Charity fraud

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 December 19, 1985, The New York Times published an article about a former fundraiser at the New York City branch of the American Cancer Society. Miriam Grubard, 67, was the supervisor at the Cancer Society for approximately 23 years until her scheme was exposed. Mrs. Grubard would fraudulently collect donations, before the annual dinner-dance, from people who were promised that they would get their money back if they came to the dance. She also arranged for people at the dance to buy gambling chips with checks in exchange for merchandise or gift certificates for high-in retailers such as Tiffany, Cartier and Gucci. Her scheme was executed in attempt to commit tax fraud. The scheme eventually was discovered and she was charged with 33 counts of filing false tax returns, which carries a fine of $3,000 to $100,000 as well as a three year sentence for each count.^[2]

• 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.^[3]

• 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.^[4]

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 Federal Bureau of Investigation’s (FBI’s) website is another source where preventatives of becoming a victim of charity fraud can be found. In their fraud alert after the Haiti earthquakes, there is a list of guidelines people should follow 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 on 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
• US: Charity Navigator's giving tips including the Top 10 Best Practices of Savvy Donors
• 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 White1
• 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=9D02E2DD1F3FE433A25753C2A9629C946996D6CF&scp=2&sq=charity%20fraud&st=Search>.
2. ^ David, Bird."Ex-Fund-Raiser at Cancer Society Indicted in $4 Million Tax Fraud."The New York Times.19 12 1985.The New York Times, Web. 13 Feb 2010.<http://www.nytimes.com/1985/12/19/business/ex-fund-raiser-at-cancer-society-indicted-in-4-million-tax-fraud.html?scp=1&sq=Ex-Fund-Raiser%20at%20Cancer%20Society%20Indicted%20in%20%244%20Million%20Tax%20Fraud&st=cse>.
3. ^ 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%20Going%20to%20Vendors,%20Not%20Charities,%20Abrams%20Charges&st=cse>.
4. ^ "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>.