what

they have received from the Red Cross? Will you take into consideration what they may have received from the Firefighters Fund,

from the dozens of other organizations that are out there, from insurance, from their Federal program? How will you coordinate

what you are doing, if you would intend to, and determine on a

family by-family basis how many of these dollars will go to specific

families?

Ms. BOVE. That is something that the board that was just formed

is considering how we are going to be doing that. From the first

day, we have been meeting, though, on a very regular basis with

representatives from the Red Cross, from Safe Horizon, from Salvation Army, from the various government agencies. From day one

we have supported Eliot Spitzer’s efforts to figure out a way to coordinate it. We actually helped find the volunteers who were putVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
79

ting together the computer program to come up with the consolidated data base. So we very much are supporting it.

I can’t tell you exactly now how we are going to do it, because

there are some shifting sands. We are still finding out, first of all,

not only what all the funds out there are, but we are also beginning to find out what all the needs are. One of the—— Mr. GREENWOOD. Do you have the personnel, sufficient personnel

to review all of these claims?

Ms. BOVE. We are not reviewing claims of individual families. We

are a foundation. The United Way makes grants also to nonprofit

entities. So we work through established nonprofit entities that

have both the personnel and the expertise to do this kind of review.

I am not going to become—— Mr. GREENWOOD. What I understand in some instances individual families, at least my constituent Russa Steiner, received an

actual check from the United Way, and the testimony from her attorney was that the way they understood this was unusual. The

United Way serves United Way organizations that provides services. The United Way has not historically provided cash payments

to individuals. Is it—do you expect that this $250 million, $337 million, that some of that money will go to families in the direct—in

the form of cash payments, or will it only go to agencies who provide services to those families?

Ms. BOVE. Well, it will go to agencies that provide cash payments, as well as services to families. We have worked primarily

through an organization called Safe Horizon, which was formerly

Victim Services, which administers funds for crime victims, and

they have cut 15,000 checks to family, families of victims, and they

are families who are defined much in the way that my colleague

defined them, people who have lost—family members who have lost

lives of a breadwinner, people who have lost jobs, people who have

been displaced from—— Mr. GREENWOOD. Do you know what the range in those checks

is?

Ms. BOVE. The average has been about $900 to $1,000, and they can come back every 2 weeks up to $10,000. This was considered

a very short-term step, and we are now figuring out what the

longer term steps need to be, factoring in what are the various

other funds going to be providing and also factoring in when regulations come out for the settlement that we talked about earlier,

the million dollars. We also want to make sure—one possible program which isn’t cash assistance that might be very helpful that

we are thinking about is some form of case management program

so that every family may have an advocate to help them, not just

today and this week but over time, negotiate some of the various

assistance.

Mental health needs, we have established—we are funding a program that is going to help children who have lost their primary

caretaker, who lost their primary parent in the disaster. So there

are a whole range of needs that we are going to be trying to figure

out, in addition to cash to families.

Mr. GREENWOOD. Okay. My time has expired. The Chair recognizes the gentleman from Michigan, Mr. Stupak, for 5 minutes to

inquire.

80

Mr. STUPAK. Thank you, Mr. Chairman. Mr. Farley, you had indicated that you had those four commitments there that the American Red Cross follows. One of them you said that the donor, when

they send money, they have to restrict it. Right?

Mr. FARLEY. I am sorry?

Mr. STUPAK. That a donor when they send money through Red

Cross, they have to restrict it; otherwise, it goes in the general—— Mr. FARLEY. If the donor restricts their contribution for particular purpose, then we honor that designation, but when we initiate a fund-raising initiative and make a case as to what the funds

are being used—what the need is, the funds that we received, we

presume that because the donor has responded to that without condition, it would be used for that purpose.

Mr. STUPAK. Did you in any of your advertising on the heels of

September 11 tell donors that they should restrict their funds if

they did not want—if they want it to go just to victims or if you

want it to go to the anthrax scare or nuclear scare or telephones,

whatever it might be?

Mr. FARLEY. No, we did not.

Mr. STUPAK. So how would a donor know that?

Mr. FARLEY. The donor would only know what we have stated

publicly about what the uses of—or contributions would be extended to, and we—of course at that point, you know, we didn’t

really know where this was going. We wanted to obviously respond

to the victims, but we wanted to do whatever we needed to do to

be there in the event that, you know, more incidents ensued. So I

think the presumption was in receipt of a gift from a donor based

on an appeal, be it through a PSA or whatever, when we said to

support the victims of this terrorist attack and other emerging

needs, or however that was framed, that when we received a gift,

that we presume that that was the purpose for which it was given,

and it was a signal to us that it should be expended in that manner. At the same—— Mr. STUPAK. I think in your testimony you said $120 million has

gone out. So there is probably about $400 million still sitting there?

Mr. FARLEY. There is about—we have expended about $155 mil- lion. Of that, $120 million of it has gone to direct victim assistance

of one kind or another. We have identified a total of about $300

million in needs that we anticipate to come into play in response

to this disaster. So that leaves a balance of, say, $264 million.

Mr. STUPAK. What is the $300 million anticipated?

Mr. FARLEY. That is for increased disbursements of funds to victims. It is for the cost——

Mr. STUPAK. How much of that 300 is for increase for victims?

Mr. FARLEY. How much of that is for——

Mr. STUPAK. Victims, yeah. Is it in your testimony? I didn’t see

it there.

Mr. FARLEY. The anticipated amount for the immediate relief we

think would be about $209, $210 million for direct victim assistance.

Mr. STUPAK. Of that $300, two-thirds will go——

Mr. FARLEY. Correct.

Mr. STUPAK. And what about the roughly $110 something million

left? What would the other go for?

81

Mr. FARLEY. The other would be used for developing the support

for the military personnel. We have a Congressional obligation to

provide emergency service communications to our military families.

Now, with mobilization into a war, we have an increased responsibility with that, with the mobilization of our service personnel. We

have anticipated services from our chapters to provide mental

health counseling and information on issues such as anthrax, and

we also have direct costs associated with the provision of those

services that provide the 1-800 numbers for victims to call in to

find out what agencies they could connect to, and if there is any

relocation or reunification of families of victims, those are included

in that.

Mr. STUPAK. A suggestion, if your fourth commitment is to make

sure that you honor the intent of the donor, I suggest you make

it very clear in your advertisement what you are going to use the

money for. If people after they are watching this hearing, if they

realize that there is about $540 million that was sent in and only

$120 million has been put out in direct aid, people will be shaking

their heads saying, boy, how do we get a refund. That is why—anyways.

Mr. FARLEY. I think if—Congressman Stupak, if we were to ask

a donor, is it appropriate for us when we have learned that there

has been an anthrax attack to provide information to communities

about that, or if we are asked should we provide particular kinds

of support for response personnel, first responders, which all leads

toward support of victim recovery, I think the logic of that would

be, yes, that would be an appropriate use.

Mr. STUPAK. Well, I am not too sure of that.

Mr. FARLEY. Okay.

Mr. STUPAK. I am sure they probably asked for some time lines.

This is a war? You know, Congress made it very clear this was not

a war. This was an authorization of a use of force, because if we

use the term ‘‘war,’’ and one reason why we did not want to do a

declaration of war, then all the life insurance policies would not

have to be paid if that is a declaration of war. So to help protect

those victims, we did not want to do that. So it brings me a little

concern when you keep saying war.

Mr. FARLEY. Congressman, one point, if I might—— Mr. STUPAK. I will let you go as long as you want, as long as the

chairman—— Mr. FARLEY. Let me make two points. First of all, I was the individual greeted by your constituents.

Mr. STUPAK. I have a glossy of you.

Mr. FARLEY. And you can see I have changed greatly since that

moment of several weeks ago. I would like to say, though, that of

the balance of those funds, the $264 million that we have not accounted for in terms of expending where that would be expended,

I want to point out that that is—those are resources that we anticipate a portion of which will be needed for direct victim support in

the weeks and years ahead because of our experience with other

tragedies, and we think it incumbent on the Red Cross to ensure

that we have the capacity to respond to those needs years later as

a result of this tragedy. So in part, those funds will be used for

that purpose.

82

Mr. STUPAK. Well, you saw the reaction, they didn’t see it that

way.

Mr. GREENWOOD. The Chair recognizes the chairman of the full

committee, Mr. Tauzin, for 5 minutes.

Chairman TAUZIN. Thank you, Mr. Chairman. Let me follow up

on Mr. Stupak’s line of questioning, gentlemen, and I want to read

you two statements you made about Liberty Fund and ask you if

you don’t think they send a very different message. The statement

in your testimony today is that ‘‘Therefore, we established the Liberty Disaster Relief Fund, a separate and segregated account. It

was created to hold and disburse funds related to the September

11 attacks, its aftermath and other terrorist events.’’ That is your

statement today.

Now, I want to read you the definition of the Liberty Fund found

on the Internet when it was announced, and here is the paragraph.

‘‘For this reason, we have created a special fund, the Liberty Disaster Fund. This is a designated disaster relief fund separate and

distinct from the Domestic Disaster Relief Fund and the International Relief Fund. The Liberty Disaster Fund will support the

immediate and emerging efforts of the American Red Cross to alleviate the human suffering brought on by the attacks of the September 11.’’ Is there a difference in those two statements?

Mr. FARLEY. They would suggest that there is a need for further

clarity, but I would say that if we were to ask that if the Liberty

Fund were to be used to provide support for an integrated response

to these kinds of activities, would it not meet the tests of common

sense that 6 weeks, 6 months hence from now if we have another

kind of an incident resulting from a terrorist act—— Chairman TAUZIN. Well—— Mr. FARLEY. It would be prudent for us to use the funds in that

manner.

Chairman TAUZIN. Then why didn’t you announce on October 31

that the American Red Cross had raised enough money to help the

victims of the terrorist attacks and will stop asking for donations?

Do you have some prior knowledge as to how many new terrorist

attacks that there are going to be that you can announce this in

advance?

Mr. FARLEY. Obviously not.

Chairman TAUZIN. No, you don’t. You see, here is the problem in

communication. The problem in communication that Mr. Stupak

pointed out is that when you created the fund, you very clearly

talked about an event, the September 11 event is the genesis for

this fund and the need for Americans to respond as generously as

it had to the victims of this disaster of September 11 in these three

cities. The fact that you say you have enough money in the fund

now to take care of these victims, that you no longer collect money

into this fund seems to bolster that position that it was strictly for

these victims and, therefore, the fund is adequate now and you can

move on to some other important Red Cross initiatives. But then

we learn that you really are putting some of this money into other

Red Cross initiatives, telecommunications upgrades, blood bank,

anthrax, mental health response. I mean, no one is going to quarrel

with you that these are important human needs that the Red Cross

83

traditionally responds to. The concern is for the families who are

obviously victimized on September 11, that America responded generously to the tune of $540 million for them, and now it is going

for other important Red Cross needs for, perhaps, other people,

other victims or other important strategic or logistical needs of the

Red Cross.

When the Better Business Bureau did a survey to see what people’s intent were when they gave, the surveys came back that the

vast majority of people donating expect the money to be used for

the current tragedy, the current problem, not to be put in reserve

accounts for future problems, and that unless you very clearly

specify that you are going to put some of the donations into reserve

accounts, that Americans expect you to use it for those victims, the

present victims, the ones we know about, the ones we saw and see

every day as we look at this tragedy of September 11 and its aftermath, the victims we saw here today at this table.

There is a disconnect here, and I know I sounded hard a while

ago, but I think the representatives of the New York Attorney General’s office sounded equally hard about this. If there is an expectation that you created by not being too specific, by saying this was

a September 11 event fund, that this money should go to these victims, and you now say that you want to use it for other purposes,

you have created a disconnect. And I think that is damaging to the

good faith that exists between the incredible giving heart of America and agencies such as yours that do so much good in using that

money to help victims. And I think there is some damage done

here, and I hope you would help repair it in some way.

Mr. FARLEY. Congressman, we will pay close attention to our

messaging on this, and I think you raised a good point. Obviously

if we solicit funds with the public understanding one thing and

then in fact we do something else, it is against the public trust for

what we have initiated. But I would like to clarify a couple items

about timing and messaging, if you will.

The original announcement of the American Red Cross about

how the funds would be used was developed in a September 20

communication that was sent out to all of Red Cross units and put

on our Web site, and in that document it talks about the uses and

intents for the Liberty Fund. And while the media had reported on

October 29 that only a portion of the funds would be designated

this some way or another, in fact, on October 12 we communicated

again what the intent would be for the Liberty Fund. And I think

it is important to think about the snapshot in time when that October 12 communication was sent. At that time we said—and you

rightly pointed out, Congressman Tauzin, with the previous panel

that we said we would need about $300 million to meet—to respond to the needs that we see then. At that moment, we had

raised about $375 million. So we thought at that point, not knowing where we were going with the nature of the event and how the

public would respond to that in the weeks ahead, that that would

be a prudent allocation to support the needs of the victims, with

anticipating that events beyond, that there are going to be some

needs for the future. So unfortunately the understanding apparently about what we were doing and what we intended to do with

that fund may not have been as clear as it could have been. But

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the intent at the Red Cross and its messaging as early as September 20 clearly stated that the fund—the Liberty Fund, which

was designated in a restricted account, would be used for those

many purposes that you have cited.

Chairman TAUZIN. I just want to point out to you, you have two

groups of people that I think ended up confused. The first was the

donors who thought from your early message that all this money

was going to go to the victims we saw on September 11, and, second, the victims and their families. It was assumed that all this

money was going to be raised to help them out, and now we learn

that there are limits on the help that is coming, because the money

may go to other purposes.

Neither one of those results is very good. And despite all the

great work you do and all the good you do, again, I would urge you

to rethink, perhaps, how you handle this.

Mr. Chairman, I know my time is up, but I think we ought to

see the chart for what it is worth. It is a chart we have that indicates the organization, the amount raised and the amount disbursed to date, and it gives a quick snapshot of all the monies that

are being raised by the major organizations, and the disbursements

as of this date as we have them. I think it is fairly accurate. The

staff has tried to be as up to date as they could with it, and it indicates obviously that all the organizations that are raising money

for the victims of the September 11 event have some way to go before all those monies are properly disbursed.

Recognizing all the logistical problems and all the difficulties in

doing it, obviously, again, the enormous generous heart that America has shared with all of you who serve as intermediaries for the

gifts, is anxious to see that the true beneficiaries of those gifts receive them at some point in the not too distant future.

Thank you very much, Mr. Chairman.

Mr. GREENWOOD. The Chair recognizes the gentleman from Florida, Mr. Deutsch, the ranking member, for 5 minutes.

Mr. DEUTSCH. Thank you, Mr. Chairman. I would like to submit,

of all things, a Sunday story from the New York Post, and the

headline is Families Struggle to Get Funds. I mean, so very time

appropriate. And I will read one short comment from Janet

Collado: ‘‘It’s depressing. You start feeling that it’s more of a handout,’’ who’s been trying to help her Spanish-speaking sister-in-law.

And so, Mr. Chairman, if we can just include that.

Mr. GREENWOOD. Without objection, the New York Post article

will be included in the record.

[The article follows:]

[Sunday, November 4, 2001—Daily News]

FAMILIES STRUGGLE TO GET FUNDS

CHARITIES FACE WOES

By Heidi Evans, Daily News Staff Writer

Hubert Hinds has never asked for anything in his life.

But now that his wife, Clara, a beloved seamstress at Windows on the World, has

been buried, and with his savings virtually gone, the 57-year-old Far Rockaway man

is about to enter the black hole of philanthropy.

When he steps into the white tent of the Family Assistance Center on the Hudson

River and 55th St. tomorrow, Hinds will encounter a bewildering network with links

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to almost 200 charities and more than $1 billion donated to help families hurt by

the Sept. 11 attack.

Hubert Hinds holds a picture of his wife, Clara, who was killed while working at

Windows on the World. ‘‘I was told there are lawyers down there to advise me on

what can be done. I really don’t know,’’ said Hines. ‘‘You hear all the stories.’’ Nearly two months after the attack, with money still pouring in to charities large

and small, there is no simple way for victims’ families to apply for the full range

of benefits and services available to them.

Relatives and friends of the grief-stricken go from one agency to another, sometimes spending morning and night at the pier or on the phone in an effort to get

help. It is a bureaucratic nightmare for both the families and groups trying to do

the right thing. ‘‘It’s a runaround. It’s depressing. You start feeling that it’s more of a handout,’’ said Janet Collado, who has been trying to help her Spanish-speaking sister-in-law,

Sandra Petrocino, get psychological and financial help as well as visas to allow her

parents to come from the Dominican Republic to help take care of her and her two

kids, Keyla, 10, and Alex, 5.

Central Register Eyed

Petrocino’s husband, Manuel, a kitchen worker at Windows on the World, died in

the Sept. 11 attack. ‘‘The one question I hear from a lot of families is: ‘‘Where do I start? They always

had that one person to lean on,’’ said Collado.

Sandra Petrocino, with children Alex and Kayla, mourn Manuel, also a Windows

on the World employee.While steps are being taken to organize this unprecedented

charitable effort, the undertaking is immense. On Friday, Attorney General Eliot

Spitzer announced that a group of major technology and consulting firms agreed to

set up a centralized registry to keep track of giving and reduce duplication of services and fraud. The agencies, including the Red Cross and The Twin Towers Fund,

will share access to a single database.

The idea is modeled on the one used in the aftermath of the Oklahoma City bombing in 1995, which kept tabs on each of the 168 families, what they needed and

what they had been given. Each family also was assigned a caseworker to check on

them several times a year and be their advocate.

But it will be at least another month before the database is up and working in

New York, Spitzer said, leaving people to continue to go from place to place on their

own. In the meantime, there is growing pressure from donors to make sure the extraordinary amount of money collected is going to the families of an estimated 5,000 victims.

‘Huge Dilemma’

‘‘The public needs to understand that we are creating something out of nothing,’’ said David Campbell, a vice president at the Community Service Society of New

York, which is counseling the families of restaurant workers killed in the attack.

The 150-year-old society also is advising the trustees of the Windows of Hope Family Relief Fund, which already has collected more than $2.1 million to benefit

the 250 food service workers killed in the attack, including those who worked at

Windows on the World. ‘‘You can’t create an accountable system overnight. It’s a huge dilemma,’’ Campbell said. ‘‘If you give it away too fast, you could give it to the wrong people. And

if you delay, you run the risk of being seen as unresponsive. It’s sort of a ‘lose-lose’ situation.’’ For the families of the 73 people who worked at the Windows on the World res- taurant on the 107th floor, where dishwashers made as little as $8 an hour, there

are particular hardships, as well as for the groups that want to help them.

Several of the kitchen workers were the sole source of support for their spouses,

many of whom are undocumented. Many workers also left behind—and supported— children who live in other countries. These families are afraid to come forward, worried they will be hounded by immigration officials. ‘‘It’s a mess,’’ said one charity official who asked not to be named.

More Than Just Money

Helping victims of the World Trade Center attack is not just about handing out

money, some disaster experts say. And big relief organizations such as the Red

Cross—which has collected an astounding $547 million for the World Trade Center

families—will need to adapt to the unique set of circumstances.

Nancy Anthony, a key player in organizing the relief effort for Oklahoma City,

said charitable groups will perform a greater service if they help people here plan

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for the next five years of their life, rather than getting them through just the next

six months of paying bills.

‘‘This is not like a flood or hurricane, where people need pots and pans and towels,’’ said Anthony, referring to the typical Red Cross disaster. ‘‘In New York, like

we had in Oklahoma City, you have incredible emotional devastation. People are

going to have long-term mental health issues.

‘‘When you look back, you don’t want to say you did a good job because you handed out the money; a bank could have done that. It’s because you helped people restore their lives, helped them to be independent, to be survivors and to go forward

with their lives.’’

Mr. DEUTSCH. You know, I just want to mention just a—in the

previous panel, I talked about, you know, my experience in south

Florida with Hurricane Andrew, and I want to speak specifically

about the Red Cross, I mean American. Literally, it is one of these

incidences that I will remember the rest of my life, that I went

down to basically what was Ground Zero, a different Ground Zero

at that time, the day after Hurricane Andrew. And if people remember that incident, President Bush came down, but he didn’t go

far enough, and the reality is that the Red Cross was there literally

before the National Guard, I mean the day after Hurricane Andrew, and they were feeding people who didn’t have food and didn’t

have water before there were any governmental entities there. I

mean, I will remember it like it is today, and they had the trailer

out, providing a service literally before the National Guard, and

eventually, if we recall Hurricane Andrew, the Army ended up having to come down. The National Guard was not significant enough,

and they actually called out the Army to provide housing and food

and kitchen service during Hurricane Andrew.

So I think that—you know, as one community who has benefited

directly from the good works of the Red Cross, I think it is significant just to understand in a broad scale day in and day out, year

in and year out the good works that the Red Cross has done.

I want to ask, I guess, two really general questions and give everyone on the panel an opportunity to respond to this. One of the

things I am concerned about is that the public may take away a

wrong message from these hearings. Clearly, we don’t want the

public to think that most of these charities are operating inefficiently or are even engaging in wasteful activities. In fact, they are

not. Therefore, I would like to ask you to tell me what you think

the main message to the public should be regarding these charities.

What is the message that should be coming from this hearing, in

other words? I mean, for each of you if you want to respond to that,

what would you hope that—I assume we are on C-SPAN, people

are watching this, reporters who covered this hearing. What do you

think the message should be of this hearing?

Mr. Bender, if you want to take a shot.

Mr. BENDER. Sure. I think the message is that—two things. One

is that the charities, the Red Cross and the other charities mentioned here and some that aren’t mentioned here, are really on the

ground doing a job, and it is an important job, and you just mentioned that, and I think that is an important message that the public understand and, second, that I think this whole issue of trust

and restoring—having trust—the public having trust in the institutions that in fact are trying to provide the relief is very, very important. And if we can build, and rebuild if we need to, that trust,

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I think that is absolutely essential for the success of our organization and the others that are really trying to perform the service.

Mr. AMUNDSEN. I think as we look at this tragedy, as far as from

the United Way of America standpoint, this is representing all

United Ways across the country. United Way and United Way organizations are on the ground in every community understanding

the impact of this tragedy in all communities. We are working with

the agencies to provide the services necessary to help people cope

with the changing nature of the world, to address the needs of victims and families, some of that through the September 11 Fund,

but even in their own local community with the ripple effect of the

devastation that has happened in the tourism and the airline industries. We are there. We will be there 365 days a year to help

address that issue in those local communities, and we do so in an

effective way. And it is clearly determined by the needs of the community and the volunteers in the community to truly understand

the needs so that the money goes directly to those needs and that

the appropriate people are served.

Mr. DEUTSCH. Thank you.

Ms. BOVE. I guess a message that I think is important to get out

is that victims and families’ emergency needs are being met and

have been from the first weeks, that nonprofits have done quite a

remarkable job of mobilizing quickly, and the point that some of

you made earlier, with very, very little fraud and abuse. And I

think that is an important message to get out. More than a million

people donated to the September 11 Fund, because the New York

Community Trust and the United Way have decades of experience

sorting out how do you identify unmet needs and apply the money

effectively, and the message that needs to get out is that we will

continue to use that expertise in a way to make sure that the funds

entrusted to us are spent to meet not only the immediate emergency needs but the longer term needs that are left in our community.

Mr. BOLLON. Part of the discussion today of the percentage of

money that has been raised, it is the greatest amount that was

ever raised by this country, but we are not looking at also the percentage of people we lost. We lost more people here than we lost

at Pearl Harbor. I lost 340 firefighters, 15 percent more than I ever

lost before. The same way with the civilians and the police department and everybody else. We should have raised that much money,

because of the incident.

And I am a little confused. The chairman when he was asking

his questions on the 5 minutes asked of Ms. Bove, was she going

to take into consideration what was given to the firefighters when

she is considering how much—how to disburse her money. What

does that mean, that I am going to be penalized now because I did

everything that this committee is looking for? We started the fund

right away as a charitable fund, as a 501(c)(3). We have filed for

all the State associations. We got the first distribution right out

there. And because we are doing everything right and held costs

down to three-eights of 1 percent, we may now be penalized and

get less because we have given that money out to our people, if we

have done that, and that is a little confusing. That sends the wrong

message to me, I think, and maybe I misunderstood.

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Mr. GREENWOOD. The time of the gentleman has expired. If I can

clarify, it was not—that was not an advocacy question on my part.

I was not advocating that. I was just trying to determine the methodology of the various charitable organizations.

Mr. Bass, do you wish to inquire?

Mr. BASS. No, I don’t, Mr. Chairman. I just wish to associate myself with the concerns of the distinguished chairman of the committee who asked questions a few minutes ago, and I will yield

back.

Mr. GREENWOOD. Mr. Whitfield, do you care to inquire? I think

in the interest of time, we are trying to wind down, and we thank

you for your patience. You have been here for 4 hours. We thank

you for that. Thank you for your testimony, and we thank you for

the extraordinary good work that you are doing on behalf of the

American people, and we hope you will keep it up. Thank you

again.

We now call the third panel, consisting of Mr. J. Howard Beales,

III. He is the Director of the Bureau of Consumer Protection for the

Federal Trade Commission. And Mr. H. Art Taylor, President and

CEO of the Better Business Bureau Wise Giving Alliance.

Mr. Beales and Mr. Taylor, gentlemen, welcome, and let me

thank you for your forbearance and apologize for the lateness of the

hour and express the appreciation of the committee for your appearance before us.

And Mr. Beales, if you will begin. You are recognized for 5 minutes to provide your testimony.

TESTIMONY OF J. HOWARD BEALES, III, DIRECTOR, BUREAU

OF CONSUMER PROTECTION, FEDERAL TRADE COMMISSION; AND HERMAN ART TAYLOR, PRESIDENT AND CEO,

BETTER BUSINESS BUREAU WISE GIVING ALLIANCE

Mr. BEALES. Thank you, Mr. Chairman.

Mr. GREENWOOD. And if I may ask you to point that silver microphone right to you and have it as close to your mouth as you can

get it, that is great.

Mr. BEALES. Thank you, Mr. Chairman, and members of the

committee. I am Howard Beales, the Director of the Bureau of Consumer Protection of the Federal Trade Commission. I appreciate

the opportunity to appear before you to testify on behalf of the Federal Trade Commission regarding fraudulent solicitations of charitable contributions. I would request that the Commission’s entire

written statement be included in the record of this hearing.

Charitable organizations play an invaluable role in our society,

providing help and assistance to millions of Americans in times of

need, tragedy and disaster. In the wake of the September 11 terrorist attacks on the United States, charitable giving has provided

the citizens of this country, both young and old, a unique, tangible

opportunity to demonstrate both support for the victims of the attacks and the unity of the American people. Millions of Americans

have responded with an outpouring of generosity. Unfortunately,

consumer protection agencies are only too familiar with the risk of

fraudulent fund-raising in the aftermath of such tragedies. This

type of fraud is especially pernicious. It not only preys upon the

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donor, but ultimately injures many others by undermining the

public’s confidence in legitimate charitable fund-raising.

The Federal Trade Commission, in cooperation with numerous

other Federal, State and local consumer protection agencies, has

pursued a three-part strategy to protect American consumers

against fraud. First, we are monitoring developments closely and

systematically to identify possible law violators and sharing intelligence with other law enforcers. Second, we are prepared to act

quickly and effectively if violations are found. And third, we are

educating consumers and businesses about how to spot potentially

fraudulent solicitations.

Immediately after September 11, the Commission began to monitor on a systematic basis consumer complaints, tips from other law

enforcers and watchdog groups and media reports about possible

charity fraud and related scams. A central part of the Commission’s monitoring effort is Consumer Sentinel, a Web-based consumer complaint data base and law enforcement investigative tool.

To facilitate the complaints, the Commission maintains both a tollfree number, 1-877-FTC-HELP, and an electronic complaint form

at www.ftc.gov. Consumer Sentinel also receives complaints from

many public and private partners, including the 64 local offices of

the Better Business Bureaus across the Nation, offices of numerous

States Attorneys General, the National Consumers League and

Project PhoneBusters in Canada. Between September 12, 2001 and

October 25, Consumer Sentinel received 193 disaster-related complaints, only 24 percent, or 46, of which related to charitable solicitations. We have followed up on every complaint, searching for likely scams and have worked with agents and investigators from a

number of other agencies and organizations, including the Secret

Service, FEMA, and the Red Cross in investigating those cases that

looked genuinely problematic. We have found that to date the instances of fraud are few and far between, and we continue to monitor this situation as aggressively as any we have ever pursued.

In addition to monitoring potential frauds, we have worked hard

to educate consumers.

On September 20, our Northeast regional office, which is located

only six blocks from the World Trade Center, held a press conference in New York City, with city, State and Federal agencies

and nonprofit organizations, to announce a coalition to protect New

York consumers and provide essential information during this time

of crisis. The Northeast region staff distributed a new consumer

alert, ‘‘Helping Victims of the Terrorist Attacks: Your Guide to Giving Wisely,’’ which was also posted on the FTC Web site. In a little

over a month, this publication has been accessed almost 10,000

times.

The Commission has also developed a dedicated Web page where

consumers and businesses can get more information about donating

wisely and filing a complaint and a banner ad that promotes the

site. In addition to our work on potential charitable giving frauds,

we are also actively monitoring the Internet to detect a host of

other potential September 11th-related frauds, including items like

home testing kits for anthrax, gas masks and antibiotics. As is the

case with charitable fraud, deception in these areas poses substanVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00093 Fmt 6633 Sfmt 6602 76307.TXT HCOM1 PsN: HCOM1
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1The views expressed in the prepared statement represent the views of the Commission. My

oral statement and responses to any questions you may have, however, are my own and do not

necessarily reflect the views of the Commission or any individual Commissioner. 2 15 U.S.C. § 45(a). The Commission also has responsibilities under more than 45 additional

statutes, e.g., the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq., which governs the privacy, fairness, and accuracy of certain sensitive consumer information; the Truth in Lending

Act, 15 U.S.C. §§ 1601 et seq., which mandates disclosures of credit terms; and the Fair Credit

Billing Act, 15 U.S.C. §§ 1666 et seq., which provides for the correction of billing errors on credit

accounts. The Commission also enforces over 35 rules governing specific industries and practial risk to consumers and will be a top priority for the Commission

and other consumer protection agencies.

In conclusion, I would say that so far, it appears that consumers

have generally shown themselves to be both generous to real charities and aware of the potential for con artists posing as fund-raisers. To consumers I would say, continue to give wisely. If you see

or suspect fraud or deception in this or any other area, please contact us at 1-877-FTC-HELP.

In contrast, to con men or scam artists I would simply say don’t

go there. You will be detected, and there are an array of Federal,

State and local law enforcement agencies anxious to take aggressive action against you.

I would be pleased to answer your questions.

[The prepared statement of J. Howard Beales III follows:]

PREPARED STATEMENT OF J. HOWARD BEALES III, DIRECTOR, BUREAU OF CONSUMER

PROTECTION, FEDERAL TRADE COMMISSION

Mr. Chairman and members of the Committee, I am J. Howard Beales, III, the

Director of the Bureau of Consumer Protection of the Federal Trade Commission.

I appreciate this opportunity to appear before you today to testify on behalf of the

Federal Trade Commission regarding fraudulent solicitations of charitable contributions, especially solicitations relating to the recent September 11th tragedies.1

I. INTRODUCTION AND BACKGROUND

The Commission recognizes the important role that charitable organizations play

in providing valuable services, a role that has become even more critical in the wake

of the September 11th attacks. Solicitations for charitable organizations, and corresponding donations, have increased noticeably in recent weeks. So, too, have concerns about possibly fraudulent solicitation schemes seeking to exploit the overwhelming urge of the American public to aid victims of September’s tragedies. The

Commission has examined every complaint, inquiry, and press report raising any

suggestion of such fraud. In addition, the Commission has surfed the Internet,

reached out to other law enforcement agencies and watch-dog groups, and actively

sought out potential fraudulent solicitors. To date, the findings of fraud are few and

far between, and the Commission continues to monitor this situation as aggressively

as any the Commission has ever pursued. Furthermore, the Commission has

stepped-up efforts to educate consumers and businesses about how to spot potentially fraudulent solicitations.

Unfortunately, but not surprisingly, the potential for fraudulent fundraising may

escalate in the aftermath of national tragedies, natural disasters, local calamities,

and the like. Fraudulent solicitors, who prey upon a donor’s charitable instinct, may

deceive a donor about who they are and what they do with the funds they raise.

The scam artists ultimately derail donors’ charitable intentions, undermine the

public’s confidence in legitimate charitable fundraising, and, in turn, injure those legitimate nonprofit organizations that compete for a depleted pool of charity dollars.

The Commission, which is the federal government’s principal consumer protection

agency, shares the Committee’s deep concern over possible deceptive or fraudulent

charitable solicitations.

Charitable organizations are closely regulated by the states. Most state governments implement detailed registration and reporting requirements that are crucial

to the effective oversight of charities.

Under the Federal Trade Commission Act (‘‘FTC Act’’), the agency’s mandate is

to take action against ‘‘unfair or deceptive acts or practices’’ that are ‘‘in or affecting

commerce.’’ 2 The FTC Act also equips the FTC with a wide array of tools to enforce

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tices, e.g., the Used Car Rule, 16 C.F.R. Part 455, which requires used car dealers to disclose

warranty terms via a window sticker; the Franchise Rule, 16 C.F.R. Part 436, which requires

the provision of information to prospective franchisees; and the Telemarketing Sales Rule, 16

C.F.R. Part 310, which defines and prohibits deceptive telemarketing practices and other abusive telemarketing practices. 3These include the authority to file civil actions in federal district court, as well as to bring

administrative cease and desist actions, against those who engage in deceptive practices. The

FTC Act also enables the Commission to obtain a full range of relief for injured consumers.

Typically these civil actions seek preliminary and permanent injunctions to halt the targeted

illegal activity, as well as redress for injured consumers. 4Section 5(a)(2) of the FTC Act states:

The commission is hereby empowered and directed to prevent persons, partnerships, or corporations...from using unfair or deceptive acts or practices in or affecting commerce. 15 U.S.C.

§ 45 (a) (2).

Section 4 defines ‘‘Corporation’’ to include: any company, trust, so-called Massachusetts trust,

or association, incorporated or unincorporated, which is organized to carry on business for its

own profit or that of its members . . . 15 U.S.C. § 44. 5See Community Blood Bank of Kansas City, Inc. v. FTC, 405 F.2d 1011 (8th Cir. 1969). 6 Community Blood Bank, 405 F.2d at 1019; Ohio Christian College, 80 F.T.C. 815 (1972). 7See FTC v. Saja, 1997-2 Trade Cas. (CCH) ¶ 71,952 (D. Ariz. 1997). Cf. California Dental

Ass’n v. FTC, 526 U.S. 756 (1999). 8 USA PATRIOT Act, Pub. Law No. 107-56, §§ 6102(a)(2), (3)(D), 6106(4), ll Stat. ll

(2001). 9 Riley v. National Fed’n of the Blind of N. Carolina, 487 U.S. 781 (1988). 10Riley, 487 U.S. at 800.

this mandate.3 But Sections 4 and 5 of the FTC Act provide the Commission with

jurisdiction over corporations only if organized to carry on business for their own

profit or that of their members.4 Over the years, federal courts have construed Section 4 to bar the Commission from suing any truly nonprofit organization under the

FTC Act, thereby removing many charitable organizations from the FTC’s scope of

authority.5

However, the Commission does have jurisdiction over a nonprofit organization

that is merely an instrumentality or a shell used to seek direct monetary gain, either for itself or for its members.6 The Commission also has jurisdiction under the

FTC Act over entities that are organized to carry on business for the profit of their

members. These entities include for-profit telemarketers, sometimes referred to as

‘‘telefunders,’’ that contract with nonprofit organizations to perform the nonprofits’ fundraising activities.7 The Commission has used this jurisdiction aggressively to attack instances of fraud.

The recently-enacted USA PATRIOT ACT of 2001 provides the FTC with an additional tool to address charitable fraud.8 The USA PATRIOT law amends the statute

authorizing the FTC’s Telemarketing Sales Rule (‘‘TSR’’) to apply to certain telemarketing activities, including the solicitation of charitable contributions. The Commission is currently considering proposed amendments to the TSR that will implement this new authority.

In addition to the statutory limitations on Commission jurisdiction over some

charities, there are also constitutional limitations. The Supreme Court has held that

fundraising for charities is fully protected speech under the First Amendment and

that state statutes may not require a charity to prove the reasonableness of using

more than 35 percent of its collected donations for fundraising expenses.9 Nor can

state statutes require fundraisers to disclose the percentage of donations the fundraisers keep.10

Against this background to the regulation of charities, the Commission now addresses your particular concern about fraudulent charitable solicitations, especially

those relating to the tragedies of September 11th. The need—and challenge—for law

enforcement here is three-fold: (1) to monitor developments closely and systematically so as to swiftly identify possible law violators, sharing that intelligence with

other law enforcers; (2) to act quickly and effectively if someone violates the law;

and (3) to educate consumers and businesses about how to spot potentially fraudulent solicitations, hopefully minimizing the extent to which deception of contributors

will occur. As set forth below, on the heels of September 11th, the Commission set

up a disaster scam project to accomplish these important tasks.

II. THE COMMISSION’S EFFORTS TO IDENTIFY FRAUDULENT CHARITABLE SOLICITATIONS

AND OTHER DISASTER-RELATED SCAMS

Immediately after September 11th, the Commission stepped-up its monitoring, on

a systematic basis, of consumer complaints, tips from other law enforcers and

watch-dog groups, and media reports about possible charity fraud and related

scams. The Commission reviewed each one and continues to do so today. In addiVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00095 Fmt 6633 Sfmt 6621 76307.TXT HCOM1 PsN: HCOM1
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11See www.consumer.gov/sentinel. 12The CRC now receives over 12,000 inquiries and complaints per week. They cover a broad

spectrum—everything from complaints about get-rich-quick telemarketing scams and online auction fraud, to questions about consumer rights under various credit statutes and requests for

educational materials. Counselors record complaint data, provide information to assist consumers in resolving their complaints, and answer their inquiries. 13The number of complaints the Commission has received is lower than might be expected.

This might be in part due to the fact that victims of fraudulent solicitations often do not know

that they have been scammed and therefore do not file complaints. It might also be in part due

to the Direct Marketing Association’s request that its members that engage in charitable fundraising, and that solicit people and businesses with whom they do not have a previously existing

customer relationship, cease outbound telemarketing fundraising through the end of September.

The announcement about this directive can be found at: http://www.the-dma.org/cgi/

dispannouncements?article=115.

tion, the Commission has surfed the Internet, reached out to other law enforcement

agencies and watch-dog groups, and actively sought out potential fraudulent solicitors. There has been some media coverage warning that scam artists may try to

take advantage of consumers’ desire to help victims of the attacks. The Commission

has not discovered any widespread problem but continues actively to monitor this

area.

A. Consumer Sentinel

A central part of the Commission’s monitoring effort is Consumer Sentinel, a webbased consumer complaint database and law enforcement investigative tool that the

Commission uses to identify targets for investigation.11 Consumer Sentinel receives

complaints and inquiries about all sorts of transactions, including charitable solicitations. The complaints come into Consumer Sentinel from a variety of sources, including from the FTC’s Consumer Response Center (‘‘CRC’’), which processes both

telephone and mail inquiries and complaints.12 For those consumers who prefer the

online environment, an electronic complaint form at www.ftc.gov, available since

May 1998, permits consumers to channel information about potential scams directly

to the CRC and the fraud database.

Consumer Sentinel also benefits from the contributions of many public and private partners. It receives data from other public and private consumer organizations, including 64 local offices of the Better Business Bureaus across the nation,

offices of numerous state Attorney’s General, the National Consumers League’s National Fraud Information Center, and Project Phonebusters in Canada.

The Commission provides secure access to this data over the Internet, free of

charge, to over 300 U.S., Canadian, and Australian law enforcement organizations—

including the Department of Justice, U.S. Attorneys’ offices, the Federal Bureau of

Investigation, the Securities and Exchange Commission, the Secret Service, the U.S.

Postal Inspection Service, the Internal Revenue Service, the offices of all 50 state

Attorneys General, local sheriffs and prosecutors, the Royal Canadian Mounted Police, and the Australian Competition and Consumer Commission.

Consumer Sentinel first went online in late 1997. Since then, the Commission has

upgraded the capacity of the Consumer Sentinel database and enhanced the agency’s complaint-handling systems by creating and staffing a new toll-free consumer

helpline at 1-877-FTC-HELP, and adding several new functions to Consumer Sentinel. In 2000, Consumer Sentinel received over 100,000 consumer complaints. Currently the database holds over 300,000 consumer complaints.

Significantly, the Consumer Sentinel database is fully searchable. This search feature enables users to search the entire database, using certain key words, to identify

specific types of complaints or complaints against specific entities. For example, an

investigator can search for the term ‘‘disaster’’ or ‘‘September 11th’’ and cull specific

disaster-related complaints. The database also features a specific identification code

that enables users to sort complaints specifically involving charitable solicitations.

Since the September 11th events, the Commission has closely and systematically

monitored disaster-related and charitable solicitation complaints in the Consumer

Sentinel database and followed up on any potential leads. Between September 12,

2001, and October 25, 2001, Consumer Sentinel received 193 disaster-related complaints, 24 percent of which related to charitable solicitations. The vast majority of

complaints has been from consumers alerting the Commission to potential scams,

not complaining about being defrauded. The Commission has followed up on likely

scams and has worked with agents and investigators from a number of other agencies and organizations, including the Secret Service, FEMA, and the Red Cross, in

investigating those cases that look genuinely problematic.13

In addition to monitoring Consumer Sentinel for complaints about fraudulent

fundraising, the Commission has also monitored the database and actively surfed

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the Internet for other related consumer frauds. For example, the FTC has seen an

increase in the number of entities marketing bioterrorism-related products. These

include everything from dietary supplements sold as effective treatments against

anthrax or small pox, and home testing kits for anthrax, to gas masks and water

filters. The FTC, along with the FDA, EPA, and over thirty states, is making a concerted effort to search the Internet for deceptive claims about these products. Based

on the results of this effort, the FTC will take follow-up law enforcement action as

appropriate.

B. Information Exchanges with Watch-Dog Groups and Other Law Enforcers

The Commission’s efforts to track and analyze consumer complaints through Consumer Sentinel are complemented by a proactive program to uncover fraud and deception by partnering with other law enforcers as well as public- and private-sector

charity watch-dog groups. For example, the Commission regularly participates in an

e-mail discussion list that has over 100 subscribers from 40 states, consisting of government regulators and law enforcement officials involved in regulating charities

and charitable fundraisers. Subscribers exchange daily messages about a variety of

topics, including possible scams, registration requirements, and recent legal actions.

The Commission also monitors other public Internet sources, including on-line discussions of charity issues.

In addition, since September 11th, the Commission, spearheaded by its Northeast

Regional Office, has reached out aggressively to others in the New York-area law

enforcement community. Further, as discussed below, the Commission’s Northeast

Regional Office has launched a full-scale consumer education campaign. Staff in the

Northeast Regional Office has communicated regularly with a New York based consumer protection group that provides a venue for exchanging information about possible charity or other disaster-related scams. The ad hoc group also includes the

New York City Department of Consumer Affairs, the Attorney General’s Office in

New York, and the New York State Consumer Protection Board. The Commission

has also partnered with the Secret Service, FEMA, and the Red Cross to pursue possible fraudulent fundraisers.

State charity officers are another invaluable source of information. After the September 11th attacks, Commission staff attended the annual Charitable Trusts Solicitations Seminar, sponsored by the National Association of Attorneys General and

the National Association of State Charity Officials. The staff met with state officials,

representatives of the Internal Revenue Service, charity and foundation officers,

fundraising counsel, professional solicitors and private attorneys. Both in closeddoor sessions with other law enforcement officers and in open sessions with representatives from the private nonprofit sector, Commission staff participated in informative discussions about possible fraudulent charitable fundraising, as well as

recent law enforcement actions.

C. Other Investigative Tools

In addition to Consumer Sentinel and exchanges with other law enforcers and

watch dog groups, Commission staff is surveying media reports. The Commission

has closely monitored reports about fraudulent solicitation, has followed up on possible scams, and has worked with other law enforcement agencies in investigating

those that look genuinely problematic.

The Commission’s assortment of investigational tools has enabled it to develop robust experience bringing law enforcement actions against fraudulent fundraisers

and other disaster-related scam artists. These law enforcement efforts are discussed

below.

III. THE FTC’S LAW ENFORCEMENT ACTIVITIES AGAINST FRAUDULENT FOR-PROFIT

TELEFUNDERS AND OTHER DISASTER-RELATED SCAMS

Acting within the parameters of its authority, the Commission has asserted a

strong enforcement presence in the fraudulent fundraising arena. In the past decade, the Commission has filed over 25 cases in federal district courts challenging

deceptive fundraising practices by for-profit solicitors. Many of these cases involved

‘‘badge fraud,’’ where a telemarketer poses as a law enforcement officer or an affiliate and typically claims that he is raising money to support law enforcement efforts

in the donor’s local area. In fact, the telemarketer is not a law enforcement officer

or affiliate, and the money is not used to support local efforts, as promised.

The Commission ultimately obtained injunctions stopping the deceptive fundraising and, in many cases, recovered monetary redress for consumers. The Commission has also obtained injunctions against these for-profit solicitors, which, among

other things, have prohibited deceptive fundraising and other remedies.

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It is the Commission’s experience that meaningful consumer protection also requires coordinated law enforcement with other state and federal agencies. The FTC

has organized two ‘‘sweeps’’ of multi-state, multi-agency law enforcement actions

targeting fraudulent charitable solicitation. In 1997, the FTC announced Operation

False Alarm, which targeted badge-related solicitation fraud. Federal and state officials brought 57 law enforcement or regulatory actions as part of this initiative. In

1998, the Commission announced Operation Missed Giving, which also targeted deceptive fundraising. In that sweep, federal and state officials brought 39 law enforcement and regulatory actions.

In addition, the Commission has experience prosecuting other types of non-charity

but nevertheless disaster-related scams. For example, the Commission is contacting

marketers of home-testing kits for anthrax and demanding substantiation for their

efficacy claims. Drawing on its past experience prosecuting marketers of ineffective

at-home test kits for HIV, the Commission is able to identify possible law violators

and quickly bring them into compliance with the law.

The Commission intends to remain active in these areas in the future. However,

the Commission recognizes that vigilant investigation and law enforcement activities alone cannot wipe out fundraising fraud. As set forth below, meaningful consumer protection also depends on education.

IV. THE FTC’S CONSUMER AND BUSINESS EDUCATION EFFORTS

The FTC’s consumer and business education program communicates anti-fraud

and educational messages to reach vast numbers of people in creative and novel

ways quickly, simply and at low cost. In the wake of the September 11th terrorists

attacks, the FTC has alerted consumers to potential charity frauds. As mentioned

earlier, the Commission’s Northeast Regional Office has been actively involved in

the Commission’s outreach to the New York area after September 11th. On September 20th, the Northeast Regional Office held a press conference in New York

City with city, state and federal agencies and nonprofit organizations to announce

a coalition to protect New York consumers and provide essential information during

this time of crisis. The Northeast Region staff distributed a new Consumer Alert,

‘‘Helping Victims of the Terrorist Attacks: Your Guide to Giving Wisely,’’ which was

posted to the FTC website, www.consumer.gov.

In a little over a month, this single publication has been accessed more than 9,400

times. The Commission also developed a dedicated webpage, where consumers and

businesses can obtain more information about donating wisely and filing a complaint, and a banner ad promoting the site.

The FTC also released other consumer and business information related to the attacks. They include:

‘‘Out of Work? How to Deal with Creditors,’’ (e-mailed to more than 1,500 daily and

weekly newspaper editors). ‘‘Offers to Treat Biological Threats: What You Need to Know,’’ produced in cooperation with the Centers for Disease Control and Prevention and the Food and

Drug Administration. This Alert was e-mailed to consumer and health editors

at more than 17,000 radio and TV stations and daily newspapers nationwide.

‘‘FTC Explains ‘Made in USA’ Standard To Confirm Consumer Confidence’’ (more

than 3,900 web hits to-date).

‘‘Selling ‘American-Made’ Products? What Businesses Need to Know About Making

Made in USA Claims’’ (more than1,600 web hits to-date).

It is worth noting that while the FTC Headquarters building was without mail

service for nine days, the Commission used electronic mail to continue the agency’s

mission of getting practical, plain language information out to the American public.

FTC staff also has been active in the Washington, D.C. area. At a town hall meeting focusing on the local impact of the September 11th events and the anthrax investigations, the FTC distributed more than 1,000 related consumer publications to

District residents. The meeting was hosted by Del. Eleanor Holmes Norton (D-D.C.)

at the Washington Convention Center on October 29.

V. CONCLUSION

Thus far, it appears that consumers have generally shown themselves to be both

generous to legitimate charities and aware of the potential for con-artists posing as

fundraisers. The press has been warning consumers to be wary of possible scam artists trying to take advantage of consumers’ desire to help victims of the attacks. The

Commission has found few such schemes. The Commission will continue to monitor

developments closely, stands ready to take appropriate law enforcement action, and

continues to educate consumers about how to avoid deceptive solicitations and to inform businesses how to comply with the laws.

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I would be pleased to answer any questions.

Mr. GREENWOOD. Thank you, Mr. Beales, for your testimony.

Mr. Taylor, you are recognized for 5 minutes for your testimony.

Thank you for being with us, sir.

TESTIMONY OF HERMAN ART TAYLOR

Mr. TAYLOR. Thank you, Mr. Chairman. The BBB Wise Giving

Alliance is a nationally recognized monitoring organization that

sets accountability standards for charities and other soliciting nonprofits. Often referred to as a charity watchdog, our core mission

is to provide information to donors, to assist them in making

knowledgeable choices about giving. We work with many audiences, including charities, governmental agencies, the media, corporate contribution departments and Better Business Bureaus.

However, the donor is our primary constituent.

We commissioned Princeton Research to interview donors to determine what their expectations were. On a range of charity issues,

the first thing we found is that 86 percent of Americans gave to

charities last year. Therefore, we found that giving to charities in

this country is pretty much a universal experience. And as Congressman Whitfield noted earlier, Americans have very high expectations for ethics and accountability by the charities but are often

frustrated at not being able to find the necessary information to

make giving decisions.

Most people, about 70 percent, said it is difficult to tell whether

a charity soliciting their contribution is legitimate, and many, 72

percent, also say that it is difficult to choose between organizations

that raise money for similar causes. Donors want to know most of

all about charity finances but also want them to be clear about

what they are soliciting for.

Also as Congressman Tauzin noted earlier, people expect the

money to be used for current purposes. Our survey found that 63

percent of the public expects the money to be used for current

needs rather than put into reserve.

Very soon after September 11, we received reports of unsolicited

e-mails and phone calls to consumers that sought donations for victims of terrorist attacks, including requests for the recipient’s credit card numbers. We immediately issued a press release cautioning

donors against fraudulent appeals that seek to use that national

tragedy to take advantage of America’s generosity. This alert provided a series of tips for donors to help them evaluate appeals. We

were very happy that this release was widely used by the media,

and the weekend after we issued the release, we got more than

17,000 hits on our Web site from people looking for those tips.

The very first tip was to be wary of appeals that were long on

emotion but were short on describing what a charity would actually

do to address the needs of victims and their families. We also noted

that charities should be willing to provide basic information that

describes the charity’s programs and finances. Even newly created

groups should have some basic information that describes their

program.

In cooperation with the Better Business Bureau of Metropolitan

New York, we will soon make available a special section of our Web

site that will provide information on organizations soliciting for

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September relief programs, and we hope all the organizations will

provide us the information.

We are still receiving inquiries from potential donors asking specific questions about these charities, but we are also beginning to

hear concerns from those who have already given and who feel

their contributions may not be used as they expected. For example,

a consumer recently wrote, if people knew what their money was

really being used for, that it was not going to be used for the victims and their families, they probably would not have made the

contribution.

The American public has stepped up to the plate and has given

in an unprecedented way. Now the challenge rests with the charitable sector to be equally forthcoming regarding the use of these

donations. Broader accountability is called for. Collaboration is

called for. How the recipient organizations handle this enormous

resource and how they communicate what they are going to do with

these funds will have a long-term effect on what donors do in the

future. We have a number of recommendations which we have submitted for the record, and we would be glad of course to answer

any questions about this event.

[The prepared statement of Herman Art Taylor follows:]

PREPARED STATEMENT OF HERMAN ART TAYLOR, PRESIDENT AND CEO, BBB WISE

GIVING ALLIANCE.

Good Afternoon: I am Art Taylor, president and CEO of the BBB Wise Giving Alliance. I appreciate the opportunity to appear before this subcommittee to report on

our donor education programs and also to share with you some of our concerns arising from September 11 solicitations and the use of 9-11 charity donations.

The BBB Wise Giving Alliance is a nationally recognized monitoring organization

that sets accountability standards for charities and other soliciting nonprofits. The

Alliance is the organization resulting from the recent merger of the Council of Better Business Bureau’s Foundation and its Philanthropic Advisory Service and the

National Charities Information Bureau. Between the two organizations, we have

over 100 years of experience in reviewing and reporting on charities.

Often referred to as a ‘‘charity watchdog,’’ our core mission is to provide information to donors to assist them in making knowledgeable choices about giving. We

work with many audiences, including charities, governmental agencies, charity governing boards, the media, corporate contribution departments, Better Business Bureaus, and nonprofit umbrella organizations. However, the donor is our primary constituent and it is from the position of donor ‘‘stand in’’ that I make my remarks

today.

I can say four things about donors that are relevant to our discussion today. First

of all, there are a lot of them. The Alliance recently commissioned Princeton Survey

Research Associates to conduct a major study on donor expectations as part of the

process to revise our charity accountability standards. Princeton Research interviewed 2000 members of the general public on a range of charity accountability

issues and found that 86% of Americans gave to charity last year. Charitable giving

is almost a universal experience in this country.

Second, as the survey found, Americans have very high expectations for ethics

and accountability by charities, but are often frustrated at not being able to find

the necessary information to make their decisions about giving. Most people (70%)

said it is difficult to tell whether a charity soliciting their contributions is legitimate, and many (72%) also say it is difficult to choose between organizations that

raise money for similar causes. Donors want to know most of all about charity finances, but also important to them are the clarity of a charity’s advertising and promotion and the effectiveness of a charity’s programs.

We were not surprised at these findings. We talk to donors every day who are

looking for information to make informed giving decisions. They want to give, but

they want to make certain their gifts are well used and for the purposes given.

As part of our basic service, the Alliance issues reports on individual national

charities that include an evaluation of the charity in relation to the voluntary CBBB

Standards for Charitable Solicitations. These standards address public accountVerDate 11-MAY-2000 11:57 Dec 14, 2001 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6621 76307.TXT HCOM1 PsN: HCOM1
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ability issues, financial activities such as how much the charity spends on its programs, accuracy of fund raising appeals, fund raising practices and also governance

issues. We focus our reporting efforts on those charities that donors and potential

donors are asking about, some of which are long established, others newly created.

On average, about 75% of these national charities meet all of our standards, and

about 25% don’t meet one or more of our guidelines.

The Alliance reports on individual charities are detailed, often covering several

pages, and set out not only to reveal whether or not the organization meets our

standards, but also information on program service activities, fund raising practices,

charity governance, executive compensation, sources of funds, and how the organization spends its money. Our reports are available directly from our office in Arlington, Virginia, through all 129 local Better Business Bureaus in the United States

and on our website www.give.org. We also issue a quarterly guide summarizing our

evaluation findings and reporting on other topics of interest to donors.

In addition, we issue special alerts and advisories on topics of concern to donors.

These range from tips on police and firefighter appeals, to what you should know

about car donations to precautionary advice in the face of disaster appeals.

My third point concerns the impact of the Internet as a tool for charity solicitations and donations. Our survey research has shown that the Internet is used by

the public more as a tool for gathering information about charities, than as a means

to donate. While over half (56%) of regular online users are very likely to go to a

charity’s web site for financial information if they are considering making a charitable contribution, less than one in 10 (6%) of Americans report having ever made

a charitable contribution of $10 or more online. Our survey also shows that the public is concerned about the privacy and security of their Internet charity contribution

transactions. However, despite this, many more Americans contributed online for

the first time in response to 9-11 relief efforts. If this increased Internet giving is

to continue beyond the current crisis charities must address these concerns.

My fourth point concerns the vulnerability of donors, particularly in the wake of

disasters. Over the years, we have observed that shortly after every major disaster—flood, hurricane, or the Oklahoma City bombing—a flurry of fund raising appeals to help the victims begins. While most of these appeals are well intentioned

and worthy of support, others are not. Americans are very generous and, unfortunately, there are those who are eager to take advantage of this generosity for their

own gain.

Very soon after the September 11th events, we received reports of unsolicited

emails and phone calls to consumers that requested donations for the victims of the

terrorist attack, including asking for the recipient’s credit card numbers. We immediately issued a press release cautioning donors against fraudulent appeals that

seek to use a national tragedy to take advantage of American generosity. This alert

provided a series of tips for donors to help evaluate appeals. A copy is included with

my testimony.

The very first tip was to be wary of appeals that are long on emotion, but short

on describing what the charity will do to address the needs of victims and their families. We also noted that charities should be willing to provide basic information that

describes the charity’s programs and finances. Even newly created organizations

should have some basic information available.

In cooperation with the Better Business Bureau of Metropolitan New York, we

will soon make available a special section on our websites that will provide information on organizations that have been soliciting for September 11 relief programs. We

have requested information from approximately 170 such organizations for this listing. Our objective here is to provide a central information resource to donors who

are responding to appeals or who are looking to direct their support to specific types

of assistance.

We are still receiving inquires from potential donors asking about specific charities. But, we are also beginning to hear concerns from those who have already

given and who feel their contributions may not be used as expected. For example

a consumer recently wrote: ‘‘We have donated $130 to the wtc disaster fund and my

employer has graciously matched that amount. We have now found out that our

money may be used for other things. We insist that our monies be used for what

they were intended. We would like our funds to be placed in an account specifically

used for the wtc disaster or be promptly returned so that we may give it to a charity

that will adhere to our wishes.’’

Or another who said ‘‘if people knew that this money was not really going to help

victims’ families with the things they really need, like with bills because of the loss

of an income, they would in many cases never have given the money they did. People would be outraged to hear this.’’ Another stated ‘‘I am appalled.’’ The messages

are consistent—‘‘I gave to help the victims and now I am hearing that my donation

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will not be used as I intended.’’ I believe this is only the beginning of these complaints.

We are at a critical juncture here. The American public has stepped up to the

plate and given in an unprecedented way. Donations total over a billion dollars and

are growing. Now the challenge rests with the charitable sector to be equally forthcoming to the public regarding the use of these donations. Broad accountability is

called for. How the recipient organizations handle the enormous resources they have

been given and how well they communicate with the public about what they have

done and plan to do in the future will have an impact on future charitable giving

at all levels. There is a lot riding on this.

On our website, we have posted a number of recommendations to charities that

we believe will help achieve this accountability and can help assure donors that

their confidence in giving is well placed. Our recommendations, among other things,

include the need for all organizations to: plan for a full accounting of all funds

raised and all expenditures by year’s end, regardless of the size of the organization;

provide for clear descriptions of the programs or services in all future fund raising

appeals so that donors and potential donors will know the specific ways that their

donations will provide assistance; and maintain strong internal controls on income

and expenses. Finally, we recommend that charities establish a board-approved plan

for how contributions will be spent and a projected time line for these expenditures

and revisit this plan as needs evolve.

Again, I appreciate the opportunity to be with you today and look forward to answering any questions.

Mr. GREENWOOD. Thank you, Mr. Taylor, for your testimony as

well.

Let me just warn everyone that the bell is going to ring in about

2 minutes, which will signify that we have a series of votes, and

so you are going to get to go home for dinner early tonight. Let me

ask a question that I think each of you might be able to respond,

you, Mr. Beales, in terms of what the law says, to the extent that

it does say anything; you, Mr. Taylor, in terms of what your organization recommends, and I know you have got a series of great recommendations. I have looked at the Better Business Bureau’s Wise

Giving Guide, Donor Expectations Defined, Giving in the Aftermath of September 11. It is a great document, and other documents

as well.

Yesterday I went into a department store and I bought this necktie that has flags on it, and I noticed on the table of neckties with

flags on it, and almost every one of them had a tag attached to it

that said a percentage of the profits or a percentage of the costs

or a percentage of the proceeds from this purchase will go to a fund

related to the events of September 11. I realize that I had no way

of knowing what that percentage would be, and we already have

seen, and I am sure we will continue to see, a plethora of products

and maybe perhaps services, advertised in this way. Some of it will

be very, very legitimate, and some of it will be a scam.

Beginning with you, Mr. Beales, and then going to you, Mr. Taylor, A, what does the law say, if anything, about this, because 100

percent of the profits could mean that the company leadership

takes a million dollars in salaries and then the profit is a couple

dollars and that goes to a fund. What does the law say about how

these representations are made, Mr. Beales, and Mr. Taylor, what

should a smart shopper or smart contributor do to protect themselves to make sure that significant portions really get to the needy

folks as opposed to just a come-on to sell product.

Mr. Beales.

Mr. BEALES. Well, from our perspective, the question would be,

is the original claim that they made a contribution deceptive? Is it

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likely to mislead consumers who are acting reasonably about something that is important? I think there is no question it is important, and so the question would be, did they actually give the

money? And if they promised in your hypothetical 100 percent of

profits and there were no profits and they didn’t tell you that, then

I think that would be a problem. That would be one that we would

be very—— Mr. GREENWOOD. Will the FTC—how do you regulate this? There

will be thousands of products, if there aren’t already, with labels

and tags attached, making a claim that some portion of the proceeds go to the World Trade Center Fund or what have you. What

does the FTC do in terms of looking into this? Is it on a complaint

basis only?

Mr. BEALES. It is certainly not complaints only. On anything

where we had some—where we had any indication, whether it was

a complaint or maybe it is a complaint from one of the potential

recipient organizations that they are not getting money from these

groups, then we would ask to see what was the evidence that supported the original claim. We could do that for anybody and would

if there was any indication at all that there might be a problem.

Mr. GREENWOOD. Clearly, if the representation made is that a

portion or a significant portion of the proceeds shall go to the victims, it is going to be very difficult, I would assume, to enforce any

existing law, regulation, since these are such nebulous terms.

Mr. BEALES. Well, I think that we would interpret the proportion

or the portion kind of claim as saying that it was some appreciable

portion. If it is merely a trivial proportion, then I think that would

be a claim that is deceptive.

Mr. GREENWOOD. And they would violate which law?

Mr. BEALES. Section 5 of the Federal Trade Commission Act.

Mr. GREENWOOD. Okay. Mr. Taylor, what would you recommend

to shoppers such as myself purchasing neckties and other items in

terms of really having the knowledge to back up the claim?

Mr. TAYLOR. Congressman, I would first say, if you like the tie,

buy it, but don’t buy it because you think money is going to victims. It may in fact go to victims, but who knows. If you want to

make a contribution, make a contribution directly to either the organization or to the fund that can serve the needs of the victim.

We encourage all of our donors to ask questions, though. I think

that is the most important thing you can do to protect yourself. If

you want to know how much is going, ask. Get it in writing.

Mr. GREENWOOD. Okay, thank you for your comments. The gentleman from Florida, Mr. Deutsch, is recognized for 5 minutes.

Mr. DEUTSCH. If either one of you can give us a sense of the allegations of fraud involving any of the charities that have been raising funds related to the September 11 offense? I mean, have

you——

Mr. TAYLOR. Yeah. What I can say is that we haven’t uncovered

any specific fraud, but early on, we did see some questionable solicitation practices. We noticed that there was a lot of solicitation

going on in the street door to door, phone calls, asking for credit

cards and spam e-mails and things of that nature, but we haven’t

uncovered any specific fraud at this point. But we do have our bureaus on alert to receive any complaint that they might uncover.

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Mr. DEUTSCH. Mr. Beales.

Mr. BEALES. We have not seen instances of what we would call

fraud. We have seen some potential problems that were very quickly fixed or very quickly ceased, but we have not seen any indication

in any of the complaints we’ve pursued of something we’ve called

fraud. And we have been looking very actively following up every

complaint we get about fund-raising matters.

Mr. DEUTSCH. Both of you sat through the several hours of hearings that we have had, so you heard a lot of discussion about the

Red Cross and its solicitation and its use of funds related to its

Liberty. How would you describe that? Do you have any issues that

you would raise with the Red Cross in terms of how the solicitations occurred? Would you advise them in any direct or indirect

way? Was it a good way—in the hindsight of, you know, time,

would you recommend that they have done it differently?

Mr. TAYLOR. I think that the challenge before us today is to get

an organization like the Red Cross to appreciate that people see

their money going directly to victims, and they do not see their

money being used for longer-term-type needs. As our survey points

out, most people expect the money to go for current needs, and this

notion that money is going to be put in a reserve will be very troubling for donors.

Mr. DEUTSCH. Mr. Beales?

Mr. BEALES. Well, I think our advice to anyone would be the

same, is really be clear about what it is you’re asking and what it

is you are going to use the money for, and be as clear as possible

so the consumers will understand and can decide whether that’s

something they want to contribute their money to or not.

Mr. DEUTSCH. And again, you gave us sort of a political answer,

which is fine. I just want to press you a little bit. Based upon what

you know what occurred, would you critique what they did in the

hindsight of time that—was it correct, or was it incorrect? Would

you advise them to do it differently in the future?

Mr. BEALES. We have not looked closely. We do not have jurisdiction because the Red Cross is not for profit. We have not looked

closely at the advertising or the claims. And without doing that, I

don’t think I could offer an opinion.

Mr. DEUTSCH. The last question that I would have is related to

and for either one of the other panels. We didn’t have a chance to

talk about it. There’s this whole issue that is coming up as it relates to Congress in terms of the victims’ compensation fund and

the issue that charitable contributions could be considered an offset

of that fund. Do either one of you have an opinion of whether or

not that would be an appropriate offset or not in terms of the victims’ compensation fund?

Mr. TAYLOR. Well, I think it would have been ideal if the American public’s contributions toward the relief effort would have been

put to immediate needs, which is what they expected, and then the

fund which the Congress is hoping to set up would be used to take

care of the more long-term needs that are still being uncovered. I

think part of the problem that we’re hearing—that we’ve heard

today is that the charities are trying to figure out what longer-term

needs are, and the public really expected them to deal with the immediate needs.

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Mr. DEUTSCH. Mr. Beales?

Mr. BEALES. I’m glad that we don’t have jurisdiction in this area

and you have to wrestle with this difficult problem.

Mr. DEUTSCH. I yield back.

Mr. GREENWOOD. Thank the gentleman.

The gentleman from New Hampshire is recognized for 5 minutes

to inquire.

Mr. BASS. Thank you, Mr. Chairman.

Mr. Beales, if I could read from your testimony here as a preface

to my question, you state on page 3, and I quote, charitable organizations are closely regulated by the States. Most State governments implement detailed registration reporting requirements that

are crucially effective oversight of charities. Under the Federal

Trade Commission Act, the Agency’s mandated to take action

against, quote, unfair or deceptive acts or practices that are, quote,

in or affecting commerce. The FTC also equips the FTC with a wide

array of tools to enforce the mandate, but section 4 and 5 of the

FTC Act provide the Commission with jurisdiction over corporations only if organized to carry on business for their own profit or

for that of their members. Over the years the Federal courts have

construed section 4 to bar the Commission from suing any truly

nonprofit organization under the FTC Act, thereby removing many

charitable organizations from the FTC’s scope of authority.

You’ve heard we’ve had some interesting discussion here today.

In light of that, do you think the FTC needs additional authority

to protect consumers from false and misleading practices involving

charities?

Mr. BEALES. The USA PATRIOT Act gave us additional authority

under the Telemarketing Sales Act because it extended that act to

cover charitable solicitations. We are in the process of exploring the

changes in our telemarketing sales rule that we should make in

order to implement that statute, but there clearly is an expansion

of our jurisdiction that resulted from that act.

The second point I’d make is in the cases we’ve seen of charitable

fraud, it has not been particularly difficult to argue that the fundraiser really was for profit and/or that the charity was essentially

a front and to pierce that front, to argue that this really was for

someone’s profit. And we have been successful with making that

argument in the courts. So for the kinds of things that I think are

the problems for the fraudulent solicitations, I think we have

enough authority in order to accomplish that mission.

Mr. BASS. Let me just expand on that a little bit further. Suppose a nonprofit or a charitable organization says that they are

raising money for one purpose and then uses it for another. That

would not come under the jurisdiction of the FTC. But if that were

a for-profit corporation, you’d be able to sue them. Do you think

you should have the ability to do the same thing that you do for

for-profit corporations for not-for-profit corporations?

Mr. BEALES. Well, I think when you get into legitimate not-forprofit organizations, the first amendment issues involved in a hypothetical like that get very much more difficult. It’s not being done

to raise—it’s not being done for anybody’s profit. It’s being done in

pursuit of a cause as the members—as the members of that organization see that cause. I mean, the Supreme Court has said you

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can’t require disclosure of the fraction of money that goes to fundraising. I think requiring more information about the specific uses

would raise very similar difficulties under the first amendment.

Mr. BASS. Thank you, Mr. Chairman.

Mr. GREENWOOD. The Chair thanks the gentleman.

The gentleman from Kentucky is recognized for 5 minutes.

Mr. WHITFIELD. I just have a few brief questions. I wanted to ask

Mr. Taylor, the Better Business Bureau Wise Giving Alliance, is

that a part of the Better Business Bureau?

Mr. TAYLOR. We are an affiliated organization of the Better Business Bureau, but we are a separate (c)(3) charitable organization

ourselves.

Mr. WHITFIELD. So you are affiliated, but a separate organization

run independently?

Mr. TAYLOR. Yes.

Mr. WHITFIELD. And your mission or purpose is primarily to

focus on charitable organizations and whether or not they meet certain standards; is that correct?

Mr. TAYLOR. That’s correct. We set standards for charities, and

we evaluate them when we’re asked to to see if those organizations

meet our standards. And our—what we see our role is is a standin for the donor essentially. We want to give the donor a voice with

the charitable organization.

Mr. WHITFIELD. Not having had the opportunity to look at this,

but this is your donor expectations defined, and they have a list of

charities, and some of them have met standards, and they have a

check by their names. Others have not, and they would list like

standards not met, A1, B1, B2. I guess that refers to some standard that your organization has developed.

Mr. TAYLOR. That’s right. In the back of our guide there is a listing of all of our standards. So they are referenced by alphabet, and

you can tell whether that standard is met or not.

Mr. WHITFIELD. How is your organization financed?

Mr. TAYLOR. We are financed, like most charities, with individual

contributions and foundation gifts and other sorts of charity.

Mr. WHITFIELD. I think you do a good job. I yield back my time.

Mr. GREENWOOD. I thank the gentleman for yielding.

Thank you, Mr. Beales, thank you, Mr. Taylor, for your testimony and for your forbearance through our 41⁄4 hour schedule. This

hearing is now adjourned.

[Whereupon, at 6:45 p.m., the subcommittee was adjourned.]