Alaska accuses crowdfunding websites of violating law, using charities’ names without their consent

New lawsuit says leading companies failed — in thousands of cases — to get charities’ permission before trying to raise money in their names

(Krisanapong Detraphiphat / Getty Images)

By James Brooks

Alaska Beacon

The state of Alaska filed civil lawsuits Tuesday against six crowdfunding websites, accusing them of illegally soliciting donations for thousands of Alaska charities without consent.

In complaints filed at Anchorage Superior Court, the consumer protection unit of the Alaska Department of Law said GoFundMe, PayPal, Charity Navigator, Pledgling Technologies, JustGiving and Network For Good each violated the Alaska Charitable Solicitations Act thousands of times. 

That act, in place since 1993, requires state registration for anyone who seeks donations on behalf of a charity. 

The suits ask a judge to order the sites shut down the pages devoted to Alaska nonprofits and immediately disburse any donations to those nonprofits. It also asks for “separate civil penalties … of not less than $1,000 and not more than $25,000 per violation.”

According to the complaints, the six crowdfunding sites scraped IRS data to obtain the information of thousands of Alaska nonprofits, then set up donation pages for each of those nonprofits without their consent.

That scraping was part of a nationwide campaign that encompassed almost a million and a half federally registered organizations.

In some cases, the sites charged fees or encouraged “tips” to themselves during the donation process. In many cases, they poured donations into a third-party account and only released donations to charities who stepped forward to claim them, according to the complaints.

Attorney General-designee Stephen Cox said the state became aware of the issue after California reporters and state officials began investigating why GoFundMe created donation pages for 1.4 million nonprofits without their consent or knowledge.

GoFundMe later took down many of those pages, but other crowdfunding websites did not. On Tuesday morning, donation pages were still visible on Charity Navigator, one of the defendants named in the new Alaska lawsuits.

Earlier this week, almost two dozen state attorney generals sent a letter to GoFundMe, demanding answers to questions about its policies.

Alaska did not sign that letter, in part because officials here believed the response was too weak.

In a prepared statement, Cox said, “Alaska law is clear: if you’re going to raise money in a charity’s name, you must first get the charity’s consent. These lawsuits are about protecting donors, protecting nonprofits, and preserving the public trust that makes charitable giving possible.”

Laurie Wolf is President and CEO of the Foraker Group, which advises Alaska nonprofits and provides them with administrative support.

The Foraker Group has been issuing warnings about the issue for months, and Wolf filed an affidavit in support of the lawsuit, as did a representative of the Bethel Community Services Foundation and Bread Line Inc., which operates a food bank in Fairbanks.

By phone on Tuesday, Wolf said the issue is a matter of consent: “They are impersonating 1.2 million nonprofits across this country, they’re impersonating them without their consent or even their knowledge.”

She said the issue became particularly important last fall, when people across the United States and the world became aware of the devastation caused by ex-Typhoon Halong in Western Alaska.

Many people, not knowing local Alaska charities, simply donated via links they found on internet searches. Some of those donations may have never reached their intended recipients.

If a crowdfunding website operates independently of the charity it intends to benefit, it might interfere with the charity’s own fundraising, she explained.

Someone might never be recognized for their gift and become angry, hurting the charity’s long-term relationship with their community.

“They take away the ability for the organization to make choices for itself about how it wants to build trust and relationships with its donors, and how it wants to put its brand and its mission out in the public sphere. They’ve taken away all of our choices about that,” she said.

In addition, donations may be subject to fees or never reach a charity at all, particularly if the charity is unaware that a crowdfunding website is holding money for it to collect.

The Foraker Group went so far as to conduct an experiment and had an employee donate to the group through several of the defendants’ platforms. In multiple cases, it took weeks before the donation reached its intended recipient, and in some cases, the donor’s identity was concealed, making it impossible for the charity to properly thank them.

GoFundMe was the only defendant to respond to emailed inquiries before the Beacon’s reporting deadline on Tuesday.

“GoFundMe’s mission is to help people help each other by making it easier for donors to discover and support the causes they care about. We are committed to helping nonprofits reach new supporters by connecting them with the millions of people on our platform who want to make a difference. Nonprofit Pages were created using publicly available information to help people support nonprofit organizations, with donations going to the intended nonprofit,” said Jeff Platt, communications manager for GoFundMe. 

“After hearing feedback from nonprofit leaders in October, we acted quickly to make Nonprofit Pages fully opt-in, removed and de-indexed unclaimed pages, and turned off search engine optimization by default. The immediate changes we made directly addressed the concerns of the nonprofit community, and reflect our continued commitment to transparency, accountability, and partnership with the nonprofit sector,” he said.

This week’s lawsuits in state court rely in large part on the 1993 Alaska Charitable Solicitations Act. 

That bill passed the Alaska Legislature amid a surge of concern about telemarketers soliciting donations by phone. 

Then-Rep. Ron Larson, a Democrat from the Matanuska-Susitna Borough, sponsored the act and told fellow lawmakers at the time that “lookalike organizations” were “ripping off” legitimate charities.

The act made no mention of donations by internet, and in state law, it’s still labeled as “Telephonic solicitations,” but it goes on to state that under any circumstances it is unlawful to use a charity’s name or symbol without their permission.

“Alaskans are generous people. But generosity depends on trust,” Cox said in his prepared statements. “GoFundMe and similar platforms used nonprofits’ good names to solicit donations without coordinating with the organizations actually doing the charitable work. That means some Alaskans may have donated thinking they were supporting a specific charity, when the charity never authorized the page and may never have received the donation — or may have received less than donors intended because of fees.”

• James Brooks Cascade is a longtime Alaska reporter who lives in Juneau. He previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. Alaska Beacon is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.