{"id":1237,"date":"2020-10-02T18:40:05","date_gmt":"2020-10-02T22:40:05","guid":{"rendered":"https:\/\/carleton.ca\/panl\/?post_type=cu-stories&p=1237"},"modified":"2021-04-06T21:43:16","modified_gmt":"2021-04-07T01:43:16","slug":"the-spectacular-tale-of-a-crowdfunder-gone-wrong-lessons-for-canada-from-australia","status":"publish","type":"cu-stories","link":"https:\/\/carleton.ca\/panl\/story\/the-spectacular-tale-of-a-crowdfunder-gone-wrong-lessons-for-canada-from-australia\/","title":{"rendered":"The Spectacular Tale of a Crowdfunder Gone Wrong: Lessons for Canada from Australia"},"content":{"rendered":"

\"\"By Myles McGregor-Lowndes<\/a>.<\/p>\n

Australia suffered several months of catastrophic bushfires that finally ended in March 2020, but not before 19 million hectares and 3,500 homes were burned out, 35 people (including 14 firefighters) were killed and nearly three billion animals died. The philanthropic response to the carnage was extraordinary: 53% of Australian adults<\/a>, joined by philanthropists, corporations and celebrities from around the world, raised an estimated AUD$500 million (roughly CAN$480 million). Dozens of superstars, in particular, stepped up: Leonardo DiCaprio (US$3 million via Earth Alliance), Ellen DeGeneres, (US$1.1 million) and, most noteworthy, Australian comedian, Celeste Barber, who ended up catalysing the most successful Facebook fundraiser in history, followed by mass confusion and legal consequences.<\/p>\n

The Celeste Barber effect<\/strong><\/p>\n

Barber, an Instagram star, created a Facebook fundraiser<\/a> on Jan. 3, 2020, after her family was evacuated from their home near the fires in New South Wales (NSW). The fundraiser target was AUD$30,000, but within a day, she raised nearly $2 million \u2013 and by the time she closed the page, on Jan. 17, she\u2019d raised $51 million from 1.3 million people, making it the largest fundraiser ever held on Facebook.\u00a0Early in the appeal, a small group calling itself #fundraiserfail gang<\/a> warned Barber that the designated charity wouldn\u2019t be able to meet the expectations of donors, but she dismissed the group, saying, \u201cWhy raise this money if it\u2019s not going to go to the people who absolutely need it?\u201d And that\u2019s when the problems began.<\/p>\n

\"\"The charity named on Facebook<\/strong><\/p>\n

The Facebook fundraiser page named a registered charity as the recipient of the money: The Trustee for the NSW Rural Fire Service & Brigades Donations Fund. If donors followed the Facebook links to the charity\u2019s page<\/a> on the website of the Australian Charities and Not-for-profits Commission (the charity regulator), they would read that this charity helps \u201cpeople in rural\/regional\/remote communities; victims of disaster; general community in Australia,\u201d and that it operates in New South Wales.<\/p>\n

If donors poked deeper, they\u2019d find a pdf of the Fund\u2019s governing document, which sets out its much narrower, legal mandate: “to meet the costs of purchasing and maintaining fire-fighting equipment and facilities, providing training and resources and\/or to otherwise meet the administrative expenses of the Brigades which are associated with their volunteer-based fire and emergency services activities.” Again, in New South Wales. The Fund solely supports the NSW Rural Fire Service<\/a>, a state agency and the world\u2019s largest volunteer fire service, with more than 71,000 volunteers, 900 full-time staff and nearly half a billion dollars in annual revenue. As a NSW government agency, the Fire Service doesn’t qualify as a tax-deductible body for charitable gifts. However, it established the Fund, which does qualify \u2013 and the Fund was the only charity named in the Facebook fundraiser.<\/p>\n

Mass confusion in Australia<\/strong><\/p>\n

The first questions about who would benefit from the donations emerged on the second day of the appeal, in Facebook comments responding to an update Barber had posted. The next day, on her Instagram account, Barber wrote that she\u2019d \u201cmake sure that funds get spread around the country to help people and wildlife affected by the fires.\u201d (Aside from the state of NSW, the neighbouring state of Victoria, as well as South Australia and other parts of the country were severely affected.)<\/p>\n

However, a few weeks later, the Fund issued a media statement: “We know that people want to know how the money will be spent. We take the responsibility of community donations very seriously and we want to make sure the money is put to good use. The NSW RFS Brigades and Donations Trust has a specific purpose and people have donated for this intent \u2013 to support volunteer brigades with equipment, training and resources relating to their emergency service role. Funds must and will be used for this purpose.”<\/p>\n

In spite of this statement, several media articles<\/a> focussed on the need for donors to check before donating to online fundraisers fronted by celebrities, creating more confusion. Australian charity and consumer regulators didn\u2019t intervene when public concerns were raised. Soon, articles suggested that court intervention might be necessary, and there were reports that both Barber and the Fund were planning to seek direction from the NSW Supreme Court. Barber was reported as saying: \u201cI\u2019m going to make sure that Victoria gets some, that South Australia gets some, also families of people who have died in these fires, the wildlife.\u201d This was in spite of the fact that the Fund works only in NSW, not other states. In response, the Fund filed an application seeking judicial advice.<\/p>\n

\"PhotoThings get funky with Facebook and PayPal<\/strong><\/p>\n

In Facebook fundraisers, the PayPal Giving Fund (itself a charity) collects donations, under extremely detailed terms and conditions, and then disperses the funds to the recipient charities named by the organizers. Do donors actually read these terms and conditions? In the Barber appeal, they were not always easy to locate, and how to \u2018learn more\u2019 differed if viewed on a mobile phone<\/a> versus a desktop computer.<\/p>\n

PayPal quickly dispatched the donations to the Fund. Some might say this was to prevent it from being embroiled in litigation, given that it had just reached a settlement with the US Attorneys General<\/a> in several states about inadequate disclosure to donors. In any event, the Fund then immediately allocated $20 million of the $51 million to volunteer firefighter matters — and it planned to distribute the rest, pending the court decision.<\/p>\n

The court steps in<\/strong><\/p>\n

A judge was asked to decide: could the money from the fundraiser be directed to other charities? If not, could the Fund be used for broader purposes than those stated in its legal mandate? In May, 2020, the NSW Supreme Court was decisive: the money could go to only the Fund, and only for the purposes in its legal mandate, mainly involving training volunteer firefighters in rural areas and supporting volunteer firefighters who are injured on the job.<\/p>\n

In short, Facebook comments by donors stating they wanted to support fire victims and communities didn\u2019t mean much, and PayPal\u2019s \u201cterms and conditions\u201d won out. When donors had made their payments to PayPal, via Barber\u2019s Facebook fundraising page, they\u2019d agreed to PayPal Giving\u2019s terms and conditions, which named the Fund as the recipient charity, \u201cdespite what donors later may have hoped or intended might be done with the money.\u201d<\/p>\n

Barber later told her supporters: \u201cTurns out that studying acting at university does not make me a lawmaker.\u201d<\/p>\n

What else could be done?<\/strong><\/p>\n

The court had to address narrow questions relying on trust law. Clearly, creating flexibility to direct some of the Barber fundraiser funds to victims and affected communities wouldn\u2019t happen through the courts. One alternative was legislation that would amend the Rural Fires Act 1997<\/em> (NSW), the legal authority behind the Fire Service and the Fund, to allow greater flexibility in how the donations could be directed. The other option \u2013 noted explicitly by the court \u2013 is for individual donors to sue PayPal Giving on the basis that they had stated on Facebook they wanted their donations to go to a different cause or charity. Given the high costs of litigation and the fact that PayPal Giving had quickly passed on the funds, no donor has taken up this option.<\/p>\n

However, a bill has been introduced into the NSW Parliament<\/a> by a Greens party member to amend the Rural Fires Act 1997<\/em> (NSW). In her submission to the parliamentary committee overseeing the bill<\/a>, Barber noted: \u201dUnderstandably, I started the fundraiser to help my family, with a goal of 30K, then when it surpassed tens of millions of dollars, and the fires kept raging and the devastation was unfathomable I absolutely thought it would be possible for this huge amount of money to be shared.\u201d<\/p>\n

She also explained the challenge of changing course once crowdfunding goes viral: \u201cIt was suggested to me that I open up a number of additional fundraising pages so the money could go to other charities. I didn\u2019t know what to do as I feared that if I closed this particular fundraiser down and started another one the momentum might have been lost.\u201d<\/p>\n

\"\"<\/strong>Barber also reflected how her own reputation and trust of her supporters \u2013 more than 10 million people online \u2013 had been damaged. \u201cIt is my name being used in the courts and throughout international media channels,\u201d she said. \u201cI have lost count of how many times I have heard and read the word \u2018unprecedented\u2019 used when referring to the money raised. Maybe something that we have never seen before deserves the consideration of a change of rules in this unprecedented instance.\u201d And she issued a caution about taking such generosity for granted: \u201cMy concern is that if it is not possible to help these people have their money allocated to where they want it to go in this unprecedented instance that this may be the last we see of such generosity on such an international scale.\u201d<\/p>\n

The Committee\u2019s July 2020 report<\/a> recommended further debate by Parliament to address legal concerns of some witnesses. That has yet to happen. Meanwhile, the $51 million is being distributed by the trustees of the Fund on new equipment, training, and assistance for injured volunteers. Some might argue this has relieved the NSW government of the burden of this expense.<\/p>\n

During the bushfires, over 500 fraudulent scams were reported to the Australian Competition and Consumer Commission. The vast majority of fundraising activities during the 2019-2020 bushfires had been through online and digital mechanisms. Government should consider whether additional regulatory responses are required to address online-fundraising fraud risk.<\/p>\n

— Royal Commission on Natural Disaster Arrangements<\/a>, Australia (Oct. 2020)<\/p><\/blockquote>\n

Lessons for crowdfunding in Canada<\/strong><\/p>\n

This is a case of good intentions, generosity and emotions colliding against legal constraints in the absence of regulation of online crowdfunding. Among the lessons:<\/p>\n