By Douglas Word, THELAW.TV
Generous donations poured in from around the world from corporations and individuals alike following the recent tragedies in Boston and West, Texas. The Boston Marathon bombings of April 15 killed three people and wounded at least 170 others, while the carnage from the West, Texas, fertilizer plant explosion three days later left at least 15 people dead and 200 injured, devastating homes and businesses.
The One Fund Boston, announced by Massachusetts Governor Deval Patrick and Boston Mayor Tom Menino, has already raised over $27 million to help victims of the bombing deal with serious injuries like shrapnel wounds, brain injuries, amputations and hearing loss in addition to the costs of hospitalization. Meanwhile, established charities like the National Fallen Firefighters Association and the United Way of Tarrant County are accepting donations to aid the victims of the fertilizer plant explosion.
Unfortunately, tragic events like these too often bring about opportunists looking to take advantage of sympathetic donors in the form of unwanted solicitations from fraudulent charities.
In fact, the Internal Revenue Service is now warning of scammers and fraudulent charities that popped up by phone, social media, email and in-person following the events in Boston and Texas.
Sandy Hook Scammers
The Sandy Hook Elementary School shooting and the aftermath of Hurricane Sandy were no exception.
In January, Nouel Alba of New York pled not guilty to a federal charge of making false statements to the Federal Bureau of Investigation (FBI) about an alleged scam linked to the Connecticut school shooting. Alba, who claimed to have been the aunt of slain first-grader Noah Pozner, allegedly raised money on Facebook for his funeral and collected money through a PayPal account.
She was charged with one count of making false statements to federal agents, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000.
Following Alba's indictment, David B. Fein, United States Attorney for the District of Connecticut, made it clear perpetrators of similar schemes will not go unpunished.
"Investigators continue to monitor the Internet to uncover other fundraising scams arising from this tragedy," said Fein. "And any individuals who attempt to profit through these schemes will be prosecuted."
In February, New Jersey Attorney General Jeffrey S. Chiesa and the New Jersey Division of Consumer Affairs filed suit against John Sandberg and Christina Terraccino, who operated the Hurricane Sandy Relief Foundation (HSRF), alleging they "unlawfully misled the public by diverting donated funds into their personal accounts, misleading donors with false claims about the ways donations would be used, falsely claiming that donations are tax-deductible, and otherwise deceiving the public in violation of New Jersey's charity registration and consumer protection laws."
Chiesa said thousands of dollars were transferred to the personal bank accounts of Sandberg and Terraccino, while less than one percent of the more than $631,000 raised was paid out to help victims of the hurricane. Under New Jersey's CRI Act and Consumer Fraud Act, a first violation is subject to a civil penalty of up to $10,000, and subsequent violations are subject to penalties of up to $20,000.
But the Internet is not the only tool for these alleged scam artists.
Be Wary Of ‘Crowdfunding'
Sandra Miniutti, Vice President of Marketing and CFO of Charity Navigator, America's leading independent charity evaluator, says potential donors need to take precaution if they receive a telephone solicitation in addition to email and online scams.
"Telemarketing is a big problem in general in this sector, and we recommend that people just hang up," Miniutti advises. "Nine times out of 10, even if it is a legitimate call, there is a for-profit telemarketing firm making that call, and they can keep as much of your donation as they want. They have worked out a contract with the charity, and we know instances where it is upwards of 90 cents of every dollar that they keep… It is a very inefficient way to give. We just recommend donors hang up and never give over the phone."
Another newer concern for the non-profit sector is an emerging trend known as "crowdfunding," which Miniutti describes as "instant gratification" for donors. Some of the more popular sites are GoFundMe.com, Indiegogo.com and Crowdrise.com.
"You can go on there and see some tragic photos and support one of the victims that have been injured," she said. "But we really have no way of knowing if that's a legitimate victim asking for funding or how that money will be used. So anybody can go on there, ask for funding, pretend to be a victim and then go take a lavish vacation."
Scamming Across State Lines
Miniutti highlighted another problem that legitimate charities and industry watchdog groups face: fraudulent charities moving across state lines to avoid getting caught.
"New York has historically done a better job of regulating the sector," she said. "So if they ban a charity in New York from soliciting New Yorkers (the banned charity) could come right over the bridge and set up shop here in New Jersey, where we're located, and start soliciting. So that's another issue that we all face in the non-profit sector.
"There's not a lot of regulation, and then we have this disjointed way of regulating charities where it's state-by-state."
New York Attorney General Eric T. Schneiderman says his office is "committed to protecting New Yorkers from scam artists who prey on their generosity after a tragedy."
"New Yorkers have shown time and time again that they are kind and generous people who rise to the occasion and offer their support to victims of major tragedies like the Boston Marathon bombings," Schneiderman said. "I am committed to protecting New Yorkers from scammers who might look to take advantage of a tragedy to bilk people out of their charitable contributions."
The media can play a critical role in uncovering fraudulent charity activity — a CNN investigation in January exposed Alba's alleged involvement in the Sandy Hook scheme — but Miniutti says enforcement and prosecution from the government is lacking.
"There is not a whole lot of oversight of the non-profit sector in general, so even charities that are up to no good rarely get investigated and prosecuted," she said. "The states and the IRS don't have the manpower to go after all these cases unless they are sure it's going to be a win."
If a donor suspects his or her contribution has gone to a fraudulent charity, Miniutti advises contacting the Federal Trade Commission (FTC).
"The FTC is probably the best bet, but if it is a legitimate charity, and they are aware of criminal activity, then the IRS at the federal level and the Attorney General at the state level (should be contacted)," she said.
Charity Navigator lists these tips to follow before deciding to make a donation. Ultimately, to avoid getting caught in a scammer's web, there is no substitute for doing your homework and carefully evaluating charities before giving.
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