Regulators Crack Down On Dubious Vets Charities
July 20, 2018 Mark Hrywna
One nonprofit said it was funding medical care and suicide prevention programs for veterans and even claimed a “Gold” rating from GuideStar. Nearly all of the $20 million it raised went to the president’s salary and fundraising firms. Another group wasn’t even a registered charity, but made millions of illegal robo-calls soliciting donations of cars, boats and other vehicles – also claiming to help veterans – that were simply re-sold for private gain.
Those are some of the latest scams involving charitable solicitations for shady veterans groups, according to state and federal regulators. Three new cases were among more than 100 law enforcement actions announced yesterday as part of a sweeping endeavor by the Federal Trade Commission (FTC) and charity regulators from 70 agencies, including every state and U.S. territories. The effort also launched a new consumer education initiative called “Operation Donate with Honor.”
The FTC planned the ongoing educational effort with the National Association of State Charity Officials (NASCO) to help consumers recognize charitable solicitation fraud and identify legitimate charities. “At its heart, this is about resources,” FTC Chairman Joe Simons said during a press conference yesterday.
For more information on “Operation Donate with Honor,” visit www.FTC.gov/charity
Some of the enforcement actions had previously been initiated, including a multi-state effort against VietNow in Michigan and the New York Attorney General’s Office forced the dissolution of Menacola Marketing, a Brooklyn-based fundraiser. A complete list of enforcement actions can be found here.
“You look at some of these names, they’re very convincing, they’re very credible sounding,” Nebraska Attorney General Doug Peterson said. “They will pressure you because the people who do the marketing are very good,” he said. “Do your due diligence. This will shut the door on a lot of them: ‘Please send me your information so I can consider it,’” Peterson advised potential donors.
Orlando, Fla.-based Help The Vets, Inc. (HTV) raised $20 million over the past three years, operating under different names, including American Disabled Veterans Foundation, Military Families of America, Veterans Emergency Blood Bank and Veterans Fighting Breast Cancer. Neil G. “Paul” Paulson, Sr., was the lone employee and president until 2016, when he became secretary treasurer and his associate, Sherwood Schoff, took over. A 78-page complaint filed in U.S. District Court for the Middle District of Florida, Orlando Division, alleges that HTV “misled donors about the good their charitable donations would accomplish, and prevented millions of dollars from going to legitimate charities that do help wounded and disabled veterans.”
Under a proposed settlement agreement, Paulson and HTV will be banned from soliciting charitable contributions under settlements with the FTC and six states (Florida, California, Maryland, Minnesota, Ohio and Oregon) for falsely promising donors their contributions would help wounded and disabled veterans. The proposed settlement order bans Paulson from charity management and oversight of charitable assets, and orders the organization and Paulson to destroy all donor lists and notify their fundraisers to do so as well.
The order imposes a $20.4 million judgment, which represents donations from 2014 through 2017, when HTV stopped operating. Paulson must pay $1.75 million and HTV must pay all of its remaining $72,000 to legitimate veterans charities. The judgment will be partially suspended when defendants have paid a charitable contribution to one or more legitimate veterans charities recommended by the states and approved by the court. Between 2014 and 2016, Paulson was compensated more than $462,000 including benefits and a 401 (k) plan, and he has continued to draw a salary from HTV through 2017 to the present, according to the complaint.
Vincent Citro of Horwitz and Citro, an attorney representing Paulson in court documents, declined comment citing the pending lawsuit.
Travis Deloy Peterson of Veterans of America was charged with using fake veterans’ charities and illegal robocalls to get people to donate vehicles and other things of value, which he then sold for his benefit. He used names like Veterans of America, Vehicles for Veterans LLC, Saving Our Soldiers, Donate Your Car, Donate That Car LLC, Act of Valor and Medal of Honor – but none were actual charities with tax-exempt status. Peterson allegedly made millions of robocalls asking people to donate cars, real estate, timeshares and boats.
A federal court issued a temporary restraining order prohibiting Peterson from making unlawful robocalls or engaging in misrepresentations about charitable donations while the FTC’s enforcement action is proceeding.
Smyrna, Tenn.-based Operation Troop Aid did not have a written agreement in an unlawful commercial co-venture with national retailer Harris Jewelers. As part of the settlement, Operation Troop Aid will cease operating and wind down operations and its chief executive, Mark Woods, will be barred from serving as a fiduciary or soliciting for any nonprofit.
The charity allowed Harris Jewelry to use its name in so-called “Operation Teddy Bear,” in which the retailer advertised that it would donate a specific amount to Operation Troop Aid when consumers purchased its teddy bears dressed in military uniforms. Operation Troop Aid admitted that it failed to ensure Harris Jewelry was donating the amount advertised.
Operation Troop Aid displayed Harris Jewelry’s logo on care packages sent overseas to deployed service members but failed to ensure that donated money was used for its stated charitable purpose and that it made other purportedly charitable expenditures to individuals at the sole direction of Woods.
“Too often, co-ventures are little more than thinly-veiled marketing operations,” New York Attorney General Barbara Underwood said in a statement. “Charities must not sell their status for questionable gains,” she said.
Harris Jewelry was not part of the settlement agreement. In a statement, the company said it was disappointed to learn of the allegations and that since January has sent proceeds from Operation Teddy Bear to another a charity that supports service members.