AGs and the Charitable Sector: In the News
New York Attorney General Will Not Support Sale of Healthcare Facilities to Residential Developer (June 6, 2016)
The Wall Street Journal reports that the New York AGs office will not support the sale of rehabilitation centers in Manhattan and Brooklyn to residential developer Allure Group. After concluding its investigation into the sale, the NY AG's Charities Bureau cited "grave concerns" that Allure Group would not operate the facilities as residential treatment centers. Under New York's recently overhauled Not-for-Profit Corporation Law ("N-PLC"), approval of such transaction must be sought by the attorney general or court, on notice to the attorney general. However, as a New York AG sale of assets guide indicates, the Charities Bureau prefers that nonprofits not exempted from the provisions of the N-PCL, submit all requisite documents to the New York AG's Charities Bureau prior to filing with the court.
Nonprofit backed by Koch brothers won't have to reveal its donors to Atty. Gen. Kamala Harris (April 21, 2016)
A federal judge has ruled that a nonprofit backed by conservative billionaires David and Charles Koch does not have to reveal its donors to Atty. Gen. Kamala Harris in a case that pitted state law governing charities against 1st Amendment rights.
U.S. District Judge Manuel Real, ruled that the Americans For Prosperity Foundation, a 501(c)(3) charity organization, can ignore Atty. Gen. Kamala Harris request to turn over the names and addresses of those who have donated more than $5,000.
Read the decision HERE
D'Amato, Melius, Schlesinger charities get subpoenas in state AG's charity probe (October 3, 2015)
New York AG issues subpoenas to charities run by former Sen. Alfonse D'Amato, political power broker Gary Melius and prominent Democratic attorney Steve Schlesinger. The subpoenas stem from Schlesinger's management of the Garden City-based Kermit Gitenstein Foundation, an $11 million private trust a judge picked Schlesinger to run in 2007. The attorney general issued the subpoenas starting in August after a Newsday investigation found Schlesinger made questionable disbursements from the foundation, including $250,000 to a charity controlled by Melius, owner of Gold Coast mansion Oheka Castle.
Citizens United Loses Preliminary Injunction Bid in Lawsuit Against New York Attorney General (July 27, 2015)
U.S. District Court Judge Sidney H. Stein granted an initial victory to the New York Attorney General’s office by denying Citizens United and Citizens United Foundation’s attempt to preliminarily enjoin the New York Attorney General from enforcing regulations which require charities registered within the state of New York to disclose the names, addresses and total contributions of major donors. Citizens United contends that the regulation, commonly referred to as the “Schedule B policy,” runs afoul of the law for four main reasons, including the nonprofit’s First Amendment rights of freedom of speech and association. Judge Stein ultimately found Citizens United contentions unpersuasive, concluding that plaintiffs were unlikely to succeed on the merits of their claim. According to Judge Stein:
Citizens United has not demonstrated that the balance of equities tips in its favor or that a preliminary injunction serves the public interest. On this record, the only actual, non-speculative burden that the Schedule B policy imposes on plaintiffs’ speech and association rights stems from its interference with their donors’ subjective desire to remain completely anonymous. As the Court has already found, that burden is negligible. On the other end of the scale, prohibiting the Attorney General from obtaining Schedules B from organizations such as plaintiffs would materially impede his oversight of charities by precluding his access to information that exposes potential violations of the law. Moreover, the public has a strong interest in the enforcement of laws that protect it from unscrupulous charities, at least when such enforcement is not likely to lead to a First Amendment violation.
To view the Court’s Opinion and Order, click HERE
New York Attorney Files Court Papers to Shutter Children’s Charity (July 20, 2015)
In yet another large-scale investigation conducted by the New York Attorney General’s Charities Bureau in the last year, the office has filed court papers to shutter the National Children’s Leukemia Foundation. According to court documents, the foundation amounted to a mirage, run by a single individual – Zvi Shor of Brooklyn. The New York Attorney Generals' Office alleges that the foundation raised approximately $9.7 million from donors nationally, but spent nothing on programmatic efforts and its charitable mission from 2009-2013, and only a negligible amount in the last year. In order to conceal his siphoning of funds for personal use, the court papers accuse Mr. Shor and others of filing false audits and other official documents. The Attorney General’s office seeks to recover all donated funds received through fraudulent practices.
FTC, 50 states and District of Columbia Accuse 4 Cancer Charities of Fraud (May 19, 2015)
In an unprecedented collaboration between federal-state agencies - including assistance from the Better Business Bureau's Wise Giving Alliance - the Federal Trade Commission (FTC), 50 states and the District of Columbia, have announced the filing of a federal civil lawsuit in the U.S. District Court of Arizona against four cancer charities for deceptive acts and false claims in soliciting charitable donations. The suit has been brought against the Cancer Fund of America, Inc. (CFA), Cancer Support Services Inc. (CSS), their president, James Reynolds, Sr., and their chief financial officer and CSS’s former president, Kyle Effler; Children’s Cancer Fund of America Inc. (CCFOA) and its president and executive director, Rose Perkins; and The Breast Cancer Society Inc. (BCS) and its executive director and former president, James Reynolds II. According to Virginia Attorney General Mark Herring, “This is the first time the FTC, all 50 states, and the District of Columbia have filed a joint enforcement action alleging deceptive solicitations by charities and I hope it serves as a strong warning for anyone trying to exploit the kindness and generosity of others.”
To view the FTC press release, click HERE
To view the complaint filed by the FTC, 50 states and District of Columbia, click HERE
Ninth Circuit Upholds California Regulation Requiring Donor Lists From Nonprofits (May 15, 2015)
The Ninth Circuit upheld a U.S. District Court in California’s decision to deny a preliminary injunction request from the Center for Competitive Politics in a suit against California Attorney General Kamala Harris, in her official capacity. The suit challenges California regulations which require nonprofits registered in the state to disclose the names and contributions of “significant donors,” through the Internal Revenue Services’ Form 990 Schedule B. The Schedule B form, attached to a Form 990, includes the names, addresses and contribution amounts of donors who generally contribute more than $5,000 in cash and/or property to a nonprofit organization. California, along with several other states, requires that an unredacted Schedule B form be provided to the Attorney General’s offices as part of the requirements for maintaining registration status within the state.
To view the Ninth Circuit's Opinion, click HERE
New York Attorney General Reminds Boy Scouts of America: Discrmination Against the Law (April 23, 2015)
In a letter addressed to the Boy Scouts of America, Kristen Clarke, the Chief of the New York Attorney General’s offices Civil Rights Bureau reminded executives at the Boy Scouts of America that under city and state law, hiring discrimination based on sexual orientation is prohibited. This letter comes after the New York City chapter of the organization hired its first openly gay member to serve as a summer camp leader, in violation of the organization's national policy.
Two Directors of Hawaii Nonprofit Charged with Theft (March 26, 2015)
After a seven month investigation, Hawaii Attorney General Doug Chin has brought criminal charges against two nonprofit directors for diverting state funds from their nonprofit organization into their personal coffers. The nonprofit, Waianae Community Outreach, received state funding to serve the homeless community. Each director has been charged with multiple felony counts of theft.
New York Attorney General’s Office Investigating Renowned Cooper Union For the Advancement of Science and Art (March 24, 2015)
In 2014, New York’s famed Cooper Union college, one of America's preeminent instituitions of higher education, which also happens to be free for those attending, announced that due to the specter of insolvency, they would begin charging tuition. Now, the New York Attorney General’s office wants to know how and why the college brass reached that decision. According to the Wall Street Journal, the AGs investigation will include analyzing board of trustee decisions regarding the financing of new facilities and the terms of the school’s lease arrangements of its major asset, the Chrysler Building, with real estate companies such as Tishman Speyer.
Court Directs Owner of Phony Colorado Cancer Charity to Pay 6 million in Penalties (March 19, 2015)
Adam Shyrock, the founder of two Colorado sham charities has been ordered by a Colorado court to pay $6 million in receipts and penalties. In addition, Mr. Shyrock has been barred for life from ever working in charitable solicitation in Colorado. Both the Colorado and Illinois Attorney General’s office had been involved in shuttering Mr. Shyrock’s phony charities in their respective states. In January 2015, a Colorado judge sentenced Mr. Shyrock to six months of additional prison time after violating various court orders stemming from the Colorado Attorney General’s office’s case.
New York Attorney General’s Office Releases Annual Report on the State of Fundraising in New York (March 4, 2015)
The New York Attorney General’s Office released their annual “Pennies for Charity” report, which looks at the state of telemarketing on behalf of charities by professional, for-profit fundraisers. Every year, members of the industry greatly anticipation the release of the New York Attorney General’s report, which often serves as a barometer of charitable telemarketing. Long known as the international leader for the non-profit/charitable sector, employment in the non-profit/charitable sector accounts for 18% of private sector employment in the state.
According to the report charitable donations in New York increased 20% from the previous year to $302 million. However, 48% of that total amount was spent on the organizations’ charitable mission. This is actually an increase from 2012, when only 37% of donations went to the charitable cause.
To view the “Pennies for Charities” Report, please click HERE
Ohio Attorney General Settles with Phone Solicitation Company (February 9, 2015)
Ohio Attorney General Mike DeWine announced a $105,000 settlement with a Massachusetts based phone solicitor over allegations that it misled Ohio residents into believing that its representatives were volunteers from a charity rather than professional solicitors. The company called on behalf of numerous charities including Environmental Defense Fund and the Anti-Defamation League of B’nai B’irth.
To view the Ohio Attorney General’s press release and assurance of discontinuance, please click HERE
New York Attorney General and Manhattan District Attorney Investigating Collapse of Historic New York Nonprofit (February 9, 2015)
The New York Attorney General's office is conducting a joint investigation with the Manhattan District Attorney's office into the financial collapse of the Federation for Employment & Guidance Services. The nonprofit served over 100,000 indigent New Yorkers by providing various services, including job counseling/placement and housing. In December, the nonprofit announced that it was $20 million in debt as a result of lost state and federal grant funding. Now, investigators want to know why the nonprofit accrued such a dramatic short-fall in light of its once significant operating budget.
Oklahoma Attorney General Requests Receivership Appointment for Oklahoma Nonprofit (February 5, 2015)
In an effort to protect charitable assets and save a nonprofit organization and its community center, Oklahoma Attorney General Scott Pruitt has petitioned a state district court to appoint a local foundation, the Tulsa Community Foundation, as receiver for the Greater Cornerstone Development Project, a nonprofit organization created to fund and operate the Greater Cornerstone Community Center in Tulsa. In January, the founder of the center and project, Reverend Willard Jones, was sentenced to a three-year one-month prison term after pleading guilty to federal wire fraud and false tax return charges. Rev. Jones was also ordered to repay approximately $1 million of misappropriated funds back to the nonprofit organization. Attorney General Pruitt worked with the Tulsa Community Foundation and the Tulsa Area United Way to keep the community center from closing its doors.
To view the Attorney General’s press release and petition, please click HERE
New York Lawyer Pleads Guilty for Embezzling Money from Nonprofit (February 4, 2015)
New York Attorney General’s office secured a guilty plea from a Westchester County attorney on grand larceny charges, after an investigation by the Attorney General’s office revealed the attorney embezzled almost $2 million from the United Hebrew Cemetery, the nonprofit organization involved in this matter. The attorney also pled guilty to stealing from his client’s escrow accounts. Defendant was arrested in September 2014 and served as acting president of the cemetery.
To view the Attorney General’s press release, please click HERE
New Hampshire Attorney General’s Office Secures Guilty Plea from Businessman for Misapplication of Charitable Property (February 3, 2015)
Justin Rosberg, the owner of a chain of butcher shops in New Hampshire, pled guilty for failing to provide the donations his business raised for military veterans’ charities in the state. Mr Rosberg was sentenced to twelve months in prison and ordered to make installment restitution payments.
To view the Attorney General's press release, please click HERE
Connecticut Attorney General Investigating Nonprofit Organization’s Use of Charitable Donations and Grant Funds (January 30, 2015)
The Hartford Courant reports that a joint investigation by the Connecticut Attorney General’s Office and the state’s Department of Consumer Protection is underway for possible misappropriation of charitable and grant funds by a Connecticut nonprofit. The organization, Hartford Areas Rally Together (“HART”) is alleged to have abused its role as a holding agent of funds for another nonprofit organization by spending the funds earmarked for that organization. In addition, asset irregularities led HART’s board of directors to conduct an internal investigation, which led to the executive director admitting that she had used nonprofit funds for personal reasons.
California Attorney General Investigating Finances of Pacifica Foundation Radio (January 8, 2015)
The California Attorney General’s Office is currently undertaking an audit of Pacifica Foundation Radio, which oversees a network of nonprofit radio stations throughout the country. The audit allegedly stems from complaints made by former board members to the Attorney General’s Office regarding recent actions taken by the Foundation’s board, including the firing of the Executive Director, and general bookkeeping, governance practices.
Oregon Attorney General's Office Releases Annual List of 20 Worst Charities (December 19, 2014)
The Oregon Attorney General's Office released its annual report of the twenty worst charities. Charities that qualify for this dubious distinction spend the vast majority of donation money on administrative costs and professional fund raisers as opposed to the charitable purpose. Five new charities made this year’s list.
National Retail Store Savers LLC Scrutinized by Minnesota Attorney General’s Office (December 12, 2014)
National media outlets, including the New York Times are reporting that Minnesota Attorney General Lori Swanson issued a compliance report in November, accusing Savers LLC - a national for-profit chain of thrift store outlets - and its subsidiary Apogee of pocketing over $ 1 million dollars that should have gone to charities. According to the Report, Savers LLC partners with charities, such as the Vietnam Veterans of America, to solicit clothing which it then sells at its retail outlets throughout the United States. Savers pays the charities a varying fee based upon the amount of donated items it receives on behalf of the charity. The store issues a tax deduction receipt to individuals who donate clothing to benefit a partner charity. According to the Attorney General's press release and report however, the following problems were discovered:
Savers mixes its identity with that of the charities and fails to disclose the amount of a donor’s donation that is received by the charity versus the amount that is retained by Savers, a for-profit corporation.
Savers gives tax receipts to donors for donations of non-clothing household products, furniture, electronics, and other so-called “brica” but states that it does not pay the charities for such “brica” donations (instead retaining for itself the funds from selling brica donations in its stores). In doing so, Savers likely misrepresents the tax laws when, on the one hand, it encourages donors to deduct the retail value of brica donations but, on the other hand, states that it retains all the revenue from the sale of these products and provides no payment to the charities.
Savers gives tax receipts to donors for clothing which is commingled with clothing donations intended by donors for other charities, making it impossible to have an accurate accounting of donations to each charity.
Savers has 45 days to amend its practices, or else face legal action by the Minnesota Attorney General.
To view the Compliance Report, please click HERE
Massachusetts Attorney General Releases Report on Professional Fundraising and the Charitable Sector (December 2014)
The Massachusetts Attorney General's Office released its annual report detailing the total amount of proceeds raised by professional solicitors on behalf of charities in 2013, and the percentage of those proceeds charities actually received. According to the "Report on Professional Solicitations For Charity in 2013," professional solicitors registered with the Attorney General’s Office raised over $388 million, an increase of $122 million from 2012. And of the money raised, for-profit solicitors received $204 million, or approximately 53% of money raised.
North Dakota Attorney General Seeking Court Remedy to Save Foundation (November 20, 2014)
In a series of articles from North Dakota’s Bismarck Tribune, and other state periodicals, state attorney general Wayne Stenehjem will be filing a complaint requesting that the Dickinson State University Foundation be placed in receivership. According to reports, the Foundation has been in a perilous financial situation for some time. By requesting a receivership, Attorney General Stenehjem may be saving the Foundation from ultimate demise. It was recently discovered that millions of dollars of donations, earmarked for scholarships and other related expenditures, may have been used to cover operating expenses. In addition, missing records are complicating an audit of the Foundation’s finances. Interim Chancellor of the North Dakota University System, Dr. Larry Skogen told the Bismarck Tribune that although receivership may be difficult for the Foundation, ultimately it will "restore the Foundation on solid grounds."
Pearson Charitable Foundation to Close its Doors (November 19, 2014)
The Washington Post reports that a year after settling with the New York Attorney General’s Office for $7.7 million, the Pearson Charitable Foundation will be closing its doors at the end of this year. In December 2013, the Foundation reached a settlement with the New York Attorney General’s Office after an investigation revealed the Foundation had violated state law by using funds to help the for-profit parent attract clients and develop educational products.
Vermont Attorney General Reaches Settlement with Beleaguered Nonprofit (October 20, 2014)
The gamut of an attorney general’s authority over nonprofits is on full display in Vermont. Several weeks ago, Vermont Attorney General William Sorrell filed suit against Emerge Family Advocates, a Vermont nonprofit, after two whistleblowers who served as members of the board of directors approached the attorney general’s office regarding the lack of financial oversight and poor governance that pervaded the organization. According to the attorney general's complaint, the executive director of the nonprofit wrote and authorized her own paychecks on an irregular basis for the last two years “(1) paying herself several times during the same two-week pay period” (2) paying herself weeks or months in advance of a pay period and (3) paying herself multiple times for the same pay period.”
Amidst demands from the Attorney General’s office, the board of the Emerge Advocates has agreed to resign as part of a settlement deal. In addition, an independent auditor will be hired by the Attorney General’s office to review the organization’s finances and a new board will be appointed by the Attorney General from a group of candidates to be nominated by the nonprofit community in the affected area.
To view the settlement agreement reached between the parties, please click HERE
Vermont Attorney General Seeks Removal of Nonprofit Board for Failing to Oversee Finances (October 7, 2014)
Good governance of a nonprofit often begins and ends with appropriate financial oversight and internal controls. Failing to have established procedures and controls in place are a recipe for a nonprofit’s demise. This cautionary tale is currently being played out in Vermont, where a suit has been filed by Vermont Attorney General William Sorrell against a Vermont nonprofit for failing to account for finances, general lack of financial oversight and poor governance. The suit alleges, for example, that the executive director of the nonprofit wrote and authorized her own paychecks on an irregular basis for the last two years “(1) paying herself several times during the same two-week pay period” (2) paying herself weeks or months in advance of a pay period and (3) paying herself multiple times for the same pay period.”
Indiana Attorney General Files Suit Against Three Fraudulent Veterans Charities (September 18, 2014)
The Indiana Attorney General’s office has filed suit against three charities that purport to help military veterans. The office alleges that since 2011, the three charities - Sandbox Veterans of America, Catholic Veterans of Indiana, and Iraq and Afghanistan Veterans of America Inc. - solicited donations on behalf of veterans, but no veterans ever received the solicited funds.
Sale of Washington D.C.'s Corcoran Gallery of Art Approved (August 18, 2014)
A D.C. Superior Court judge has granted the trustees of the Corcoran Gallery of Art's petition for cy pres relief, finding that the famed art gallery met the conditions necessary for cy pres relief. The art school portion of the gallery will now become part of George Washington University, while the collection of art and the building will be taken over by the National Gallery of Art. On July 16, the D.C. Attorney General’s office agreed with the proposal, concluding that the request for cy pres relief was justified under the circumstances.
To read the Court's decision, please click HERE
New York State Executive Order Limiting Executive Compensation Deemed Constitutional (August 8, 2014)
A New York State Supreme Court judge has upheld New York Governor Andrew Cuomo’s executive order requiring state agencies to implement regulations that limit the amount of state authorized funds that may be used towards a nonprofit's administrative costs and executive compensation. The New York State Attorney General’s office’s Suffolk County Regional Bureau defended the New York State Department of Health's regulations and the Governor's executive order.
To read the Court's decision in Concerned Home Care Providers v. New York State Department of Health, please click HERE
Connecticut Legislators Ask Attorney General to Investigate Amistad Nonprofit (August 8, 2014)
Legislators in Connecticut have asked Attorney General George Jepsen to investigate the audit reports and other issues involving Amistad America Inc., the entity responsible for operating the replica of the famous ship overtaken by Mende captives in 1839. In 2012, Amistad America lost its nonprofit status for its failure to file tax returns. Now recently released audits from 2009-2012 show various financial weaknesses, including a lack of appropriate operating money. In a letter addressed to Attorney General Jepsen, State legislators asked his office to investigate the audits and the closing of Ocean Classroom Foundation, a Maine foundation which had an agreement with Amistad America to jointly operate the ship.
To view the Legislators' letter to Attorney General Jepsen, please click HERE
New Hampshire Law Increases Oversight of Charitable Gaming (August 7, 2014)
On Aug. 4, New Hampshire Governor Maggie Hassan signed House Bill 1630, a bill which increases oversight of charitable gaming within the state by both the New Hampshire Attorney General’s office and the state’s Racing and Charitable Gaming Commission. Legislators hope the new law will strengthen oversight of the approximately $75million spent at charitable gaming events each year.
Montana Attorney General's Office Releases Sixth Annual Report on the Charitable Purpose of Montana Hospitals (July 30, 2014)
Montana Attorney General Tim Fox has released the results of a sixth annual report prepared for the office by the University of Montana’s School of Public and Community Health Sciences. Entitled "Montana’s Hospitals: Issues and Facts Related to the Charitable Purposes of Our Hospitals and the Protection of Montana Consumers Sixth Annual Report," the report highlights the level of community care provided by Montana’s 46 nonprofit hospitals.
To access the report, please click HERE
New York Attorney General Charges Nonprofit Executive With Grand Larceny (July 30, 2014)
A grand jury has indicted an executive of two charities on grand larceny charges and falsifying business records. The New York Attorney General's office alleges that the executive misued $1 million of state grant funds. The grant money was used for overhead costs as opposed to the programs it was intended to fund.
Judge Rules that Coalition Opposed to Sale of Washington D.C.’s Corcoran Gallery Can Intervene in Proceedings (July 21, 2014)
In its ongoing coverage of Washington D.C.'s Corcoran Gallery of Art and College of Art and Design cy pres proceedings, the Washington Post reports that a D.C. Superior Court judge will permit opponents of a proposed merger between Washington D.C.’s famed art institution and George Washington University to intervene as parties in the proceedings. The “Save the Corcoran” group, a coalition of former and current students, professors and donors, filed a motion to intervene on July 2, arguing that the proposed deal – merging the College of Art and Design with George Washington University and transferring much of the Gallery’s art collection to Washington D.C.’s National Gallery of Art - uniquely affected them.
Over the last several years, the Corcoran’s board publicly discussed the financial dire straits facing Washington D.C.’s oldest private art institution. Board members argued that a sale of its famed building, a proposed merger with George Washington University and a transfer of much of its collection to the National Gallery of Art remained the institutions best option, in light of its financial predicament. Consequently, last month the Corcoran Board and the D.C. Attorney General's office issued a notice of cy pres proceedings initiated by the board of the Corcoran. On July 16, the D.C. Attorney General’s office agreed with the proposal, concluding that the request for cy pres relief was justified under the circumstances.
To view the D.C. Attorney General's "Notice of Cy Pres Petition of the Corcoran Gallery of Art and College of Art and Design" webpage, please click HERE
Arkansas Attorney General Reaches Settlement With New Jersey Nonprofit (July 15, 2014)
Arkansas Attorney General Dustin McDaniel reached a settlement with a New Jersey nonprofit organization, after the Attorney General's office brought suit alleging the organization misled state donors. The National Police Defense Foundation of New Jersey has agreed to pay $120,000 in restitution and cease all fundraising activities in Arkansas.
New York Attorney General's Office Reaches Precedent Setting Settlement Against Deceptive Veterans Charity (June 30, 2014)
It what has been described as the largest settlement in the United States against a deceptive charity, the New York Attorney General's office has secured a $25 million settlement today with veterans charity Disabled Veterans Foundation and its direct mail companies Quadriga Art and Convergence Direct Marketing. A several year investigation by CNN and the New York Attorney General's office revealed that the companies misled donors through false solicitation practices, used money for overhead and executive compensation rather than its advertised purpose and failed to disclose glaring conflicts of interest. Other settlement terms include an assurance by the direct mail companies to fully disclose all potential conflicts and for the veterans charity to alter its business model and solicitation practices. The companies are also precluded from working together for three years.
To view the Assurance of Discontinuance, please click HERE
Detroit Institute of Arts Will Be Transferred to Charitable Trust Under Bankruptcy Deal (June 17, 2014)
Michigan Attorney General Bill Schuette gave his official approval to the proposed Detroit bankruptcy deal which would, as part of the overall package, transfer the Detroit Institute of Arts to an independent charitable trust, thereby protecting the collection against any possible sales. In June 2013, the City of Detroit Emergency Manager Kevyn Orr began itemizing Detroit’s assets, including the art collection at the museum. In response, Michigan Attorney General Bill Schuette issued an official opinion stating that no piece from the Detroit Institute of Arts' collection may be sold, transferred or conveyed to satisfy the City's debts or obligations, since the collection is held as charitable trust by the City of Detroit for the people of the state.
Ohio Attorney General's Office Indicts Members of Nonprofit Board (June 13, 2014)
Ohio Attorney General Mike DeWine announced indictments of seven board members of an emergency medical services nonprofit for theft and other charges. Investigators allege that the seven members stole approximately $500,000 of the nonprofits money and undertook other corrupt acts.
Washington Attorney General Investigating Homes for Veterans Charity (June 6, 2014)
Washington Attorney General Bob Ferguson has opened an investigation into Tacoma, Washington charity Making a Difference Foundation, a charity which places military veterans on a path towards affordable housing and provides financial counseling. A local news segment and various consumer complaints indicate that families who registered with the charity received homes in poor condition and with no financial counseling.
New Jersey Attorney General Announces Remaining Donations Redistributed From Unregistered Hurricane Sandy Related Charity (June 5, 2014)
In February 2013, the New Jersey Attorney General’s Office filed a civil suit against the Hurricane Sandy Relief Fund and its directors and founders, John Sandberg and Christina Terraccino, alleging that the couple misappropriated charitable donations and the charity did not have tax-exempt status. As part of an agreement reached in June 2013, a court administrator was appointed to dissolve the fraudulent charity and redistribute the donated funds. The New Jersey Attorney General’s Office reports that as of June 5, 2014 all of the remaining funds have been redistributed to legitimate Hurricane Sandy related charities.
Massachusetts Attorney General Reaches Agreement With Nonprofit Healthcare System (May 20, 2014)
Massachusetts Attorney General Martha Coakley and nonprofit Partners Healthcare, the state’s largest medical system, have reached an agreement regarding Partners’ acquisition of two state hospitals. The Attorney General’s office will approve the acquisitions (pending final court approval as per Massachusetts General Laws) and in exchange Partners Healthcare will limit rate increases across its network to the rate of inflation.
New York City Councilman Arrested After New York Attorney General Investigation (May 7, 2014)
The New York Times reports that the New York Attorney General’s Office has arrested New York City Councilman Ruben W. Wills, a democrat representing the southeastern borough of Queens, on fraud and larceny charges. Amongst the charges, the indictment alleges that Mr. Wills used state grant money earmarked for the Councilman's charity to combat obesity for various shopping sprees.
Whistleblower Suit Initiated After Minnesota Attorney General Report Finds Executive Director Used Nonprofit Funds for Personal Use (May 7, 2014)
Six former employees of a Minnesota nonprofit organization which serves as a sanctuary for exotic wildcats have filed a whistleblower lawsuit against the entity for allegedly being fired or forced to resign after reporting illegal activities to the board of directors. The suit follows a report issued by the Minnesota Attorney General’s office which found the executive director of the nonprofit used thousands of dollars in organization funds for personal use.
Massachusetts Attorney General Sues Veterans Charity for Deceptive Practices (April 29, 2014)
Nonprofit Quarterly reports that Attorney General Martha Coakley has filed suit against a Rhode Island based veteran’s charity for deceptive solicitation practices and operating without a proper certificate. The article draws attention to the impact scams of this kind have on public confidence in nonprofits, by highlighting language from the Massachusetts Attorney General's complaint that acknowledges this effect.
California Attorney General to Investigate Nonprofit Group for Waste and Misappropriation (April 25, 2014)
The Balboa Park Celebration Inc., a defunct nonprofit organization created for the purpose of planning the Park’s centennial celebration, is now under investigation by the California Attorney General’s Office for waste, possible misappropriation and excessive compensation to executives.
Massachusetts Attorney General Files Suit Against Former Head of Nonprofit School (April 25, 2014)
Attorney General Martha Coakley has filed suit against the former head of a nonprofit school for breach of fiduciary duty. AG Coakley alleges that Robert Gee, the former president of a nonprofit educational institution based in Falmouth, Massachusetts, received excessive compensation given the size and total assets maintained by the school. In addition, AG Coakley alleges Mr. Gee procured lavish benefits from the school without the knowledge of its board of directors.
New York Attorney General Secures Guilty Plea from Former Head of Metropolitan Council on Jewish Poverty (April 23, 2014)
William Rapfogel, the former head of the New York’s Metropolitan Council on Jewish Poverty, and co-conspirators pleaded guilty to grand larceny, after an investigation by the New York Attorney General’s Office and the State’s Comptroller’s Office revealed that Mr. Rapfogel and others engaged in an insurance kickback scheme that resulted in the theft of over $5 million. Rapfogel will be sentenced to 3 1/3 to 10 years in prison and will pay $3 million in restitution.
Pennsylvania Attorney General’s Office Investigates Nonprofit Behind the Construction of Bethlehem Museum (April 22, 2014)
The Pennsylvania Attorney General’s Office is conducting an investigation of the nonprofit group behind the National Museum of Industrial History in Bethlehem, PA. In January, a grand jury found evidence of possible mismanagement, which may warrant dissolution proceedings against the nonprofit. Although no criminal wrongdoing was found, the grand jury recommended that the attorney general undertake an investigation after it was determineed that the nonprofit spent approximately $18 million in a decade, while the project remains under construction. The details of the attorney general’s investigation have yet to be released.
New Jersey Attorney General’s Office Redistributes Charitable Funds Collected from Unregistered Charity (April 17, 2014)
Acting Attorney General John J. Hoffman announced that his office will be redistributing $225,000 in donations from an unregistered charity to five registered Hurricane Sandy related charities. In June 2013, the New Jersey Attorney General’s Office reached a settlement with the unregistered charity, The Hurricane Sandy Relief Foundation, after an investigation revealed various violations of New Jersey’s Charitable Registration and Investigations Act and the Charities Regulations and Consumer Fraud Act. Violations included operating an unregistered charity and misappropriating donated funds.
Maine Attorney General to Investigate Nonprofit Directors for Possible Conflicts of Interest (Apr. 14, 2014)
A Maine court granted Attorney General Janet Mills’ ex parte application to investigate possible conflicts of interests involving two directors of the Friends of Maine’s Mountains. The public benefit corporation registered with the state in 2009 to oppose wind power development in Maine. The application alleges that the two directors may have personally benefitted from board action at the expense of the nonprofit.
New York Attorney General's Office Recovers Embezzled Funds From the Widow of Former Chief Financial Officer of Catholic Missionary Organization (March 26, 2014)
New York Attorney General Eric Schneiderman announced that his office has recovered $1 million embezzled from a Catholic missionary group by its former CFO. In addition, the Attorney General's Office reached an agreement with the missionary group to strengthen its internal financial controls by instituting specific mechanisms to guard against such activity.
Minnesota Attorney General Sues State Foundation for Misusing Funds (March 13, 2014)
Minnesota Attorney General Lori Swanson announced that her office has brought suit against A Brighter Day Foundation and its executive director for misusing Foundation funds for personal use. The Foundation once served as the local chapter of a national organization, which took high-achieving, at-risk youth and placed them in higher performing public schools. The suit alleges various violations of the state's charitable and nonprofit organization laws.
Michigan Attorney General's Office Releases Its Annual Report on Charitable Solicitation (March 12, 2014)
Attorney General Bill Schuette announced the release of his office's annual report on charitable solicitation in Michigan. According to the Report, telemarkerters, on average, pocketed 62 cents of every dollar raised during a fundrasing campaign.
Access the report HERE
Maine Attorney General Offers Her Support for Nonprofit Fundraising Legislation (March 7, 2014)
During her testimony before a State legislative committee, Maine's Attorney General Janet Mills said that she enthusiastically supports a proposed bill that that would amend the State's Charitable Solicitations Act. The Act currently requires entities soliciting donations for a charitable purpose to be licensed with Maine's Office of Professional and Occupational Regulation. The proposed bill would limit the Act's scope to professional fundraisers who receive money for their activities. Entities which do not receive money for soliciting charitable donations would not be required to register with the State.
Two New Jersey Men Sentenced for Establishing and Operating Fraudulent 9/11 Charity (March 7, 2014)
On Friday, a New Jersey Superior Court Judge sentenced two men for operating a fraudulent charity purportedly aimed at helping families of 9/11 victims. Mark Niemczyk was sentenced to five years probation, while Thomas Scalgione was sentenced to six months in a County jail. As part of the conditions of their probation, both men must comply with a final consent judgment entered in the civil action, and are permanently banned from ever working with a charitable entity in New Jersey.
Michigan Attorney General's Office Settles With Telemarketing Firm for Misleading Seniors (February 27, 2014)
The Michigan Attorney General's Office announced that they have settled with telemarketing firm Associated Community Services for $45,000, after an investigation revealed solicitors for the firm misled senior citizen donors.
New York Attorney General's Office Releases Annual Report on Charitable Solicitations (February 27, 2014)
The New York Attorney General's Office released its annual report detailing where money donated to charities actually goes. According to the Report, entitled Pennies for Charities: Where Your Money Goes: Telemarketing by Professional Fundraisers, for-profit fundraisers kept 61.5 cents of every dollar raised in 2011. The Attorney General's Office also found that 76 of the 602 fundraising campaigns analyzed by their Office actually resulted in losses to the charities involved.
Access the report HERE
Ohio Attorney General Takes Action Against Several Horse Rescue Charities (February 23, 2014)
The Ohio Attorney General's Office has recently brought actions against several horse rescue charities for fraud and breach of fiduciary duties. In its most recent case, the Attorney General's Office initiated a lawsuit against the owner of a horse rescue charity for misappropriating funds and failing to register with the State. In the second case, the Attorney General's Office announced that an assurance of discontinuance has been filed with an Ohio court, requiring another horse rescue charity to redistribute its assets and dissolve its organization.
New York Attorney General's Office Reaches Settlement with Former Head of NARAL Pro-Choice New York (February 14, 2014)
The New York Attorney General's Office has reached a settlement with Kelli Conlin, the former head of the pro-choice political and advocacy organization NARAL Pro-Choice New York. In 2012, the Attorney General's Office brought suit against Ms. Conlin, alleging that she used donor money for personal use. Pending court approval, the agreement requires Ms. Conlin to pay $20,000 in restitution to the organization. Ms. Conlin is also prohibited from ever serving as a fiduciary of any nonprofit registered in New York State.
New York Attorney General's Office Shuts Down Three Sham Charities and Settles Case for $500,000 (February 3, 2014)
An investigation initiated by the Attorney General's Charities Bureau has led to a $500,000 settlement and the shuttering of three Long Island based charities. The investigation revealed that the three charities: Bi-County Helpline for Abuse Against Women and Children, Long Island Responds and Breast Cancer Funds for Research essentially served as shell organizations for fundraisers and charities officers.
Founder of Sham Colorado Charities Sentenced to Jail for Violating Court Order (January 30, 2014)
A Colorado man has been sentenced to 14 days in jail after violating a temporary restraining order and asset freeze obtained against him by the Colorado Attorney General's Office. In June of 2013, the Attorney General's Office filed suit against this individual for using money donated to his breast cancer for his own personal use.
Connecticut Attorney General Files Two Separate Suits Against Foundation and Its Director (January 21, 2014)
This week the Connecticut Attorney General's Office has filed two separate suits stemming from mismanagement at the Doc Hurley Scholarship Foundation. The first suit seeks a court order dissolving the Foundation, while the second suit has been filed in conjunction with the State's Department of Consumer Protection against the executive director of the Doc Hurley Scholarship Foundation for misappropriating scholarship funds.
AG Coakley Calls for Greater Transparency and Data on Nonprofit Executive Compensation (January 9, 2014)
The Chronicle of Philanthropy reports that Massachusetts Attorney General Martha Coakley has called on nonprofits to provide more data when it comes to executive compensation. These comments come after the Massacusetts Attorney General's office released a report in December, finding that executive compensation at the 25 largest public charities in the state is rising.
More Arrests Announced in Metropolitan Council Case (January 8, 2014)
The New York State Attorney General's Office arrested two more former executives of the Metropolitan Council on Jewish Poverty charity. Former executives of the charity have been charged with grand larceny, money laundering and conspiracy stemming from an alleged insurance kickback scheme.
Two New Jersey Men Plead Guilty to Creating Fradulent 9/11 Charity (January 7, 2014)
New Jersey Acting Attorney General John J. Hoffman announced that two New Jersey men have pled guilty to stealing thousands of dollars through a bogus charity purporting to aid the families of 9/11 victims.
New York’s Nonprofit Revitalization Act Signed into Law (December 19, 2013)
On December 18, 2013, New York Governor Andrew Cuomo signed into law the Nonprofit Revitalization Act of 2013 (the “Act”). The Act, which was unanimously passed by both houses of the New York Legislature in June, effectively updates and amends extensive portions of New York’s Not-For-Profit Corporation Law (“NPCL”) for the first time in 40 years. The passage of the Act fulfills one of the long term goals articulated by New York Attorney General Eric Schneiderman, the Act’s architect.
Massachusetts Attorney General's Office Releases Report on Public Charities CEO Compensation (December 19, 2013)
The Non-Profit Organizations/Public Charities Division of the Massachusetts Attorney General's Office released a report highlighting executive compensation at the 25 largest public charities in Massachusetts. The Report found that compensation amongst these 25 charities is generally high. The goal of the study is to increase transparency of executive compensation generally, while also highlighting the complex components which make up a CEO's compensation package.
Ohio Judge Sentences John David Cody to 28 Years in Prison for Charities Fraud (December 16, 2013)
A Ohio judge sentenced John David Cody to 28 years in prison, after the Ohio Attorney General's Office obtained a guilty verdict, in November, against Mr. Cody on 23 criminal charges, including racketeering and money laundering.
New York State Attorney General Reaches Settlement With Pearson Foundation for Millions (December 12, 2013)
New York State Attorney General Eric Schneiderman has reached a settlement with the Pearson Foundation, the charitable wing of Pearson Inc., the worlds largest for-profit education company. The Foundation has agreed to pay $7.7 million to the state, after the Attorney General's investigation revealed that the Foundation used donations to lure clients for the parent company. The terms of the settlement also require the Foundation to alter its governance structure by ensuring that three board members review transactions which may benefit Pearson Inc.
Connecticut Attorney General's Report Finds $11 Million Yet to be Distributed by Sandy Hook Charities (December 10, 2013)
According to a survey conducted by the Connecticut Attorney General's Office, of the $28 million raised by various charities, $11 million has yet to be distributed.
Massachusetts Attorney General’s Office Obtains Indictment Against Officer of Veterans Charity for Stealing Funds (December 9, 2013)
The Massachusetts Attorney General’s Office announced a former officer of the Disabled American Veterans charity has been indicted on larceny charges. Richard Trott is alleged to have misappropriated approximately $125,000 of the charity’s funds and created several fictitious veterans charities in an attempt procure additional money for personal use.
Arkansas Attorney General Files Lawsuit Against Arizona Charity (December 6, 2013)
Arkansas Attorney General Dustin McDaniel recently filed a lawsuit against an Arizona charity for violating the Arkansas Deceptive Trade Practices Act. The suit alleges that the Arizona based Children of Veterans Foundation, deceived donors into believing their donations supported veterans causes. Instead, the money was used to support the owners' for-profit business.
New York Attorney General Charges Nonprofit Executive With Theft of State and Federal Funds (December 5, 2013)
New York Attorney General's Office, in collaboration with the New York State Comptroller's Office and the New York City Department of Investigation, announced the arrest of a nonprofit executive who is alleged to have stolen approximately $373,000 in state and federal grant money.
Oregon Attorney General's Office Releases Annual List of 20 Worst Charities (December 3, 2013)
The Oregon Attorney General's Office released a report of the twenty worst charities of 2013. The list was determined by using guidelines issued by the Better Business Bureau. Under this standard, organizations are to allocate a minimum of 65% of funds to charitable programs. A maximum of 35% may be used toward administrative related costs. The organizations listed in the report represent the twenty worst offenders of the BBB guidelines.
Pennsylvania Attorney General Exercises Authority to Hold Board of Trustees of Nonprofit Entities Accountable (December 2, 2013)
Nonprofit Quarterly article highlights recent efforts by Attorney General Kathleen Kane’s office to hold the board of trustees of two nonprofit entities accountable for their failures to properly undertake their fiduciary responsibilities.
Ohio Attorney General Reaches Agreement With Charity to Stop Soliciting Charitable Donations From State Residents (December 2, 2013)
Ohio Attorney General Mike DeWine reached an agreement with Teen USA, a nonprofit entity registered with the state, to stop soliciting donors in Ohio and to pay $10,000 to the Attorney General's Office. According to the AG's Charitable Law Section investigation, donations received from the public were not used for charitable purposes.
Massachusetts Attorney General Releases Report on Professional Fundraising and the Charitiable Sector (November 27, 2013)
The Massachusetts Attorney General's Office released its annual report detailing the total amount of proceeds raised by professional solicitors on behalf of charities in 2012, and the percentage of those proceeds charities actually received. The "Report on Professional Solicitations For Charity in 2012," found that of the $266,624,653 raised by professional solicitors registered with the State in 2012, approximately 34% of that money went to the charities themselves.
Iowa AG Office Investigation of Charities Telemarketing Firm (November 14, 2013)
An article by the Center for Investigative Reporting on a telemarketing firm’s zealous solicitation tactics highlights the Iowa Attorney General’s Office investigation into the firm’s practices.
Ohio AG's Office Obtains Guilty Verdict in Veterans Charity Fraud Case (November 14, 2013)
After three hours of deliberations Wednesday night, a Ohio jury convicted Bobby Thompson of 23 charges including racketeering and money laundering. The defendant, whose real name is John Donald Cody, defrauded unsuspecting donors of approximately $100 million dollars in various states through his fictitious charity, the U.S. Navy Veterans Association.
Pennsylvania Attorney General Kathleen Kane Announces Audit of Pittsburgh's August Wilson Center for African Americal Culture (November 7, 2013)
Pennylvania Attorney General Kathleen Kane announced that her office would be conducting an audit of August Wilson Center (AWC) in Pittsburgh to assess AWC's administration of charitable assets from 2006 to the present. Opened in 2009, the Center celebrates the cultural history and legacy of African Americans in Western Pennsylvania through performances in various artistic genres and through its education center. AWC has been embroiled in foreclosure proceedings, stemming from its failure to make payments on a outstanding construction loan debt.
New York AG Reaches Agreement with Four Charities on Hurricane Sandy Related Spending (October 25, 2013)
New York Attorney General Eric T. Schneiderman reached an agreement with four charities to accelerate spending of already allocated Hurricane Sandy recovery money by a date certain.
New York AG Charges Four with Charity Fraud (June 27, 2013)
New York Attorney General Eric T. Schneiderman has charged four Brooklyn residents with intentionally creating fraudulent charities with names similar to legitimate Israeli charities in order to solicit funds that they then used for personal expenses.
New York AG Announces Sweeping Non-Profit Reforms (June 24, 2013)
New York Attorney General Eric T. Schneiderman has announced passage of the Nonprofit Revitalization Act, which institute a number of wide-reaching reforms in the New York non-profit sector. The act, which was widely supported by non-profits, will generally reduce the red-tape that has made non-profit administration difficult while simultaneously strengthening oversight over non-profit activities.
Ohio AG Successfully Prosecutes Man for Running Fraudulent Charity (June 17, 2013)
Ohio Attorney General Mike DeWine has announced a two and a half year prison sentence for a man convicted for falsely telling donors that charitable funds were being used to support veterans.
Michigan Attorney General Says Art Collection May Not Be Sold (June 13, 2013)
In an official opinion, Michigan Attorney General Bill Schuette states that no piece from the Detroit Institute of Arts' collection may be sold, transferred or conveyed to satisfy the City's debts or obligations, since the collection is held as charitable trust by the City of Detroit for the people of the state. In March 2013, Detroit filed for declaration of financial emergency, at which time Kevyn Orr was apppointed emergency manager of the City. said that he originally looked into the art collection's value as part of an itemization process he is obligated to undertake
To Attorney General Schuette's opinion, please click here
New York AG Secures $4.6 Million From Fraudulent Cancer Charity (June 12, 2013)
NY Attorney General Eric Schneiderman has obtained an order from a NY Judge directing the fraudulent charity to pay $4.6 million in restitution and other damages.
New York Attorney General Requires Non-Profits to Disclose Political Spending (June 5, 2013)
NY Attorney General Eric Schneiderman has begun to require non-profits to disclose their donors and their spending if they spend at least $10,000 to influence New York campaigns at any level.
Connecticut Attorney General clears Newtown Charity to Distribute Funds (June 3, 2013)
Connecticut Attorney General George Jepsen has authorized a charity that has collected approximately $7.7 million for victims of the Newtown shooting to begin distributing the funds. The charity has been criticized by some parents for the methods by which it was raised and is to be distributed, but Jepsen has determined that nothing impermissible has occurred.
Illinois AG Sues California Breast-Cancer Company for Charity Fraud (May 31, 2013)
Illinois Attorney General Lisa Madigan has sued ‘Boobies Rock’, a California based company for allegedly selling cancer-awareness merchandise under the guise of giving the money to charity. It is alleged that Boobies Rock sold the merchandise at bars and sporting events after asking ‘Would you like to donate to breast-cancer awareness?” while only turning over a small percentage of the proceeds to breast-cancer charities.
Experts at 2013 Charities Regulation Policy Conference Says Government Regulators Need More Money and Data (February 12, 2013)
New Jersey Attorney General Reviewing Proposed Sale of Nonprofit St. Mary's Hospital to California For-Profit Hospital Company (January 21, 2013)
The New Jersey Attorney General's Office is reviewing the proposed sale of nonprofit hospital St. Mary's, which is the last hospital operating in Passaic, to California For-Profit hospital company Prime Healthcare Services (PHS). Under New Jersey law, the Attorney General is required to review any proposed conversion of a charity to for-profit status, in order to ensure that benefits the institution enjoyed as a nonprofit are protected for the public. Among the questions being asked by Attorney General is why St. Mary's trustees are willing to accept only a five-year commitment by PHS to maintain the hospital as an acute-care facility.
Ohio Attorney General DeWine Files Complaint Against Ministry for Alleged Violation of Charity Act (January 16, 2013)
Ohio Attorney General Mike DeWine has filed a 37-count complaint against the Ministry in Marketing and its president for misappropriating funds that it raised by selling coupon books in the name of charity, and for misleading donors and consumers. Specifically, the AG alleges that the Ministry failed to register with the state before engaging in solicitation there, falsely presented itself as a 501(c)(3) nonprofit, and failed to give charities sole control over the funds it collected on their behalf. A Richland County judge granted the AG's request for a temporary restraining order prohibiting the ministry from soliciting for charity in the state and freezing its bank accounts. The Ministry, through its lawyer, called the AG's allegations "wholly untrue."
Price of Board Inaction $5.5m for One Charity (January 14, 2013)
In this Chronicle of Philanthropy piece, attorney Michael Peregrine details the consequences for a nonprofit student housing organization in New York whose board's actions and inaction drew the ire of the NY Attorney General's Office. The Board allegedly failed to properly review the organization's financial relationships with its CEO and with a separate company owned by the CEO's wife, as well as its executive and trustee pay decisions. For their alleged lack of due diligence, the organization's CEO and its five board members paid a total of $5.5 million to settle the matter, of which the board members were required to pay $1 million while resigning from their positions and agreeing never to serve in a fiduciary role in a New york nonprofit. Peregrine emphasizes the need for boards to closely scrutinize their organization's financial relationships, and to make use of outside advisers in their assessments.
NY Attorney General Releases Report on Charitable Solicitation by For-Profit Telemarketing Firms (January 3, 2013)
The New York Attorney General's Office has released a report, "Pennies for Charity: Where Your Money Goes" concluding that state-wide, telemarketers keep nearly 40% of the funds they collect on behalf of charitable organizations. The report examined 602 fundraising campaigns by professional telemarketers, who generated $240.5 million in donations. Just 49 campaigns saw charities receiving more than 65% of donations, which is the threshold identified as acceptable by the Better Business Bureau. The AG's Office is following up on the report with an investigation to determine if any charitable solicitation laws have been broken, focusing particularly on campaigns that repeatedly result in little or no money going to charity.
Access the 2012 report here.
Connecticut Attorney General Jepsen Cautions Residents to Beware of Charitable Giving Scams in the Wake of Newtown Tragedy (December 24, 2012)
Connecticut Attorney General George Jepsen andDepartment of Consumer Protection (DCP)
Commissioner William M. Rubenstein are warning residents to be wary of those seeking to exploit the mass shooting in Newtown through charitable giving scams. They asked potential donors to charitable requests to take a number of precautions, including giving only to well-known charities, specifying the purpose of any donation, be suspicious of email, social media or telephone solicitations (which are more likely to be used for fraud), do not give if coercive tactics are used, avoid cash donations, do not make checks out to individuals and do not provide personal financial information to solicitors.
New York Attorney General Schneiderman Announces Electronic Filing for Charities (December 17, 2012)
New York Attorney General Eric Scheinderman has announced the launch of an electronic filing system for charities registered with the state to submit required financial filings. The system will allow charities to submit their federal and state forms simultaneously using the website Form990.org, a service provided by the Urban Institute's National Center for Charitable Statistics. Efiling was recommended by the Attorney General's Leadership Committee for Nonprofit Revitalization, composed of nonprofit leaders from across the state, and will not only provide convenience to filing charities but will allow expedited dissemination of filing information to the public
Charities Head Calls Vermont Fundraising Report Misleading (December 13, 2012)
The head of a prominent Vermont charity is disputing the significance of a Vermont Attorney General report on the percentage of charitable donations kept by professional fundraisers misleading. Matt Vinci, head of Professional Firefighters of Vermont, argues that the report, which shows that 75 percent of money donated to Vermont charities through paid fundraisers goes to the fundraiser rather than the charity, is misleading because it fails to recognize overhead and other expenses that go into fundraising, and the fact that some organizations are simply not equipped to organize and carry out their own fundraising campaigns. The Vermont Attorney General's office insisted that the report is not intended to "get into the weeds" of who pays for what but is simply intended to show that some significant portion of a donation through a paid fundraiser does not go to the charity. The Vermont Attorney General's Office is looking to identify alternatives to the current paid fundraiser model for charities that lack the capacity to do their own fundraising.
New York Attorney General Adopts New Nonprofit Rules (December 13, 2012)
New York Attorney General Eric Schneiderman has proposed new regulations that would require nonprofit organizations registered in the state to report their spending on political campaigns. Under the regulations, which would take effect early next year, organizations spending $10,000 or more on local, state and federal elections in New York would be required to submit itemized reports detailing that spending, which would be released publicly. The New York Attorney General, who oversees the state's charities, is empowered to unilaterally change disclosure rules.
Independent Sector Defends Charitable Deduction (December 11, 2012)
Independent Sector, a leadership network for nonprofits, foundations, and corporate giving programs, has published a two-page ad signed by 945 organizations urging President Obama and Congress to “preserve the charitable deduction" as they negotiate to avert what is being called "the fiscal cliff," tax increases and spending cuts scheduled to begin January 2. President Obama's current proposal is reported to include a reduction in the tax deduction that wealthy people get for their charitable gifts from 35 percent to 28 percent. Republicans, meanwhile, are reported to favor a limitation of all itemized deductions. Independent Sector and many nonprofit leaders argue that any such limitations would depress giving, but are declining to take political sides on the issue.
Vermont Attorney General Report Finds That Paid Fundraisers Continue to Keep Lion's Share of Donations (December 11, 2012)
The Office of Vermont Attorney General Bill Sorrell has released a report analyzing fundraising data in the state over the last two years, and finding that more than two-thirds of the total dollars donated to charity through professional fundraisers went to the fundraiser rather than the charity. The report found that Vermont charities using paid fundraisers received a smaller proportion of the money raised than out-of-state charities that used paid fundraisers. The Report recommends that charities and donors alike educate themselves as to the percentage of donated dollars going to charity, highlighted a database on the Attorney General's website allowing them to do just that, and pointed to private organizations that rate charities based on various factors, including their fundraising expenses.
Commentary: A Step Backward for Religious Accountability Measures (December 10, 2012)
In this piece fo commentary, Nonprofit Quarterly columnist Rick Cohen examines the conclusions of a 91-page report released by the the Evangelical Council for Financial Accountability (ECFA) on new measures for the financial accountability of the more than 1 million nonprofit religious institutions in the United States, submitted at the request of Iowa Senator Charles Grassley. According to Cohen, the report essentially argues that religious organizations should be permitted to self-regulate and that establishing accountability should be the responsibility of the organizations' donors. Cohen considers this position highly dubious, given the huge number of donors giving to religious organizations - giving rise to a collective action problem - and the lack of transparency resulting from the fact that such organizations are not required to file full form 990s.
AG Schneiderman Obtains $5.5m Settlement For Self-Dealing at Leading Not-for-Profit Provider of Student Housing (December 10, 2012)
New York Attorney General Eric Scheiderman has announced a $5.5m settlement with not-for-profit student housing provider Educational Housing Services, Inc. (EHS) over alleged self-dealing by the organization's President and breach of fiduciary duty by the EHS board. Former EHS President George Scott - who has been removed - and his wife are alleged to have siphoned off millions of the organization's funds for personal use through the use of a shell company they created. The EHS board breached its fiduciary by providing Scott with an excessive salary and lavish benefits, including paying for transportation between Scott's Aspen Colorado home and New York and a stipend for a Brooklyn Heights penthouse apartment. Under terms of the settlement, Scott and the shell company Scott and his will pay $4.5 million in restitution and the directors on EHS's board will pay another $1,000,000.
Texas AG to Seize Assets of Christmas Bureau Charity (Dec.ember 6, 2012)
The attorney general of Texas has received permission from a judge to seize the assets of Christmas Bureau of Austin and Travis Counties, a charity that purports to provide assistance to needy families around the holidays. The Attorney General alleges that the organization breached its fiduciary duties by spending donations on personal expenses. The charity has received more than $26,000 in recent months yet claims it has less than $100 in its accounts. Probate Judge Guy Herman has issued a restraining order against all individuals involved with Christmas Bureau, including its current president, former president and former executive director.
The Texas Workforce Commission Supports Cracking Down on Payroll Fraud (December 5, 2012)
The Texas Workforce Commission has unanimously voted to urge the legislature to crack down on employers who commit payroll fraud, as more employers report their inability to compete in a marketplace where such cheating occurs on a rampant basis.
Religious Leaders Tell Congress No New Laws are Needed to Curb Abuse (December 5, 2012)
In a report by the Commission on Accountability and Policy for Religious Organizations, religious leaders from a variety of faiths have strongly rejected the notion that new laws may be needed to curb tax abuses by religious organizations, such as excessive spending on salaries and other perks. The Commission - which was organized by the Evangelical Council for Financial Accountability - issued the report in response to a request by Iowa Senator Charles Grassley, and concluded that some of the proposed legislation, such as narrowing rules that exempt churches from filing tax documents or specifying who can qualify for clergy tax-free housing allowance, were either unconstitutional or unnecessary. Senator Grassley agreed that efforts to limit abuse should minimize burdens on aboveboard organizations, but that the report failed to address some key issues, including how to prevent organizations from exploiting vagaries in the law for individual benefit.
NY Charity Corps Expands Resources for Nonprofits (December 4, 2012)
Charity Corps, a joint initiative of the New York State Attorney General's Office and the New York State Bar Association, will seek in its second year to double the number of nonprofits it serves, matching them with volunteer lawyers who can assist in navigating the state's complex laws regulating charities. According to Charity Corps' chair Lesley Rosenthal, who is also general counsel of the Lincoln Center for the Performing Arts, New York state is home to more than 80,000 charities, only one quarter of which have regular access to legal counsel. Charity Corps' volunteer lawyers are drawn from top local firms as well as legal services organizations and are trained to assist with a variety of legal issues that charities face, including regulatory, fundraising and registration matters. Nonprofits seeking assistance from Charity Corps beginning next year must apply by Jan. 15; the Charity Corps website can be accessed here.
A Hospital War Reflects a Bind for Doctors in the U.S. (November 30, 2012)
(Vastly)Exaggerating the Value of Donated Goods (November 29, 2012)
An international Christian aid organization, World Help, has self-reported that it overestimated the value of goods donated to it in 2011 by $127 million. World Help claims that the value of medical supplies it received from Direct Relief International was accurately recorded as $3.3 in shipping records and Direct Relief's own tax return, but that the documentation World Help received stated the value at $106 million. World Help attributes the change in the documentation to tampering. Nonprofit Quarterly columnist Ruth McCambridge expressed skepticism at the notion that World Help would not have discovered this discrepancy earlier. She noted that Forbes magazine has recently been investigating cases of goods overvaluation, in light of the fact that the magazine's list of top 100 largest charities includes many that receive a large portion of their donations in the form of in-kind gifts.
Tacoma, WA to Tax Nonprofit Health Systems Like Businesses (November 29, 2012)
The City Council in Tacoma Washington has voted to tax two large nonprofit health systems - Multicare and Franciscan - the standard business-and-occupation tax rate, which would raise approximately $5.5 million for the city in fiscal year 2013-2014. The tax applies only to healthcare nonprofits with gross income with $30 million or above. A number of localities, primarily in the Northeast and Midwest, have taken similar action, on the grounds that nonprofit hospitals act and run much like businesses and regularly pay their CEOs upwards of $1million per year. The hospitals in Tacoma object to the new tax, arguing that they should not be responsible for filling the city's budget gaps, and that in fact Tacoma's fiscal problems are systemic and would resist such short-term fixes.
Michigan Attorney General Schuette Teams With Nonprofits to Fight Charities Scams (November 17, 2012)
Michigan Attorney General Bill Schuette is partnering with the Michigan Nonprofit Association, Council of Michigan Foundations and Michigan Association of United Ways on a brochure providing the public with information and tips to avoid scams in their charitable giving. The publication, entitled "Giving Wisely," is designed to coincide with the flurry of charitable giving and fundraising appeals that come around end-of-the-year holidays. “Giving Wisely is the commitment of Michigan nonprofits to work with government to educate and protect our donors from fraud, waste and abuse,” said Kyle Caldwell, President and CEO of the Michigan Nonprofit Association.
Tennessee Comptroller Audit Finds Community Health Network Misspent Funds (October 19, 2012)
According to an audit by the Tennessee Comptroller, nonprofit Community Health Network - an organization which helps doctors deliver healthcare in rural areas using video and computer technology - misspent more than $1.2 million in a three-year period, with $90,000 simply pocketed by two of the organization's leaders. When the organization's former CEO, Keith Williams, abruptly resigned in January 2010, its board began to uncover Williams' mismanagement, through which he gave himself more than $80,000 in unauthorized benefits and, along with the group's former assistant director Paul Monroe, falsified grant invoices and grant reports, misused state funds and spent $1.47 million on a computer system that was never used. After Williams' resignation, Community Health Network hired an accountant to perform a forensic audit and reported its concerns to the state.
Top Breast Cancer Charities Agree to Clearly Disclose Terms of Cause Marketing Campaigns (October 18, 2012)
The NY Attorney General has announced that the nation's two largest breast cancer charities, Susan G. Komen For The Cure and the Breast Cancer Research Foundation, have agreed to apply a set of best practices recommended by the NY AG's Charities Bureau to their "pink" cause marketing campaigns. The guidelines will apply where companies sell products adorned with the charities' pink ribbons and similar symbols, to ensure that consumers know whether their purchase triggers a donation - and if so, in what amount - or merely draws attention to the cause. Companies involved in the campaigns will also disclose any limitations or restrictions on their giving and to post the total amount raised on their website. Combined, the two charities raised more than $70 million through cause marketing campaigns in the fiscal year 2012.
NY Attorney General's Charities Bureau Releases Guide on Best Practices for Cause Marketing (October 18, 2012)
The Charities Bureau of the New York Attorney General's Office has released "Five Best Practices for Transparent Cause Marketing," which provides guidelines to charities and companies that collaborate to market products with a pledge that some portion of proceeds will go to charity. The guide emphasizes disclosure, noting that any promotion, the amount going to charity for each purchase, and any limitations or conditions should be clearly defined. For campaigns using social media platforms, the same approach to disclosure should apply, and companies should provide real-time data on the amount of donations generated. The guide additionally emphasizes that charities and consumer should know their rights and obligations when participating in cause marketing campaigns.
Michigan Senate Passes Blue Cross Overhaul Legislation (October 17, 2012)
The Michigan Senate has passed legislation that would end Blue Cross Blue Shield of Michigan's tax-exempt status and regulate the insurer under the same regulatory framework as its competitors; previously, Blue Cross of Michigan been regulated under a separate statute in its capacity as the state's insurer of last resort (meaning it must provide insurance coverage regardless of a customer's health status). That status has been made redundant by federal legislation requiring all insurers to provide coverage regardless of health status. The measure would require Blue Cross to pay taxes - estimated at $100 million annually - and to contribute $1.5 billion over 18 years to a foundation that would perform "social mission work" including improving public health and health care access. Michigan Attorney General Bill Schuette praised some of the bill's measures as "a step in the right direction" but opposes it - along with the Consumers Union, advocacy arm of Consumer Reports, and senior advocacy group AARP of Michigan - because it does not go far enough. The legislation now goes to the Michigan House for consideration.
Watching the Charity Watchdogs: Vignettes from the NASCO Annual Meeting (October 5, 2012)
This opinion-inflected dispatch by Rick Cohen discusses some key topics discussed at the one-day public session of the 2012 National Association of Attorneys General (NAAG)/ National Association of State Charity Officials (NASCO) Conference. Discussion of the state and future of self-regulation by nonprofit charity watchdog organizations such as the Better Business Bureau Wise Giving Alliance focused on methods of measuring and assessing nonprofit impact and performance. Cohen criticizes discussion that correlated nonprofit size and scaling with accountability, particularly in light of suggestions that parent organizations should not bear full legal responsibility for the actions of their local affiliates. Cohen concurs with criticism of volunteer boards for their failures in oversight, use of board member insurance to insulate themselves from their fiduciary and oversight duties, and the increasing flagrancy of conflicts of interest of board members. Cohen lauds discussion of the challenges posed by regulation of hybrid organizations. Finally, Cohen sites the role of a newspaper investigation in breaking open a high profile fraud case as evidence that the press serves a key oversight role that both regulators and good faith members of the sector ought to embrace.
Watchdog Plans Review of Charity Fundraising Appeals (October 4, 2012)
The BBB Wise Giving Alliance has announced plans to begin reviewing review direct-mail solicitations, commercials, and telemarketing scripts from randomly selected charities in order to identify and deter the use of false or misleading statements in fundraising appeals. The Alliance will include in its review specific organizations that have generated complaints or that have been the subject of media reports. While expressing his belief that the “vast majority” of charities are truthful and accurate in their solicitations, Wise Giving Alliance President H. Art Taylor expressed concern that charities may be failing to sufficiently oversee professional fundraisers they hire, and that boards are ultimately accountable for bad fundraising agreements, misleading copy, and overly aggressive tactics by fundraisers.
White House Hosts Innovation Forum for Philanthropists (September 21, 2012)
The White House recently hosted a private meeting on innovation in philanthropy, attended by 150 leaders in philanthropy and finance, discussing among other things the role of “impact investing” in for-profit businesses that pursue a social mission or purpose and cooperation between the philanthropic and public sectors. Speakers at the meeting featured prominent representatives from the foundation world – including Jean Case, chief executive of the Case Foundation, and Vikki Spruill, chief executive of the Council on Foundations – who discussed projects through which foundations could encourage and enable impact investing. Administration officials in attendance included Valerie B. Jarrett, senior adviser to President Obama, and Jonathan Greenblatt, director of the White House Office of Social Innovation and Civic Participation. The meeting was closed to the press and it was unclear how the White House planned to use the information and ideas discussed there.
Montana AG Steve Bullock Releases Annual Report on Nonprofit Hospitals (September 17, 2012)
Penn State Board's Handling of NCAA Sanctions Could Be Subject to State AG Review (September 14, 2012)
Michigan AG Approves Proposed Marquette Hospital Sale (August 31, 2012)
Michigan Attorney General Bill Schuette has approved the sale of Marquette General Hospital toDuke Lifepoint LLC. After assigning an eight-person team to review the proposed sale, Schuette concluded, in a formal report, that the hospital's board of trustees had fulfilled its fiduciary duties duties, properly preserving the hospital's charitable assets.The sale is valued at $483 million and will allow the hospital to pay off more than $100 million in long-term debts. As part of the approval, Duke Lifepoint will pay an additional $8 million to the Marquette General Foundation, must provide periodic reports to the Foundation detailing the hospitals operations for ten years, and both parties recognize the Attorney General's ongoing authority to enforce the terms of the sale, includingDuke Lifepoint's duty to provide charity care, continue core services and invest capital.
Texas Troopers Charity Under State AG Scrutiny Closes Doors (August 28, 2012)
The Texas Highway Patrol Museum, which was sued by state Attorney General Greg Abbott for misusing charitable donations, has closed its doors. The Museum raised more than $12 million between 2004 and 2009 claiming to benefit state troopers and their families, but spent less than 1% of every dollar raised on that charitable purpose. Under the terms of a settlement with the state, the charity running the museum will be dissolved, and a court-appointed receiver will sell some of the museum's assets, providing $10,000 death benefits to a number of troopers' widows who were promised them. Additionally, most of the museum's top employees are banned from managing any entity in Texas that purports to benefit law enforcement.
Illinois Attorney General Madigan Sues "Animals for Autism" Charity, Alleging Fraud (August 24, 2012)
Illinois Attorney General Lisa Madigan has announced a settlement with state resident Lea Kaydus, who ran a charity that claimed to provide service dogs to children with Autism Spectrum Disorder. The lawsuit alleges that Kaydus and her organization, Animals for Autism, solicited donations and took payments from families around the country, promising - but never delivering - service dogs for their children. Madigan says that Kaydus collected at least $5,190 from the families in violation of the Illinois Consumer Fraud Act and Solicitation for Charity Act. The settlement requires Kaydus to provide restitution to the families from whom she accepted money and to come into compliance with state charitable protection and consumer fraud laws.
Massachusetts AG Sues Veterans' Charity (August 16, 2012)
Massachusetts Attorney General Martha Coakley has sued Bay State Vietnam Veterans Inc. (BSVV), alleging that the veterans' charity engaged in deceiving fundraising practices. According to the AG's office, the charity and a professional fundraising company it hired, Dynamic Marketing Solutions Inc., claimed that all donations would go directly to benefit veterans when in fact 85 percent of each donation was kept by Dynamic. Dynamic representatives additionally are alleged to have claimed they were volunteers for BSVV and on several occasions, that they were themselves veterans' returning from Afghanistan. The suit seeks$5,000 in civil penalties for each deceptive act committed by the defendants, and the Superior Court judge has issued a temporary restraining order preventing either organization from transferring funds raised or destroying any relevant records.
Iowa AG Files Suit Against Florida For-Profit Fundraiser (August 16, 2012)
Iowa Attorney General Tom Miller has filed a lawsuit against Florida-based for-profit fundraising company Courtesy Health Watch Inc. (CHW), alleging that the company made false and misleading statements to Iowa residents in the course of its telephone solicitations. According to AG Miller, CHW representatives told potential donors that making a donation would stop future solicitation calls when doing so in fact led to more solicitations, insinuated that they were directly connected with the charities for which they were soliciting rather than a paid fundraiser, and misrepresented how much of each donation went to the charities. CHW also allegedly called Iowans repeatedly despite asserting that they would call only once per year. The lawsuit seeks an injunction requiring CHW to cease making deceptive statements in its solicitation calls to Iowans and seeks attorneys' fees and civil penalties.
California Attorney General Sues Wounded-Veteran Charity (August 9, 2012)
California Attorney General Kamala Harris has filed a lawsuit against the charity Help Hospitalized Veterans, which claims to run programs for military veterans and active-duty personnel but has allegedly been engaging in self-dealing, and has spent donations on excessive salaries and perks such as an $80,000 golf membership and the use of a condominium. The organization, which has been in existence since 1968, has been criticized for spending a meager percentage of donations received on its programming; in 2011, for example, the organization spent only 35% of it $45 million revenue to assist military personnel. The lawsuit seeks the recovery of $4.3 million in illegally-diverted funds and the removal of several of the organization's board members and officers.
New York Attorney General Investigates Nonprofit Groups' Political Spending (August 9, 2012)
New York Attorney General Eric Schneiderman is investigating dozens of tax-exempt groups that are spending massively in this year's election. AG Scheiderman is requesting tax and other financial information from the groups in question, known as 501(c)(4)
or social welfare organizations, which purport to be educational in nature and therefore need not disclose their donors as super PACs, candidates and political parties must do. While social welfare organizations are permitted engage in some political activity, such activity may not consume the majority of their spending and resources, and Schneiderman's inquiry appears designed to determine whether the nonprofits he is investigating are exceeding the permitted amount of political activity, even though IRS guidelines do not clearly define this threshold.
Illinois AG Madigan Sues Charity Director for Misuse of Funds (August 3, 2012)
Illinois Attorney General Lisa Madigan has sued the director of Chicago-based charity Organization of New City for spending over $350,000 in contributions on himself, more than $200,000 of which came through checks written to casinos or withdrawals from casino ATMs The Organization, which purported to provide support and services to the poor and elderly, was a registered charity in Illinois through 2011, but had its registration cancelled when it failed to file annual reports for 2008-2010 as required by law. AG Madigan's lawsuit seeks an injunction, an accounting of the organization's finances, fines, punitive damages and reimbursement to the AG for costs of the investigation.
Iowa AG Secures Ban on Telemarketer Making False Claims (July 31, 2012)
Iowa Attorney General Tom Miller has secured a temporary injunction requiring an Arizona based telemarketing company, Action Point LLC, to stop making sales calls Iowans, alleging that representatives for the company falsely claimed to be seriously disabled veterans and that a portion of proceeds from the sale of consumer goods would go to support services for disadvantaged veterans. AG Miller's lawsuit seeks to permanently enjoin the defendants from making deceptive calls to Iowans, require the company to pay civil penalties, honor refund requests and reimburse the state for attorney fees.
New Jersey Sues Two Men for Running Bogus 9/11 Charity (July 30, 2012)
The New Jersey Attorney General's Office has filed a lawsuit against two state residents for allegedly accepting tens of thousands of dollars in donations for a fraudulent 9/11 charity. The lawsuit alleges that one of the men falsely claimed to be an ex-Navy SEAL while soliciting donations, and that both used the donations on personal expenses and failed to register the charity as required by law.
Ohio AG: New Indictment in Navy Charity Scam Case (July 25, 2012)
An Ohio grand jury has reindicted a man, known only as Bobby Thompson, for his role in a $100 million charity scam collecting donations for Navy veterans. The 24-count indictment includes charges for complicity in money laundering and identity fraud against the man, whose identity is unknown. "Thompson" was arrested in Portland, Ore., in May and has pleaded not guilty.
'Three Cups of Tea' Charity Expands Its Board in Settlement (July 19, 2012)
The Central Asia Institute, a charity founded by "Three Cups of Tea" author Greg Mortenson, has agreed to add seven new board members to its current three-member board as part of a settlement over allegations that Mortenson mismanaged the organization. The board expansion was spurred by a Montana Attorney General investigation that concluded that the Institute's board did not exercise proper oversight of Mortenson's management and activities, leading to improper expenditure of organizational funds on Mortenson's personal expenses. The settlement additionally calls for Mortenson to reimburse the Institute more than $1 million and relieves him of any financial oversight within the organization, although it allows him to remain as a nonvoting board member.
California Attorney General Actively Reviewing animal Charity Executive (July 13, 2012)
The California Attorney General is "reviewing" SPCA executive Terri Crisp, who had agreed in 2007 not to serve as an officer or executive at any nonprofit as part of a settlement between the State and the charity Crisp headed, Noah's Wish. Noah's Wish, an animal rescue charity, and Crisp were alleged to have improperly handled donations intended to support rescue and car for animals affected by Hurricane Katrina, agreeing to return more than $million dollars in donations. Crisp responds that she is an employee, not a director, at SPCA.
Freeh Report Raises Penn State Accountability Questions (July 12, 2012)
An independent report by Former FBI chief Louis Freeh and his law firm into allegations of sexual abuse of young boys by former Penn State assistant football coach Jerry Sandusky concludes that in their failure to properly investigate allegations of abuse, "the most senior leaders at Penn State" displayed "total and consistent disregard" for Sandusky's victims. Although Sandusky met many of his victims through the charity he founded, "Second Mile," the report asserts that whether they were clients of Second Mile or participants in Penn State programs, the University was responsible for their safety and protection. The report concludes that Penn State officials were motivated more by concern for the reputation of the University itself than by the well-being of its constituents, and that the Board of Trustees, largely unaware of its legal duties to report allegations of sexual abuse and responsible for a culture of little accountability, failed in its oversight duties.
Read the full report and watch the press conference here.
NH Center Gauges Exec Pay at Nonprofit Hospitals (July 2, 2012)
The New Hampshire Center for Public Policy Studies has released a study on executive compensation at nonprofit hospitals in the state that was requested by the New Hampshire Attorney General's Office. The report found that average salaries increased 18% between 2006 and 2009, although there was great variation between hospitals, with some CEOs salaries dropping while others increased by 50%. The report also found no correlation between executive pay and either hospital cost or quality of care, and found that most but not all hospitals met Internal Revenue Service standards for determining executive pay levels.
Access the full report on the NH Dept. of Justice website
Opinion: what to Expect Now That the Supreme Court Has Upheld Health Care Reform Law (June 28, 2012)
In this Nonprofit Quarterly piece, Rick Cohen details the potential impact on nonprofits following from the U.S. Supreme Court's decision upholding thePatient Protection and Affordable Care Act (PPACA). Cohen makes several specific predictions: an increase in advocacy from nonprofit groups that oppose aspects of the law, such as Catholic organizations; resistance among some states to instituting the Act's reforms, particularly state-based health insurance exchanges; conflict over how and where funding to implement the bill is directed; a number of legislative and regulatory fixes to flaws in the current reforms, including increasing the incentives for small businesses and nonprofits to provide insurance to their employees; increased scrutiny of nonprofit hospitals; and the need for nonprofits who support the reforms to assist in implementing them by continuing funding, educating clients and providing services.
New York Attorney General Inquiry Looks Into a Shield for Donors in Elections (June 26, 2012)
New York Attorney General Eric Schneiderman has begun an inquiry into contributions to tax-exempt organizations heavily involved in politics. A focus of the inquiry is a foundation funded by the U.S. Chamber of Commerce, from which Scheiderman e-mails, bank records and other documents to determine whether the foundation illegally funneled $18 million to the chamber for political and lobbying activities. The investigation is the first into tax-exempt groups that are expected to spend hundreds of millions on issue advertisements attempting to influence the upcoming presidential and Congressional elections.
Kentucky Nonprofit Hospice Found to Do Business with Firms Connected to Board, Executives (June 23, 2012)
Based on its tax returns from 2005 through 2010, the Kentucky nonprofit Hospice of the Bluegrass has entered into more than $1.82 million worth of business deals with firms associated with board members and spouses of its executives. While not strictly illegal, such insider transactions are ethically precarious, as they create potential conflicts of interest. Assistant Attorney General David Spenard, who represents the state of Kentucky in its supervision over non-profits and charitable trusts, noted that if at all possible, nonprofit organizations should avoid such transactions, known as "self-dealing," saying, "I don't think it's per se wrong, but it's something you should try to navigate around." The Hospice asserted through an attorney that its board of directors approved all of the transactions at issue and that the services were necessary and the prices paid were reasonable.
Delaware AG Alleges That DuPont Trust Run Improperly (June 18, 2012)
Delaware Attorney General Beau Biden is alleging that overseers of the $4 billion Alfred I. duPont charitable trust have deviated from the trust's intended purpose by shifting the proportion of its distributions from Delaware to Florida. The duPont trust funds the work of the Nemours Foundation, which runs the Alfred I. duPont Hospital for Children in Delaware and other facilities in Delaware, Florida, New Jersey and Pennsylvania, as well as the Nemours Mansion and Gardens in Wilmington Delaware. Officials claim that by counting $72 million used to reniovate the Nemours Mansion and Gardens against Delaware's share of the Nemours Foundation distributions , and unevenly assigning other costs to Delaware, trust officials have deprived Delaware of its proper share of trust distributions. Biden is seeking a declaratory judgment to ensure proper governance and financial accounting of the trust, after intervening in a case in which the duPont trustees are attempting to modify the trust for tax reasons.
NH Passes Ban on Sweepstakes Gambling Machines (June 8, 2012)
Both houses of the New Hampshire legislature have passed a bill that would close most of the state's 150 to 200 video slot machines. The machines operate through a system in which users buy phone or internet time cards and receive credits that they can spend on the machines. The new law expands the definition of gambling to include circumstances where it is clear that what customers are purchasing is really the opportunity to play the sweepstakes. The bill was drafted by the state attorney general's office, includes fines of up to $5,000 per day for each machine, and gives authority to local officials to close gaming centers. New Hampshire's governor is expected to sign the bill.
How Businesses Raise Money for Charity on Social Networks (June 5, 2012)
In this podcast, Alison Fine, an expert on nonprofit communications and technology, and Heather Campion, Northeast Bancorp's chief administrative officer, discuss how an internet savings bank - Ablebanking - uses social media to market its services as well as encourage customers to donate to charity. Under Ablebanking's model, the bank charges no fees and promises to donate to charity the advertising dollars it saves without the overhead of physical branch locations and by using social media instead of traditional advertising methods. The bank gives new customers $25 to give to any nonprofit they choose, as well as .25% of each customer's account balance each year. Finally, the bank's website offers a series of resources to facilitate giving, including a series of promotional videos for partner charities and a search function that provides a list of charities close to a provided zip code. The bank does not charge any fee to the customer or to the charities that receive donations through its platform.
How Nonprofits Can Prevent Fraud (June 5, 2012)
The Chronicle of Philanthropy's hosted on live online discussion on the topic, How Nonprofits Can Prevent Fraud, featuring two guests:Michael S. DeLucia, a trustee for the Agnes Lindsay Trust and former director of Charitable Trusts in the New Hampshire Attorney General’s Office from 1996 to 2010; and Bradford E. Cook, who works with nonprofits as an attorney for Sheehan, Phinney, Bass and Green in New Hampshire. Responding to questions posed by a Chronicle moderator and by online participants, the two discussed topics including the role that board members, top executives, and staff can play in preventing fraud and how nonprofits can identify and eliminate weaknesses in their financial systems that make embezzlement easy for employees to accomplish.
Real Innovation in Social Change Lies in Reinvention (May 23, 2012)
This piece in the Chronicle of Philanthropy argues that innovation in the field of social change depends not on new ideas but on a restructuring of the field itself. It describes some of the ways in which this restructuring is beginning to occur, including new mechanisms of financial support (growth capital, foundation loans, social-impact bonds, and investments that seek both financial and social returns); a convergence of business, government and nonprofit models and functions; and increasing demand for measurable public benefit as a return on investment. The piece then argues for finding ways to expand new platforms currently garnering capital and management support for social businesses to nonprofit social entrepreneurs as well.
Massachusetts Senate Considering Budget Amendment Limiting Compensation of Directors and Officers of Public Charities (May 22, 2012)
The Massachusetts Senate is considering a state budget amendment that would limit the compensation paid to officers and senior managers of public charities and would wholly prohibit compensation of members of boards of directors. The amendment would apply to charities with gross revenue over $1,000,000 and would limit compensation of executives to no more than $500,000 per year, while prohibiting board compensation. The bill would additionally establish a commission to which charities could apply for exemption. Organizations found to have violated the prohibitions would be subject to loss of their designation as a public charity.
Without State Oversight, Charities Disclose Scant Fundraising Costs (May 21, 2012)
A new study by the Scripps Howard News Service concludes that in states that carefully monitor how charities raise money, such organizations are far more likely to accurately disclose their fundraising costs to the IRS. The study, which examined financial records of 37,987 major nonprofit groups provided by the watchdog group GuideStar, found that a majority of nonprofits in nine states reported to the IRS that they had incurred zero fundraising costs, a claim that charities watchdogs call ridiculous. The states from which the highest percentage of nonprofits reported zero fundraising costs to the IRS - including Indiana, South Dakota, and Idaho - were also the states with the least charitable oversight. By contrast, only 34 percent of nonprofits claimed zero fundraising expenses in states such as Massachusetts, Oregon and Colorado that review fundraising costs and issue "Do Not Give" lists of charities.
Michigan VFW's Receives Only 9.4% of Funds Raised by Its Commercial Fundraisers (May 20, 2012)
In 2010, the Michigan Veterans of Foreign Wars received only 9.4% of the funds collected on its behalf by commercial fundraisers, a fact that angers donors but which the VFW's director calls a "necessary evil." The VFW employs the services of a Canadian fundraising company called Xentel, Inc., which raised $1,047,563 in 2010 for the VFW but kept all but $20,000 of that sum for its own expenses. While the VFW explored doing the fundraising itself, start-up costs were prohibitive at over $100,000. Xentel submits an accounting of its expenses each year to VFW, which then reviews the report and passes it on to the Michigan state Attorney General's Office. Xentel's accounting reports are not highly detailed but the corporation claims that its net profit is approximately only 5 or 6 percent of funds raised. Meanwhile, the VFW's 990s for 2008, 2009 and 2010 listed zero professional fundraising expenses based on a loophole that allows such an assertion if a nonprofit never holds any of the funds collected and kept by a commercial fundraiser.
Cuomo Unveils N.Y. Nonprofit Reform Plan (May 18, 2012)
New York Governor Andrew Cuomo has released a plan to cap the amount of state funding that may be used by a nonprofit organization to compensate its executive directors in the state at $199,000. The cap applies to organizations receiving more than $500,000 from the state in a given year and for which state money represents more than 30% of total annual funding. Exceptions to the cap would be permitted if an organization can provide outside funding for the amount above the cap that they wish to pay, but only where the executive's pay falls below the top 25 percent in the field. Additionally, the regulations require nonprofits to spend at least 75% of state funding on programming rather than overhead .
Nonprofit Sector’s Big (Often Feared)
Question Briefly Arises at House Hearing (May 18, 2012)
Questioning and testimony during the House Ways and Means Oversight Subcommittee hearing on Tax Exempt Organizations largely focused on nonprofit organizations' concerns about recent changes in the form 990, and IRS responsiveness to those concerns. But a short colliquy betweenLos Angeles Congressman Xavier Becerra (D-Calif.)
andRoger Colvineaux, an associate professor of law at the Catholic University of America in Washington, D.C., touched on an existential issue for nonprofits: whether the tax-exempt status of nonprofit organizations should depend on the affirmative public good provided by organizations rather than simply their adherence to proscriptions against particular actions, such as political activity. To follow Colinveaux's suggestion that it was time to consider favoring certain charitable activities over others would amount to a redefinition of what is a "charity." The issue is of critical import to many big charities, universities, hospitals, museums, and foundations and it remains to be seen whether the Ways and Means Committee will consider it.
Opinion: American Democracy Demands Increased Nonprofit and Philanthropic Transparency (May 10, 2012)
In this opinion piece, the Nonprofit Quarterly's Rick Cohen explores arguments for and against increased transparency in the nonprofit and philanthropic realms, particularly as they relate to organizations affecting the political process. Cohen concludes that the American democratic system is sufficiently threatened by anonymous political expenditures that the fear of chilling support for unpopular causes is outweighed by the need for accountability. Cohen proposes a series of reforms to balance increased transparency with the risk that disclosure will be exploited to chill unpopular charitable activity.
Suspect Who Ran Fraudulent US Navy Veterans Charity Arrested (May 1, 2012)
Ohio's Attorney General and the U.S. Marshalls Service have announced the arrest of a man alleged to have collected as much as $100 million for a fraudulent Florida-based charity claiming to serve U.S. Navy veterans. The man, who is known only by the false identity Bobby Thompson, has been a fugitive since being indicted in Ohio in 2010 on charges of theft and money laundering. Ohio investigators tracked the man through Arizona, Florida, Indiana, Massachusetts, Rhode Island, Washington and West Virginia, to Portland Oregon where he was arrested; U.S. District Judge John Acosta of Portland has ordered Thompson to be returned to Ohio. The man fled after legal counsel for the charity identified irregularities in the group's financial records and took her concerns to the Ohio and Florida attorneys general.
Minnesota AG Swanson Issues Investigative Report Criticizing Hospital's Debt-Collection Methods (April 27, 2012)
Minnesota Attorney General Lori Swanson has issued a report criticizing nonprofit Fairview Health Services for employing a company, Accretive Health Inc., that used what the AG called overly aggressive tactics in attempting to get patients to pay their bills. Among the report's allegations are that Accretive demanded payment before and during treatment, and that Accretive employees were improperly given full access to Fairview patients' medical records. Fairview CEO Mark Eustis maintained that the organization had not done anything to impair the individual care of any patient, but acknowledges patients' feelings to the contrary, and said that Fairview would not renew its contract with Accretive.
Ohio AG DeWine Settles with InfoCision Over Alleged Charity Call Violations (April 20, 2012)
Ohio Attorney General Mike DeWine has settled with telemarketer InfoCision over allegations that the company failed to make required disclosures to consumers when it made solicitation calls on behalf of its nonprofit clients. Among the disclosures that InfoCision callers failed to make were that InfoCision is a paid solicitor and how much of the funds raised would go to charity. In addition, the company failed to file timely financial reports of its activities with the state. InfoCision has agreed to pay $75,000 in fines, change its calling practices and send advance copies of scripts it will use for its calls to the Attorney General for review.
Arizona Attorney General's Office Sues Charity That Continued to Illegally Solicit Donations (April 18, 2012)
The Arizona Attorney General's Office, Charitable Trusts and Organization Section, has sued an Arizona charity for soliciting donations from Pennsylvanians without registering in that state. The charity, known as the Ironwood Pig Sanctuary, signed a consent agreement with Pennsylvania in 2010 requiring the organization to pay a fine for unregistered charitable solicitation in the state and to register before undertaking any further solicitation. Ironwood paid the fine but failed to register and then continued to solicit funds from Pennsylvania residents after a cease and desist order from the Pennsylvania Secretary of State. The lawsuit seeks an account of all funds raised while the Sanctuary was not registered, fines for solicitations that violated the Charities Act, costs and restitution.
Should Charities Be Protected From the Claws of Fraudulent Transfer Laws? (April 17, 2012)
This article explores the question of whether charities should be exempt from "clawback" provisions that allow victims of financial fraud, such as Ponzi schemes, to access funds that were transferred to third parties by the perpetrator of the fraud. In a Ponzi scheme, the fraud is maintained by using the principal investments of later investors to generate artificial “false profits” for early investors. The use of clawback provisions to recover donations to charities and religious organizations by fraudulent actors can have devastating effects on those organizations, and some are now arguing for leniency in such circumstances by shortening the statute of limitations under which a defrauded investor can access funds given to a charitable organization. The article sets out the basic structure of Ponzi schemes, federal and state clawback provisions and arguments for and against limiting their application to charities.
N.J. Division of Consumer Affairs Files Suit Against Unregistered Charity Marketer (April 13, 2012)
New Jersey Attorney General Jeffrey S. Chiesa and the New Jersey Division of Consumer Affairs have filed suit against a telemarketing company that is alleged to have solicited New Jersey residents on behalf of charities that are not registered in New Jersey. The company also allegedly failed to keep financial records that are required to ensure that solicited donations are provided to charities as promised, and used for charitable causes. The company used teenage telemarketers to solicit consumers both inside and outside the state, according to the complaint. Telemarketers claimed that they represented charities with missions to help cancer patients, missing children, American veterans, or police officers. The State’s lawsuit seeks full restitution to consumers who made donations based on the company's solicitations, as well as civil monetary penalties.
Texas Department of Public Safety "Charity" Relinquishes its Assets (April 13, 2012)
The Texas State Highway Museum has voted to relinquish more than $1.2 million in assets, including the museum's building in downtown San Antonio, as the result of a lawsuit brought by Texas Attorney General Greg Abbot. AG Abbot alleges that the charity squandered donations, with employees hiding questionable expenses from the Museum's board, including vacations, vehicle leases, visits to amusement parks and six-figuresalaries. The Board, which is composed of current and former Department of Public Safety officials, voted in a recent meeting to relinquish the assets, which will be transferred temporarily to a court-appointed receiver and then to a yet-to-be-named nonprofit organization. A court filing by the Attorney General says the Board was not informed of the questionable expenditures and asked few questions, despite its responsibility to oversee the organization's finances.
Combined Federal Campaign Admits "Three Cups of Tea" Charity (April 12, 2012)
The Central Asia Institute (CAI), a charity run and directed by "Three Cups of Tea" author Greg Mortenson, has been approved by the U.S. Combined Federal Campaign to be a recipient of the money raised through the Campaign's workplace fundraising. The approval was made despite a report issued by the Montana department of Justice detailing Mortenson's and CAI's misuse of charitable assets, and a settlement with the Montana AG in which Mortenson agreed to repay $1 million to the charity he founded. The U.S. Combined FederalCampaign - which is like a United Way for federal workers - found that CAI met its requirements, while stating that the Campaign remained “concerned about the charity’s lack of internal controls, as identified by the Montana Attorney General’s Office.”
State Has a Long List for Charitable Taxpayers (April 2, 2012)
New York State’s income tax form features a growing list of optional charitable donations for taxpayers. Line 60 of the state form offers eight causes to which taxpayers may donate via their tax bill, including the Department of Environmental Conservation; research into breast or prostate cancer, as well as Alzheimer's disease; and dedicated funds to help missing or exploited children, recruit firefighters and EMTs, or build and maintain the 9/11 memorial. The list has grown by legislation since the DEC was the first to be included in 1983, with the Volunteer Firefighting & EMS Recruitment & Retention Fund added only last year. The total raised via the tax form for each organization ranged from approximately $474,000 for the breast cancer research and education fund, to approximately $34,000 for the U.S. Olympic Training Center in Lake Placid. At least four additions to the list are currently being proposed.
Number of Charities and Foundations in U.S. Drops Sharply as New Law Goes Into Effect (April 29, 2012)
The number of charities and foundations registered with the Internal Revenue Service dropped by 16 percent in 2011, largely as a result of the more than 272,000 organizations that lost tax-exempt status after running afoul of a 2006 law requiring organizations with annual revenue of $25,000 or less to file informational tax forms within three years.According to IRS figures, the number of groups classified under Section 501(c)(3)
of the Internal Revenue Code totaled nearly 1.1 million in 2011, down from nearly 1.3 million in 2010. The IRS moved slowly in implementing the 2006 law, in part to give nonprofits time to submit the new information, but announced the organizations that had failed to comply in June of 2011. The latest figures signal a continued slowing in the number of charities created in the United States.
Colorado Attorney General Alleges Fort Collins Shelter Founder Mishandled Funds (March 23, 2012)
Colorado Attorney General John Suthers has sued a Fort Collins homeless shelter, alleging that its founder, Reverand Richard Thebo, used charitable donations to pay personal expenses, including his mortgage, credit card and veterinary bills, and a speeding ticket. The lawsuit names Thebo, Full Spirit Ministries and several of its board members, and seeks t a court order barring those parties from operating the shelter or any other nonprofit. Thebo responded that the allegations are “ridiculous” and says he has no plans to shut down the shelter.The complaint alleges that Full Spirit Ministries and its principals have misused at least $31,000 in charitable assets.
Idaho Attorney General Lawrence Wasden to St. Luke's: Put Brakes On Saltzer Buy Out (March 17, 2012)
Idaho Attorney General Lawrence Wasden has sent a letter to St. Luke's Health System informing them of an investigation into recent st. Luke’s acquisitions by the AG’s Office and the Federal Trade Commission under federal antitrust law and under Idaho's Competition Act. The letter requests that St. Luke’s halt its current acquisition of Saltzer Medical Group and any other acquisitions, in order to avoid additional expense and complications. A St. Luke’s representative stated that the health group would cooperate fully with the investigation.St. Luke's is Idaho's largest health care system with six hospitals and more than 100 outpatient centers and clinics throughout the state.
Getting Faith Out of the Gutters: Resolving the Debate Over Political Campaign Participation by Religious Organizations Through Fiscal Subsidiarity (2011)
This article proposes a solution to the debate over political campaign participation by religious organizations. Under this solution, section 501(c)(3)
organizations would be allowed to increase political campaign activity in exchange for paying a “self-directed tax.&rdquoOrganizations would then be able to direct government how to allocate the proceeds from the tax, by selecting from a preset group of spending choices. This approach represents a philosophical compromise, in which 501(c)(3)
organizations receive the right to participate in political campaign activity in exchange for subjecting themselves to taxation, while maintaining a partial right not to provide a portion of their proceeds to government to do with as it pleases.
NJ Attorney General Cites Questionable Law Enforcement Charities (March 7, 2012)
The New Jersey Division of Consumer Affairs has released its most recent report on the spending of the state’s “10 Most Inquired About Charities.” The report allows consumers and donors to examine the annual expenditure reports of the charities that have generated the most calls from consumers to the Division's Charities Registration hotline during the most recent two-month period.The Better Business Bureau standards for Charitable Accountability state that a charity should allocate at least 65% of its expenses toward program expenses. Half of the charities in the most recent report failed to meet this standard.
A Nonprofit with Shareholders? The Koch Brothers’ “Hostile Takeover” of Cato Institute (March 2, 2012)
A dispute at the libertarian think tank the Cato Institute involving the Koch Brothers, billionaire supporters of conservative causes, is bringing attention to that organization’s unusual and questionable governance structure.The institute was founded as a nonprofit in 1977 under a structure in which four “owners” each controlled 4 shares of stock worth $1 apiece. The Koch brothers now control half the stock and are arguing that the widow of a recently deceased shareholder must sell or give her shares to the remaining owners, which would give the Koch’s a controlling stake. Former IRS Exempt Divison head Marc Owens calls the Institute’s ownership structure “completely at odds with the requirements for [a nonprofit]” and says that the Institute is at “risk of retroactive revocation of its tax-exempt status back to 1977.” Cato’s tax lawyer acknowledges that while the structure may not be preferred by the IRS, the shares are a “strange breed of stock that doesn’t have any economic advantage to it.” He said that despite the use of the ownership nomenclature, the structure “is more of a control mechanism and in practice it’s not much different than a membership.”
Putting Your Money Where Your Mom and Pops Live (March 1, 2012)
A new movement, called Locavesting, seeks to make it easier for individuals to invest in local businesses, using mechanisms from credit unions to crowdfunding. Crowdfunding is currently restricted by securities laws that limit the types of projects and entities which may offer equity to their financial supporters. A new law in Congress that would relax the securities restrictions, the Entrepreneur Access to Capital Act (HR 2930), has passed the House of Representatives, has the support of President Obama and is now before the Senate. Until that bill passes, however, advocates are promoting “social investing,” which allows “investors” to provide “loans” to businesses in exchange for perks such as free products or services.These ventures are continuing to blur the increasingly hazy line between nonprofits and for-profits by combining entrepreneurial and charitable instincts and models in a variety of new ways.
SEC Commissioner Calls for Corporate Disclosure of Contributions to Political Nonprofits (February 27, 2012)
Securities and Exchange Commission Commissioner Luis Aguila is advocating for mandatory disclosure of corporate political expenditures on the grounds that without disclosure, investors are deprived of crucial information regarding the activities of the companies they own. The argument against disclosure, that investors might withdraw funds from organizations engaging in political spending, is the same that major nonprofit leadership organizations have made in response to calls for corporate disclosure of charitable donations.Cohen calls for disclosure of both corporate philanthropic spending and political spending, which in fact overlap. “After all,” he notes “the primary instruments for undisclosed corporate campaign financing are 501(c)(4)
‘social welfare organizations’ which fund super PACs or themselves spend on behalf of their secret donors.&rdquo
Medical Institutions Pay Big Salaries for Top Fundraisers (February 23, 2012)
A number of large nonprofit medical institutions pay their fundraisers salaries over $500,000 per year, with one fundraiser earning $1.4 million in 2010 for Sloan-Kettering Memorial Center, a year in which Sloan-Kettering raised a total of $244.6 million. The institutions employing these fundraisers raised between $107.4 million and $698 million in 2010. An official at Morris & Berger, a firm that fills top jobs at nonprofit firms, stated that few fundraisers make more than $600,000 and that the majority make between $200,000 and $300,000.
How Governments Should Help Philanthropy: The Council on Foundations Perspective (February 23, 2012)
In this piece, Cohen summarizes his conversation with Andrews Schultz, COF Vice President for Legal and Government Relations at the Council on Foundations, on how government can promote philanthropy, in particular through tax policy. Schultz also discussed the future of the foundation community as it approaches its centennial, the Council's intentions to shift its legislative approach, streamlining the process of Program Related Investments (PRI), and the upcoming "Foundations on the Hill" day planned for late March.
New Deal Helps Small Charities Use Text Appeals (February 23, 2012)
The Mobile Giving Foundation - which connects charities to mobile carriers - and the BBB Wise Giving Alliance - a nonprofit connected with the Council of Better Business Bureaus - have developed a cooperative effort to allow small charities to solicit and receive donations by text. Under the deal, the two organizations will monitor participating charities to ensure they are meeting a set of 20 standards, in order to reassure mobile carriers who process the donations for free. Mobile Giving Alliance previously enabled mobile giving only for organizations that raise more than $500,000 per year. The new standards will require charities to demonstrate governance, financial, and fundraising practices and policies; approval may be denied if charities' annual reports lack key information, if they hold too few governing board meetings, or if they don’t share their informational tax return online.
Understanding the Mortgage Deal: A Primer - and Battle Cry - for Nonprofits (February 17, 2012)
Here, Cohen explores nonprofits' stake in the $25 billion settlement between 49 state attorneys general and five of the nation's largest mortgage servicers over the servicers' improper mortgage foreclosure practices. In general, nonprofits will play a crucial role in monitoring and ensuring enforcement of the settlement's provisions. Nonprofits will also provide housing counseling, legal assistance and other services funded by the $2.5 billion allotted for state-level anti-foreclosure initiatives. In neighborhoods with high foreclosure rates, nonprofits will participate in programs aimed at preventing blight and in redevelopment. Finally, nonprofits' organizing and advocacy will be crucial to continuing the settlement's first step towards cushioning the impact of the housing collapse, assisting mortgage holders and reinvigorating the market.
As an Increasing Target for Claims, Nonprofits Seek More D&O Coverage (February 6, 2012)
Potential legal liabilities for nonprofits are extensive, including employment-related matters, civil rights, fiduciary duty, conflicts of interest, and fund misappropriation. Individual board members may be liable for board actions even if not present when a decision was made, and their finances are accessible if the nonprofit is unable to pay for damages arising out of a lawsuit. At the same time, the financial ability of nonprofits to weather legal problems is limited as compared to for-profit corporations. As a result, more nonprofits and board members are seeking to purchase directors & officers liability insurance, purchasing policies that cover more potential risks, or increasing the amount of coverage.
This Is What a Backlash Looks Like: Komen for the Cure and Planned Parenthood (February 1, 2012)
The public response to the announcement by breast cancer charity Susan B. Komen for the Cure that it was withdrawing funding for breast cancer screening at Planned Parenthood has been swift and dramatic.This piece examines the political overtones of the announcement, the impact it has had on public support for Komen and Planned Parenthood, and the internal response of these organizations.
Nevada AG Investigates Henderson City Taxpayer Funds Directed to Local Nonprofit Organizations (January 30, 2012)
Former Henderson city councilwoman Kathleen Vermillion is being investigated by the Nevada Attorney General’s office for expenditures of city funds she authorized while on the council.Henderson city council members are permitted to assign up to $15,500 each fiscal year from the city’s general fund to go to programs and services that benefit the community. The investigation was launched after a complaint from the Executive Director of a homeless services nonprofit for which Vermillion served at the Chief Operating Officer, alleging that Vermillion misappropriated city funds in directing them to the organization. Vermillion maintains that she has committed no wrongdoing and Henderson city officials are not investigating the expenditures, with a city spokesman saying, “The donations she made out of her funds, from what we've seen, she was able to do.”
California Charity Health Care Initiative Enters Circulation (Jan. 20, 2012)
California Secretary of State Debra Bowen, having received the official summary of a Charity Health Care Initiative from the Attorney General of California, has granted permission to petitioners Nisa L. Walker and Jimi Hardy to start collecting signatures for the measure. The petition would require nonprofit hospitals to provide health care to the needy of at least 5 percent of their net patient revenues, and authorizes penalties for non-compliance. A minimum of 504,760 signatures of registered voters is required to qualify for the ballot. The signatures must to be collected by June 18, 2012.
Troubles Plague Youth Charity, Chief Officer (January 20, 2012)
The Interim Executive Director of the Nevada Partnership for Homeless Youth (NPHY), Arash Ghafoori, has filed a claim with the Nevada Attorney General’s office against Kathleen Vermillion, the organization’s Chief Operating Officer. According to Ghafoori, Vermillion has misappropriated funds, and has been misusing restricted donations to the charity. Since December, seven NPHY board members have resigned while raising concerns about the organization's finances. The AG office would not comment on whether or not an investigation has been launched, but Vermillion has faced criticism for appropriating $10,500 to the Nevada Partnership for Homeless Youth in her role as a member of the Henderson City Council and then transferring hundreds of thousands from NPHY to another organization of which she is COO, Partnership of Homeless Youth.
Telemarketer for Defunct Veterans Charity Settles with Virginia Attorney General (January 17, 2012)
Virginia Attorney General Ken Cuccinelli has reached a settlement worth over $65,000 with Associated Community Services (ACS), a telephone solicitor which raised money for the United States Navy Veterans Association (USNVA), a fraudulent charity that raised millions but spent little on the veterans is purported to serve. Bobby Thompson, USNVA founder, disappeared in 2010 and remains at large. ACS did not admit any wrongdoing under the settlement, but has agreed to refund all contributions to Virginians, and pay civil penalties and the state’s attorneys fees. Cuccinelli said that his “office will continue to work to ensure that those responsible are held accountable for what they have done.”
South Carolina AG Requests Financial and Governance Information from Shuttered Nonprofit Mentoring Group (January 6, 2012)
The South Carolina Attorney General has requested financial and governance information from nonprofit mentoring group Strive to Excel, which operated at Hilton Head high School and has recently shuttered operations.The inquiry comes after South Carolina’s Secretary of State issued a letter to the group’s citing at least three violations of the state's Solicitation of Charitable Funds Act in Strive to Excel’s most recent federal tax return. The group reportedly violated its own bylaws on several occasions over the past few years, in failing to convene its board of directors and increasing the President’s salary by $41,000 in a single year.Strive to Excel must respond file a corrected tax return or provide proof that the current form is correct within 15 days, or else face $2,000 in fines for each violation.While there is no formal deadline for providing the information requested by the Attorney General’s Office, the AG has said that it will follow-up within 30 days.
Penn State’s Advice to Fund Raisers After the Sex Scandal (January 5, 2011)
Internal memos provide insight into Pennsylvania State University’s efforts to manage its relationship with University donors in the wake of the sexual abuse scandal involving former Penn State Assistant Football Coach Jerry Sandusky. The University has instructed all officials to express “remorse, humility, and resolve” in responding to the scandal but that donors should be informed that the University will continue its existing policy not to return gifts once they are made. Some donors have cancelled monthly gifts and are holding off on honoring pledges as the scandal plays itself out.This may interfere with Penn State’s current capital campaign to raise $2 billion by June 2014.
Massachusetts AG Coakley Releases Report on Charities (December 29, 2011)
Massachusetts Attorney General Martha Coakley has released a report on charitable solicitation in the prior year, 2010. Among the report’s data were findings that professional solicitors raised over $367 million in Massachusetts, nearly $39 million more than in 2009. Approximately $166 million of the $267 million, or 45 percent of the amount raised, ended up in the charity’s hands.The annual report is designed to assist residents in making decisions about to whom to give. “In this trying economic climate, it is more important than ever to support the Massachusetts charities that benefit residents of the Commonwealth who are in need,” said AG Coakley. “We encourage donors to do some basic research and ask important questions to ensure donated funds are going to a worthy cause.”
Charities That May Have Benefited From Hacking Seek to Make Refunds (December 28, 2011)
Two major charities, American Red Cross and CARE, are investigating gifts given to them from computer hackers using stolen credit-card data. The American Red Cross says that it does not know how much it received in unauthorized donations, but both charities insist they would ensure that any gifts given to them unintentionally will be returned.Hackers associated with the global hacker network Anonymous publicly posted personal information of thousands of clients of the global intelligence firm Strategic Forecasting (Stratfor).Stratfor has issued a statement that it has hired an identity-theft protection and monitoring service to assist affected clients.
Ohio Attorney General Goes After Bingo Assets (December 22, 2011)
Ohio Attorney General Mike DeWine has filed a civil lawsuit against a booster organization formerly associated with Mansfield City Schools, including 15 people who oversaw the organization’s bingo operation. The AG alleges that the defendants used a complex scheme to siphon money from seven charities since 2004.Specifically, the lawsuit claims that booster club trustees compensated themselves using funds drawn from accounts meant to support the organization’s charity bingo operations and its scholarship fund. While a criminal investigation of the defendants is ongoing, the civil suit seeks to freeze the organization’s bank account and recover money intended for charities and schools.
Texas Busts Police “Charity” (December 21, 2011)
Texas Attorney General Greg Abbot has frozen the assets of three organizations alleged to have misspent more than $400,000 collected under false promises that the money would assist families of slain police officers.The lawsuit – filed against the Texas Highway Patrol Association, two affiliate groups, and their directors – claims the groups collected money under false pretenses, failed to properly secure funds and employ proper accounting practices, and spent donations on video games, movies, tickets to Sea World and Six Flags, airfare to Germany, hotel bills in Napa Valley, and "exorbitant vet bills" for an office cat. Texas seeks damages for deceptive trade, breach of fiduciary duties, violations of the Texas Law Enforcement Solicitation Act, fraud, violation of constructive trust, conspiracy to defraud, negligence and grossly negligent mismanagement.
Four Reasons Why NOT to Use Social Media . . . and Why to Use It Anyway (December 20, 2011)
This article examines and responds to possible arguments against social media use by nonprofits, noting that there are a number of risks to be managed, but the rewards likely make such use worthwhile. First, making use of new technological tools requires an investment of time and energy, which can be wasted if the tools disappear or change significantly, as they do. But social media tools will continue in some form, and organizations can commit to the social model generally without making a long-term or exclusive commitment to a single tool. Second, building a social media presence requires significant attention and dedication of resources that may not immediately pay dividends, but the benefits are likely to flow after the organization’s social network has reached a tipping point. Third, social media opens nonprofits to the possibility of widely disseminated criticism. Such criticism is probably inevitable, but can be used to engage in a conversation with stakeholders; a greater threat would be not to participate in this conversation at all. Fourth, an organization should be attentive to the types and extent to which their potential supporters are using social media. Instead of trying to lure supporters to a whole new space, the organization should go to them. Finally, organizations should clearly articulate their goals in using social media and closely monitor and evaluate the results.
Second Mile board: CEO Never Warned Them of Sandusky (Decemeber 19, 2011)
Former board members and staff of The Second Mile, a charity founded by retired Penn State Assistant Coach Jerry Sandusky, say that the organization’s CEO, Jack Raykovitz, never informed them Sandusky was under investigation for allegedly sexually assaulting children he met through the organization. Board members assert that Reykovitz, a close friend of Sandusky’s, was legally required to provide them with all information that could have affected the charity, regardless of whether he suspected it was true or false. They also state that had the board been informed, they would have vigorously pursued the matter in order to protect the organization and the children it serves.Sandusky is now charged with 52 counts related to sexual abuse of 10 minors and The Second Mile has been named in two civil complaints.Individual board members can face lawsuits for failure to properly execute their oversight duties, and The Second Mile insures its board members against such claims.
Oregon Attorney General Posts 2011 Edition of 20 Worst Charities (December 14, 2011)
As holiday charitable giving reaches its peak, the Oregon Attorney General’s Office has posted its annual list of the 20 worst charities registered in the state. State law requires charities to make regular financial filings disclosing their fundraising and expenditures. At the top of the list for the second consecutive year was Shiloh International Ministries, based in California, which expends an average of $846,340 over the past three years to provide medical and moral support to the needy, but spent only $27,000 on its charitable purpose. Second on the list is American Medical Research Organization of Sarasota, Fla.The list includes charities from around the country, including two Washington State organizations, and one from Oregon. In a news release, AG Kroger urged Oregonians to be selective in making contributions, noting that some charities “are little more than scams that do little to help the people they claim to support.”
The Voice from Outside: Stakeholder Resistance in Nonprofit Organizations (December 13, 2011)
This piece from examines the ways in which “stakeholder resistance” can shape the governance of nonprofits. Stakeholders are defined as those who are linked to an organization in some way other than a formal contract, such as donors, members or volunteers. Examples of stakeholder resistance include a scuttled merger between Smile Train and Operation Smile – two organizations that repair cleft palates in children – that occurred due to the opposition of Smile Train donors, and an effort by two girl scouts to reduce the amount and source of palm oil used in Girl Scout Cookies. Underlying most acts of stakeholder resistance is displeasure with the organization’s responsiveness to its stakeholders, often through a lack of structural modes by which stakeholders may voice their feelings on the organization’s governance. In other words, it is not merely the failure to enact the stakeholders’ preferred policy that motivates stakeholder resistance but the sense that their views are not being adequately considered. One of the reasons that stakeholder resistance has increased is the ubiquity of social media, which provide a direct, efficient, and low cost venue for communication between the organization and stakeholders, but also between stakeholders seeking to influence organizational decisions or policies. Resistance has occurred because organizations have tended to use social media as a megaphone, rather than as a venue for collecting input.
Missing In America Project Receives $6,000 Grant (December 7, 2011)
Ohio Attorney General Mike DeWine has awarded a $6,000 grant to a veterans’ charity, the Missing in America Project, a national organization that works to locate, identify, and inter the unclaimed cremated remains of American veterans. The grant was funded by proceeds recovered in the investigation of fraudulent charity U.S. Navy Veterans Association. The Ohio AG has made a total of nine grants to Ohio veterans’ charities, under a court order directing distribution to such charities of the more than $76,000 in assets seized from U.S. Navy Veterans Association. The fraudulent charity’s treasurer, Blanca Contreras, has been sentenced to five years in prison for theft, money laundering, tampering with records, and engaging in a pattern of corrupt activity. The organization’s director, known by the alias Bobby Thompson, is still at large.
California AG Releases Report on Charities’ Use of For-Profit Fundraisers (December 7, 2011)
The California Attorney General’s Office has released a report finding that charitable organizations hiring for-profit fundraisers received an average of 44 percent of the money raised. Thirteen of the organizations examined hired for-profit fundraisers that raised more than $1 million, of which 10 percent or less went to the charity. Several large organizations, including Amnesty International and Save the Children, ended up with large negative balances, although representatives from those charities note that in the long run they expect to end up ahead, as new donors acquired by their for-profit fundraisers continue to give for years. Additionally, new donors represent a base that can engage in advocacy on behalf of the charity or its causes. The charities insist that if hiring for-profit fundraisers were not in the organizations’ interest, they would not use them. Senior Assistant Attorney General Belinda Johns, of the California AG’s Charitable Trusts Division, agrees that nonprofits can legitimately spend money on fundraising campaigns that yield little up front, and that the Office cannot dictate what percentage a nonprofit must receive of money raised. The AG can and does sue fundraisers that mislead donors as to the amount given to charity. The Office strongly urges donors to be aware of the percentage of their donation that goes to the charity and to determine whether they feel money is being wasted.
Ohio Attorney General Puts Charity Info Online (December 6, 2011)
Ohio Attorney General Mike DeWine has introduced a new web resource that will allow the public to determine whether an organization is a registered charity in good standing with the state.The introduction of the Online Charitable Registration Search comes soon after a update of the state’s registration system for charitable organizations, from a paper to an online system.As organizations file online next year, the public will be able to view charities’ financial reports and the percentage of their donations going to charity work. AG DeWine notes that funds misspent by charities – whether well-meaning or fraudulent – are very difficult to recover. He therefore urges donors to exercise caution and diligence before they give.
‘Charity Corps’ Formed by New York Attorney General and State Bar Association (December 6, 2011)
The Charities Bureau of the New York State Attorney General’s Office is launching an initiative in cooperation with the New York State Bar Association to connect volunteer attorneys with nonprofit organizations in need of assistance.The program is designed to help nonprofits meet their legal duties – in areas such as governance, fiduciary responsibilities and tax/accounting – so that they may continue to provide needed services as government services are cut back.The AG’s Office will train and guide the volunteer attorneys, and the program will be administered by the State Bar Association. Charity Corps will run a pilot program in its first year, serving up to 50 nonprofits, and will prioritize organizations serving the indigent.
Avoiding Trouble: What Nonprofits Can Learn From the Penn State Sex-Abuse Scandal (November 29, 2011)
In this opinion piece, the Chronicle of Philanthropy offers lessons that nonprofits can take from the sex-abuse scandal involving former Penn State football Assistant Coach Jerry Sandusky, who is accused of sexually abusing children he met through the charity he founded, The Second Mile.First, all members of an organization, including founders and board members, must be subject to the same standards and scrutiny. Second, a charity’s response to scandal must be guided by service to its mission rather than by pure public relations goals. Third, organizations should consider hiring independent parties to assist or conduct internal investigations. Fourth, organizations should treat their IRS Form 990 as a public relations document that reflects their values, offering information on organizational policies – on whistleblowers, for example – beyond what is strictly required. Fifth, it is important to develop governance practices that address the organization’s specific mission, such as how it will prepare for and learn from difficulties faced by similar organizations. Seventh, organizations must develop a cohesive internal communications system and convey a unified public message. Eighth, payments to insiders will receive scrutiny in any scandal, and should be reviewed in order to ensure that they are reasonable.Finally, board members must be fully involved in developing and executing the organization’s response to scandal.
To Advance Their Cause, Foundations Buy Stocks (November 24, 2011)
As Charitable Foundations increasingly use program-related investments to further their missions, some nonprofit officials are expressing concern that this approach is blurring the line between charities and for-profit organizations. A program-related investment is an investment in a for-profit business that does work related to the investor Foundation’s mission; the investment can be counted toward federal requirements that foundations pay out 5 percent of their assets each year.For example, in furtherance of its global health program, the Bill & Melinda Gates Foundation invested $10 million to acquire a stake in Liquidia Technologies, a biotechnology company developing new methods of vaccine delivery. The Gates Foundation notes that while the same goal might be accomplished the funding of a nonprofit, it would be significantly more difficult. At a time of decreasing government financial support for nonprofits, nonprofit leaders fear that charitable organizations that have spent years building up a legacy of trust will be forsaken as foundations look to increase their capital by investing in less-established, riskier – if well-intentioned and potentially impactful – profit-making ventures.
The For-Benefit Enterprise (November 2011)
In this idea piece, Heerad Sabeti notes a blurring in traditional boundaries between for-profit and nonprofit models and promotes the development, already occurring, of a Fourth Sector made up of “for-benefit” corporations that combine a commitment to social purpose and a reliance on earned income, as well as an ecosystem to support such organizations. The piece describes the key characteristics of for-benefit organizations and identifies a set of crucial decision points that such organizations face, including the distribution of stakeholder value, methods of capitalization, ownership and governance models, legal form and tax treatment, and performance measurement and reporting. Sabeti additionally identifies the essential support services required by and available to for-benefit organizations. He concludes that while for-benefits cannot replace for-profits, governments or nonprofits, they can and will fill significant gaps resulting from the failure of the current three-sector model to adequately balance increases in prosperity with social and environmental costs.
Second Mile CEO: Closing One Option (November 1, 2011)
The charity founded by former Penn State Assistant Coach Jerry Sandusky, who is charged with abusing numerous children he met through the organization, may close its doors by year’s end. According to new CEO David Woodle, the organization – The Second Mile – is considering three possibilities: closing the charity’s program for at-risk youth, continuing to run scaled-down versions of its programs, or transferring the programs to other nonprofit groups. The decision will depend in part on discussions with Second Mile’s donors aimed at determining whether they will continue to support the organization. Second Mile’s annual revenue is approximately $2.9 million and it employs 20 staff in three offices; Sandusky was the group’s primary fundraiser until his resignation in September 2010. The organization’s Board of Directors has hired former Philadelphia Aistrict Attorney Lynne Abraham and the law firm Archer & Greiner to conduct an independent investigation of Sandusky’s contact with children through the charity.
Salvation Army Goes Digital This Season (November 15, 2011)
The Salvation Army, whose bell ringing solicitors have long been a staple in shopping areas during the winter holiday season, is shifting into mobile fundraising with the adoption this year of Square, a mobile payments start-up that enables mobile devices to process credit card payments. The Salvation Army, with annual revenue of $2 billion, is testing the new technology in 10 locations in each of the following cities: Dallas, San Francisco, Chicago and New York. Square charges a 2.75% fee on each transaction, most of which goes to the credit car company, uses the same security measures as financial institutions, and additionally requires that the donor/payer must be present in order to engage in the transaction. A spokesman for the Salvation Army noted that “[a] lot of people just don’t carry cash any more,” and that the charity is seeking to connect with supporters via the technologies that they are using.
Three Illinois Dioceses Drop Foster Care Lawsuit Against State (November 15, 2011)
Three Roman Catholic dioceses have dropped their lawsuit against the state’s decision not to renew foster care and adoption contracts with Catholic charities due to the charities refusal to consider same-sex couples as candidates for adoption, in violation of state anti-discrimination law.The decision came on the same day that the American Catholic bishops announced a new national religious liberty committee, condemning government mandates that require the church to violate church teachings.The Illinois Attorney General argued that the state new civil union bill, Religious Freedom Protection and Civil Unions Act, exempts only clergy who do not want to officiate at civil union ceremonies, and not religious foster care or adoption service providers. As a result of the state’s decision, and the Catholic charities’ acquiescence, a transition plan for more than 2,000 children in foster care is scheduled to begin on November 30.
Jerry Sandusky’s Second Mile Charity May Be as Culpable as Penn State (November 14, 2011)
In the wake of allegations that Penn State Football Assistant Coach Jerry Sandusky sexually abused children he met through The Second Mile, his charity for at-risk youth, president of Penn State University, Graham Spanier, head coach of the Penn State football team, Joe Paterno, and of course Sandusky, have lost their jobs. In this piece, Rick Cohen examines the culpability of Sandusky's charity in the matter. Sources allege that Second Mile officials were aware of at least three allegations of abuse against Sandusky going back to 1998, although the charity denies such awareness before 2008, when Sandusky himself told the organization that he was being investigated. Lists of the members of The Second Mile's official and honorary boards (including a number of celebrities)
have been removed from the organization's website. Cohen criticizes the organization for either failing take the allegations seriously or for failing to pay sufficient attention to be aware of them in the first place, and faults prosecutors for failing to sufficiently investigate the organization that served as conduit for Sandusky to secure his alleged victims.
Congress Questions the I.R.S. About Delays in Its Oversight of Nonprofit Hospitals (October 31, 2011)
The federal Internal Revenue Service (IRS)
is facing criticism and inquiry over delays in its efforts to regulate the charitable sector. For example, the IRS is failing to collect data on the amount of charitable care and other so-called community benefits that nonprofit hospitals are providing, although this care is ostensibly the basis for the hospitals’ tax-exempt status. Due to complaints from the American Hospital Association and complications arising from the new health care reform law, the IRS has delayed a requirement that hospitals provide this information. A number of lawyers, accountants, state regulators and consumer advocates have long expressed frustration with what they see as the IRS’s failure to police nonprofits, and Congress is beginning to ask questions as well. The IRS argues that the delays are the result of ambiguous Congressional mandates and foot-dragging from other agencies.
Oregon Attorney general’s Office Settles Misconduct Suit Against Veterans Charity and For-profit Telemarketer (October 27, 2011)
The Oregon Attorney General has announced an agreement with a veterans charity and its for-profit telemarketer, resolving allegations that the two organizations violated Oregon’s no-call law and misled donors about how their contributions would be spent.Specifically, the Attorney General alleged that Veterans of Oregon & Members of the Community (VOMC)
told donors that contributions would be spent on assisting veterans but instead paid almost 80% of donations to Associated Community Services, Inc. (ACS)
and spent most of the rest on the travel expenses of VOMC’s directors.In May, ACS resolved claims that it had misled donors about how money would be spent and called numbers on the Federal and Oregon do-not-call list.ACS agreed to pay $40,000, refrain from soliciting on behalf of any Oregon charity until December, 2013 and after that date, to file documents with the AG assuring that it will comply with applicable law. VOMC has agreed to restrict any telemarketer from using the organization’s donor list for commercial purposes, to submit all solicitations scripts to its full board to ensure they include a detailed description of how funds will be used, and to obtain bids from three firms before hiring any telemarketer.
Nonprofit hospitals' huge tax breaks under increasing scrutiny (October 22, 2011)
Nonprofit hospitals have total revenue, property and investment portfolios worth billions but are exempt from most state and federal taxes.In return for tax exemption, federal law requires that nonprofit hospitals provide charity care and other community benefits.These hospitals typically dedicate only a small percentage of their revenues – between 1.7 percent to 2.6 percent of total operating revenue for St. Louis’s largest providers – to care for the needy, and cite other community benefits ranging from medical research to free prostate examinations.Although state and federal regulators set no uniform standards for the amount of charity care or community benefits that must be delivered to qualify for tax-exempt status, hospitals are facing increasing scrutiny for their status and practices.Supporters of tax-exempt status point out that numbers can be deceiving – for example, a small percentage of revenue can represent a large portion of a hospital’s operating margin – and that nonprofit hospitals must put earnings back into the hospital’s operation, rather than distributing them to shareholders.Nevertheless, the IRS has begun requesting more detailed information on nonprofit hospitals’ community benefits, states such as Illinois have recently suspended hospitals’ nonprofit status for providing insufficient charity care, and states are increasingly requesting payments in lieu of property taxes or considering the propriety of such exemptions at all.
NY's AG launches probe of cancer charity claims (October 20, 2011)
The New York Attorney General’s Office has announced a probe into for-profit campaigns that claim to benefit breast cancer charities. The AG’s office has requested information from 130 business and 40 charities on their “cause marketing” efforts, including data on advertising, promised donations, campaign duration and donation limits.According to AG Schneiderman, the investigation is meant to ensure that cause-related marketing campaigns – on which breast cancer charities rely heavily for fundraising – provide the benefit claimed by charities and their for-profit partners, and expected by consumers. The AG’s announcement adds to a series of moves by the Office focusing on charitable activity around breast cancer. In June, for example, Schneiderman shut down what he alleged was a fraudulent Long Island charity, Coalition Against Breast Cancer, that raised more than $9 million over five years and spent the vast majority of those funds on itself.
NJ Division Of Consumer Affairs Charges Charity With Fraud (October 13, 2011)
New Jersey Attorney General Paula Dow’s Office has announced the filing of charges against a New Jersey couple and their business partner for allegedly soliciting funds that they claimed would be used to buy, and then resell, luxury cars to raise money for children with cancer, when in fact they were keeping the money for personal use. Using false identities and documentation, the three allegedly made millions purchasing luxury cars and then exporting them to countries, including Canada, Finland, and Russia. The organization purchased as many as 61 luxury and other motor vehicles - for a total of more than $2.3 million and without paying sales tax -in 2009 and 2010 alone. While claiming to donate 100 percent of donations to the Memorial Sloan-Kettering Cancer Center, the organization never had a relationship with the Center or provided it with funding.The state’s lawsuit seeks restitution for the affected consumers, and civil penalties for violations of the Consumer Fraud Act and other regulations.
A Quest for Hybrid Companies That Profit, but Can Tap Charity (Octoer 12, 2011)
More than a dozen states and two Indian tribes have adopted legislation permitting a new organizational form combining a social benefit mission with a profit-making model.California is the latest state to legalize so-called “flexible-purpose” corporations, and other states including New York and Massachusetts are considering legalizing the forms, also known as benefit or low profit liability corporations.Unlike traditional nonprofits, the organizations can utilize conventional capital markets, and unlike a traditional corporation, the organizations can access philanthropic giving and can prioritize a social purpose over, or along with, profit-making.Some nonprofit executives are expressing concern over the potential competition for charitable donations, while corporate lawyers and regulators worry that serving dual missions creates an inherent conflict of interest and lowers standards of fiduciary duty.Critics also ask why these new forms are necessary when foundations can already invest in standard forms of business, and businesses may incorporate social missions into their bylaws.Many of the organizations adopting these hybrid forms provide services, such as database software or food services, to traditional nonprofit groups.
Colorado State Attorney General Reviewing Proposed Nonprofit Hospital Expansion (October 12, 2011)
The Colorado Attorney General’s Office is reviewing plans by Denver’s third-largest hospital system, Catholic Sisters of Charity of Leavenworth Health System, to add two more hospitals, Exempla Lutheran Medical Center and Exempla Good Samaritan Medical Center to its system, although a similar proposal was rejected by a court-appointed arbitrator in 2009.Owner of the Exempla hospitals, Community First Foundation, would stand to gain $280 million on the deal.The two hospitals are nonsectarian and provide emergency contraception and other reproductive services that would end under Catholic Sisters of Charity.
N.J. Lawmakers Seek to Strengthen Law Requiring Attorney General to Oversee Transfer of Non-profit Hospitals (September 23, 2011)
Two New Jersey lawmakers are seeking to introduce legislation that would strengthen the state attorney General’s oversight of nonprofit hospital transfers.The current law requires the AG to review all aspects of the sale of a non-profit hospital, including determining whether the sale is for fair market value, ensuring disclosure of potential conflicts of interest conflicts, and certifying that the bidding process is fair.The move is a response to a potential deal that would transfer city-run Hoboken University Medical Center to the ownership group of Bayonne Medical Center without independent review by the AG.Attorneys for Hoboken claim that the Hospital, being city-run, is not a nonprofit and therefore not subject to review when it is transferred.State Sen. Loretta Weinberg (D-Bergen), chair of the Senate Health and Senior Services Committee and State Sen. Joe Vitale (D-Middlesex), vice-chair of the committee, claim that Hoboken Hospital is attempting to exploit a loophole to avoid scrutiny, and a former attorney for the Hospital, Donald Scarinci, claims that the city has sought to force the Hospital into bankruptcy so that it may be sold to the ownership group.Weinberg has asked the U.S. Attorney’s Office and the state Attorney General’s Office to investigate the former attorney allegations before the state approves a transfer of the hospital’s license.
California Attorney general denies sale to controversial hospital chain (September 20, 2011)
The California Attorney General has denied the sale of Victor Valley Community Hospital to nonprofit foundation Prime Healthcare Services’ as not in the public interest.Prime-owned hospitals have been accused of ordering unnecessary tests, admitting rising numbers of Medicare patients and then exaggerating their medical conditions in order to obtain higher Medicare premiums, and cancelling contracts with health insurers – thereby limiting access to the hospital for those insurers’ policy holders.The foundation criticized the AG’s decision, arguing that the denial “could have an immediate and dire impact on the needs of an already-underserved” community, and that Prime would improve efficiency and increase charity care at the hospital if the sale were approved.A bankruptcy judge had already approved the sale.
Nonprofits Edge Closer to Managing California’s State Parks (September 2, 2011)
The California state senate has approved legislation designed to allow nonprofits to manage some of the 70 state parks that will be closed due to the state’s budget shortfall.The bill’s sponsor, Jared Huffman, hopes that operating agreements with nonprofits will allow the state to save a dozen or more parks from closing.Volunteers for the nonprofits that may be operating the parks have express uncertainty as to how their roles will change. The legislation, which reportedly has widespread report from both Republicans and Democrats, must now face a final vote in the state Assembly and must then be approved by California Governor Jerry Brown.
Massachusetts Attorney General Selects Overseer of Hospitals, Insurers (August 29, 2011)
Massachusetts Attorney General Martha Coakley has hired Boston lawyer Mary Beckman to serve as head of the AG’s nonprofit and public charities division, which oversees much of the state’s health care industry.AG Coakley has said that Beckman will focus on antitrust, access and affordability issues as a wave of consolidation occurs among both hospitals and insurers.The nonprofit and public charities division was quite active in the area of health care under its previous head, David Spackman, reviewing the proposed conversion of nonprofit hospitals to for-profits, investigating board oversight of hospital and insurance chief executives, and examining board fees at nonprofit organizations.Beckman has stated that she looks forward to working with Coakley on a number of issues, including creating more transparency around board and executive compensation. Prior to taking the new post, Beckman worked in the general counsel’s office of Children’s Hospital in Boston and served as the state’s assistant secretary for health policy from 1999 to 2002, advising on hospital closings and nursing home receiverships.
Connecticut State Officials Warn Retailers About Fraudulent Veterans Charities (August 9, 2011)
Connecticut Attorney General George Jepsen along with that state’s commissioners in charge of consumer protection and veterans’ affairs have issued a warning to retail stores to inspect charitable organizations’ registrations before allowing them to solicit donations from customers outside their stores. “Registration helps to promote public confidence that the money being given is going to the purpose intended,” said Jepsen. “Unregistered charities fly beneath the State’s radar and can more easily misuse the charitable funds they collect.”
“Questionable” Veterans Charity Vows to Resume Operations (July 25, 2011)
Hawaii Attorney General David Louie is investigating Stay Strong Nation, a Maui-based veterans charity. Stay Strong is attempting to raise funds in order to build a post-traumatic stress disorder/traumatic brain injury treatment facility in Maui for service members. Attorney General Louie previously had to ask Stay Strong to cease all fund-raising activity until it registered with the state as a charity. Although the organization subsequently registered, Daniel Borochoff, president of charity watchdog group the American Institute of Philanthropy, has raised concerns about Stay Strong, asserting that the organization’s president and vice president lacked professional expertise in PTSD, and referring to Stay Strong as “highly questionable.” Stay Strong’s president has stated that, once Louie concludes the investigation, the organization will resume its operations.
Missouri AG Sues Internet Radio Operator for Charity Fraud (July 25, 2011)
Missouri Attorney General Chris Koster is suing Steven Blood, operator of Cowboy Bill's Radio, for violating the Merchandising Practices Act. Blood sold t-shirts and claimed he would use the proceeds to set up a benefits concert for victims of the Joplin tornado. Instead, Blood allegedly used the almost $5,000 he collected to pay for his personal expenses. Blood told the Associated Press that he was using the money to cover his operating costs, and that he did not say the money was "going to anybody." Attorney General Koster is seeking an injunction, full restitution to donors, and civil penalties of $1,000 per violation.
Kentucky AG Conway Announces $26.4 Million Settlement with Passport Members (July 22, 2011)
Kentucky Attorney General Jack Conway has announced that Passport Health Plan improperly paid four of its member organizations $26.4 million as part of a settlement, and that the money must be repaid. Attorney General Conway alleges member organizations, including Jewish and St. Mary’s Inc., Norton Hospital, University Physicians Associates, and University Medical Center, received $30.5 million in disbursements in 2008 and 2009. Passport, a nonprofit care organization that provides health care to the indigent, made these disbursements illegally, as nonprofit corporations cannot pay dividends to its members. Portions of the disbursement that were used to serve Medicaid patients will not be repaid to Passport. If the money is not repaid to Passport in a timely fashion, Conway can triple the amount the members owe.
Oklahoma Officials, Charities Work to Meet New Regulations (July 20, 2011)
Oklahoma state officials are working with charities to ensure their compliance after a law reforming Oklahoma's nonprofit registration system went into effect July 1. The law requires nonprofits, as well as professional fundraisers and solicitors, to register with Oklahoma's secretary of state. Nonprofits are additionally required to keep certain documentation for at least five years. According to Tom Bates, chief of the Oklahoma Attorney General's Public Protection Unit, the requirements will assist both the public and law enforcement in distinguishing upstanding nonprofits from potentially unreliable ones. Marine Taylor, executive director of the Oklahoma Center for Nonprofits, says that leaders in her sector are supportive of the new plan but are still working to fully understand it. To that end, the law's author, Susan Paddack D-Ada, and other state officials have spoken to more than 350 nonprofits around the state.
Unions Say City Opera Invalidates Endowment (July 19, 2011)
The New York City Opera’s unions have filed a complaint with New York Attorney General Eric Schneiderman, asserting that City Opera’s proposed move from Lincoln Center violates the terms of a gift from Lila and DeWitt Wallace that serves as the bulk of City Opera’s endowment. During 2008-2009, the Attorney General’s office gave City Opera permission to use $23.5 million from the Wallace endowment. The withdrawal, unusual for a nonprofit, helped pay City Opera’s debts and finance its operations, and was likely approved because City Opera was in financial straits. The unions assert that City Opera misrepresented its plans when it sought release of the funds, because City Opera acknowledged that the purpose of the Wallace fund was to support “a constituent part of the Lincoln Center campus.” The certificate of incorporation for the Fund also states that it was established “exclusively for the benefit of the constituent companies of Lincoln Center.” If City Opera leaves Lincoln Center, it is uncertain that it should be able to use its remaining balance.
Attorney General Closes Humane Society Investigation (July 13, 2011)
Connecticut Attorney General George Jepsen has concluded an investigation into the Connecticut Humane Society’s alleged financial mismanagement, and will take no further action against the organization. The investigation, which was launched by former Attorney General Richard Blumenthal and spanned two administrations, was initiated following charges of mishandling donations, inadequate animal care, and anti-union activity. The Humane Society has since improved oversight of animal behavior concerns, and no evidence was found that the organization entered into financial transactions that were unrelated to the accomplishment of its charitable purpose.
Schneiderman says Breast Cancer Charity Funneled Donations (June 28, 2011)
New York Attorney General Eric Schneiderman filed a lawsuit Tuesday against the Long Island-based Coalition Against Breast Cancer, alleging that the charity solicited $9.1 million over the past five years but spent virtually no money on the breast cancer programs it claimed to support, instead using the funds to pay for exorbitant fundraiser fees, benefits packages, unjustified salaries and other personal goods like cell phones, TV, internet services and home phones. Other allegations against the organization include advertising a bogus relationship with Memorial Sloan-Kettering Cancer Center, falsely telling donors that their money would be used to fund breast cancer research, mammogram screenings, support seminars and forums for survivors and their families, and spending less than one-half of 1 percent of donations raised for any purpose related to breast cancer prevention or detection. Schneiderman is seeking to shut down CABC and hold the defendants financially accountable for the alleged waste and misappropriation of CABC's charitable assets.
Internal Revenue Service Revokes Tax-Exempt Status of 275,000 Organizations (June 10, 2011)
In light of the IRS’s recent announcement that 275,000 organizations have lost their tax-exempt status, Ohio Attorney General Mike DeWine has reminded Ohioan charitable donors to verify whether a nonprofit has lost its tax-exempt status prior to making donations. The organizations had their tax-exempt status revoked because they failed to file annual reports for three consecutive years, as required by the federal Pension Protection Act, passed in 2006. Donations to these organizations are no longer deductible, and taxpayers who mistakenly claim deductions could face penalties.
Health Board Pay Ban Could Affect Charities (June 10, 2011)
Massachusetts Attorney General Martha Coakley has supported a proposed law that would require nonprofits to seek permission from the Attorney General in order to continue compensating their board members. The state Senate recently approved a budget amendment that would bar all charitable organizations from paying directors without state approval. While some organizations and executives agree that high pay is unnecessary to attract nonprofit board members, others assert that the practice is a fair and appropriate reward for the time, expertise, and service of the board members. The state Senate-approved budget amendment must be reconciled with a House version in coming weeks.
Foster Care May See Upheaval Over Same-Sex Unions (June 9, 2011)
In the wake of the passage of a new law allowing same-sex unions in Illinois, Catholic charities in the state have filed suit seeking an injunction and opinion allowing them to refuse state-funded adoption and foster care to unmarried couples, including those in same-sex civil unions.Instead, they wish to be permitted to continue their current practice of referring such couples to other agencies.The charities’ suit was motivated by a request from Illinois Attorney General Lisa Madigan for documents relating to the charities’ licensing practices and alleged discrimination on the basis of on race, marital status and sexual orientation.Although both sides expressed a willingness to meet and negotiate a settlement, antiabortion not-for-profit law center the Thomas More Society filed suit on behalf of three Catholic charities before any meeting could occur.Anthony Riordan, chief operating officer of Catholic Charities of the Diocese of Peoria, predicted upheaval in the state’s adoption and foster care services if the courts side with the state.
Massachusetts Foundations Consider Proposed Restriction on Board-Member Pay (June 7, 2011)
As Massachusetts lawmakers move towards passage of legislation that would require Attorney General prior approval of nonprofit groups’ payment of salaries to board members, charities and foundations are scrambling to determine how they will be affected.Although grantmakers originally thought they were exempt from the law, a close reading of the bill reveals they may not be.Foundations are concerned that the restriction may prevent them from attracting trustees from the nonprofit sector, including grass-roots groups, and immigrant communities and low-income communities.Organizations would be able to apply for an exemption from the law, subject to the requirement that any payment must not be “in excess of that reasonably necessary to accomplish the purposes for which compensation is approved and paid.”Some Foundations argue that paying salaries to board members is worth the expense.For example, Nicholas H. Donahue, chief executive of The Nellie Mae Ed Foundation, which paid its 15 directors a total of $327,047 in 2009, argues: “We are an education foundation trying to make big change.” “We think we get a benefit from some modest payments to people to keep them engaged and get their expertise.”
Telemarketers for Iowa charities keep most of the money raised (May 22, 2011)
According to an investigation by the Iowa Gazette, Iowa charities using telemarketers from outside the state receive an average of 22 cents for every $1 raised. Telemarketers for out-of-state charities took an even greater percentage, as much as 99 cents out of every dollar raised. The Iowa Attorney general’s office requires telemarketers to register with its Consumer Protection Division, which provided financial disclosures, contracts and other records to the paper. Most charities defended the deals, noting that telemarketers do all the work, that the costs to telemarketers are significant, and that they are open with donors regarding the percentage of donations going to each party.The Attorney General’s Office requires disclosure by telemarketers of any prior disciplinary or legal action against them, and relies on other state agencies, self-disclosure and the Internet to identify telemarketing violations, such as the use of “deceptive” language in solicitations.
Alabama Attorney General Clarifies Gambling Enforcement (May 18, 2011)
Alabama Attorney General Luther Strange has issued a memorandum to law enforcement and district attorneys in the state clarifying his office’s position on gambling, including “charity bingo.”The memorandum reaffirmed the State’s strict prohibition on gambling and noted that in counties with local constitutional amendments allowing it, charity bingo must satisfy the six-factor test for “traditional bingo” as set out by the Alabama Supreme Court.Bingo, whether electronic or paper, must be operated on behalf of a charity in strict adherence to the county’s local constitutional amendment.According to Strange, his memorandum represents a significant change in policy from the previous attorney general, whose advisory opinion on the issue took a more lenient approach.
State Officials Say Charity Review Just Beginning (May 16, 2011)
As a result of an advisory opinion issued by Virginia Attorney General Ken Cuccinelli, the State of Virginia is performing a months-long constitutional review to determine which state charities may continue to receive funds from the state. The Virginia constitution prohibits grants to nonprofit organizations unless the nonprofit is “owned or controlled by the Commonwealth.”State lawmakers have nonetheless regularly appropriated funds to such organizations.Organizations may receive funds through a contractual relationship with the state to provide a particular service, rather than through direct grants.Under this rule, the Virginia Health Department has restructured its relationships with 25 of the 26 charitable groups it has previously funded such that the organizations a now again receiving funding.
Squeezed Cities Ask Nonprofits for More Money (May 11, 2011)
In response to historic budget shortfalls, many cities are asking tax-exempt organizations to make voluntary payments in lieu of property taxes, and seeking to institute formal standards for such payments.In cities such as Boston, Providence, Chicago and Princeton, New Jersey, city officials are arguing that all entities, including tax-exempt organizations, must sacrifice in order to solve deepening financial crises.While many large tax-exempt entities, such as universities and hospitals, have been and continue to make voluntary payments, others argue that tax-exempt organizations provide vital services, the cost of which cities would otherwise be forced to absorb, and that they are tax-exempt for this very reason.Given that nonprofits currently also face great financial strain, they argue that making voluntary payments will merely harm their organizations and reduce the quantity and quality of services they are able to provide to the community.In addition to services, many large tax-exempt organizations benefit communities by supplying jobs, attracting visitors and revitalizing downtowns.However, they also own large swaths of valuable land – more than fifty percent of all the property in Boston, for example – in cities that depend heavily on property taxes.
Illinois’s Hospital Tax Exemption Status in Limbo (May 3, 2011)
More than a year after a landmark Illinois Supreme Court case that upheld the State Department of Revenue’s decision to strip a hospital’s tax-exempt status, state officials have not taken action on a single hospital applications for tax-exempt status. The state’s inaction comes amid a wave of consolidations by local hospitals.Representatives of Attorney General Lisa Madigan and the Department of Revenue have participated in talks with the Illinois Hospital Association, which has requested a moratorium on tax status determinations until the state clarifies how to define charity care and how much a hospital must provide to qualify for property- and sales-tax exemptions.The hospitals take the position that their tax-exempt status is justified by more than the charity care they provide, while state officials believe that nonprofit hospitals must dedicate a greater percentage of their revenues to charity care than the 6.4% they do currently.The state says that the delay in making tax status determinations is the result of hospitals’ failure to provide additional information requested by the state in the wake of the Illinois Supreme Court’s decision.
Pennsylvania Hospital Sales Finalized (May 3, 2011)
After a review by the state attorney general's office, the Vatican and Lackawanna County Judge Carmen Minora, the sale of three Pennsylvania hospitals was finalized on May 3. The formerly nonprofit Mercy Hospital in Scranton, Tyler Memorial Hospital in Tunkhannock and Special Care Hospital in Nanticoke now belong to Community Health Systems, Inc., a for-profit company. Under the sales agreement, the hospitals will implement charity care policies comparable to those in place when the facilities were owned by Mercy Health Partners and will participate in Medicare and Medicaid programs, officials said.