Minnesota attorney general sues Savers thrift store chain

Minnesota is ratcheting up its fight with the international thrift store chain Savers.

State Attorney General Lori Swanson sued the secondhand retailer in Hennepin District Court on Thursday, saying Savers is seriously misleading the public about how much of the proceeds from donated clothing and furniture actually go to charity.

Locally, Savers collects and sells secondhand items for organizations such as the Epilepsy Foundation of Minnesota and Vietnam Veterans of America. Three other charities cut their ties with Savers after Swanson released a scathing compliance report in November that took Savers and its partner charities to task for mishandling donations.

The lawsuit claims eight separate counts of charities law violations. The suit also names Apogee Retail LLC, the fundraising subsidiary of Savers, as a defendant.

Savers, based in Bellevue, Wash., bills itself as the largest retail thrift store chain in the country, with annual sales of more than $1 billion. It's privately owned by two private equity groups and company executives, and operates about 15 stores in Minnesota under the names Savers, Unique Thrift and Valu Thrift.

In a statement, Savers President and CEO Ken Alterman expressed disappointment that Swanson filed the lawsuit since the company has been changing practices in response to her concerns.

"Rather than allow these changes to take place and then evaluate their effect, the AG's office has decided to file this lawsuit and put more than 25 years of positive community impact and millions of dollars in annual charitable funding at risk," Alterman said. "The money we pay our charitable partners furthers medical research and supports veterans and their families across Minnesota. We take this mission seriously, and we now have no choice but to vigorously defend our business and we are confident that we will prevail."

At a news conference Thursday, Swanson called Savers' practices a "triple scam," and said she has no reason to think it's unique to Minnesota. Only a small fraction of the money Savers makes from selling used clothes in its stores ends up at the charities, she said. Typically the company pays the charities about 40 cents per pound of donated clothing, which works out to pennies for a shirt that Savers might sell for $6.

In the case of non-clothing goods such as furniture, Savers pays charities nothing at all.

Swanson also said donations are commingled so that proceeds from donations meant for one charity might wind up at another, and that the company conceals its role as a for-profit fundraiser.

At the news conference, three Twin Cities residents spoke about how they had no idea that most of the clothes and households items they gave to Savers were benefiting a for-profit corporation.

Anne Hallgren, of St. Paul, said she donated her expensive power wheelchair to Savers last fall with the understanding it would find a home with a needy disabled veteran. To get the wheelchair ready for a new owner, she had upgraded it with new wheels, joy stick and battery.

Hallgren, who has multiple sclerosis, said she doesn't know what became of the wheelchair that her family dropped off at a Savers' "Community Donation Center" in the Sun Ray Shopping Center in St. Paul, but learned that it likely did not go to a veteran.

"I felt very angry and very betrayed," Hallgren said.

Sue Kirchoff said that after the deaths of her aunt, mother and husband in recent years, she made several donations to the Disabled American Veterans and the Epilepsy Foundation. Trucks for the organizations hauled away the items from her Minneapolis house.

"It makes me think I should donate directly to the charity," Kirchoff said.

Swanson sent her compliance report to the Internal Revenue Service last fall, and said her office is communicating with the agency about the issues.

People who took tax write-offs after donating used goods to Savers won't get into trouble with the IRS, Swanson said, because the deductions were made in good faith.

Since the report went public last fall, three of the six local charities involved cut ties with Savers: True Friends, Courage Kenny Foundation and the Lupus Foundation of Minnesota.

Three others still do business with Savers: Epilepsy Foundation of Minnesota; Disabled American Veterans, Department of Minnesota; and Vietnam Veterans of America, Swanson said.

Joshua Vrtacnik, director of operations at the Disabled American Veterans, Department of Minnesota, said Savers has been a source of revenue for his organization. The lawsuit "is kind of an unexpected blow," Vrtacnik said.

Vrtacnik said his organization tried running its own thrift stores to raise money, but the venture was too expensive. The Savers arrangement is the "steadiest, most stable and predictable source of revenue that we've come across so far."

Donations have not dropped off since the Savers issues were publicized, Vrtacnik said.

Kris Kewitsch, executive director of the Charities Review Council in St. Paul, said Swanson has brought to light information the public needs to know. "Transparency around contributions is of the utmost importance," Kewitsch said. "It's about making informed decisions."

Jennifer Bjorhus • 612-673-4683