Under Pressure, Red Cross Closes Liberty Fund

Facing mounting questions about how its World Trade Center relief donations are being used, the American Red Cross announced Tuesday that it would close out one of the funds it established for victims of the Sept. 11 terror attacks.

The Red Cross said it already has more money than it can manage and would stop accepting contributions to the Liberty Fund, created after Sept. 11 for terrorism relief efforts. The Liberty Fund held $547 million as of Monday.

Donations received after Wednesday will be deposited in the charity's fund for general disaster relief unless contributors specify that the money is for the Liberty Fund, said Harold Decker, Red Cross' interim chief executive officer.

Liberty Fund money will continue to be held separately from other accounts, according to Decker, and will be spent on aid to victims' families and other relief efforts arising from the attacks.

"That is the way the fund was set up," he told reporters. "That is what donors expect."

The announcement comes after non-profit watchdog groups cranked up pressure on the Red Cross to explain exactly how it was using the donations that poured in after Sept. 11.

"We've begun to receive inquiries from the public raising questions about the distributions of 9/11 funds," said Bennett Weiner, a spokesman for the Better Business Bureau Wise Giving Alliance. "I think the public certainly expects the 9/11 relief organizations to follow through" by helping attack victims.

The watchdogs raised red flags Monday when the Red Cross said a portion of the half a billion dollars in 9/11 contributions would go toward other, broader services such as a blood reserve program, a national outreach effort and a telecommunications upgrade.

The dispute over the Liberty Fund and the distribution of donations led Red Cross CEO Bernadine Healy to resign Friday. Healy said differences with the governing board, including her decision to keep the Liberty Fund dollars separate from the organization's main disaster relief account, led to her resignation.

"I strongly oppose commingling of the monies with any other Red Cross disaster funds," Healy said. "Reasonable people can differ."

During a weekend meeting of the Red Cross' governing board, Decker was chosen to succeed Healy until a permanent replacement is found. Healy will stay on as president until Dec. 31.

To date, the Red Cross has spent more than $140 million on services related to the Sept. 11 attacks. Nearly $44 million of that has been distributed to more than 2,200 affected families to help cover housing, childcare, food, and other expenses for about three months.

Another $67 million has been spent on immediate disaster relief needs, such as onsite food, shelter and other support for rescue workers and victims' families, the Red Cross said.

The organization expects to spend about $300 million through the next year on other terrorism-related efforts. The remaining funds, totaling more than $200 million, will be held in trust for victims of the terrorist attacks in future years, said Chief Financial Officer Jack Campbell.

Campbell said the charity also was contacting victims of the anthrax-by-mail threats and has given money to the families of a tabloid photo editor in Florida and two Washington postal workers who died after being infected with the bacteria.

The American Red Cross also has hired accounting firm KPMG to conduct an independent audit of the Liberty Fund. The findings will be released publicly once the audit is completed, Decker said.

Though careful to note the Red Cross meets high standards overall, the philanthropic watchdogs monitoring the situation complained the that organization wasn't clearly defining its distribution plans for the Liberty Fund dollars.

The Red Cross defended its handling of monies it's received, pointing to the unusual step it took by creating the special terrorism relief account instead of pooling donations into its general Disaster Relief Fund, as it normally would.

"We believe very much that we are honoring donor intent," Red Cross spokesman Mitch Hibbs said. "Yes, we are helping the families, but we're also helping everyone else."

But by creating the Liberty Fund, said the president of the American Institute of Philanthropy, Daniel Borochoff, the organization may have inadvertently set up unrealistic expectations that all contributions would go directly to 9/11 victims.

"I wish they hadn't set up that separate fund," Borochoff said.

Borochoff said the Red Cross still receives an "A" rating from his group but needed to be more specific with plans for the money it has raised since the tragedy rather than appearing to use the crisis "as a way to get money for more general purposes."

The Associated Press contributed to this report.