On 26 September 2024, the news broke that Naomi Campbell had been disqualified from acting as a charity trustee and her charity, Fashion for Relief, had been removed from the register of charities following a Charity Commission statutory inquiry.
The following day, Naomi Campbell issued a statement in which she accepted responsibility for any governance failings, but denied financial misconduct and said she is considering appealing the Commission’s decision. She also commented: “I’ve dedicated nearly 30 years of my life to charitable initiatives, and I care deeply about the value and impact of the work I do.”
There is no doubt that Naomi Campbell cares about supporting charitable causes and her track record speaks for itself. But it is also clear that something went very wrong with the charity that she founded less than 10 years ago. She is not the first philanthropist to have made mistakes in running a charity, but could these errors have been avoided and should Fashion for Relief ever have been registered as a charity at all?
Philanthropy and charitable status
The allure of charitable status for philanthropists is understandable. Research on public trust and confidence in charities consistently shows high levels of trust in the sector, and when high-profile philanthropists wish to use their name and brand to encourage donations from others, charitable status allows for donations to be Gift Aided. Founding a charity also has an intrinsic appeal for those wishing to create a legacy and for those with a strong desire to be more actively involved in decision-making.
Given the advantages and appeal of charitable status, it is understandable that Naomi Campbell decided to register Fashion for Relief as a charity. But setting up a new charity through which to achieve philanthropic aims is not always the right choice and it was always going to be difficult to reconcile the luxurious world of high-end fashion and international supermodels with the concept of charity.
Fashion for Relief
Fashion for Relief was registered as a Charitable Incorporated Organisation in January 2015. However, Naomi Campbell had been organising ‘Fashion for Relief’ shows as fundraising events to support other charities for 10 years before setting it up as a charity.
Fashion for Relief hosted charity fashion shows to raise funds for other charities. High-profile, luxurious events were held during Fashion Week, complete with red carpets, gala dinners, auctions and enviable guest lists, including many celebrities from the world of fashion, music and entertainment.
Naomi Campbell explains that Nelson Mandela inspired her to launch Fashion for Relief: “He always said to use my voice to speak out about things that I care about, to speak up and do something. Fashion For Relief is dedicated to improving the lives of those living in adversity, by uniting the fashion industry as a force for good.”
What went wrong?
The Charity Commission opened a compliance case in September 2020, having identified a range of governance and financial regulatory concerns. The case was escalated to a statutory inquiry in November 2021, partly due to the limited response of the charity trustees to the Commission’s Action Plan.
Interim managers were appointed, who concluded “that there had been serious misconduct and/or mismanagement in the administration of the charity by its trustees since it was established” and that the charity was “poorly governed and managed”. Specific findings included:
Over a 7-year period, the charity raised almost £4.8 million and spent almost £4.6 million. However, only 10% of its income was used to make grants to other charities.
Unreasonable trustee expenses, including five-star hotels and spa treatments, and unauthorised personal benefits to trustees (£290,572 paid in consultancy fees).
Failure to manage the charity’s finances appropriately, including allowing funds to be held by professional advisers (instead of in a bank account), resulting in £54,236.15 being misapplied (and subsequently recovered by the interim managers).
Was charitable status ever appropriate?
Fashion for Relief was in the business of organising fashion shows. It was established with that activity in mind and there was never any intention of considering other fundraising activities. It is unclear why the fact that the profits from these events were donated to other charities was deemed sufficient for the organisation to be registered as a charity.
To be registered as a charity in England and Wales, an organisation must be established for exclusively charitable purposes for the public benefit (a key aspect of which is that there must be no more than incidental private benefit).
Charities must engage principally in activities which directly advance their charitable purposes. Whilst income generation is, of course, critical for the success of a charity, it is not possible for charities to focus more than a small amount of their resources on non-charitable trading activities. For example, a charity’s activities could not principally involve operating a business selling widgets, even if all of the profits from that business were used for charitable purposes. Where a charity wishes to generate more than a small amount of income through non-charitable trading it must set up a trading subsidiary.
The rules about charities and trading aim to ensure that most of a charity’s resources are directed at advancing its charitable purposes; not generating income. Many businesses donate some or all their profits to charities, but this is not (and should not be) sufficient to obtain charitable status. If giving away your profits to other charities were all it took to obtain charitable status, businesses might start applying to become charities due to the significant tax advantages that they enjoy.
Most grant making charities are established as ‘foundations’ because they have a ‘regular source of finance or a pool of money’. Grant making charities usually either have an endowment (invested to generate income for the charity’s activities), or they receive regular donations from their founder(s). It is less common for grant making charities to have to engage in fundraising activities to generate income from which to make grants. It is even less common for fundraising events to be their only source of income.
Whilst it is perfectly acceptable for charities to engage in fundraising activities, including galas and other events, charities are not established with the intention of engaging in a specific type of fundraising activity only. Typically, charities engage in a range of different fundraising activities with a view to maximising the income for the charity and trustees have duties to keep their fundraising activities under review.
In the case of Fashion for Relief, the inquiry found no evidence “to show that the trustees had reviewed the charity’s operating model and ascertained whether the costs of the fundraising activities were reasonable and continued to be in the charity’s best interests relative to the profits they generated”. However, given the nature of the organisation, is it likely that it was ever intended that the charity might stop organising fashion shows and fundraise in some other way? If not, should it have been registered as a charity based on its business model and plans?
Whilst charities can be established as grant making charities and it is permissible to raise funds by hosting fundraising events, the business model of Fashion for Relief is difficult to reconcile with the legal test for charitable status.
Lessons to be learned
Philanthropy is critical for the charity sector and the disqualification of philanthropists like Naomi Campbell, someone who has spent decades supporting charitable initiatives, is not likely to encourage other high-profile individuals to consider philanthropic ventures. However, the mistakes made in this case could have been avoided.
Whilst charitable status is understandably appealing, setting up your own charity is not the only way to be philanthropic. It is very important to take advice on your options and ensure you fully understand the role and responsibilities of charity trustees before setting up a charity. It is not necessary to run a charity to support existing charitable causes.
Naomi Campbell had successfully raised money for charities through her fashion show events for 10 years before she founded Fashion for Relief as a charity. It is unclear why she felt that charitable status was either necessary or helpful at that stage. She has admitted that she “was not involved in the day-to-day operations” of Fashion for Relief and has now instructed new advisers to “undertake a detailed investigation of what transpired”. It will be interesting to see whether she challenges her disqualification and, in doing so, whether any thought is given as to whether Fashion for Relief should have been registered as a charity at all.
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