Kars4Kids barely mentions its charity is mostly for Orthodox Jewish kids, officials warn
LAKEWOOD — Officials out of state say New Jersey-based Kars4Kids misleads would-be donors about its charitable work — obfuscating just how much it spends, and rarely mentioning that its charity is focused on Jewish children from New York and New Jersey.
Minnesota Attorney General Lori Swanson, in a compliance report issued last week, said car donations from 5,800 residents of her state raised more than $3 million from 2012 through 2014 — but the group only spent $11,600 to benefit Minnesota residents in that time. Just three kids from that state benefited from Kars4Kids over that period, she said.
Instead, the bulk of its fundraising goes to help Orthodox Jewish children in New York and New Jersey, with a focus on summer camp programs and tuition assistance, Swanson said. And she said Kars4Kids overstates its charitable spending — playing accounting games to make it look like some of the $38 million it spends a year on advertising is really for charitable purposes.
"Donors need accurate and straightforward information to make informed choices," Swanson said. "We hope this report sheds greater transparency on Kars4Kids, one of the nation's largest vehicle donation programs."
But Kars4Kids, in a statement cited by Minnesota publications including the Star Tribune, defended its practices — saying that because it's located in the Northeast, "many of our programs and recipients naturally come from this area."
“As the attorney general’s report makes clear, there has never been any question of diversion of funds from the charity," the statement reads. "We believe Minnesota residents understand that charity needs cross state borders and appreciate that their generous donations to Kars4Kids help children both in and out of state.”
Calls and emails to Kars4Kids from New Jersey 101.5 have not yet been returned.
It's not the first time Kars4Kids has come under criticism. In March, watchdog group Charity Watch flagged Kars4Kids' close relationship with Oorah — a charity based in the same Lakewood office as Kars4Kids, sharing the same personnel. Donations to Oorah account for about 90 percent of Kars4Kids' actual charitable spending, Swanson said in her report.
"The Kars4Kids commercials claim that the charity provides for 'quick and easy' pick up of car donations, and that the car donations will in some way be used for the benefit of kids," Charity Watch said at the time. "An important question potential donors should ask, though, is: Just how much do kids benefit from the cars donated to Kars4Kids? Also, with hundreds of millions of kids in the world, exactly which kids will benefit, and how are those kids helped?"
It says Kars4Kids never mentions in its ads donations will specifically help Jewish children, and that a visitor to the group's website must scroll "all the way down to the fine print" alongside a copyright notation to learn it's "dedicated to addressing the educational, material, emotional and spiritual needs of Jewish children and their families."
It also paid out settlements in 2009 after being accused of misleading donors in Oregon and Pennsylvania, not making it clear enough that donations would specifically help children in certain Jewish communities, according to reports in the Mercury News and the Mail Tribune.
"In CharityWatch’s view, the Kars4Kids ads deceive potential donors by failing to inform them that donated cars will benefit a Jewish organization and kids of Jewish faith," the group said.
However, as of Tuesday, Kars4Kids' homepage included a description of its work that specifically noted its ties to the Jewish community and Oorah. It wasn't immediately clear how long that description had been in place.
"A child's life is his home, school, friends and community. It takes a positive experience in all arenas to build a healthy child," the site reads. "We're a registered nonprofit Jewish organization who, together with Oorah, our sister charity, help thousands of children develop into productive members of the community."
Swanson's report said between 2012 and 2014, Kars4Kids made more than $80 million on proceeds from the scrapping of around 160,000 cars. Only about half of that went to charity work — mostly through Oorah — with the rest going to advertising and overhead, her report said.
Swanson said Kars4Kids used two "reporting tactics," Swanson said Kars4Kids had found ways to make it look like more of the money it raised was being donated to charity.
She said it spent $12 million on "fundraising ads" out of a total advertising budget of $38 million, but described that spending as charitable work because it mentioned the Kars4Kids website. She said it also reported the net proceeds from car sales instead of the gross proceeds, "thereby failing to disclose another $9.7 million it spent on fundraising costs associated with the processing of donated vehicles."
In all, Swanson said, the company claimed to have spent 63 percent of the proceeds from vehicle donations on charity work — but actually only spent 44 percent.
The Charity Watch report said Kars4Kids President Eliyohu Mintz made $109,760 in compensation based on the fiscal year that ended in December of 2015 while General Counsel Bentzion Turin made $100,441 during that same time.
Swanson's report also said Kars4Kids and Oorah lost more than $9 million in real estate investments that were managed by Mintz's cousin since 2007. That real estate, she said, included an outlet mall, strip mall, and hotel in Staten Island, and a condo development in New Jersey.
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