L.A. Cracks Down on Thrift Shops Run for Charity

In a move that could affect charities that depend on money earned from thrift stores, the City of Los Angeles has ordered two second-hand shops to stop violating a state law or stop soliciting donations.

In letters sent Dec. 11 but made public Tuesday, the city Social Services Department declared that both stores violate a state law that prohibits charities from hiring independent contractors to solicit donations of used clothing and household goods and to then resell them.

The American Way Off-Price Thriftstore in Sunland, which benefits the California Council for the Blind, and the Valley Thrift Store on Lankershim Boulevard, which benefits the Vietnam Veterans of America Foundation, were ordered to return their solicitation permits, known as information cards, and to cease and desist from violating Section 148 of the state Welfare and Institutions Code. Violation of the code section is a misdemeanor.

Renegotiating Contract

However, the California Council for the Blind has negotiated a 30-day delay in enforcement while it renegotiates its contract with store operator Bill Ashe, according to Ashe, Robert Burns, general manager of the city Social Services Department, and Randolph Skidmore of Napa, the council’s attorney.

James Pechin, business manager for the Vietnam Veterans of America Foundation, said he is at a loss to understand the city’s action. He denied reports by city officials that the veteran’s group, in a telephone conversation with principal investigator George Delianedis, disputed the city’s authority and challenged the Social Services Department to take the veterans charity to court.

“We will comply with whatever laws are applicable,” Pechin said. “That is our intent, always has been, always will be.”

The city’s action followed consumer complaints to the Los Angeles city attorney’s office, according to Burns and Asst. City Atty. Ron Tuller.

Burns, Tuller, Pechin and Skidmore, the council’s attorney, said they were unaware of the state law barring charities from hiring independent contractors to run thrift stores until it was cited in a Times story on Sept. 27.

That article detailed how the Ellison family and their associates dominate the growing nationwide practice of businesses running thrift stores on contract for charities. Essentially, the Ellisons and their associates buy the right to solicit tax deductible donations of used clothing and furniture in the charity’s name, paying the charity a fee that is typically 4%-13% of what the used goods are sold for in thrift stores. In terms of profits, the business owners typically get $1.50 for each $1 the charity gets.

Ray Ellison of Ventura and his sons, Mark and Matthew Ellison, who operate the Valley Thrift Store for the Vietnam veterans charity, did not respond to telephone calls and a telegram seeking comment. The store’s manager, Bob Hubina, said he was not authorized to comment.

The city’s action has no effect on charities that run their own thrift stores using employees and volunteers.

Ashe and Skidmore said Ashe has sought for some time to negotiate a new contract with the blind charity. The proposed contract, known as a wholesale buy-sell agreement, has been informally sanctioned by the state attorney general since the late 1960s.

Ashe also operates another store on contract with the blind council, the American Way Thrift Store, but it is not directly affected by the city’s order because it is in Burbank.

Skidmore and Pechin noted that the city’s cease and desist letters say it issued the thrift store solicitation permits due to “administrative error” and that until now the city has relied on a different state law in deciding whether to issue solicitation permits. Skidmore said he believes the other law, part of the Business and Professions Code, is the operative law and will ask Atty. Gen. John Van de Kamp to declare whether his office agrees with that interpretation.

Burns and Tuller said they believe the Welfare and Institutions Code prevails because it was the most recently amended and contains explicit language barring independent contractors in charity-affiliated thrift stores.

Skidmore said he also believes that “enforcing the Welfare and Institutions Code on an organization of blind people is inappropriate . . . because blind people cannot drive trucks to pick up goods and, without great difficulty, cannot do all of the telephone work” needed to solicit donated goods.

However, Skidmore added, “no written contract will be in force and in place unless it is in the good graces of the City of Los Angeles.”