RAY SUAREZ: It's been a challenging three months for one of America's best known charities, the 120-year-old American Red Cross. In the wake of the terror attacks of September 11, Americans responded quickly and with astounding generosity. Charities have raised an unprecedented $1.4 billion for victims of September 11. Nearly half of the money has been raised by the Red Cross, which also collected hundreds of thousands of blood donations. This story, of blood and money, has brought controversy and scrutiny to the well-regarded $3 billion a year charity.
Founded in 1881 by the Civil War nurse Clara Barton, the American Red Cross provides disaster relief to the victims of more than 67,000 disasters annually, and has been the largest seller of blood in the nation for the last 50 years. Immediately after the attacks, the Red Cross ramped up for round-the-clock relief efforts.
SPOKESPERSON: We honor our heroic relief workers, victims, and their families. Please call 1-800-give-life to donate blood, or 1-800-help-now to offer financial support.
RAY SUAREZ: As the contributions poured in, Red Cross President Bernadine Healy took the unusual step of not putting the money in the agency's general funds, rather in a separate place, the Liberty Fund, which most people assumed would be used solely for September 11 victim relief. On the blood side, it was a case of donations pouring in but little demand. More than 3,000 died in the attacks but a relatively small number were injured. Jim MacPherson is the executive director of America's Blood Centers, which collect about half the nation's blood supply.
JIM MacPHERSON: By September 12, we knew that the victims of the attack were, frankly, mostly dead and we're not going to need very much blood. I believe a total of about 600 or 800 units were used for the injured parties. During that first 24 to 48 hours, we doubled and then tripled the blood supply in the country.
RAY SUAREZ: Blood has a 42-day shelf life. For those who manage the nation's fragile blood supply, having too much blood can be just as much of a problem as having too little.
JIM MacPHERSON: Even on September 12, the day after the attacks, we called the Red Cross and we said, "would you join with us with a message to people that the blood supply is adequate and let's stop the collections right now so we can minimize the wastage."
RAY SUAREZ: But the Red Cross saw the charitable outpouring as an opportunity to restock its depleted national inventory at a time of great uncertainty. Jerry Squires is chief scientific officer at the Red Cross.
DR. JERRY SQUIRES: When you consider that we were trying desperately to increase our inventory to a safer level, that we were hearing that September 11 might not be the end, and we had to be worried about the entire United States, we really felt that sort of calling a halt to blood donations was probably not the wisest or the safest thing to do.
RAY SUAREZ: So the Red Cross continued soliciting and receiving blood.
SPOKESPERSON: The American Red Cross: Providing life-saving assistance.
SPOKESPERSON: To donate money, to donate blood, or volunteer.
SPOKESPERSON: But we still need your help, so please call 1-800-help-now to make a...
RAY SUAREZ: Meanwhile, as the blood piled up in storage, so did the millions in the Liberty Fund.
PRESIDENT GEORGE W. BUSH: Americans love for America was channeled through our nations great charities, and as President of this great land, nothing made more proud.
RAY SUAREZ: As Bernadine Healy was accepting praise from President Bush for the Red Cross's efforts, her organization was discovering just how difficult it was to distribute half a billion dollars. By the end of October, the initial praise had turned to criticism of Healy's management of the Liberty Fund, and contributed to her surprise resignation, effective December 31. Red Cross officials then closed the Liberty Fund, which had received pledges of $543 million and spent $147 million on September 11 relief efforts-- less than one third. They announced they had raised more than enough money for the needs of the victims of September 11 and planned to spend over half the money to build up blood supplies, improve their telecommunications, and prepare for possible future terrorist attacks. At a contentious Congressional hearing, Healy defended the use of the money.
DR. BERNADINE HEALY: The American Red Cross, to my knowledge, has never described its work as limited only to those people who were lost on 9/11 and their families in New York and Pennsylvania and the Pentagon. We worked with them vigorously. Everything that we thought we could do, everything that was within our mission we did.
RAY SUAREZ: Victims of September 11 and members of Congress responded heatedly to Healy, and New York Attorney General Eliot Spitzer threatened legal action.
ELIOT SPITZER, New York Attorney General: And we have two victims here at this table who haven't received the money they need. This is anathema to what the American public expects. When people were writing their checks for $100, $200, or $10,000 and sending them in in response to the PSA's that the Red Cross was running, they believed victims were going to get that money.
REP. BILLY TAUZIN: What's at issue here is that a special fund was established for these families.
SPOKESPERSON: No, it was established...
REP. BILLY TAUZIN: It was specially funded for this event, for September 11, and we're also being told parenthetically, "by the way, we're going to give two thirds of it away to other important Red Cross needs."
RAY SUAREZ: The Brookings Institution's Paul Light, who studies American charities, said the Red Cross had to face some difficult choices.
PAUL LIGHT, Brookings Institution: They were in the damned if you do, damned if you don't situation. I mean, the Red Cross did not have the administrative infrastructure to handle this money. They have been unable to raise the dollars over the years to update their administrative infrastructure. But Americans don't want to pay for the heat and light. They don't want to pay for telecommunications or the freezers to store the blood. They want the blood to go directly to the victims. They want their dollars to make it to the victims. They want somebody else to pay for the heat and light and the electricity and the infrastructure.
RAY SUAREZ: In early November, the Red Cross reversed itself and announced all Liberty Funds would go to September 11 victims and families. Red Cross interim President Harold Decker:
HAROLD DECKER, Interim President, American Red Cross: I want to say now that America has spoken loudly and clearly, and that America wants our Liberty relief efforts directed solely at the affected... People affected by the September 11 tragedies. We deeply regret that our activities over the past eight weeks have not been as sharply focused as America wants.
RAY SUAREZ: Meanwhile, blood donated after September 11 was reaching the end of its 42-day shelf life. According to news reports, directors at several Red Cross blood centers were discarding as many as one out of every five donations. Jim MacPherson said that has been his concern since September 11.
JIM MacPHERSON: We knew from day one that when there was this outpouring, how do we manage this precious resource? How do we make sure that it doesn't get wasted?
RAY SUAREZ: The Red Cross's top blood official, Jerry Squires, said the waste was minimal.
DR. JERRY SQUIRES: Very little blood was actually... Actually discarded.
RAY SUAREZ: When there's a spike in supply that's not met by a spike in demand, how do you not throw out a lot of blood, or at least an amount that exceeds the normal throw out level?
DR. JERRY SQUIRES: Sure. Think of it this way. It's sort of like filling a sink. You've got the drain open and you have the faucet open, and what happened was that normally what we have is the sink is filled this much, two to three days worth. What we have is not blood that we've thrown out, but a higher level in the sink. And now we can manage that inflow and outflow, but there's more residual in that sink.
RAY SUAREZ: Many regular donors have continued to trust the Red Cross, showing up every two months to give blood.
DONOR: You know they're not going to open the window and dump it out. Those people don't administer it unless somebody needs it, and if somebody needs it, I want to be there.
RAY SUAREZ: Shoring up the faith of people who gave blood or money has been the number one challenge for the Red Cross after Bernadine Healy's exit, according to Michael Farley, the Vice-President for Development.
MICHAEL FARLEY, Vice-President for Development, Red Cross: The premium for us is to maintain the trust and the stewardship... The deliverance of the stewardship of dollars that we have received. This is all about trust, and if it weren't for the trust, then the American Red Cross would not be able to be there every day for disasters that occur around the country.
RAY SUAREZ: But Paul Light at Brookings said that fundamental trust between the Red Cross and the public has been strained.
PAUL LIGHT: This particular incident is going to affect and probably depress giving for some time to come. The next time there's a crisis, a national disaster in which the Red Cross asks for donations, or another nonprofit, for that matter, asks for donations, Americans are going to think a little bit about this crisis, and it's going to take some time for this to heal.
RAY SUAREZ: The Red Cross will announce their plans for spending the remaining $275 million in the Liberty Fund in January.