Red Cross Refuses to Disclose Info on Sandy Spending Claiming “Trade Secrets”

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Red Cross

June 27, 2014; Mother Jones

NPQ has previously written about ProPublica’s investigation of the Red Cross’s spending on Sandy, but here is an interesting update. ProPublica filed a public records request for information the Red Cross had been required to provide to the N.Y. attorney general’s office. But law firm Gibson Dunn, representing the Red Cross, appealed to the attorney general to block some of the Sandy information under the Freedom of Information Law’s trade secret exemption.

Trade secrets?!

Gabrielle Levin of Gibson Dunn wrote in a letter that the documents include “internal and proprietary methodology and procedures for fundraising, confidential information about its internal operations, and confidential financial information,” If those details were disclosed, “the American Red Cross would suffer competitive harm because its competitors would be able to mimic the American Red Cross’s business model for an increased competitive advantage.”

Ben Smilowitz of the Disaster Accountability Project, comments, “Invoking a ‘trade secret’ exemption is not something you would expect from an organization that purports to be ‘transparent and accountable.’”

But the attorney general’s office agreed to withhold portions of the documents that “describe business strategies, internal operational procedures and decisions, and the internal deliberations and decision-making processes that affect fundraising and the allocation of donations,” finding “that this information is proprietary and constitutes trade secrets, and that its disclosure would cause the Red Cross economic injury and put the Red Cross at an economic disadvantage.”

NPQ will keep you updated on this.—Ruth McCambridge

  • Paul Jolly

    Listening to the advice of lawyers can cause an organization to so stupid things….

  • Anne Marie Borrego

    Contrary to what is stated in the article, the American Red Cross does provide information about our spending on disasters. The Red Cross has several publically available resources to ensure those we help and the general public are aware of how donations enable us to meet the short and long-term needs of communities impacted by disasters such as Hurricane Sandy.
    Those can be found here:

  • Karen Horn

    Who knew re-allocating donations and violation of donor intent could be defined as “trade secret”, though?

  • Jared Skok

    Without being privy to all the details, I offer up the following observations and comments.

    First, the Red Cross – like the United Way, Salvation Army, Feeding America, etc. – is a non-profit “business.” Its product is, in this case, disaster relief services and its sales, so-to-speak, are in the form of charitable donations. It is in competition with other non-profit businesses for scare philanthropic dollars. The “non-profit” part of this and any other like organization is merely how the IRS approaches taxing its sales revenue (i.e., donations). In keeping with this rationale, I am in agreement with the folks at Gibson Dunn that the Red Cross’ fundraising tactics, much like a for-profit business’ sales tactics, are trade secrets. Should the Attorney General’s office pursue a case against the Red Cross, and a court find its fundraising tactics to be illegal, then said tactics should be disclosed as a matter of public record as well as the reasoning behind any ruling.

    Second, while I believe the Red Cross’ fundraising tactics to be a protected trade secret, I do not believe its process for disseminating donated funds to disaster victims can be considered trade secrets, and therefore must be disclosed. The aforementioned preferential tax treatment of non-profit businesses like the Red Cross is granted under Section 501(c)(3) of the IRS Code requiring that the funds these groups raise serve the greater good. I would argue that preferential tax treat of these funds make them public dollars akin to tax revenue, and like the Federal Government, non-profits should have no choice but to disclose how they spend, or reallocate, public/taxpayer dollars.

  • G. M. Ravetto

    For all the good the American Red Cross does, all too often they are their own worst enemy when it comes to protecting their brand. This is not the first time they have self-inflected black ‘n blue marks on their logo. Makes one wonder if it is arrogance or ignorance.

  • Rick Cohen

    or is there, in the case of the Red Cross and so many others, a problem of size and scale, that some organizations, at some levels of scale, become too large to be or feel beholden to and accountable to their constituencies? Our sector idolizes “scaling up” and equates size and growth (frequently, though not always) with organizational progress. Do you think that in some cases, size and scale make it difficult for some nonprofits to remember, honor, and live up to the expectations of their stakeholders?