Friday, 28 March 2014

Fraudulent Charities                  


Charity fraud is the act of using deception to get money from people who believe they are making donations to a charity. Often a person or a group of people will make material representations that they are a charity or part of a charity and ask prospective donors for contributions to the non-existent charity.


Charity fraud not only includes fictitious charities but also deceitful business acts. Deceitful business acts include charities accepting donations and not using the money for its intended purposes or the operators of the charities spending much of the money on themselves. 


Throughout the year, and especially during the holiday season, you will probably get appeals over the Internet, in the mail, or by telephone urging you to contribute financially to a good cause. And when disasters hit — whether natural or man-made — fraudulent websites pop up like weeds, supposedly collecting funds for victims. There are plenty of fraud operators out there who are scheming for your money and the last thing on their mind is charity. Not only do such come-ons bilk you from your money, but they also put money you intended for the needy into the hands of con artists.     


Non-existence charities


Bogus charities that prey on donors' heartstrings are frequently licensed and allowed to carry on fundraising for many years before they are shut down, if they are shut down at all. They organize campaigns that promise they are raising money for such causes as missing, dying and abused children; local poverty; conquering AIDS in Africa; medical conditions such as Parkinson's Disease and asthma; helping the lives of animals; or saving human souls.

There is a growing number of schemes in which a professional fundraising firm has links with a charity, purportedly to do good works, but its real practice is to make a fast buck for the operators of the so-called charities.


 In one example, a Toronto based company, the Canadian Organization for International Philanthropy, had been linked with two charities to raise $40 million in tax-receipted donations. The charities are All Saints Greek Orthodox Church and the Orion Foundation. The former is a local Toronto church and the latter is a so-called charity run by a James Arion who worked out of his home in Stouffville, Ontario.   

The promotional material for this scheme was titled, Fight AIDS, Save Taxes! They claimed in their promotional material that they planned to send $350 million in antiviral medication to Africa and had already issued $40 million in tax receipts to donors. The Toronto Star discovered that the company was telling donors that they are buying AIDS drug doses at about $12 a dose when in fact; legitimate charities are buying the drugs overseas for 30 to 40 cents a dose.

Robert Steen, senior executive with the Canadian Organization for International Philanthropy, said they purchase the drugs from a Costa Rican company called Globe Lending Group. A search by the Star was unable to come up with a head office and the company's mailbox is a Costa Rican company that sets up offshore companies. Steen wouldn’t discuss anything about his so-called supplier, saying that he wasn’t allowed to talk about the people behind it. He also couldn’t explain why his so-called charity was paying so much money for those so-called drugs.

The Wish Kids Foundation said it was giving dying children their final wish, but its operators were really just trying to buy themselves an airplane. Canadians Against Child Abuse said it was trying to stop child abuse, but its executive director was using the money collected they scammed from the unsuspecting public to pay for his house, entertainment and vacations with the money.                        

A Hamilton, Ontario animal charity has had its charitable status revoked for paying almost all its incoming cash back out to a questionable fundraising promotion company and issuing more than $9 million in donation receipts for cash and shares that did not qualify as gifts.

The Animals’ Charity — based on the 2nd Concession in Lynden was formerly known as Furry World Rescue Mission and operated from 2001 with a focus on “improving the lives of domestic and nondomestic animals by providing education and support,” according to its website, which was later taken down.

The Canada Revenue Agency said an audit “revealed that the organization failed to devote its resources exclusively to its own charitable activities” when it took part in a donation arrangement with an organization called Innovative Gifting Inc. (IGI) in 2008. The organization enthusiastically lent its resources to support the donation arrangement, with little regard for the legitimacy of the arrangement it had with Animals’ Charity.

IGI led participating charities to believe they were receiving shares as a gift from a Swiss philanthropist who would match Canadian donors’ cash donations. However, the philanthropist did not exist. The Ontario Securities Commission found that IGI consultants solicited charities to participate. Then IGI charged a fundraising fee to the charities that was equal to 90 per cent of the cash donations each charity received.

There are too many examples of fraudulent charities whose good acts are non-existent to write about so I will direct you to the next segment of this article.

Money donated used to feather operator’s nests       

The typical non-profit charity spends significantly less on overhead than the public thinks. A Record (newspaper in New Jersey, US) review of the most recent tax returns filed by more than 3,000 New Jersey-based non-profits charities found that they typically spend about 15 cents of every dollar on overhead expenses which also includes salaries.

The 50 worst U.S. charities devoted less than 4% of donations to direct cash aid. Many of the operators among this bunch of crooks lied to their donors about where their money went. They took multiple salaries, secretly paid themselves enormous consulting fees or arranged fundraising contracts with friends.         

Here are some examples where the money went to those operators of those firms soliciting the money from their victims.

American Association of State Troopers.  Total raised by solicitors: $45 million. Paid to the operators: $36 million.
National Veterans Service.  Fund Total raised by solicitors: $70.2 million Paid to operators: $36.9 million.

International Union of Police Associations, AFL-CIO.  Total raised by solicitors: $57.2 million.  Paid to the operators: $41.4 million

Breast Cancer Relief Foundation. Total raised by solicitors: $63.9 million.  Paid to the operators: $44.8 million.

Firefighters Charitable Foundation. Total raised by the solicitors: $63.8 million. Paid to the operators: $54.7 million.

American Cancer Foundation. Total raised by solicitors: $80.8 million. Paid to the operators: $59.8 million

American Breast Cancer Foundation. Total raised by solicitors: $80.8 million. Paid to the operators: $59.8 million.

Children’s Wish Foundation International. Total raised by solicitors: $96.8 million. Paid to the operators: $63.6 million

Cancer Fund of America. Total raised by solicitors: $98 million. Paid to the operators: $80.4 million

Kids Wish Network. Total raised by solicitors: $127.8 million. Paid to the operators: $109.8 million.

The amount of money actually sent by these charities to the people in need was between 2.5% and 8%.  How do you feel knowing that for every dollar you contribute to these charities; between only two and a half cents to eight cents actually goes to those in need? The difference between the money sent and the money given to the operators is the expenses incurred in running the charities such as rent, heat and lights etc.  

And now, I will give you an example of a Canadian charity where the senior operators feathered their nests from the donations they received. The charity is called PHS Community Services Society which is located in Vancouver, British Columbia. They claim to be the largest social services provider in Vancouver’s severely distressed downtown east side of the city. Mark Townsend was until recently, the executive director and his wife Liz Townsend was until recently, the co-executive director. Both of these sleaze bags along with two other executives, Kirsten Stuerbecher and Dan Small and the entire board of directors were forced to resign when it was learned what was being done with the charity’s money.

Both Mr. and Mrs. Townsend were paid $120,000 a year as their salaries. That comes to $10,000 a month and if they worked 40 hours a week, it came to $62.50 an hour. 

But the combined $240,000 a year that they received wasn’t enough so they took from the donations between $1,400 and $1,600 a month because they claimed that they did some of the business of the Society in an office they also claimed was in their home. And over a three-year period, they spent another $11,000 of the donations having professionals clean their home office on a regular basis. Now if you think that this expenditure is gross, consider what follows.

The four-mentioned executives took between 40% and 40% in payments in benefits such as vacation pay each year (which was $20,000 for each executive) plus $6,500 for each statutory holiday pay for each executive. There are 12 statutory holidays in Canada so in essence, they were each paid and additional $78,000 for those holidays. Therefore the total income they received in in salaries, vacation pay and statutory holidays was $210,000 each year.  

Now one would hope that these sleaze bags would finally stop dipping in the till but no, that wasn’t going to happen at all. Mrs. Townsend and a Ms. Evens (who was an agent with Society) went to New York in 2009 and stayed at the very expensive Plaza Hotel. The cost was $9,266. Ms. Even also spent $250 in New York salons. Did these two horrible people use their own money? Of course not. The money came from the donations.  

The investigating accountants discovered that there was close to $1 million dollars put on the VISA Platinum Avion credit cards alone for luxury travel, world famous hotels, fine dining, liquor, floral arrangements, hair salons, spas and limousines.

As much as $69,000 was spent on 769 visits at  restaurants over a three-year period and even $5,842 was spent on a cruise on the Danube River. There was also a Disneyland vacation for four in which came to $2,700. These sleaze bags that racked up those bills didn’t use their own money. They used the money from the donations.

Further, there were questionable payments to various companies that submitted inflated invoices which makes me wonder who in Society was pocketing the difference.

Not only should these sleaze bags be ordered to repay these additional expenses, they should also be charged with fraud. 

The Canadian federal government operates the Charities Directorate, part of the Canada Revenue Agency. Charities are tax exempt and can issue federal tax receipts to donors. Provincial authorities, usually through the Public Guardian's office, also have the power to step in and take a charity to court if it is doing something wrong. Unfortunately, the guardians across Canada rarely take action.

The Toronto Star found the primary regulator, the federal Charities Directorate, is virtually powerless to deal with problem charities. To begin, tax law forbids it from warning the public about bogus or wayward charities. The directorate, which is part of the Canada Revenue Agency, treats charities the same way the taxman treats personal taxpayers. So, even when auditors have found a charity is doing little or no good work at all they cannot tell the public. Each year about 800 to 1,000 charities are audited and half are told they have done something wrong, but the public can't find out, even if it would be of major importance. The only way that the public knows about fraudulent charities is when the press learns of them and prints stories about them. In many cases, the charity had been allowed to operate for five years or more, its bold claims of putting the majority of its money to ‘good works’ unchallenged by the regulator. But when complaints and often investigations by newspapers prompted an audit, the auditor looks at the books of the bogus charity. Auditors in the Wish Kids case found the charity did not provide assistance to any sick children or their families.

Precautions to take when donating money    

Before you give donations to any charity, make sure you take all the necessary precautions to insure your money goes where you intended it to. Here are some suggestions if you intend to give them a great deal of money.     

Research the charity first. It’s always good to make sure you’re donating to a legitimate non-profit organization.  Check in Google as it will bring to your attention if anything detrimental has been written up in the media about the organization.                                                                               

Ask for the name, address, phone number and whether or not the charity is registered. If the presenter claims that it’s registered, get a registration number. An established foundation usually provides the names of the Board of Directors and general contact information.            

Ask for a copy of their annual report and read over the non-profit's financial information. These are available on-line from organizations like Guidestar listed below. If 10% or more of a non-profit's income goes toward expenses then your donation may not be benefiting those persons the charity claims to help.                                                        

Make sure the website of the charity you’re donating to uses encryption technology before entering any sensitive information (i.e. credit card number or bank draft information).

Always look at the charity’s privacy policy concerning the use of       your personal information. Know who’s collecting your information and how they plan to use it.                      

Get a receipt! This allows you to document your donation for tax reasons, and for your own personal records. Not to mention if anything ever does arise, you’ll have the proper paper trail the authorities can use if necessary.  

Be wary of email solicitations. Always be cautious when you receive a charity donation request by email. Some legitimate charities will email people who have donated before, but never respond to requests where you’ve never donated, unless you are familiar with the organization.

 To ultimately ensure that your money goes where you intend it to go, you should always donate directly to the organization. Don’t give it to the kid who comes to your door.   

Be wary of organizations that seem to exist just to promote the non-profit's head or spokesperson. A non-profit organization should focus on the beneficiaries of its mission.         

I don’t get people coming to my door seeking donations. That is because I have posted a sign behind the glass which says the following. 


No one has ever come to my door seeking donations except kids on Halloween. I happily donate candy to them naturally.

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