Congress probes Red Cross finances as charity announces fund-raising changes

WASHINGTON - The embattled Red Cross announced fund-raising changes to clarify how contributions are spent while U.S. lawmakers are reviewing how charities have responded to the Sept. 11 attacks, a senior Senate Republican said Wednesday.

Sen. Charles Grassley (news, bio, voting record), ranking Republican on the Senate Finance Committee, is concerned about scattered reports of fraud and wants to ensure the more than dlrs 1 billion that poured into charities after the Sept. 11 attacks got to victims and their families, aides to the Iowa Republican said.

The American Red Cross (news - web sites) came under fire last year after it was revealed that tens of millions of dollars raised by its newly created Liberty Fund would not be used for victims of the attacks but would instead be set aside for things like telephone system upgrades and a blood reserve.

Facing a barrage of criticism, the charity reversed course in November and said all the money raised by the fund would flow to those affected by the attacks.

The Red Cross has so far distributed dlrs 570.4 million of the dlrs 967 million raised by the Liberty Fund.

Creation of such a segregated account was highly unusual for the Red Cross. Typically donations are placed in the charity's multipurpose disaster relief fund, the revolving account that is the main pipeline of for Red Cross disaster aid nationally.

On Wednesday, Red Cross chairman David McLaughlin said it was "very unlikely" that such a separate fund would be created again because it created such confusion.

"We learned hard lessons from that fund," McLaughlin said.

The Liberty Fund was created by then-Red Cross Chief Executive Officer Bernadine Healy, who resigned in part because of controversy over it.

Healy maintained that ads and solicitations for the Liberty Fund stated that some of the contributions could be used for future disasters.

But critics said the charity's ads were misleading and that money poured into the Liberty Fund because donors believed they were helping victims of the attacks

Red Cross officials said at a news conference Wednesday that new changes to the fund-raising guidelines were aimed at ending such confusion. The charity will no longer solicit donations for particular disasters in ads, direct mail and Internet sites.

Instead, the charity will change its language to make clear to donors that their money could be used for many earthquakes (news - web sites), floods and fires over time instead of immediately for a specific calamity, Red Cross interim Chief Executive Officer Harold Decker said.

The report Grassley requested is due from the investigative arm of the Congress in November.

Grassley is also requesting a report on other federal aid related to Sept. 11, including the government's victims compensation fund.

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On The Net:

American Red Cross: http://www.redcross.org/