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Docs Show Red Cross Warned to Resolve Internal Disputes

The American Red Cross was warned years before Hurricane Katrina hit to resolve its internal disputes or risk a repeat of snafus that plagued the Sept. 11, 2001 relief effort, according to internal documents made public by a Senate panel Monday.

Thousands of pages of Red Cross e-mail, corporate documents and whistleblower complaints paint a picture of an organization whose mammoth structure contributed to the charity's uneven response to Hurricane Katrina.

In an Oct. 29, 2001 e-mail, board member Bill George warned Red Cross chairman David McLaughlin to resolve the group's disputes. At the time, the nation's largest charity was reeling from CEO Bernadine Healy's resignation amid charges it had mismanaged Sept. 11 donations.

"The worst thing we could do is to gloss over the split on the board, make some superficial changes in governance, and see the whole scenario repeated three or four years from now," the Medtronic Inc. executive wrote.

"I do not think the board can continue kidding itself that it wants a strong leader and then not giving that person the authority to lead," he said. Four years later, the group's next CEO, Marsha Evans, would resign in the aftermath of Katrina, citing board friction.

Sen. Charles Grassley, R-Iowa, calling for immediate changes, warned the Red Cross board Monday that "'business-as-usual' cannot continue." He said the documents raise questions about the Red Cross' ability to keep close watch on billions of dollars in donations.

"This type of culture, a culture that discourages people from coming forward, management that does not want to hear the bad news, and is more concerned about good press than good results, is a theme that I am hearing too often," said Grassley, who as Finance Committee chairman oversees charitable organizations.

His committee released the documents Monday.

In a statement, the Red Cross said it would fully cooperate with the committee's review. The charity has said it responded to Katrina the best it could in circumstances almost unimaginable, while acknowledging that it stumbled in "technology, logistics and coordination."

"The American Red Cross is committed to learning from our prior challenges and making the necessary changes," the charity said Monday, noting it had recently launched an independent audit to review operations.

A House report earlier this month on the Katrina response found the Red Cross was overwhelmed by water, food and supply shortages as well as a disorganized shelter process. Some lawmakers have called for a change to the national response plan that gives the Red Cross the primary role and the dollars that flow with it.

Replying to a Senate inquiry, the Red Cross said this month it was working to improve coordination with FEMA and local charity groups.

It said it had no "fixed deadline" for hiring a new CEO to replace Evans, who took over in August 2002 as the organization was shaking off criticism over how it handled Sept. 11 donations, some of which were quietly set aside for future terror incidents.

In dozens of letters to Grassley's office, former Red Cross employees and volunteers detail a culture of inefficiency in which poor communications, layers of bureaucracy and resistance to change contributed to waste and chaos after Katrina struck.

Typical of the complaints: Red Cross trucks rolling in with goods or sitting idle in parking lots, but not always accounted for; volunteers staying in hotels rather than shelters, holding them for use in case it was needed for someone "with more privilege in the organization;" orders placed for food well in excess of need; extensive travel paid for at retail rather than pre-negotiated volume cost.

"We ask for the Red Cross to be more accountable for donor funds," wrote Christee Lesch, a hurricane volunteer from Adel, Iowa. "They tell the public how much money has been spent on disaster relief, but not how well it is spent."

Documents also show Red Cross leaders eager to repair the group's image following its fundraising flap, but at times uncertain how to navigate among the local chapters, which represent 30 of the charity's 50-member board. Ultimately, Evans was counted on — unsuccessfully — to smooth out problems.

In a June 18, 2002, letter, Bill Van Eman, chairman of the Brazos Valley, Texas, chapter complained that the charity's national leaders were unfairly asking the chapter, following media criticism, to lower its administrative costs below 10 percent of funds raised.

"Allowing us to have a small portion of the funds raised was a wise idea," Eman wrote. "It could have been phrased as a 'special administrative cost' and not a soul would have said anything. ... If all we get as local chapters is bad publicity and additional paperwork, I do not feel this is a wise use of funds."

McLaughlin responded: "Withholding some funds to cover chapter expenses makes infinitely good sense. With our new president on board, I suspect that we will be undertaking a thoughtful analysis of how we fund disaster response."