Charity fraud is the act of using deception to get money from people who believe they are making donations to charities. Often a person or a group of people will make material representations that they are a charity or part of a charity and ask prospective donors for contributions to the non-existent charity. Charity fraud not only includes fictitious charities but also deceitful business acts. Deceitful business acts include businesses accepting donations and not using the money for its intended purposes.

Examples

On April 20, 1918, The New York Times published an article about a charity fraud committed by the Secretary of the Cripples’ Welfare Society, George W. Ryder. Ryder pleaded guilty to using mail fraud in order to use the donations for his personal gain.[1]

On November 13, 1992, The New York Times released an article about fraudulent solicitations supporting a cause. Often, beside the cash register in stores is a collection being taken up for a charity or for people in need. Although there are several real cases of people with ailments that need donations, there are several donations that are used as a marketing scam. In this specific case, the small-change donations were being kept by the vendors. The article states that the vendors paid a two dollar per month fee to use the charity’s name.[2]

On May 27, 2009, CNN reported the arrest and sentence of five leaders of one of the largest Muslim charities. These men were found guilty of using donations to aid a Palestinian militant organization labeled as terrorists by the United States.[3]

Prevention

There are several controls as well as laws governing charities as well as businesses that accept donations. The Internal Revenue Service (IRS)[1], along with the Better Business Bureau (BBB)[2], has regulations in place that can be found on their websites.

The United States Federal Bureau of Investigation (FBI) provides online information about avoiding charity fraud, such as fraudulent schemes that emerge in the wake of natural disasters, claiming to be providing disaster relief. The Internet Crime Complaint Center maintains a list of guidelines to avoid charity fraud when making a donation.[3]

It is advised that people should not only follow certain guidelines when they donate but that they should also consult a list such as the one listed on the BBB’s website. This list includes the participants in the BBB Wise Giving Alliance’s National Charity Seal Program. Participants in this program have met the Standards for Charity Accountability and may have, for a fee, display the seal logo on their websites as well as any other printed documents.[4]

See also

Confidence trick

External links

US: U.S. (FTC.gov) information regarding charity fraud

AVOID CHARITY FRAUD

by Federal Trade Commission

A flyer in the mail, a phone call, a personalized email — everyone receives requests for donations in one form or another. Many legitimate charities use telemarketing, direct mail, email and online ads to ask for contributions. Unfortunately, scam artists also use these techniques to pocket your money. If someone asks for a donation, take your time and familiarize yourself with the charity:

Ask for the charity’s name, address, and phone number, and written information about its programs.

Ask whether the person contacting you is a professional fundraiser and how much of your contribution will go to fundraising costs.

Check the history of the organization with the office that regulates charities in your state. For a list of state offices, visit the National Association of State Charity Officials.

You should also know the warning signs of a scam:

High pressure pitches. Reject them: It’s okay to hang up.

A thank you for a pledge you don’t remember making. Be skeptical; scam artists will lie to get your money.

Requests for cash. Avoid giving cash donations.

Charities that offer to send a courier or overnight delivery service to collect your money.

Charities that guarantee sweepstakes winnings in exchange for a contribution.

Charities that spring up overnight, especially those that involve current events like natural disasters, or those that claim to be for police officers, veterans, or firefighters. They probably don’t have the infrastructure to get your donations to the affected area or people.

For more detailed information about charity donations, read Charitable Donations: Give or Take.

Facts for Consumers

by Federal Trade Commission

Charitable Donations: Give or Take?

Your charity dollars are an investment in your community, the nation, and the world. The Federal Trade Commission (FTC), the nation’s consumer protection agency, says it’s wise to be cautious when making your donation decisions so you can avoid scam artists who try to make money by taking advantage of your generosity.

Charity Checklist

Consider the following precautions to help ensure that your donation dollars benefit the people and organizations you want to help. They make sense whether you’re solicited by an organization’s employees, volunteers, or professional fundraisers by phone, mail, e-mail, or in person.

Be wary of charities that spring up overnight in connection with current events or natural disasters. They may make a compelling case for your money, but as a practical matter, they probably don’t have the infrastructure to get the donations to the affected areas or people.

Ask for written information about the charity, including the name, address, and telephone number. A legitimate charity or fundraiser will send you information about the charity’s mission, how your donation will be used, and proof that your contribution is tax deductible.

Contact the office that regulates charitable organizations and charitable solicitations in your state to see if the charity or fundraiser must be registered. If so, check to make sure that the company you’re talking to is registered. For a list of state offices, visit the National Association of State Charity Officials at www.nasconet.org/agencies. Your state office also can verify how much of your donation goes to the charity, and how much goes to fundraising and management expenses.

Don’t be shy about asking who wants your money. Some charities hire professional fundraisers for large-scale mailings, telephone drives, and other solicitations rather than use their own staff or volunteers, and then use a portion of the donations to pay the fundraiser’s fees. If you’re solicited for a donation, ask if the caller is a paid fundraiser, who they work for, and the percentage of your donation that will go to the charity and to the fundraiser. If you don’t get a clear answer — or if you don’t like the answer you get — consider donating to a different organization.

Call the charity. Find out if the organization is aware of the solicitation and has authorized the use of its name. If not, you may be dealing with a scam artist.

Check with local recipients. If giving to local organizations is important to you, make sure they will benefit from your generosity. If a charity tells you that your dollars will support a local organization, like a fire department, police department, or hospital, call the organization to verify the claim.

Watch out for similar sounding names. Some phony charities use names that closely resemble those of respected, legitimate organizations. If you notice a small difference from the name of the charity you intend to deal with, call the organization you know to check it out.

Know the difference between “tax exempt” and “tax deductible.” Tax exempt means the organization doesn’t have to pay taxes. Tax deductible means you can deduct your contribution on your federal income tax return. Even if an organization is tax exempt, your contribution may not be tax deductible. If a tax deduction is important to you, ask for a receipt showing the amount of your contribution and stating that it is tax deductible.

Look twice at organizations that use meaningless terms to suggest they are tax exempt charities. For example, the fact that an organization has a “tax I.D. number” doesn’t mean it is a charity; every nonprofit and for-profit organization must have a tax I.D. number. And an invoice that tells you to “keep this receipt for your records” doesn’t mean that your donation is tax deductible or that the organization is tax exempt.

Trust your gut — and check your records if you have any doubt about whether you’ve made a pledge or a contribution. Callers may try to trick you by thanking you for a pledge you didn’t make. If you don’t remember making the donation or don’t have a record of your pledge, resist the pressure to give.

Refuse high pressure appeals. Legitimate fundraisers generally don’t push you to give on the spot.

Be wary of charities offering to send a courier or overnight delivery service to collect your donation immediately.

Consider the costs. When buying merchandise or tickets for special events, or when receiving “free” goods in exchange for giving, remember that these items cost money and generally are paid for out of your contribution. Although this can be an effective fundraising tool, less money may be available for the charity.

Be cautious of promises of guaranteed sweepstakes winnings in exchange for a contribution. According to U.S. law, you never have to give a donation to be eligible to win a sweepstakes.

Do not send or give cash donations. Cash can be lost or stolen. For security and tax record purposes, it’s best to pay by check — made payable to the charity, not the solicitor. If you’re thinking about giving online, look for indicators that the site is secure, like a lock icon on the browser’s status bar or a URL that begins “https:” (the “s” stands for “secure”).

Checking Up

Before you open your checkbook, check out the charity you’re considering with these organizations. Note: Many small, new, or local charities may not be rated by the organizations listed here. Some fraternal organizations, like police and firefighter groups, may not be rated at all. If the charity seeking your donation is not listed or rated, follow the precautions listed under the Charity Checklist to help you determine whether it merits your donation dollars.

BBB Wise Giving Alliance
4200 Wilson Boulevard, Suite 800
Arlington, VA 22203
(703) 276-0100
www.bbb.org/charity

American Institute of Philanthropy
P.O. Box 578460
Chicago, IL 60657
(773) 529-2300
www.charitywatch.org

Charity Navigator
1200 MacArthur Boulevard
Mahwah, NJ 07430
(201) 818-1288
www.charitynavigator.org

GuideStar
4801 Courthouse Street, Suite 220
Williamsburg, VA 23188
(757) 229-4631
www.guidestar.org

Military Relief Societies
Although the U.S. Department of Defense does not endorse any charity, you can learn about military relief societies at
www.militaryhomefront.dod.mil.

Reducing Telephone and Direct Mail Solicitations

Typically, when you donate to a charity, your name is placed on the charity’s contact list. The charity uses this list to contact you again for future donations, and often rents the list or exchanges it with other charities and fundraisers. If you feel overwhelmed with requests for donations, here are some steps you can take.

Tell the charity to put you on their “do not call” list. By law, the charity must not contact you again. If it does, report it to your state Attorney General (www.naag.org) or your local consumer protection agency (www.consumeraction.gov). You can get the phone numbers for these organizations in your phone book or through Web directories.

Include a note with your donation asking the charity not to rent, sell, or exchange your personal information and donation history.
Ask the organization to limit its donation requests to you to once or twice a year. If the organization fails to honor your requests, you may wish to find a different charity to support.

Sign up for the Direct Marketing Association’s (DMA) Mail Preference Service (MPS) at www.dmachoice.org. The DMA’s MPS lets you opt out of receiving unsolicited commercial mail from many national companies for five years. When you register with this service, your name will be put on a “delete” file and made available to direct-mail marketers. However, your registration will not stop mailings from organizations that do not use the DMA’s Mail Preference Service. The DMA also has an Email Preference Service to help you reduce unsolicited commercial emails. To opt out of receiving unsolicited commercial email from DMA members, visit www.ims-dm.com/cgi/offemaillist.php. Your online request will be effective for five years.

Sign up for the National Do Not Call Registry — the free, easy way to reduce the telemarketing calls you get. While charities are exempt from the FTC’s Telemarketing Sales Rule that implemented the Registry, some will not call you if they know you don’t want to receive calls. To register your telephone number, or to get more information, visit www.donotcall.gov, or call 1-888-382-1222 from the phone you want to register. You will receive fewer telemarketing calls within three months of registering your number. Telephone numbers on the Registry will be removed when they are disconnected and reassigned, or when you choose to remove your number(s) from the Registry.

Telemarketing Sales Rule

The FTC’s Telemarketing Sales Rule applies to telemarketers who make calls across state lines on behalf of charitable organizations. The Rule restricts calling times to the hours between 8 a.m. and 9 p.m. The Rule also requires telemarketers to promptly identify the charitable organization they represent and to disclose that the purpose of the call is to ask for a contribution. Telemarketers may not mislead you or lie to get your contribution.

For More Information and Complaints

To learn more information about making your donations count, visit www.ftc.gov/charityfraud.

If you believe an organization may not be operating for charitable purposes, or is making misleading solicitations, contact your state Attorney General (www.naag.org) or your local consumer protection agency (www.consumeraction.gov). You can get the phone numbers for these organizations in your phone book or through Web directories.

You also may file a complaint with the Federal Trade Commission.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

***

PREVIOUS SWEEP OPERATIONS & CASES

For Release: 05/20/2009

FTC Announces “Operation False Charity” Law Enforcement Sweep

Agency Joined by 49 States in Bringing 76 Actions Against Fraudulent Solicitors Nationwide

In a nationwide, federal-state crackdown on fraudulent telemarketers claiming to help police, firefighters, and veterans, the Federal Trade Commission, together with 61 Attorneys General, Secretaries of State, and other law enforcers of 49 states and the District of Columbia, today announced “Operation False Charity.” Federal and state enforcers announced 76 law enforcement actions against 32 fundraising companies, 22 non-profits or purported non-profits on whose behalf funds were solicited, and 31 individuals. These include two FTC actions against alleged sham non-profits and the telemarketers who made deceptive claims about these so-called charities. The FTC and state agencies also released new education materials, in both English and Spanish, to help consumers recognize and avoid charitable solicitation fraud.

“In these difficult economic times, Americans want to make every contribution count,” said FTC Chairman Jon Leibowitz. “The good news is they’re still being generous and donating to charitable organizations, including those that support our police officers, firefighters, military families, and veterans. The bad news is that some unscrupulous operators have seized on this goodwill to make a quick buck. The actions we’re announcing today demonstrate that federal and state partners will find charity scammers and we will stop them.”

“All of us share a deep trust and respect for our law enforcement officers, firefighters, and military service members,” said Attorney General Chris Koster of Missouri. “The attorneys general across the country will not stand idly by while greedy telemarketers take advantage of that trust and respect.”

“I encourage all donors to maximize their charitable contributions by getting basic financial information about an organization before giving,” said Pennsylvania Secretary of State Pedro A. Cortés. “Trustworthy resources are available through your department of state or attorney general’s office. By doing research and asking questions of a charity or its professional fundraisers, consumers can help ensure their donations have the impact they expect.”

FTC Enforcement Actions

The two FTC cases announced today involve federal court complaints and proposed settlement orders against defendants who allegedly tricked consumers into giving by claiming that donations would support police or firefighters disabled in the line of duty, often in the donors’ communities, or that the donations would assist military families in need, and by misleading consumers about how much of the money would go to those causes. According to the FTC, the defendants used legitimate-sounding names and described sympathetic causes to give their sham organizations a veneer of credibility. Their real goal, however, was to dupe consumers into contributing money that the defendants used overwhelmingly just to support themselves and their fundraisers.

In the first case, the FTC alleged that three sham non-profit organizations, American Veterans Relief Foundation, Inc. (AVRF), Coalition of Police and Sheriffs, Inc. (COPS), and Disabled Firefighters Fund (DFF), all based at the same address in Santa Ana, California, were created almost entirely to provide profits for the individual defendants and the for-profit fundraisers they hired. One defendant, Jeffrey Dean Duncan, ran COPS and DFF, while another defendant, William Rose, ran AVRF. Another defendant, Kathy Clinkenbeard, managed the telemarketers with which the entities contracted. The FTC contends that solicitors calling on behalf of AVRF falsely claimed that the money they were raising would support the families of soldiers fighting overseas through a program it called “Operation Home Front.” In fact, AVRF spent virtually no money assisting military families. AVRF’s bogus “Operation Home Front” is not connected to the genuine non-profit Operation Homefront, Inc., a national organization with 30 chapters across the country that provides real support to the families of troops and gets high ratings from watchdog groups.

According to the FTC’s complaint, the defendants misrepresented that donations would go to a legitimate charity, that the organizations have programs that do not actually exist, and that those programs benefit the donors’ local communities. The complaint also alleges that COPS misrepresents its affiliation with police officers and sheriffs, and charges the defendants with assisting others to commit deceptive acts and practices.

The proposed order settles the FTC’s complaint by barring the defendants from making false claims, or assisting anyone else in making false claims, in connection with charitable solicitations, or in connection with telemarketing. It also prohibits the defendants from violating the Telemarketing Sales Rule, requires that they make certain disclosures when fundraising, and it requires that they monitor any fundraisers that solicit on their behalf. Finally, the order imposes on defendants COPS, DFF, Duncan, and Clinkenbeard a judgment of $13.1 million and against defendants AVRF, Rose, and Clinkenbeard a judgment of $6 million. These judgments are suspended based on defendants’ documented inability to pay.

In the second case, the FTC alleged that defendant David Scott Marleau ran several for-profit fundraisers that solicited money on behalf of sham police, fire, and veterans non-profit charitable organizations. The FTC charged that Marleau and his companies, Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc., misrepresented the programs for which funds were solicited, misrepresented that donations would benefit the donor’s local community, mailed notices to consumers stating they had made a pledge when they had not even been called, and misrepresented their affiliation with sheriffs and police. Six additional counts in the complaint charged the defendants with multiple violations of the FTC’s Telemarketing Sales Rule, including ignoring company-specific do-not-call requests. The Commission also alleged that their operations often targeted seniors, sometimes debiting their accounts for donations without permission.

The proposed order settling the charges requires the defendants to stop misrepresenting facts, make certain disclosures when soliciting money from consumers, and stop violating the Telemarketing Sales Rule. The order also requires that the defendants substantiate any claims they make about a nonprofit or its programs prior to soliciting consumers, and requires that they train and monitor their telemarketers. Finally, the order imposes a monetary judgment of nearly $1.7 million against the corporate entities Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc. That judgment is suspended based on these defendants’ documented inability to pay.

The FTC would like to thank the Attorneys General of California, Idaho, Oregon, and Washington and the Secretary of State of Washington for their invaluable assistance with these cases.

State Law Enforcement and Public Education

Law enforcement and public education efforts by the states are integral components of “Operation False Charity.” The FTC would like to acknowledge the following state officials for their participation in Operation False Charity, either by taking enforcement action or initiating consumer education efforts: the Attorneys General of Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; and other state agencies including the Secretaries of State of Colorado, Georgia, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, West Virginia, and Washington, and the Georgia Governor’s Office of Consumer Affairs, the New York State Consumer Protection Board, the Rhode Island Department of Business Regulation, the Utah Division of Consumer Protection, the Virginia Department of Agriculture and Consumer Services, and the Eu Claire County (Wisconsin) District Attorney.

Information about these agencies’ participation is summarized on the FTC’s Web site at www.ftc.gov/os/2009/05/090520charitychart.pdf

Private-sector partners included AARP, the Better Business Bureau Wise Giving Alliance, the American Institute of Philanthropy, Guidestar, the National Association of State Charities Officials, and Charity Navigator.

Consumer Education

The FTC today issued a new consumer alert providing tips about charities that solicit donations on behalf of veterans and military families. According to the alert, which can be found on the agency’s Web site at www.ftc.gov/charityfraud/, while many legitimate charities are soliciting donations to support the nation’s military veterans, not all “charities” are legitimate – some are operators whose only purpose is to make money for themselves. Others are paid fundraisers whose fees can use up most of your donation.

The new alert, “Supporting the Troops: When Charities Solicit Donations on Behalf of Vets and Military Families,” offers the following tips to help consumers ensure that their donations go to a legitimate charity. Many of these tips apply to charitable giving to other types of organizations, as well.

Recognize that the words “veterans” or “military families” in an organization’s name don’t necessarily mean that veterans or the families of active-duty personnel will benefit from your donation.

Check out an organization before donating. Some phony charities use names, seals, and logos that look or sound like those of respected, legitimate organizations.

Donate to charities with a track record and a history. Charities that spring up overnight may disappear just as quickly.

If you have any doubt about whether you’ve made a pledge or a contribution, check your records. If you don’t remember making the donation or pledge, resist the pressure to give.

Call the office in your state that regulates charitable organizations to see whether the charity or fundraising organization has to be registered.

Do not send or give cash donations. For security and tax-record purposes, it’s best to pay with a check made payable to the charity.

Ask for a receipt showing the amount of your contribution.

Be wary of promises of guaranteed sweepstakes winnings in exchange for a contribution. You never have to give a donation to be eligible to win a sweepstakes.

Some sites where consumers can check out a charity include:

*www.nasconet.org – National Association of State Charity Officials, where you can look up and contact your state’s charities regulator for more information.

*www.guidestar.org – Guidestar

*www.bbb.org/charity – Better Business Bureau Wise Giving Alliance

*www.charitynavigator.org – CharityNavigator

*www.charitywatch.org – American Institute of Philanthropy

The Commission vote approving each complaint and proposed court order was 4-0. The complaint and proposed order against David Scott Marleau, et al. were filed in the U.S. District Court for the Western District of Washington on May 19, 2009. The complaint and proposed order against American Veterans Relief Foundation, Inc., et al. were filed in the U.S. District Court of the Central District of California on May 18, 2009.

The proposed orders announced today settle the FTC’s charges against the following defendants: 1) American Veterans Relief Foundation, Inc.; Coalition of Police and Sheriffs, Inc.; Disabled Firefighters Fund; Jeffrey Dean Duncan, individually and as an officer or director of Coalition of Police and Sheriffs, Inc., and Disabled Firefighters Fund; Kathy Clinkenbeard, individually; and William Rose, individually and as an officer or director of American Veterans Relief Foundation, Inc.; and 2) David Scott Marleau, individually and as an officer or director of Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc.; Jedi Investments, LLC; Impact Fundraising, LLC; Millenium Fundraising, LLC; and PC Marl, Inc.

NOTE: The Commission authorizes the filing of complaints when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaints are not a finding or ruling that the defendants actually have violated the law.

NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.

Copies of the complaints and proposed court orders are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACTS:
Peter Kaplan
FTC Office of Public Affairs
202-326-2334

Mitchell J. Katz
FTC Office of Public Affairs
202-326-2161

STAFF CONTACTS:
David M. Horn
FTC Northwest Region, Seattle
206-220-4483

Tracy S. Thorleifson
FTC Northwest Region, Seattle
206-220-4481

STATE CONTACTS
Available on case list in press packet

(FTC File Nos. 092-3065 and 092-3064)
(FalseCharitySweep.wpd)
 

US: Charity Navigator’s giving tips including the Top 10 Best Practices of Savvy Donors

Top 10 Best Practices of Savvy Donors

1. Be Proactive In Your Giving
Smart givers generally don’t give reactively in a knee-jerk fashion. They don’t respond to the first organization that appeals for help. They take the time to identify which causes are most important to their families and they are specific about the change they want to affect. For example, they don’t just support generic cancer charities, but instead have targeted goals for their giving, such as providing mammograms to at-risk women in their community.

2. Hang Up The Phone / Eliminate The Middleman
Informed donors recognize that for-profit fundraisers, those often used in charitable telemarketing campaigns, keep a large portion (in some cases all) of each dollar they collect (read our report about telemarketing for more specifics on the costs affiliated with this form of fundraising). Wise donors never give out their personal information – like credit card accounts, social security numbers – over the phone. If they like what they hear in the pitch, they’ll hang up, investigate the charity on-line and send their contribution directly to the charity, thereby cutting out the middleman and ensuring 100% of their donation reaches the charity. Taking it a step further, donors may want to reconsider supporting a charity that uses an inefficient telemarketing approach and instead identify a charity that does not use telemarketing to raise funds.

3. Be Careful Of Sound-Alike Names
Uninformed donors are easily confused by charities that have strikingly similar names to others. How many of us could tell the difference between an appeal from the Children’s Charity Fund and the Children’s Defense Fund? Their names sound the same, but their performances are vastly different. Would you be surprised to learn that the Children’s Charity Fund is a 0-star charity while the Children’s Defense Fund is a 3-star charity? Informed donors take the time to uncover the difference.

4. Confirm 501(c) (3) Status
Wise donors don’t drop money into canisters at the checkout counter or hand over cash to solicitors outside the supermarket. Situations like these are irresistible to scam artists who wish to take advantage of your goodwill. Smart givers only support groups granted tax-exempt status under section 501(c) (3) of the Internal Revenue Code. All of the charities evaluated by Charity Navigator meet this basic requirement.

5. Check The Charity’s Commitment To Accountability & Transparency
In 2011, Charity Navigator added an Accountability & Transparency dimension to its rating system. It tracks metrics such as whether the charity used an objective process to determine their CEO’s salary, whether it has an effective governance structure, and whether it has a whistleblower policy. This data is critical because charities that follow good governance and transparency practices are less likely to engage in unethical or irresponsible activities. So, the risk that such charities would misuse donations is lower than for charities that don’t adopt such practices.

6. Obtain Copies Of Its Financial Records
Savvy donors know that the financial health of a charity is a strong indicator of the charity’s programmatic performance. They know that in most cause areas, the most efficient charities spend 75% or more of their budget on their programs and services and less than 25% on fundraising and administrative fees. However, they also understand that mid-to-large sized charities do require a strong infrastructure therefore a claim of zero fundraising and/or administrative fees is unlikely at best. They understand that a charity’s ability to sustain its programs over time is just as important as its short-term day-to-day spending practices. Therefore, savvy donors also seek out charities that are able to grow their revenue at least at the rate of inflation, that continue to invest in their programs and that have some money saved for a rainy day. All of this analysis is provided on Charity Navigator’s website for free, but when considering groups not found here, savvy donors ask the charity for copies of its three most recent Forms 990. Not only can the donor examine the charity’s finances, but the charity’s willingness to send the documents is a good way to assess its commitment to transparency.

7. Review Executive Compensation
Sophisticated donors realize that charities need to pay their top leaders a competitive salary in order to attract and retain the kind of talent needed to run a multi-million dollar organization and produce results. But they also don’t just take the CEO’s compensation at face value; they benchmark it against similar-sized organizations engaged in similar work and located in the same region of the country. To help you make your own decision, Charity Navigator’s analysis reveals that the average CEO’s compensation of the charities we evaluate is almost $150,000. In general, salaries tend to be higher in the northeast and at arts and education charities. Sophisticated donors also put the CEO’s salary into context by examining the overall performance of the organization. They know it is better to contribute to a charity with a well-paid CEO that is meeting its goals than to support a charity with an underpaid CEO that fails to deliver on its promises. (Check out our CEO Compensation Study for more benchmarking data.)

8. Start A Dialogue To Investigate Its Programmatic Results
Although it takes some effort on their part to assess a charity’s programmatic impact, donors who are committed to advancing real change believe that it is worth their time. Before they make a contribution, they talk with the charity to learn about its accomplishments, goals and challenges. These donors are prepared to walk away from any charity that is unable or unwilling to participate in this type of conversation.

9. Concentrate Your Giving
When it comes to financial investments, diversification is the key to reducing risk. The opposite is true for philanthropic investments. If you’ve really taken the time to identify a well-run charity that is engaged in a cause that you are passionate about, you should then feel confident in giving it a donation. Spreading your money among multiple organizations not only results in your mail box filling up with more appeals, it also diminishes the possibility of any of those groups bringing about substantive change as each charity is wasting a percentage of your gift on processing expenses for that gift.

10. Share Your Intentions And Make A Long-Term Commitment
Smart donors support their favorite charities for the long haul. They see themselves as a partner in the charity’s efforts to bring about change. They know that only with long-term, committed supporters can a charity be successful. And they don’t hesitate to tell the charity of their giving plans so that the organization knows it can rely on the donor and the charity doesn’t have to waste resources and harass the donor by sending numerous solicitations.

US: The American Institute of Philanthropy [5] and the Better Business Bureau’s Wise Giving Alliance can also be consulted.

UK: use the Charity Commission to find out if the organisation you want to support is formally registered.
Its Inquiry Reports list and give details on its latest investigations

UK: Intelligent Giving gives an independent analysis of a charity’s transparency for prospective donors(UK)
Rumours about fraud and related activity are discussed in its Watchdog section

Charity On Trial: What You Need To Know Before You Give by Doug White

US: [6] Life Cycle of an Exempt Organization

US: [7] Standards for Charity Accountability

US: [8] Haitian Earthquake Relief Fraud Alert

US: [9] National Charity Seal Program

References

1. “Charity Fraud Pleads Guilty.” The New York Times. 20 April 1918. The New York Times, Web. 3 March 2010.<http://query.nytimes.com/gst/abstract.html?res=9D02E2DD1F3FE433A25753C2A9629C
946996D6CF&scp=2&sq=charity%20fraud&st=Search>.

Charity Fraud Pleads Guilty.

George W. Ryder, Secretary of the Cripples’ Welfare Society, pleaded guilty yesterday before Judge Mack in the Federal District Court to a charge of having used the mails to defraud. He was charged with having, by means of “mite boxes” and touching appeals by mail to the philanthropic procured money for the society, which he used for his own purposes. He will be sentenced on Monday.
The New York Times
Published: April 20, 1918
Copyright The New York Times

2. McFadden, Robert. “Small-Change Donations Going to Vendors, Not Charities, Abrams Charges.”The New York Times. 12 11 1992. The New York Times, Web. 13 Feb 2010.<http://www.nytimes.com/1992/11/13/nyregion/
small-change-donations-going-to-vendors-not-charities-abrams
-charges.html?scp=1&sq=Small-Change%20Donations%20
Going%20to%20Vendors,%20Not%20Charities,%20Abrams%20
Charges&st=cse>.

Small-Change Donations Going to Vendors, Not Charities, Abrams Charges

By ROBERT D. McFADDEN
Published: November 13, 1992

The New York Attorney General charged yesterday that hundreds of honor boxes and candy-gum vending machines found near cash registers in businesses across the state, with messages seemingly soliciting small-change donations for national charities, are part of a fraudulent and deceptive marketing scheme.

In a civil suit in State Supreme Court in Manhattan, Attorney General Robert Abrams said that merchants were deceived by dozens of private vendors who wore caps and T-shirts with a charity’s distinctive trademark, implying falsely that they worked for the charity, and that the public was deceived by messages on slotboxes and machines implying falsely that donations benefited a charity.

The suit, against the National Federation of the Blind and 27 independent vendors in New York, said the vendors had paid a fee for the right to use the charity’s name — $2 a month for every machine or box placed in restaurants, barber shops and other businesses. But, it said, the vendors kept the donations and none of the nickels, dimes and quarters went to the charity.

3. “5 Men From Defunct Muslim Charity Get Long Sentences.”CNN. 27 May 2009. Cable News Network, Web 3 March 2010.<http://www.cnn.com/2009/CRIME/05/27/
texas.charity.sentencing/index.html?iref=allsearch>.

JUSTICE DEPARTMENT

5 men from defunct Muslim charity get long sentences

CNN

May 27, 2009

Holy Land Foundation, in Richardson, Texas, was once the largest Muslim charity in the United States.

Five leaders of what was once the nation’s largest Muslim charity were given long prison sentences Wednesday by a federal judge, months after they were found guilty of aiding a militant Palestinian organization.

“These sentences should serve as a strong warning to anyone who knowingly provides financial support to terrorists under the guise of humanitarian relief,” said David Kris, assistant attorney general for national security.

Five leaders of the now-defunct Holy Land Foundation for Relief and Development were convicted in November by a federal jury for providing money and resources to the Palestinian group Hamas, designated by the United States as a terrorist organization.

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Officials Warn Donors To Beware Of Charity Fraud
Donations Being Taken By Groups, Individuals

Deb Stanley, New Media Producer

POSTED: 11:37 am MDT July 27, 2012
UPDATED: 12:03 pm MDT July 27, 2012

AURORA, Colo. — The Federal Trade Commission and a Colorado District Attorney’s Office are telling people to beware of charity fraud when donating money to support Aurora shooting victims.

“People are particularly vulnerable right now and want desperately to do something to help,” said First Judicial District Attorney Scott Storey. “But as eager as people are to help, we urge them to take a little time to be sure they know where their donation is going.”

The Colorado Organization of Victim Assistance (COVA) is coordinating donations for victims of the Aurora mass tragedy. Checks can be made out to COVA and mailed to 90 Galapago Street, Denver CO, 80223. Please include “Aurora Tragedy” in the check memo line. You can also donate online through COVA’s Giving First profile at https://www.givingfirst.org/cova Link.

Colorado Governor John Hickenlooper and the Community First Foundation have established a fund called the Aurora Victim Relief Fund. Money donated to that fund will be given to nonprofits helping the victims.

“The money would not go to cutting a check to family members,” said Marla Williams, president and CEO of the Community First Foundation. “It would be helping by giving grants to organizations that are helping the families cope financially and emotionally in so many ways.”

Donations can be made by visiting http://www.GivingFirst.org Link. For more information contact Karla Maraccinni at 313-866-3700 or karla.maraccini@state.co.us.

Before giving money to any charity, Storey said you should make certain the organization is legitimate and learn as much about them as you can.

You can begin by contacting the Secretary of State, 303-894-2214, or its website http://www.sos.state.co.us/pubs/charities/charitableHome.html Link to determine if the company is registered as required by Colorado State Law.

Next, contact the Better Business Bureau to obtain a reliability report at 303-758-2100 or http://www.denver.bbb.org

The FTC said if you donate to a charitable group, ask for a receipt showing the amount of the contribution and stating that it is tax deductible.

If you give to a charity or individual, it’s best to pay by check, making it payable to the beneficiary, not the solicitor

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Ohio Grand Jury Reindicts in Navy Charity Scam

ABC News

CLEVELAND July 26, 2012 (AP)

An Ohio grand jury has reindicted a former fugitive accused of running a $100 million scam collecting donations for Navy veterans.

State Attorney General Mike DeWine says the 24-count indictment against the man reflects new information since two previous indictments in 2010. Charges filed Wednesday by the Cleveland grand jury include identity fraud and complicity to money laundering.

Authorities say it’s unclear what the man’s true identity is. They say he goes by Bobby Thompson and has signed court documents as Mr. X. They say he defrauded donors in 41 states of up to $100 million through a bogus Florida-based charity. Some of the money has been found.

The man was arrested in Portland, Ore., in May and has pleaded not guilty. He’ll be arraigned Monday. His attorney hasn’t returned a message seeking comment.

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Charity Fraud: Disabled Veterans National Foundation Squanders Millions On Marketing Services

5/8/12

Huffington Post

A charity that claims to offer services to veterans with disabilities has squandered millions of dollars on marketing costs, instead of addressing the needs of its clients, CNN reports.

Disabled Veterans National Foundation (DVNF), based in Washington, D.C., was slapped with an “F” rating by a charity watchdog group for failing to spend the nearly $56 million its raised since 2007 on actual veteran services.

The organization says its mission is to help underserved veterans — those suffering from PTSD, brain injuries and battling homelessness –- and to collaborate with likeminded nonprofits, but it appears to have been concentrating its efforts on paying for fundraising services and doling out cheap giveaways. But according to CNN, the nonprofit has used most of its donor dollars to pay Quadriga Art LLC, which helps the organization with its fundraising efforts.

“Up to $2 billion is raised in the name of veterans in this country and it’s so sad that a great deal of it’s wasted,” said Daniel Borochoff, president of CharityWatch, the group that rated the organization. “Hundreds of millions of dollars of our charitable dollars intended to help veterans are being squandered and wasted by opportunists and by individuals and companies who see it as a profit-making opportunity.”

CNN has tried to contact the DVNF for more than a year, but hasn’t received any specific replies.

But DVNF is hardly the exception.

Nearly half of the 39 veterans charities rated by the American Institute of Philanthropy in its April/May 2011 report received F grades, The Huffington Post reported in June. These nonprofits failed mostly because of their exorbitant fundraising expenses and the fact that they spend a small ratio of their expenses on charitable services.

“[DVNF] sent us 2,600 bags of cough drops and 2,200 little bottles of sanitizer,” J.D. Simpson of Alabama veterans charity St. Benedict’s told CNN. His nonprofit was hit hard after last year’s tornadoes.” And the great thing was, they sent us 11,520 bags of coconut M&M’s. And we didn’t have a lot of use for 11,520 bags of coconut M&M’s.”

Feeling inspired to help a veteran in need? Consider donating to the charities below that are working to improve the quality of life of severely wounded vets.

The Fisher House

The Fisher House provides free housing to wounded troops on the grounds of major military hospitals. “It’s a terrific program because otherwise, to have my family with me it would have been a hotel or some other strange place,” said Bobby Henline, who was badly burned in an IED explosion in 2007 and moved into The Fisher House with his family.

Hero Miles

Through its Hero Miles program, the Fisher House Foundation also provides free air transportation for the families of wounded warriors who must travel between home and hospital. The program uses donated frequent flyer miles from the public.

Semper Fi Fund

The Semper Fi Fund brings specially adapted clothing to amputees.

Adaptive Adventures

Adaptive Adventures takes disabled veterans on ski trips. organize adaptive sports, enabling disabled warriors to go fishing, ride horses, mountain climb, even paraglide. Still others provide job counseling and training and help wounded veterans find jobs.

The Mission Continues, Project Healing Waters, the VA’s community-based sports programs, and Disabled Sports USA. These organizations organize adaptive sports, enabling disabled warriors to go fishing, ride horses, mountain climb, even paraglide. Still others provide job counseling and training and help wounded veterans find jobs. They also help finance handicapped-adapted cars and trucks, organize volunteers to run errands, buy groceries and mow the lawns of families struggling with a severely wounded and hospitalized loved one.

Wounded Warrior Wives

This nonprofit takes the wives of the severely wounded away from their 24/7 bedside caregiver role and flies them away for a weekend of fun and companionship.

Wounded Warrior Project

The Wounded Warrior Project aims to honor and empower warriors, who were injured on or after Sept. 11, 2001, through its athletic, employment and rehabilitative programs. Their Soldier Ride program is dedicated to getting the wounded up out of their wheelchairs or rehab clinics and out onto bicycles. Both organizations are looking for riders, volunteers and fundraisers across the United States.

United Service Organizations

United Service Organizations aims to boost our troops’ morale through its entertainment and educational programming. From its language programs for those stationed in Afghanistan to its touring musical groups in the Persian Gulf, the USO works to provide “a home away from home” for military servicemen and servicewomen stationed in 27 states and 14 countries.

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Charity Fraud: Is That Celeb Legit?

By ABBY ELLIN

June 1, 2012

It’s one thing to think twice before sending cash to a Nigerian ex-ambassador who perished in a plane crash and named you as the beneficiary of his $25 million inheritance.

It’s quite another to donate money to Mary J. Blige, whose Foundation for Advancement of Women Now (FFAWN) is being sued by TD Bank for a $250,000 loan that was taken out in June 2011 –and only $368.33 has been repaid. Or to “Three Cups of Tea” author Greg Mortenson, who was recently ordered to repay $1 million in donations to his various charities. Or to phony Hurricane Katrina, Japan earthquake or tornado relief organizations.

“We see a lot of phony charities that pop up after storms or disasters,” said Katherine Hutt, a spokesperson for the Council of Better Business Bureaus in Arlington, Va. Indeed, the National Center for Disaster Fraud, which the Department of Justice established in 2005 to investigate, prosecute and deter fraud associated with fede

The most recent data shows that in 2010, individual Americans donated $211.77 billion to charity, reports the Giving USA Foundation, a research and education group, and its research partner, the Center on Philanthropy at Indiana University. But while giving has increased, so has the number of fraudulent charities, reports the U.S. Department of Justice.

The tactics range from the high-tech to low-tech. Phishing, for example, is a real hazard: Users simply click on email links that lead to bogus web sites that appear legit but aren’t. Instead, the users’ credit card information and passwords are stolen.

“Legitimacy is a big issue today, particularly in time of crises,” said Bob Ottenhoff, president and CEO of GuideStar, which collects information– including nonprofits’ official Web addresses, tax forms and financial data–on the 1.9 million non-profit organizations in the U.S. “Fake web sites pop up. It’s good to be a little skeptical, and if you don’t know the charity or haven’t heard about it before or are not quite sure, that’s a reason to say, ‘I’ll think about it’. I often say, ‘send me some information.” Ninety percent of the time you never hear from them.”

The best way to protect yourself is to be proactive. Consumer and charity watchdog sites like the Better Business Bureau, Charity Navigator and GuideStar also list nonprofits’ official web addresses, as well as tax forms and financial data. The BBB also rates them based on 20 standards of accountability, including the structure of the board of directors and the transparency of financial data.

“We recommend that donors check out three things before they give,” said Sandra Miniutti, Charity Navigator’s vice president.

First is the charity’s financial health. Either go onto a charity watchdog site like Charity Navigator, which also rates nonprofits, or ask the organization for a copy of their Form 990, an informational tax return that charities must file annually with the IRS. By law, they are required to provide it to anyone requesting a copy.

You should also check on issues around accountability and transparency.

Last year, Charity Navigator began tracking whether the charity uses an objective process to determine their CEO’s salary, whether it has an effective governance structure, and whether it has a whistleblower policy.

“Do they make their 990 readily available when requested? Do they have a conflict of interest policy? Do they have at least five independent board members? A lot of that are details on the 990,” she said.

Lastly, check on their results. “Give them a call, find out what challenges they face, what their goals are, and what their accomplishments are,” she said.

But what if it’s a celebrity who, by all accounts, is legit? Should consumers assume that his or her charitable organization is on the up and up, too?

Ottenhoff advises caution. “Sometimes celebrities connect with charities and the link hasn’t been defined,” he said. “This happens a lot with the charities of big-name athletes. Often they start a charity not for charitable purposes, but for ways to avoid taxes or to employ friends and family. The whole Greg Mortensen thing. You had a guy who became a celebrity and he didn’t have a governance structure.”

Other times, a celebrity might be able to “sell the vision” but doesn’t know how to process the money, or deliver on the programs, he said. “Having a good idea only goes so far—then you have to implement it. Celebs get too busy. Somebody could be using their name—the celeb may not know the details of what’s really happening.”

Mary J. Blige, who is the CEO and founder of FFAWN, took full responsibility for its troubles. She told TMZ that the main problem was that she “didn’t have the right people in the right places doing the right things.”

The DOJ has issued a list of guidelines to consider before making a donation. These include: Be skeptical of individuals representing themselves as surviving victims or officials asking for donations via email or social networking sites. Be cautious of emails that claim to show pictures of the disaster areas in attached files, because the files may contain viruses. Only open attachments from known senders. And don’t feel obligated to say yes.

“We’re all flooded with requests-email, phone calls, tweets, texts,” said Ottenhoff. “There’s no reason why you have to say yes. Don’t feel like you’re personally obligated. Think of the stock market—if you spent your money based on tips people give you you’re probably do a lot worse than if you spend your time thinking about what is best in terms of investing.”

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Specific tips you need to know to protect yourself from charity scams: Internet ScamBusters #97

by Scambusters.org

NEW: Beware of Haiti Earthquake Scams

Today’s issue is on charity scams. Since it’s getting towards the end of the year and many people do their charitable contributions at this time of year, we thought it would be especially useful to help you avoid falling for a charity scam now. Let’s get right to it…

Charity Scams

Fortunately, many people like to give with an open heart to help others in need.

Unfortunately, that means we’ve created a climate that’s ripe for fake charity scams and scam artists. They know they can tug at our heartstrings — and rake in the cash.

Fake charity scams often set up quasi-legitimate agencies so that, at first glance, they look real; they may also name themselves something similar to other legitimate charities.

They may even carry ‘ID’ in the name of the charity, complete with a logo.

These scam artists use all of the standard methods to collect ‘donations’ for their charity scams — tables at the local mall, going door-to-door, email, and telemarketing.

All this makes charity scams harder to spot. However, here are 10 tips to help spot charity scams:

1. BE WARY of every opportunity that presents itself — especially when it presents itself in the wake of some big disaster that gets lots of media attention.

2. Ask for the name, address, and phone number of the charity — and whether or not it is registered. If the presenters claim that it is registered, get a registration number. The Better Business Bureau Wise Giving Alliance offers information about national charities; you can call 703-276-0100 or go to their website:
==> http://www.give.org

If you’re trying to figure out whether or not some particular charity is worthy of support, check out this section of the site:
==> http://www.give.org/reports/index.asp

They publish their standards for rating charities, and then rate over 600 different charities using these standards.

3. Verify with the office of the charity that there is indeed a campaign going on, or that they’ve authorized the charity drive that you’re being invited to contribute to.

4. Don’t ever donate cash if you can help it. Write a check to the charity — not to the person standing in front of you. This also helps you document the donation for your records and for your tax return. And don’t give out bank information!

5. Ask what percentage of your donation goes directly to the cause. Legitimate charities will have ready answers because they are used to the question.

6. Get a receipt with the name of the charity on it.

7. Be especially cautious about getting a charity donation request by email. Most legitimate charities don’t use email for their solicitations. (Some legitimate charities will email people who have donated before — but never respond to requests where you’ve never donated.)

8. Be especially wary about charities that claim to be raising funds for the local police or firefighters. Check with them first!

9. Don’t give in to pressure or ‘guilt trips’ about ‘suggested donations’ or ‘requested minimum contributions.’ Once you’ve determined that the charity is legitimate and you’ve decided you want to contribute, simply give what you can and want to give — it will be appreciated.

10. The best way we know of to avoid charity scams is to decide IN ADVANCE (while you’re doing your annual or monthly budget) which charities you’ll support and CONTACT THEM. Then you can gracefully turn anyone else down who comes your way with hat in hand.

It’s great to be a giver — but give cautiously so you’re not enriching scammers or a questionable ‘charity.’

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The 9/11 Charity Fraud Shame List

by gawker.com

The Associated Press checked in with 325 charities founded in the wake of 9/11, many of which are still active. Most of them were doing nice things! But a bunch were doing ethically dubious, borderline fraudulent things, frittering away millions of benevolently bestowed dollars.

Examples:

Arizona resident Kevin Held reportedly raised $713,000 to create a 9/11 memorial quilt “big enough to cover 25 football fields.” He gave himself a a $175,000 salary, a $200 weekly car allowance, “rent reimbursement,” and unreported “loans.” He paid his family members “consulting fees.” He apparently said a Catholic priest was the chairman of his charity’s board, but the Catholic priest wasn’t even aware of it. He told lies about the origin of his charity. He will soon move into a $660,000 five-bedroom home overlooking a lake, the AP reports. Total memorial quilt output: “several hundred decorated sheets packed in boxes at a storage unit.”

Connecticut resident John Michelotti reportedly raised $140,000 for his Flag of Honor/Flag of Heroes Project. He used the money to launch a for-profit company that produces flags printed with the names of 9/11′s dead for $5 in China, then sells them for $25 a pop stateside under the guise of contributing to a “fund to help those that were affected,” the AP reports. He hasn’t donated any proceeds to charity, yet, but he says he’s going to start soon! He will donate 70 cents from the sale of each flag (pictured above) and keep $19.30 for himself. Oh, and he gave $15,000 to charity once. Good for him.

Based in a church near Ground Zero, Rev. Carl Keyes reportedly raised more than $4 million “to help victims and first responders” with the help of a Christian TV telethon. His 9/11 charity, Urban Life Ministries, has accounted for the use of only $670,000 of its funds since 2001, the AP reports. Keyes says his organization did nothing wrong, they’re just “bad managers.”

Harley aficionado Theodore Sjurseth organizes an annual 9/11 memorial motorcycle ride. His charity had “nearly $2.2 million in gross revenue between 2003 and last year.” It reportedly spends less than 20 percent of the money it raises on charitable causes; the rest goes towards hotel rooms, meals, and entertainment for ride participants. After those other tales of crass greed, this one seems almost quaint! Just run-of-the-mill mismanagement and obnoxious priorities.

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Red Cross Probes Post-Katrina Fraud

February 11, 2009 6:40 PM

by CBS News

The Red Cross said Friday it is “aggressively investigating” allegations brought by volunteers of outright criminal activity during Katrina, reports CBS correspondent Sharyl Attkisson.

Former Red Cross volunteer and attorney Jerome Nickerson wrote a blistering investigative report made public Friday. In an exclusive interview with CBS News, Nickerson said he found widespread evidence of theft and fraud — including a veritable black market of disaster relief goods operating out of New Orleans with the knowledge of some Red Cross supervisors.

Red Cross managers, Nickerson said, “…were definitely protecting individuals that were engaged in diverting Red Cross supplies, it was absolutely unmistakable. I mean we reported it to the FBI, I reported it to the FBI, I reported it to homeland security.”

Nickerson uncovered what he called rogue operations — including warehouses with millions of dollars worth of off-the-books Red Cross inventory. On a tip, Nickerson also seized Red Cross laptops and other equipment allegedly used to steal tens of millions in disaster funds. Along the way, Nickerson says, Red Cross personnel fabricated documents, impeded his investigation, and even threatened him.

After Nickerson turned his report in to Red Cross headquarters, he says he was treated like a pariah and pulled off the job.

His findings counter what the charity told the public earlier this month in an open letter — that there were no serious fraud or criminal issues at play.

“It’s a flat-out lie,” Nickerson said. “The fact of the matter is we found numerous individuals that were committing criminal acts and were committing fraud against the Red Cross, and National Headquarters knows it to be a fact.”

The Red Cross declined an interview with CBS News. But officials say they investigate all allegations, prosecute criminals, and have already recovered more than $2 million. They say this shows that their tough-on-fraud policy is a deterrent.

“Any conduct that violates either the law or Red Cross code of conduct is not tolerated,” Red Cross spokesman Chuck Connor said Friday, adding that any criminal wrongdoing uncovered by the group’s conduct and ethics office will be turned over to law enforcement officials.

Allegations of wrongdoing go far beyond what the statement said were “inevitable … departures from standard procedures” after such a catastrophe, according to the chairman of the Senate Finance Committee.

The charity’s public promise that it is investigating claims comes under increasing pressure from congress.

Sen. Charles Grassley, R-Iowa, has said volunteers may have committed criminal fraud. The accusations include improperly diverting relief supplies and violating Red Cross rules by using felons as volunteers in the disaster area. Grassley has threatened to rewrite or revoke the organization’s charter if it does not overhaul its operations.

In a statement Friday, Grassley said he hopes the Red Cross’ investigation will embrace whistleblowers and provide a top-to-bottom review of the group’s leadership, oversight and openness.

Especially worrying, Grassley said, was the Red Cross’ failure to take seriously the concerns of volunteers reporting the thefts “until I drew attention to them.”

“The Red Cross needs to change its mind-set so it addresses volunteers’ concerns swiftly and appropriately, regardless of whether a Senate committee chairman is asking questions,” Grassley said.

The New York Times reported Friday that more than a dozen Red Cross volunteers described an organization that had few cost controls, little oversight of its inventory and no system of basic background checks for its volunteers.

The volunteers cited little direct evidence of criminal activity, but the magnitude of the missing goods had convinced them that the operations were being manipulated for private gain.

In one case, a kitchen manager swapped 300 prepared meals for parking spaces for Red Cross emergency response vehicles without creating any record of the transaction.

The Red Cross had 235,000 volunteers working in the Katrina disaster area, nearly six times the previous peak of 40,000. The sheer number collapsed the normal vetting process, the volunteers said.

The charity has said it responded to Katrina as best it could in circumstances almost unimaginable, while acknowledging that it stumbled in “technology, logistics and coordination.”

That admission was not good enough for Grassley, who said he is set to meet next week with American Red Cross board of governors chairwoman Bonnie McElveen-Hunter.

“I hope to understand better what the timeline is for a complete review and reforms,” Grassley said.

Two presidents of the Red Cross have resigned in a little more than four years. Both resignations came after clashes with the board of governors on the tail of major disasters: Dr. Bernadine Healy stepped down shortly after the Sept. 11, 2001, terror attacks and, more recently, Marsha Evans quit following Hurricane Katrina.

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