As reported in Crain’s Detroit Business on December 21, 2016:
“Michigan Attorney General Bill Schuette has issued a cease-and-desist order against Dearborn-based Golden Recyclers Inc., a for-profit company that is allegedly operating clothing donation bins illegally in Michigan.
Schuette alleges that Golden Recyclers is collecting clothing donated through 318 bins stationed across the state and misrepresenting who the donations are benefiting. He contends Golden is benefiting itself from the sale of the donated items, rather than forwarding some portion of the proceeds to charity.
Golden Recyclers operates two differently labeled types of bins, both of which violate the Charitable Organizations and Solicitations Act, Schuette said in a release. One bin implies that Golden is collecting clothes for the California-based Cancer Federation Inc. The other has a “Mercy” logo but provides no information about where the donations go.
Schuette alleges Golden benefits from the sale of the donated clothes, rather than any charity.
He’s issued a Notice of Intended Action and Cease and Desist Order alleging 2,594 violations on Golden’s part, with maximum penalties of $10,000 per violation, and ordered Golden to produce information and financial records for its operation of the bins.
Golden has 21 days to resolve the issue or face a civil action in court.
The AG’s investigation of Golden was spurred by a consumer complaint about the vagueness of the labeling on the donation bins.
The Cancer Federation, which is also being reviewed by the AG’s office, receives $12,000 a year from Golden for use of its name. But the donations in the bin do not benefit the Cancer Federation.
That organization told the state that the Mercy bins were not authorized by it and it was ordering Golden to stop using them. Golden, however, continued to use them, the AG contends, saying it has photographic evidence.
It is not yet clear what Golden Recyclers does with the donations placed in the bins, the state said. But records obtained by the AG show Golden Recyclers earned gross receipts of $223,000 over a six-month period in 2015.
The AG has issued a consumer alert warning people to be vigilant about where they make donations and who they are actually going to.
The operation of clothing donation bins is subject to Michigan’s Charitable Organizations and Solicitations Act. Under this law, generally, bin operators must be licensed with the attorney general and file their contracts with the attorney general. The law also prohibits misrepresentations and requires certain disclosures, according to the AG.
A similar issue came up locally three years ago, as Crain’s reported at the time, when the Society of St. Vincent de Paul Detroit and Maryland-based Planet Aid in Sept. 2013 filed a lawsuit against Houston-based American Textile Recycling Services, claiming illegal seizure and disposal of their donation bins at several sites in Southeast Michigan. The intent, according to the suit, was to pave the way for for-profit American Textile to put its own bins in those locations.
Massachusetts-based Institute for International Cooperation and Development, which like Planet Aid had operations in Michigan, later joined the suit against American Textile.
The suit alleged American Textile solicited donations in several states, attaching the names of well-known nonprofits to encourage more donations.
American Textile was able to persuade property owners or managers to rescind permission for the nonprofit bins in some cases, and had them sign the letters, the nonprofits said in the court filings.
In other cases, American Textile used fraudulent signatures on the letters it sent to the nonprofits, they alleged.
The suit was settled shortly after the injunction through court-ordered mediation, said Dan Dalton, partner with Dalton & Tomich PLC in Detroit, which represented the charities in the case.
While not admitting any liability to the charges levied against it, American Textile agreed to pay damages and attorney’s fees and agreed not to seize the nonprofits’ donations bins, he said.”
If you have any questions regarding the regulations of donation bins, please contact the professionals at Dalton & Tomich PLC to help you through the process.