HOUSTON – You see charity donation bins in parking lots all over our area. They seem like an easy way to clean out your closet and help someone in need, but consumer expert Amy Davis discovered your old shoes and clothes are making big profits for private companies who some claim are hiding behind charities, which often get the short straw.

From a modest box on a street corner to a massive warehouse on the west side of Houston, you may not care what happens to your old clothes and shoes after you dump them in a local charity bins, but the Michigan Attorney General's office said you should know.

“It's all about being honest, and they weren't being honest,” said Andrea Bitely with the Michigan attorney general’s office.

The state of Michigan is suing Houston-based American Textile Recycling Services. The company has donation bins in 13 cities across the country.

In Michigan, the bins had a sign claiming that 100 percent of the market value of donations went to the Michigan Humane Society. The state's top attorney called them out.

“Explain the difference between what the bin says and what we're seeing on your annual filings, which is only pennies on the dollar, going to the Michigan Humane Society,” Bitely said.

The lawsuit claims last year in Michigan alone, ATRS made $835,000 by selling the textiles recycled in the bins. They donated $49,000, or about 6 percent, of the total revenue.

“They say you should have given much more money to the Humane Society,” Davis said to the marketing director of ATRS, Debra Stevenson Peganyee, who is also married to the company’s owner.

“Well, I think they are looking for more clarity, and they are looking to make sure that donators in the community have a clear understanding of what we do,” Stevenson Peganye said.

Stevenson Peganyee invited Davis to ATRS to see how the business works. Employees sort through thousands of pounds of clothing every day. Old blue jeans are compacted into large bales and sold to companies that turn them into insulation. T-shirts are sold to companies that turn them into cleaning cloths.

“We make sure that everything has a place to go and nothing goes to waste,” Stevenson Peganyee said.

No one is complaining about recycling, but, rather, how ATRS collects its bread and butter.

“It's an extraordinary business model, I guess,” said Bob Dogum, with Monarca Development Company.

The company owns a lot of shopping centers in Texas, property he says ATRS has chosen to drop their charity boxes on without permission.

“It seems like they look for properties where they’re either not developed (or) not a lot of tenants,” Dogum said. “There might not be anybody saying anything about it.”

When his company did complain to ATRS, Dogum said a company representative got upset.

“We were just told angrily by them, ‘Go ahead and move it yourself,’" Dogum said.

“That is not our policy,” Stevenson Peganyee said when Davis asked about the unapproved boxes.

Stevenson Peganyee said ATRS gets written permission from every property owner where it leaves the boxes.



No matter where they are, none of the ATRS bins in Houston are in compliance with state law.

The Texas Business and Commerce code states that if any of the proceeds from the sale of donated items will be given to charity, signs on the box must state what percentage or flat fee that charity will get.

ATRS boxes in Houston are emblazened with the logo of nonprofit "Houston Area Community Services."

The charity is operated by Stevenson Peganyee's father-in-law, a practicing physician in a small building just up the road from ATRS. When Davis stopped by, Peganyee wasn't available, but workers were helping people giving out food and clothes.

Unlike Michigan, in Texas ATRS is not required to report its annual revenues and how much actually goes to charity.

“It is a business and it's an important one, but along the way we're helping people,” Stevenson Peganyee said. “We're helping pets. We're helping the planet. It's a circle of reuse that we're very committed to.”

It is true the recyclers don't have to give to charity. If they don't, the bins must state all goods are sold for profit. Since no one is policing the companies in Texas, it is up to the donator

to confirm the charities they claim to give to actually exist and that they are receiving money.

The easiest way to check out a charity is to enter the name of the organization on websites like www.Guidestar.com or www.CharityNavigator.com.

The Houston Better Business Bureau can also help with the background of local charities. It offers the following advice: