New book-donation bins that have popped up around Palo Alto and surrounding cities purporting to be for charity are really making money for a for-profit company, the nonprofit Friends of the Palo Alto Library claimed this week.
Critics of the blue, metal bins said the company, Thrift Recycling Management LLC, is preying on the kindness of residents who donate books believing the reading materials are going to a nonprofit cause. Instead, the company is using a nonprofit organization, Reading Tree, as a front and is making millions of dollars from the donations, they said.
The Reading Tree, based in West Jordan, Utah, distributes children's books to libraries, schools and places such as Boys and Girls clubs in local low-income neighborhoods.
Thrift Recycling Management LLC, located in Lakewood, Wash., manages the bins and book collections. The company is a commercial fundraiser a business that collects a fee or a portion of profits from the sale of the books in exchange for managing the collection and transport of materials for a nonprofit organization, its officials said.
On Staunton Avenue in Palo Alto's College Terrace neighborhood, a blue bin labeled "Books for Charity" is located under a small tree adjacent to a parking lot. An 8 1/2 by 11 label describes where the donations will go: to needy schools in the area. "Unusable books are recycled ... or sold by our recycling partners in part to pay for our programs and in part to pay for services in connection with our book collection efforts," the Reading Tree sign notes. It does not specify Thrift Recycling Management.
"The two don't seem to be able to exist without the other," said Barron Park resident Winter Dellenbach, who takes exception to the implication that the bins are operated by a charity.
Thrift Recycling is one of the largest online sellers of recycled media and consumer goods, according to the company's website. Founded in 2004, the company generated $27 million in revenue in the 2010 fiscal year, according to a press release.
CEO Phil McMullin said about 25 percent of the collected books go to the libraries and schools, with 50 percent being sold for pulp. The money from pulped materials -- about $75,000 to $80,000 annually -- goes back to Reading Tree, he said.
Thrift Recycling resells about 25 percent of the books as its fee for managing the bins and collecting and transporting the books, he said. The company culls mostly technical books, which have the greatest value, for resale on such online retailers as Amazon, eBay, Alibris and Barnes and Noble, he said.
"We don't pretend to be a nonprofit. We see ourselves as being in the business of the professional fundraiser," he added.
McMullin, who was in management at Savers, Inc., a for-profit thrift store that also partners with nonprofit groups, said he noticed that countless used books were being thrown into landfills. McMullin's wife is a special-education preschool teacher who came across many students and families in need of books.
Thrift Recycling started Reading Tree as a nonprofit group to distribute the books, he said.
"It was an internal idea that became formalized. It has its own independent board, its own finances and its own building. It operates separately," he said.
His son, Jeff McMullin, president of Thrift Recycling, is still on the board but receives no pay, he said.
A 2009 income-tax exemption form filed by Reading Tree showed the nonprofit places more than 1 million books in more than 140 organizations. It received $10,669,333 in contributions and grants and its expenses totaled roughly $3.6 million. Jeff McMullin is listed as president and signed the return.
The relationship between Reading Tree and Thrift Recycling has attracted the attention of the Oregon Department of Justice, which began investigating Reading Tree's relationship with Thrift Recycling last month, said Tony Green, Oregon Department of Justice spokesman. The investigation is based on complaints regarding the lack of clarity on the bins' label, he said.
Tyler Hincy, Thrift Recycling's director of business development, said the business model for Thrift Recycling isn't any different from other organizations, such as the Salvation Army and Goodwill Industries or for-profit groups that take merchandise in the name of cancer, he said.
The Friends of the Palo Alto Library, which has been investigating Thrift Recycling and Reading Tree, runs its own book sales to raise funds for city libraries. Jim Schmidt, the Friends' president, said his group has contributed $2 million in the past 10 years. He worries that any donations to the blue bins will effectively take money away from the local library system.
It is still too early to tell if donations to Reading Tree will impact the Friends' sales efforts, said book-sale manager Jerry Stone.
Hincy didn't think so, since Reading Tree's focus is on schools and Thrift Recycling sells mostly technical books no one wants at library book sales.
But Stone isn't so sure.
"It may be hurting us more than we know," he said.