July 8, 2015 VIA ELECTRONIC TRANSMISSION Ms. Gail J. McGovern President and CEO American Red Cross 2025 E Street, NW Washington, DC 20006 Dear Ms. McGovern: I am deeply concerned by the recent NPR and ProPublica reports indicating widespread problems with the American Red Cross’s (“Red Cross”) response to the earthquake that struck Haiti on January 12, 2010.1 A few months ago I met with you and your team to discuss performance, improvements and whistleblower issues. I was assured that the Red Cross had made substantial steps forward in improving efficiencies and reducing waste, fraud and abuse within the organization. However, the recent news articles cast doubt on some representations made by the Red Cross. After the earthquake, the Red Cross received nearly half a billion dollars in donations and unveiled ambitious plans to improve communities, provide permanent homes, and improve infrastructure in the impoverished nation.2 For example, the Red Cross launched a $24 million project designed to transform neighborhoods such as Campeche with hundreds of permanent homes.3 Despite the substantial amount of donations, news reports indicate that the Red Cross failed to meet many of its objectives in Haiti, including the failure to rebuild neighborhoods. According to internal Red Cross documents, part of the initial rebuilding plan included building 700 permanent homes with finished floors, toilets, showers, and some with rainwater Justin Elliot, Laura Sullivan, “How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes,” ProPublica and NPR. (June 3, 2015). Available at https://www.propublica.org/article/how-the-red-cross-raised-half-a-billion-dollars-for-haitiand-built-6-homes; Lauren Sullivan, “In Search Of The Red Cross’ $500 Million In Haiti Relief,” NPR (June 3, 2015). Available at http://www.npr.org/2015/06/03/411524156/in-search-of-the-red-cross-500-million-in-haiti-relief 2 Id.; See also, Tim Young, Red Cross Chief Executive Outlines Haiti Relief, National Press Club (January 12, 2011). 3 Id. 1 Ms. McGovern July 8, 2015 Page 2 of 5 collection systems.4 The houses were supposed to be finished in January of 2013. However, news reports indicate that within Campeche, a neighborhood in the project area, there have been no permanent homes built and only six homes built in all of Haiti.5 A former Red Cross official was quoted as saying, “Everything takes four times as long because it would be micromanaged from DC, and [the Red Cross] had no development experience.”6 The Red Cross has stated that it had to “scale back its housing plans because it couldn’t acquire the rights to the land.”7 However, according to news reports, land titles were problematic for other groups, yet they built roughly 9,000 homes compared to the Red Cross’ six.8 It is particularly troubling that the Red Cross had warnings from its own employees about how its plans were simply not working as intended, yet failed to make necessary adjustments. As early as 2011, then-director of the Haiti program, Ms. Judith St. Fort, wrote that serious program delays were caused by “internal issues…due to lack of staff training.”9 In addition, morale was low due to a “lack of leadership” in the field.10 Furthermore, many employees “resigned due to their discontentment about the work environment created by Sr. Management.”11 Indeed, NPR and ProPublica acquired an April 2012 organizational chart that showed 9 of 30 leadership positions vacant in Haiti.12 Other former Red Cross officials have voiced serious concerns about Red Cross leadership. Mr. Lee Melany, a former Red Cross Haiti shelter program official, stated that Red Cross leadership were more interested in projects generating good publicity rather than those that would provide the most homes.13 Another former Red Cross official stated that the Haiti disaster was viewed internally as a fundraising opportunity.14 And further, news reports state that a March 2014 internal update on a project four years in to a six year program still had not received final approval.15 The Red Cross also appeared to show a reluctance to hire Haitians for senior leadership positions in Haiti. One such position, Project Manager in Campeche, was entitled to a generous salary, benefits, home leave trips, and R & R four times a year; the package added up to $140,000.16 By comparison, compensation for a senior Haitian engineer, which was the top 4 Internal American Red Cross LAMIKA Proposal. (March 2012). Justin Elliot, Laura Sullivan, “How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes,” ProPublica and NPR. (June 3, 2015); Lauren Sullivan, “In Search Of The Red Cross’ $500 Million In Haiti Relief,” NPR (June 3, 2015). 6 Id. 7 Id. 8 Id. 9 Red Cross Haiti Program Director Judith St. Fort Memo. (May 2011). Available via ProPublica at https://www.propublica.org/documents/item/2081560-red-cross-haiti-program-director-judith-st-fort.html. 10 Id. 11 Id. 12 Justin Elliot, Laura Sullivan, “How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes,” ProPublica and NPR (June 3, 2015); Lauren Sullivan, “In Search Of The Red Cross’ $500 Million In Haiti Relief,” NPR (June 3, 2015). 13 Id. 14 Id. 15 Id. 16 Id. 5 Ms. McGovern July 8, 2015 Page 3 of 5 position available to locals, was $42,000 per year.17 This discrepancy in salary and to whom positions were available gives support to Ms. St. Fort’s observation that the Red Cross gave the “implication that talented, smart, competent Haitians cannot be found in Haiti,” despite the fact that it should be a notion immediately “dispelled.”18 Even the Red Cross’s Washington, DC manager for the Campeche project noted the delays were due to the Red Cross “[not] hav[ing] the know-how.”19 These comments lend credibility to some who believe that donations to the Red Cross were perhaps not spent in the most efficient and effective manner. In total, I am disappointed that these issues were not brought to light in our meeting. As painful as talking about mismanagement and organizational mistakes can be, for an organization to be truly great it must first come to terms with its shortcomings so that work can begin to make improvements. The Red Cross has a great responsibility to be a force for good in the world. The recent news reports cast an unflattering picture of the internal dynamics within the organization. Ultimately, the fact that the Red Cross raised nearly half a billion dollars, yet failed to accomplish major goals stated during its fundraising campaign is troubling. Perhaps even more troubling is that the Red Cross plans to leave Haiti before completing many objectives. Please answer the following questions: 1. Please provide the exact amount that was raised by the Red Cross for the Haiti relief effort and the exact amount that was spent. 2. For each year after the Haiti earthquake, please provide a list of organizations that the Red Cross partnered with on projects, subcontracted with, provided grants to, and similar associations related to the Haiti relief effort. In addition, for each organization please describe the purpose of the Red Cross associating with them, the amount of money transferred to them by the Red Cross and the amount of money actually spent by those organizations. 3. For each year after the Haiti earthquake, please provide a list of all Red Cross managed projects and projects that Red Cross funded but did not necessarily manage, a description of the project, the amount of money budgeted for each project as well as the amount actually spent, and the number of people assisted by the respective projects. 4. For each project covered in question two and three, please describe the criteria used to determine that an individual was successfully assisted. 17 Id. Id. citing Red Cross email chain available at https://www.propublica.org/documents/item/2081560-red-cross-haiti-programdirector-judith-st-fort.html 19 Justin Elliot, Laura Sullivan, “How the Red Cross Raised Half a Billion Dollars for Haiti and Built Six Homes,” ProPublica and NPR (June 3, 2015). 18 Ms. McGovern July 8, 2015 Page 4 of 5 5. How many permanent homes have been built in Haiti by the Red Cross since the program was first announced? 6. Of the nearly half a billion dollars raised for the Haiti rebuilding effort, how much money was spent on Red Cross overhead expenses for each project? Of the money transferred to third parties, how much did the Red Cross charge for managing each third-party project? 7. For organizations that received money from the Red Cross, how much did each charge to overhead? Was the Red Cross aware of the overhead costs charged by other organizations prior to transferring money to them? If not, why not? 8. Please describe the criteria used to determine which organizations would receive Red Cross funding. 9. Why were only expatriates granted the opportunity to apply for senior-level management positions in Haiti? 10. Why did the Red Cross not heed Ms. St. Fort’s advice in 2011 regarding the internal issues that led to the delay of the Campeche program? 11. After reaching its fundraising goal, why did the Red Cross keep soliciting money, unlike Doctors Without Borders, which ceased fundraising? 12. What is the Red Cross’ current timetable for leaving Haiti? Has that timetable changed since the rebuilding effort was first announced? If so, please explain why. 13. Please describe the “wonderful helicopter idea” that was mentioned as a way to spend remainder funds.20 14. How many whistleblowers contacted the Ombudsman’s Office to provide information regarding the Haiti projects? What types of issues were raised by the whistleblowers and have the disclosures resulted in positive change? Please provide examples. 15. How many Red Cross employees contacted the Ombudsman’s Office to provide information regarding the Haiti projects? What types of issues were raised and have the disclosures resulted in positive change? Please provide examples. 20 Red Cross email chain available via ProPublica at https://www.propublica.org/documents/item/2081190-gail-mcgovern-anddavid-meltzer-emails-on.html Ms. McGovern July 8, 2015 Page 5 of 5 16. Aside from whistleblowers and employees, what types of complaints were raised by other internal and external constituents? What steps has the Ombudsman taken to provide workable solutions to the problems raised by complaints? 17. Please provide a copy of the itemized report the Red Cross has submitted to the Secretary of Defense in the past 5 fiscal years. Please number your responses according to their corresponding questions. Please submit your responses by July 22, 2015. If you have any questions, contact Josh-Flynn Brown of my Committee Staff at (202) 224-5225. Thank you for your cooperation. Sincerely, Charles E. Grassley Chairman Committee on the Judiciary cc: Mrs. Bonnie McElveen-Hunter Chairman of the Board American Red Cross 2025 E Street, NW Washington, DC 20006