PROFITEERING

06.08.15 9:15 AM ET

‘Wounded Warrior’ Charity Fights—To Get Rich

The Wounded Warrior Project’s CEO wants charity execs to get a big-league salary without worries about high overhead—and he’s not shy about selling donor info.

Traditionally, charities are supposed to keep their costs down and give the vast majority of their funds to the needy. Steven Nardizzi—CEO of the Wounded Warrior Project, a veterans charity—has another idea: that philanthropies should be allowed to have king-sized fundraising costs and huge salaries for executives.

Nardizzi is an advisory board member of the Charity Defense Council, an outfit with lofty ambitions. The organization wants to remake the entire charitable sector to be more permissive of high overhead and high executive compensation, explicitly citing as its model the oil industry’s efforts to rehabilitate its public image.

Highly compensated CEOs are persecuted, the Charity Defense Council says, so much so that they need an “Anti-Defamation League” to defend them. “Free speech” means that charities should not be made to talk about overhead, the group also argues. (The Anti-Defamation League, which combats anti-Semitism, told The Daily Beast that its lawyers had previously reached out to request that the CDC not use the ADL’s copyrighted name in its messaging).

Nardizzi’s participation in the Charity Defense Council is the latest odd turn for the Wounded Warrior Project, which the veterans community has questioned for spending too much on self-promotion and not enough on helping wounded warriors. The group has outraged yet more vets by threatening legal action against—and even suing—small charities that use the term “wounded warrior” in their name.

And in another twist, the charity is repackaging givers’ personal information and selling it off to third parties, making more than $1 million in the process.

The renting of private information is a betrayal of donors, argues Sandra Miniutti, the vice president of Charity Navigator, a group that rates nonprofits. “When a donor gives to you there’s a level of trust, that you’re going to repay that with respect, that together you’re working to make the world a better place, and that [the charity is] not going to flip and sell my personal information,” she said.

A top official for a another large veterans nonprofit was aghast when informed about the practice. “We have never rented out, sold, or shared our donor list,” said the official, who spoke on the condition of anonymity. “Our donors would kill us if we did that…I can’t believe their big, midsize, and small donors would be too happy with that.”

Nardizzi’s group not only engages in the selling of donor information, but he’s apparently proud of it, brazenly arguing in its favor.

The practice reflects a broader, self-serving philosophy that is being employed at his organization: higher revenue at high cost, churning growth at high cost. Good for direct marketers, good for executives—but how good exactly for veterans?

For his part, Nardizzi is putting his money where his mouth is: The Wounded Warrior Project CEO’s own salary rose by nearly $100,000 in the course of one year, to $473,015 in 2014. The group’s 10 most highly compensated employees made approximately $2.6 million in total that year.

But at least one highly visible nonprofit—Invisible Children, the charity behind the “Kony 2012” campaign—collapsed under the weight of the philosophy espoused by the Charity Defense Council.

“[T]he market-based functioning of Invisible Children, whose operations have become increasingly in line with [Charity Defense Council boss] Dan Pallotta’s thinking…generated an unprecedented amount of funds for the organization,” The Washington Post noted. “However, this kind of growth model only works if, at a minimum, an organization maintains the same market share, and ideally continues growing…its resource base collapsed.”

The Wounded Warrior Project has been much more successful, at least when it comes to raising money. In fiscal year 2014, it brought in more than $342 million in revenue—making it one of the largest veterans charities in America. That’s up from $235 million in 2013 and $155 million in 2012.

By comparison, the WWP raised more than the National Labor Relations Board’s requested budget, and just slightly less than the budget for the entire Peace Corps.

And the WWP is unapologetic about supplementing those fundraising levels by selling off donor information.

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“Sound and common business practice dictates that organizations or companies mailing marketing materials to the public share and exchange lists,” said Ayla Hay, a spokeswoman for the Wounded Warrior Project. The charity declined to list the organizations it sold/shared personal information to, except to describe them as “numerous large, national veterans service organizations.”

The Wounded Warrior Project raised more than $1.1 million by renting out donor names and addresses over the last two years for which records are available. The practice is not illegal, and only 44 percent of charities explicitly promise not to rent out donor names and addresses, Charity Navigator said. (The remaining charities may or may not engage in the practice.)

There have been grumblings in the veterans community about how the Wounded Warrior Project is expanding for expansion’s sake and spending money on splashy programs that draw attention to the organization but don’t really help vets.

Miniutti also said she worries about charities that sell donor information or have consistently high overhead costs. These are “scorched earth” policies that destroy donor trust, she said: “Not only do they not trust that charity anymore, they don’t trust any charity anymore, so it’s very damaging to the whole sector.”

Privacy advocates argue that, regardless of which charities use the practice, it is still wrong.

“Most donors don’t want that happening with their information, that they’d rather have that be kept private," added Stephanie Kalivas, an analyst for Charity Watch, a watchdog that gives Wounded Warrior Project a C+. (Privacy of donor information is not included in the rating.)

Sharing or selling of personal donor information “should be done only with explicit permission from the donor,” said Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse, speaking about best practices. “The default should be that information you give to a charity should be used solely for the processing of a donation, and should not be shared with other entities.”

But the Wounded Warrior Project CEO isn’t backing down on the issue of donor information.

A pledge not to rent or share donor information is unnecessary because the Wounded Warrior Project is sharing “nothing more than names and addresses—information that is readily available online with a quick Google search,” Nardizzi wrote in a LinkedIn post. “Names are already on the multitude of lists regularly sold and exchanged in the for-profit world.”

Nardizzi also argues that refusing to sell information limits charitable sector efficiency: “Donor lists, which tend to include those individuals more interested in philanthropy than the average American, are both cost and mission efficient,” he wrote. “The misdirected privacy protections will limit the effectiveness of important charitable organizations.”

But charity watchdogs counter that if the information was readily available on the Internet, it wouldn’t be sold for hundreds of thousands of dollars a year.

“It’s being packaged up based on demographics, your inclinations to donate to charities X, Y, Z—I don’t know that it exists online in that way,” said Miniutti.

As for the contention that selling and sharing donor lists is better for the Wounded Warrior Project’s efficiency, Stephens responded: “That doesn’t seem to be a valid argument…The donor is the one whose rights need to be respected. If you’re going to solicit someone and accept a donation from that individual, it would seem to me that you need to respect the privacy of that individual donor.”

The Wounded Warrior Project does not make obvious when individuals donate that personal information could be sold to third parties. There is no disclaimer on the form individuals use to donate online, nor on the form used to mail in a contribution.

In small print at the bottom of the page, the Wounded Warrior Project links to its privacy policy. On the second page, on the seventh point, the Wounded Warrior Project informs donors that the group may share “financial donor postal mailing lists with other non-profits and third parties.” In order to opt out of having personal information sold, donors must fill out a long form.

On the other hand, giving money to the $342 million Wounded Warrior Project takes just a few clicks.