Thursday, June 13, 2013

CNN to Showcase "Worst Charities" Investigation

CNN's AC360 will tonight focus on the 50 Worst Charities investigation we blogged about yesterday.  The show airs at 8:00 p.m. and 10:00 p.m. ET.  I'll be watching; I hope you will, too.


June 13, 2013 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Judge Orders Company to Pay $3 Million for Sham Fundraising

Yesterday we blogged about the nation's 50 worst charities.  We wondered just what can be done to stop these organizations from taking advantage of an unsuspecting public.  As if in answer to our query, Newsday is reporting that a New York judge has ordered a fundraising company that duped people into giving money to a sham breast cancer charity to pay $3.1 million in restitution. Nearly all of that money will be given to legitimate breast cancer charities through a fund set up by New York State Attorney General, Eric Schneiderman, who brought the action against the Lindenhurst, New York-based Campaign Center, Inc., and its principal, Garrett Morgan of West Islip, New York.

Labelling charitable fundraising scams as "among the lowest of the low," Attorney General Schneiderman praised the decision by New York State Supreme Court Judge Emily Pines.  According to Mr. Schneiderman, "This decision proves that New York fundraisers will be held accountable when they defraud the public and line their own pockets."  He went on to state that the charity played on people's emotions to get them to donate money in the hopes of fighting breast cancer, but little of the money ever went to research or medical services

Judge Pines' decision said that from 2005 to 2011, the Campaign Center raised $4.9 million on behalf of the charity but kept $3.9 million for itself. During those years, the decision continued, fundraisers, including the Campaign Center, raised $10 million for the Coalition Against Breast Cancer, but the charity only spent 4 percent of that on charitable purposes, according to the judge's decision.

Well, someone is doing something!


June 13, 2013 in Current Affairs, In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 12, 2013

Miller Publishes "Fixing 501(c)(4): Recalibrating the Tax Subsidy for Lobbying and Political Activity"

David S. Miller (Cadwalader, Wickersham & Taft, New York) has published Fixing 501(c)(4): Recalibrating the Tax Subsidy for Lobbying and Political Activity.  The abstract follows:

While the surge in 501(c)(4)s that led to the current IRS scandal is widely attributable to Citizens United, it was a very deliberate IRS action – the decision to exempt donations to 501(c)(4)s from gift tax – that was equally responsible for the unprecedented spending by 501(c)(4)s in the 2012 election.

This paper describes the history of the gift tax as applied to donations to 501(c)(4)s, discusses the policy implications, and then proposes a legislative solution. 

First, under a "disclosure or tax" rule, donations to a tax-exempt organization that engages in any substantial amount of lobbying or campaigning would be exempt from gift tax only if the organization discloses the name of the donor in accordance with the rules in section 527.  

Second, any organization that engages in any substantial amount of lobbying or campaigning would be taxable on all its investment income.  

And finally, appreciated property donated to any organization that engages in a substantial amount of lobbying or campaigning would be treated as sold. 

The effect of these provisions would be an extension of the section 527 rules to organizations that substantially lobby or campaign, except that (i) any organization that substantially lobbies or campaigns would be subject to tax on all of its investment income (and not only the lesser of investment income and the amount spent on campaigning, as is the case today under section 527(f)), and (ii) the organization could keep the name of a donor anonymous if the donor were willing to be subject to gift tax.


June 12, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Michigan Senate Moves to Protect Art Collection at Detroit Institute of Arts

The Michigan Senate has passed a bill intended to protect the Detroit Institute of Arts art collection from sale in the event of a bankruptcy in the City of Detroit.

The Detroit Free Press reports that the Senate voted 24-13 to codify ethical standards adopted by the American Alliance of Museums which bars museums from selling artwork for purposes other than enhancement of the museum’s collection.  The bill now moves to the Michigan House of Representatives.

Detroit’s emergency manager, Kevyn Orr, recently stirred outrage when he said that he has to consider the value of all the city’s jewels when determining how to pull the city out of financial crisis.  Orr went on to say that he was evaluating the DIA’s art collection and preparing in case creditors seek repayment of their debts through asset sales.


June 12, 2013 in Current Affairs, In the News, State – Legislative | Permalink | Comments (0) | TrackBack (0)

Tampa Bay Times: America's 50 Worst Charities Rake in More Than $1 Billion For Corporate Fundraisers, Give Little to Charitable Causes

A special report published in the Tampa Bay Times contends that over the past decade, the nation's 50 worst charities paid more than $1 billion to for-profit corporations but gave very little to charitable causes.  The report comes at the conclusion of a yearlong investigation by the Times and The Center for Investigative Reporting.

Using state and federal records, the Times and CIR identified nearly 6,000 charities that have chosen to pay for-profit companies to raise their donations.  The investigators then reviewed records over the past decade to zero in on the 50 worst such charities, based on the money they diverted to boiler room operators and other solicitors during that time period.

According to the Times, these nonprofits adopt popular causes or mimic well-known charity names that fool donors. They then rake in cash, year after year, then pay their solicitors for their services.  Over the past 10 years, these payments have amounted to more than $1 billion.

Among the report's findings are:

• The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent nothing at all on direct cash aid.

• Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fundraising contracts with friends. One cancer charity paid a company owned by the president's son nearly $18 million over eight years to solicit funds. A medical charity paid its biggest research grant to its president's own for-profit company.

• Some nonprofits are little more than fronts for fundraising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Florida-based Project Cure has raised more than $65 million since 1998, but every year has wound up owing its fundraiser more than what was raised. According to its latest financial filing, the nonprofit is $3 million in debt.

• To disguise the meager amount of money that reaches those in need, charities use accounting tricks and inflate the value of donated dollar-store cast-offs — snack cakes and air fresheners — that they give to dying cancer patients and homeless veterans.

The question we must answer is this: what can we do to put an end to this conduct?  Should the federal government act?  The state governments?  I do not know, but I am convinced that the public would benefit greatly if these so-called charities are made to account for every penny they raise.


June 12, 2013 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)