Car Donation Charity Sued by Charity Fundraiser

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A lawsuit against Cars 4 Causes® was filed this week in the California Superior Court for the County of Los Angeles for alleged failure to pay funds owed to its car donation fundraiser.

Throughout CD's (Charity Development's) performance of the contract, CD repeatedly reminded C4C (Cars 4 Causes) of its obligation to pay the charities, and that payment to the charities was a priority.

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Cars 4 Causes®, one of the nation's leading car donation charities, was sued this week by a professional fundraiser for allegedly failing to pay funds owed to the fundraiser and to charities on whose behalf Cars 4 Causes accepts donated vehicles. The suit, filed in the California Superior Court for the County of Los Angeles (Central District #BC 437065), further alleges that the Board of Cars 4 Causes failed in its fiduciary duty to properly oversee the organization's business practices, conflicts of interest and finances.

Charity Development, LLC, the fund-raising firm that filed the May 4 lawsuit, was hired by Cars 4 Causes in 1998 to handle the logistics of assessing, repairing, storing and selling donated vehicles. Tim Finnigan, owner of Charity Development, LLC, asserts that, since then, his firm has returned to Cars 4 Causes a higher percentage of proceeds than any other fundraiser in the business; also, that more than 87 percent of the gross selling price of every vehicle donated to Cars 4 Causes and sold by Charity Development has gone to Cars 4 Causes.

Cars 4 Causes terminated its contract with Charity Development in May. The lawsuit, filed by the Law Offices of Martina A. Silas, Valley Village, Calif., states that "Throughout CD's (Charity Development's) performance of the contract, CD repeatedly reminded C4C (Cars 4 Causes) of its obligation to pay the charities, and that payment to the charities was a priority." It also states that Charity Development "deferred its receipt of payments at C4C's request as an accommodation, when C4C indicated it could not pay charities, salaries and/or vendors."

Finnigan added in an interview related to the lawsuit that he and his firm "have been concerned for some time about Cars 4 Causes' high internal costs, which, he estimates, have consistently absorbed approximately 70 percent of the funds it receives. Cars 4 Causes currently gives less than approximately 16 percent of its gross proceeds to other charities that have been designated by donors, according to Finnigan, and the rest of the proceeds are spent on internal overhead and a few small programs that it runs directly.

"It is a shame that we were forced to take this kind of drastic action against a charity that has historically done so much good for the public," said Finnigan.

"Unfortunately, our advice has fallen on deaf ears," Finnigan alleges, "and we've observed that the money from our concessions has been used not to pay charities, but has been diverted to other purposes."

The lawsuit charges that Cars 4 Causes has failed to pay Charity Development what is owed. "But worse," charges Finnigan, "in our opinion, they have failed to pay to charities moneys that were collected on their behalf. We can no longer in good conscience stand by and watch this continue, especially because there is time to turn the situation around if the Cars 4 Causes board of directors wants to do so."

As a spur to the lawsuit, Finnigan says, is a recent history with the Cars 4 Causes executives and board of directors during which Finnigan reports that he and his company have "urged the Board to examine its internal practices and cost structures, and have made numerous concessions on our contract so that more money could go to the charities."

Further allegations in the lawsuit charge one member of the Cars 4 Causes board with conflict of interest and violation of his fiduciary duty as a board member.

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Martina A. Silas, Esq.
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