DECEMBER 2017

Arizona

A Phoenix fundraising consultant was sentenced to 33 months in federal prison by a federal district court. She was also ordered to pay more than $1 million in restitution. The prosecutors alleged that she defrauded charities dedicated to curing debilitating diseases, educating children, and saving injured wildlife during the period of 2009 – 2014. Her scheme involved charging consultation fees with a promise of delivering large donations. In fact, she used fictitious employees, associates, and donors to lull nonprofits into paying consistently more fees with the expectation of receiving a large donation that never came.

California

The office of the Attorney General announced the investigation of a San Francisco based charity that claimed to serve the developmentally disabled when, in fact, it has been accused of doing nothing more than funding its directors’ lifestyle. The charity is defending its operation and represented to the media that they are confident the Attorney General’s office will find no wrongdoing.

Florida

On December 18, the Attorney General filed a lawsuit against a charitable organization that does business using a series of project names involving public safety and cancer. In addition to the organization being named, the Attorney General has also named as defendants the executive director and members of the board. This is a significant complaint that alleges misrepresentation in a number of different ways. At issue are not only the representations and the fundraising, but also the manner in which the organization accounted for non-cash donations. 

Michigan

According to published reports, three of the five charitable foundations affiliated with top UAW executives have curtailed their Michigan fundraising, and UAW affiliated nonprofits are no longer allowed to take donations from the union in wake of a federal investigation. The Attorney General has announced that the charitable registrations for each of the organizations were allowed to expire. None of the organizations are currently registered in accordance with Michigan law.

The Attorney General has sued ATRS, the operator of clothing bin services for a number of charities nationwide. In this case, bins that contained the logo and the name “Michigan Humane Society” posted on the outside of the bins advertised that 100% of the donations went to the organization. The Attorney General alleged that only 6% of the actual total revenue generated from the sale of the donated items was received by the charity and is seeking a judgment against ATRS to make the representation a reality.

Nevada

How to deal with a terrible situation is the issue facing those who are involved with the distribution of funds raised to support the victims of the mass shooting in Las Vegas. There is approximately $16 million in the fund. The original plan called for the money to go to relatives of those killed or victims whose injuries left them with permanent brain damage or major injury. The reality is that more than 22,000 people attended the concert where the tragedy took place and now many of them are asking for redetermination regarding how distribution should be made to include those who have suffered emotional damage as well as physical loss.

New Hampshire

AARP New Hampshire announced that it is joining forces with the AARP National Fraud Watch Network and the US Postal Inspection Service for Operation Protect Veterans. This is an educational campaign to warn veterans about scams targeting them.

New York

The Attorney General has not completed its investigation of President Donald Trump’s charitable foundation which last year admitted to violating federal tax rules on “self-dealing.” The organization wishes to dissolve, but the Attorney General is objecting and will not agree until such time as the investigation is completed.

North Carolina

The Secretary of State’s annual report on charitable giving reports that charitable giving grew dramatically. However, upon closer inspection, it appears that the inclusion of a new category of organizations and their income has skewed the statistics. A copy of the annual report can be obtained directly from the Secretary of State’s website.

Ohio

The Attorney General’s office announced a suit in late November against the nonprofit organization Cops for Kids. The suit accuses the organization of misleading donors. The Attorney General is seeking a court order prohibiting the organization from soliciting further contributions in the State.

Oklahoma

In a classic example of a billionaire philanthropist making a difference, George Kaiser continues to focus his efforts on helping the poor children of Tulsa. His goal is to have his foundation target every poor child from birth until third grade so that a patchwork or public programs becomes a seamless quilt.

Washington

Savers, a nationwide based thrift store and recycling company that recently settled similar legal matters in Minnesota, has taken the offensive in its home state. A federal declaratory judgment action was filed by the company against the Attorney General in the course of the Attorney General’s investigation and demands.  Subsequently, the Washington Attorney General went ahead with the filing of its lawsuit against Savers in state court.

OTHER NEWS

Tax Reform

The impact of tax reform on the charitable community cannot yet be known, but the prospects are not good. The legislation doubles the standard deduction which will result in fewer people itemizing when they file their tax returns. Those who itemize are far more likely to make a charitable contribution because there is a savings as a result of the deduction the government gives to the final tax bill. The result is that there is less of an incentive to make charitable contributions, at least from the standpoint of obtaining tax-savings. The estate tax exemption was doubled, meaning that an even smaller percentage of tax payers will be subject to estate tax and thereby be motivated to make charitable bequests as part of their end of life planning. Two important things were not changed. First, the Johnson Amendment was not repealed, which means that charities continue to be prohibited from actively engaging in election activities. Second, the proposed tax on royalty income was not part of the final package. Some experts in the field predict that charitable giving will decline by as much as $20 billion in the years to come. This is only a guess but should be of concern.