Minnesota attorney general sues Savers, calls chain's marketing deceptive

ST. PAUL - Minnesota's attorney general is accusing secondhand retail chain Savers of lying to donors about what it does with the money it makes from selling their used goods.

In a lawsuit filed Thursday in Hennepin County District Court, Attorney General Lori Swanson alleges that while the for-profit company publicly claims to donate a significant portion of all its sales to nonprofit charity organizations, it donates only a small fraction of proceeds from clothing sales and none of the proceeds from the sale of other items.

"Savers has seriously misled the public about the extent to which donated clothes and merchandise benefit the for-profit retailer vs. the charity,” Swanson said in a news release.

Bellevue, Wash.-based Savers is the largest for-profit thrift store chain in the United States, with 290 locations nationwide and $1 billion in annual revenue as of 2012, according to Swanson's complaint. Twelve of Savers' 15 Minnesota stores are in the Twin Cities, some operating under the names Unique Thrift and Valu Thrift.

Swanson's office first began investigating Savers in late 2013 after receiving a series of complaints. She released the findings of the investigations in November 2014 and publicly criticized the company's business practices.

Representatives of Savers and the attorney general's office met several times in the months leading up to the lawsuit's filing. Although Swanson said Savers refused to make sufficient changes to its business practices, Savers CEO Ken Alterman said in an emailed statement that it has "begun implementing operational changes to address the AG's concerns.”

"We are disappointed by the decision of the Minnesota Attorney General's office to take this action because we have made multiple attempts to work collaboratively on a resolution that benefits everyone involved,” Alterman said. "The money we pay our charitable partners furthers medical research and supports veterans and their families across Minnesota.”

The Pioneer Press reported on Savers' business practices in 2011.

Savers accepts donations of used clothing and household goods and sells them to shoppers at a mark-up. The company tells its Minnesota donors that a portion of the proceeds from each sale go to benefit Disabled American Veterans, Epilepsy Foundation of Minnesota or Vietnam Veterans of America.

None of three organizations returned phone calls seeking comment on the lawsuit.

The company's marketing claims, "Savers pays local nonprofits every time you donate,” Swanson said.

However, Swanson's complaint alleges the company pays charities as little as 50 cents for each pound of clothing it receives and nothing for nonclothing items. These terms are laid out in the company's agreements with affiliated nonprofits.

For example, the complaint says, a 1-pound suit sold for $100 in a Savers store would result in a 50-cent donation to an affiliated nonprofit, while Savers would keep the other $99.50. In the case of a $250 television, the complaint says Savers would keep the entire sale price.

Some who donated items through Savers believed they were donating directly to a nonprofit and were unaware Savers was involved.

After the deaths of her husband, mother and aunt, Sue Kirchoff of Minneapolis decided to donate many of their possessions to Disabled American Veterans. She had received a post card purportedly from DAV, offering to pick up any items she wished to donate.

Kirchoff grew suspicious after reading that the attorney general was investigating Savers and felt betrayed when she discovered it was actually Savers who had picked up her items.

"Should you have to be suspicious?” Kirchoff said. "You just kind of assume that it's legitimate.”

Additionally, those who donate items for the benefit of charitable organizations are eligible for tax write-offs, but many Savers donors who claimed such write-offs never actually donated to charity because Savers pocketed the proceeds, Swanson said.

However, Swanson assures Minnesotans who wrote off their Savers donations that they're not in any tax trouble because they claimed the deductions in good faith.