Good will gone to waste in the wake of 9/11

The 9/11 terrorist attacks inspired a resolve among Americans to do something – anything – to assist the victims and their families.

That drive led millions to open their wallets. So much money flowed into charities in the months following 9/11 that even reputable organizations struggled with how to manage and spend it. A few simply took advantage of Americans’ generosity.

An investigation by the Hartford, Conn., newspaper has revealed how one Gig Harbor man found himself uniquely positioned to capitalize on the outpouring of good will following 9/11.

In August 2001, Stephen Careaga, a former volunteer firefighter and reserve police officer, set up a small nonprofit called Fire Donations to help him sell computer software to rural fire departments.

When the planes struck the World Trade Center, Careaga’s Web site was the only fire-services charity on the Internet equipped to take online donations. At one point, the site was taking in $250,000 a hour.

In all, donors contributed $11 million. The Hartford Courant reported that only 65 percent of the money went to the people it was intended to help before the charity dissolved in 2005. That’s the bare minimum recommended by many charity watchdogs, although most respectable nonprofits do much better.

But Careaga had promised that the money would go directly to the spouses and children of firefighters and rescue workers who lost their lives at the World Trade Center.

Even worse, many of his supposed overhead expenses were questionable. They included six-figure salaries for him and an associate, legal fees to a board member’s law firm and payments to a software company that Careaga created.

Perhaps the most charitable thing that can be said of Careaga is that he was out of his depth. His operation lacked safeguards – such as prohibitions against doing business with a board member – that help ensure donations are managed wisely.

Donors, too, could have been more careful. The nonprofit’s lack of a track record should have been a huge red flag.

Americans’ generosity is only as good as the organizations through which it is expressed. Giving to charities that do the most good dollar for dollar has a compounding effect: It makes sure your money reaches those in need, and it discourages those who would take advantage of tragedies.

On the Web

One of the best donor-assistance resources is Charity Navigator (charitynavigator.org) which evaluates the financial health of more than 5,300 of America’s largest charities.

In Washington, another resource is the secretary of state’s office. Go to secstate.wa.gov/charities to check on a charity’s registration and find out what percentage of revenues it spends on actual programs.