America's Worst Charities, by Kris Hundley and Kendall Tagga

For those absolutely devoid of scruples, charity fraud is the field par excellance, in which you can simultaneously harvest kudos for your humanitarianism and make off with vast bundles of untaxed cash. Convictions for charity fraud are so rare as to be nonexistent, so any criminals operating in other fields of endeavor are incurring unnecessary risks.

America's Worst Charities, by Kris Hundley and Kendall Tagga

Postby admin » Tue Jun 24, 2014 3:07 am

America's Worst Charities: You've given them more than $1 billion. They've given almost nothing to the needy.
America's 50 worst charities rake in nearly $1 billion for corporate fundraisers

By Kris Hundley and Kendall Taggart
Times/CIR special report

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YOU ARE REQUIRED TO READ THE COPYRIGHT NOTICE AT THIS LINK BEFORE YOU READ THE FOLLOWING WORK, THAT IS AVAILABLE SOLELY FOR PRIVATE STUDY, SCHOLARSHIP OR RESEARCH PURSUANT TO 17 U.S.C. SECTION 107 AND 108. IN THE EVENT THAT THE LIBRARY DETERMINES THAT UNLAWFUL COPYING OF THIS WORK HAS OCCURRED, THE LIBRARY HAS THE RIGHT TO BLOCK THE I.P. ADDRESS AT WHICH THE UNLAWFUL COPYING APPEARED TO HAVE OCCURRED. THANK YOU FOR RESPECTING THE RIGHTS OF COPYRIGHT OWNERS.


Thursday, June 6, 2013 1:30pm

PART 1

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Dream Giveaway’s Mark Breiner, left, walks with WorldCause Foundation’s Robert A. Preston Jr. at the Mustang Memories Car Show in Dearborn, Mich., on Aug. 12, 2012. WorldCause Foundation has paid Breiner’s companies to run similar car givaways. Associated Press

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Mark Breiner, left, the founder and one-time president of Kids Wish Network, stands with Patrick Meehan as he talks to the crowd at the car show. Associated Press

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Craig Tillman, commander of the American Legion Ford Motor Company Post 173, and Ford Motor Credit’s Michael E. Bannister, right, look on as Preston addresses the crowd at the show. Associated Press

The worst charity in America operates from a metal warehouse behind a gas station in Holiday.

Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families.

Every year, it spends less than 3 cents on the dollar helping kids.

Most of the rest gets diverted to enrich the charity's operators and the for-profit companies Kids Wish hires to drum up donations.

In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity's founder and his own consulting firms.

No charity in the nation has siphoned more money away from the needy over a longer period of time.

But Kids Wish is not an isolated case, a yearlong investigation by the Tampa Bay Times and The Center for Investigative Reporting has found.

Using state and federal records, the Times and CIR identified nearly 6,000 charities that have chosen to pay for-profit companies to raise their donations.

Then reporters took an unprecedented look back to zero in on the 50 worst — based on the money they diverted to boiler room operators and other solicitors over a decade.

These nonprofits adopt popular causes or mimic well-known charity names that fool donors. Then they rake in cash, year after year.

The nation's 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works.

Until today, no one had tallied the cost of this parasitic segment of the nonprofit industry or traced the long history of its worst offenders.

Among the findings:

• The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent nothing at all on direct cash aid.

• Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fundraising contracts with friends. One cancer charity paid a company owned by the president's son nearly $18 million over eight years to solicit funds. A medical charity paid its biggest research grant to its president's own for-profit company.

• Some nonprofits are little more than fronts for fundraising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Florida-based Project Cure has raised more than $65 million since 1998, but every year has wound up owing its fundraiser more than what was raised. According to its latest financial filing, the nonprofit is $3 million in debt.

• To disguise the meager amount of money that reaches those in need, charities use accounting tricks and inflate the value of donated dollar-store cast-offs — snack cakes and air fresheners — that they give to dying cancer patients and homeless veterans.

Over the past six months, the Times and CIR called or mailed certified letters to the leaders of Kids Wish Network and the 49 other charities that have paid the most to solicitors.

Nearly half declined to answer questions about their programs or would speak only through an attorney.

Approached in person, one charity manager threatened to call the police; another refused to open the door. A third charity's president took off in his truck at the sight of a reporter with a camera.

Kids Wish has hired Melissa Schwartz, a crisis management specialist in New York City who previously worked for the federal government after the 2010 BP oil spill.

Schwartz said Kids Wish hires solicitors so its staff can focus on working with children, not on raising donations. According to its 2011 IRS filing, the charity has 51 employees. Schwartz also said donors who give directly to the charity instead of in response to solicitations ensure that 100 percent of their pledge will be spent granting wishes.

She declined to answer additional questions about Kids Wish's fundraising operations, saying the charity "is focused on the future."

Charity operators who would talk defended their work, saying raising money is expensive especially in tough economic times.

"No parent has ever turned me down for assistance because we got our money from a telemarketer," said David Thelen, who runs the Committee for Missing Children in Lawrenceville, Ga. The charity is No. 13 on the Times/CIR list.

Over the past decade, the charity paid its solicitors nearly 90 percent of the $27 million it raised. It spent about $21,000 each year on its cause, most often buying plane tickets to reunite families.

The charity's efforts primarily consist of giving advice to families whose children have been abducted. Thelen said his group has worked with about 300 parents since 1997.

But he publicly claims credit for reuniting as many as 1,600 children with their families, even if his charity's involvement was as minimal as posting the child's picture on the charity website.

Doug White is one of the nation's foremost experts on the ethics of charity fundraising. A consultant to nonprofits for more than 30 years, White teaches in Columbia University's fundraising management master's degree program.

He said charities with high fundraising expenses often rationalize that such costs are inevitable in the early years. But White said the Times/CIR findings, based on a decade of data, show that the nation's worst charities can't use that excuse.

White also criticized reputable nonprofits that refuse to condemn bottom-tier charities.

"When you start a charity, you have a sacred compact with society," said White, one of 30 charity experts interviewed for this series. "They are ripping off the public under the guise of an organization that's supposed to do good for society."

What happened to Gina Brown's mother-in-law is a classic case.

Brown said the 72-year-old woman was struggling with dementia when the phone calls started.

From 2008 to 2011, telemarketers representing some of the worst charities in the nation persuaded her to write checks and charge donations to her credit card for a total of nearly $15,000.

Among those on the Times/CIR list that got multiple donations, sometimes only months apart, were Cancer Fund of America, Children's Cancer Fund of America and the Committee for Missing Children.

"She was such a vulnerable person, she must have been on the 'A' list," Brown said.

The Minnesota woman discovered the donations, which ranged from $10 to nearly $1,000, only after her mother-in-law was placed in an Alzheimer's facility.

"It's hard to come to grips with the thought of her as a victim because she had been such a bright woman," Brown said. "This can happen to anyone."

How the list was made

To identify America's 50 worst charities, the Times and CIR pieced together tens of thousands of pages of public records collected by the federal government and 36 states. Reporters started in California, Florida and New York, where regulators require charities to report results of individual fundraising campaigns.

The Times and CIR used those records to flag a specific kind of charity: those that pay for-profit corporations to raise the vast majority of their donations year in and year out.

The effort identified hundreds of charities that run donation drives across the country and regularly give their solicitors at least two-thirds of the take. Experts say good charities should spend about half that much — no more than 35 cents to raise a dollar.

For the worst charities, writing big checks to telemarketers isn't an anomaly. It's a way of life.

The Times and CIR charted each charity's performance over the past decade and ranked it based on the total donations diverted to fundraisers, arriving at the 50 worst charities. By this measure, Kids Wish tops the list.

Tracking donations diverted to fundraising is just one way to rate a charity's performance. But experts called the rating fair and said it would provide a unique resource to help donors avoid bad charities.

White, the Columbia University professor, dismisses the argument made by charities that without telemarketers they would have no money.

"When you weigh that in terms of values, of what the charity is supposed to be doing and what the donor is being told in the process, the house comes tumbling down," White said.

Collectively the 50 worst charities raised more than $1.3 billion over the past decade and paid nearly $1 billion of that directly to the companies that raise their donations.

If that money had gone to charity, it would have been enough to build 20,000 Habitat for Humanity homes, buy 7 million wheelchairs or pay for mammograms for nearly 10 million uninsured women.

Instead it funded charities like Youth Development Fund.

The Tennessee charity, which came in at No. 12, has been around for 30 years. Over the past decade it has raised nearly $30 million from donors by promising to educate children about drug abuse, health and fitness.

About 80 percent of what's donated each year goes directly to solicitation companies.

Most of what's left pays for one thing: scuba-diving videos starring the charity's founder and president, Rick Bowen.

Bowen's charity pays his own for-profit production company about $200,000 a year to make the videos. Then the charity pays to air Rick Bowen Deep-Sea Diving on a local Knoxville station. The program makes no mention of Youth Development Fund.

In its IRS tax filings, the charity reports that its programming reaches "an estimated audience of 1.3 million."

But, according to the station manager, the show attracts about 3,600 viewers a week.

Bowen, who runs the charity out of his Knoxville condo, declined to be interviewed. He defended the practice of hiring his own company with the public's donations.

"We just happened to be the low bidder," he said.

Obvious differences

America's worst charities look nothing like Habitat for Humanity, Boys and Girls Clubs or thousands of other charities, large and small, that are dedicated to helping the sick and needy.

Well-run charities rely on their own staff to raise money from a variety of sources. They spend most of their donations on easy-to-verify activities, whether it's running soup kitchens, supporting cancer research, raising awareness about drunken driving or building homes for veterans.

The Times/CIR list of worst charities, meanwhile, is littered with organizations that exhibit red flags for fraud, waste and mismanagement.

Thirty-nine have been disciplined by state regulators, some as many as seven times.

Eight of the charities have been banned in one state.

One was shut down by regulators but reopened under a new name.

A third of the charities' founders and executives have put relatives on the payroll or the board of directors.

For eight years, American Breast Cancer Foundation paid Joseph Wolf's telemarketing company to generate donations.

His mother, Phyllis Wolf, had founded the Baltimore-based charity and was its president until she was forced to resign in 2010.

While she ran the charity, her son's company, Non Profit Promotions, collected $18 million in telemarketing fees.

Phyllis Wolf left the charity after the payments to her son attracted media attention in 2010. The charity has since stopped using telemarketers, including Joseph Wolf's.

Phyllis and Joseph Wolf did not respond to several calls seeking comment.

The nation's worst charities are large and small. Some are one-person outfits operating from run-down apartments. Others claim hundreds of employees and a half-dozen locations around the country. One lists a UPS mail box as its headquarters address.

Several play off the names of well-known organizations, confusing donors.

Among those on the Times/CIR list are Kids Wish Network, Children's Wish Foundation International and Wishing Well Foundation. All of the names sound like the original, Make-A-Wish Foundation, which does not hire professional telemarketers.

Make-a-Wish officials say they've spent years fielding complaints from people who were solicited by sound-alike charities.

"While some of the donations go elsewhere, all the bad public relations that comes with telemarketing seems to come to us," said Make-A-Wish spokesman Paul Allvin.

Donors who answer calls from the 50 worst charities hear professionally honed messages, designed to leverage popular causes and hide one crucial fact: Almost nothing goes to charity.

When telemarketers for Kids Wish call potential donors, they open with a name you think you've heard before.

Then they ask potential donors to "imagine the heartbreak of losing a child to a terminal illness," according to scripts filed with North Carolina regulators in 2010.

Kids Wish, the callers say, wants to fulfill their wishes "while they are still healthy enough to enjoy them."

They leave out the fact that most of the charity's good deeds involve handing out gift cards to hospitalized children and donated coloring books and board games to healthy kids around the country. And they don't mention the millions of dollars spent on salaries and fundraising every year.

The biggest difference between good charities and the nation's worst is the bottom line.

Every charity has salary, overhead and fundraising costs.

But several watchdog organizations say charities should spend no more than 35 percent of the money they raise on fundraising expenses.

The Make-A-Wish Foundation of Central and North Florida is one of dozens of Make-A-Wish chapters across the country.

Last year, it reported raising $3.1 million cash and spent about 60 percent of that, $1.8 million, granting wishes.

The same year, Kids Wish raised $18.6 million, its tax filing shows. It spent just $240,000 granting wishes — 1 percent of the cash raised.

The formula

The path chosen by Jacqueline Gray shows exactly how a worthy cause can be turned into one of the nation's worst charities.

In 2007, Gray and her husband, Kevin, started Woman to Woman Breast Cancer Foundation in Lauderdale Lakes.

For a year the couple struggled to raise money by hosting golf tournaments and by making phone calls to potential donors themselves.

Then they met Mark Gelvan, a New Jersey consultant who has spent two decades transforming fledgling charities into money-making machines.

"He said he had the best dialers on the market," Jacqueline Gray recalled.

Gelvan introduced the Grays to what sounded like a winning formula.

He would help the charity expand if it signed a contract with telemarketer Community Support Inc.

The staff at Community Support would handle everything. They would create the marketing materials and run the call centers.

The telemarketer even gave the Grays $30,000 in seed money to cover bills related to the expansion. All the Grays had to do was agree to let Community Support keep the majority of every dollar raised, then sit back and wait.

The transformation was immediate.

From donations of less than $15,000 in fiscal 2008, contributions to Woman to Woman through its professional solicitor increased to $1.5 million in 2009, then leaped to $6.3 million in 2010 and $6.7 million in its most recent filing.

What the charity got to keep was far more modest. It netted about $50,000 its first year with Community Support and $544,000 in 2011.

That was still enough for Gray, her husband and her daughter to start taking salaries. In the latest year, the trio received $84,000 in total compensation. Each member of the family also has a vehicle provided by the charity.

The Grays' decision to sign on with professional fundraisers transformed Woman to Woman into one of the nation's worst. It falls at No. 22 on the Times/CIR list.

Woman to Woman raised $14.5 million in donations from 2009 to 2011, tax filings show.

It paid nearly 95 percent of that to its for-profit fundraiser and spent about $700,000 on overhead and salaries.

That left an average of less than $20,000 a year to provide mammograms and other diagnostic services for women with breast cancer.

Jacqueline Gray, herself a breast cancer survivor, said she is as shocked as anyone by how much money has been raised in her charity's name and how little of it has reached patients. She said she is angry that phone solicitors take more than 90 percent of the revenue.

But she vehemently denies that she's to blame.

"Why would I be to blame for a system that's dysfunctional?" Gray asked. "We are doing what we're supposed to be doing."

She showed a reporter several emails she has sent Gelvan in the past year, trying to renegotiate Woman to Woman's contracts for better returns.

His response, according to Gray: If they didn't like 10 percent, Gelvan would replace Woman to Woman with another charity.

"In the tele-funding business sector, it is common for nonprofit organizations to renew PFR (professional fundraising) contracts under the same terms and provisions of the previous contract," Gelvan wrote in an email that Gray shared with Times/CIR reporters. "This is part of the 'if it's not broken, don't fix it' principle."

Instead of giving the charity a better return, Gelvan introduced the Grays to the next piece of the formula — gifts-in-kind.

Gifts-in-kind are donated items like generic drugs and medical supplies. Getting them to the sick and poor in developing countries can be an important role for a charity.

But for charities that spend most of their money on for-profit solicitors, gifts-in-kind can function as an accounting gimmick.

The value of these shipments is often highly inflated, with pills that sell for pennies priced at $10 each on paper.

Several charities also can pitch in to pay the overseas transportation costs of the same shipment of medical supplies.

Under accounting rules, each charity is then allowed to take credit for the entire value of the shipment as if it alone provided the supplies to those in need.

The result: A charity's revenues and good deeds are boosted and fundraising costs look smaller.

That makes donated items especially useful for charities that fear being criticized for having excessive fundraising costs on their public IRS filings.

Kevin Gray, the charity's chief financial officer, said Gelvan made no pretenses when he suggested the charity start shipping goods overseas.

"Mark said it was a way to make our 990 (IRS filing) look better," Kevin Gray said.

Gelvan told them to hire a company that rounds up donated goods and ships them overseas for charities, according to the Grays.

He handed them a binder laying out options like a Sears catalog.

They could send blood pressure monitors to Ghana. Or maternity ward equipment to the Philippines. Or surgical supplies to Guatemala.

The Grays rejected the idea.

"I can't figure out why I'd pay to ship medicines out of the country while people need the stuff right here," Kevin Gray said. "Why would I want to spend money that way?"

But the Grays say their charity would have no money if not for professional fundraisers, so they have continued paying them.

Reaping the benefits

The fundraising formula that raised millions of dollars for the Grays' charity has been adopted by hundreds of charities.

They use it to deceive donors and turn their causes into profit centers.

Few have been more successful than Mark Breiner, the founder and one-time president of Kids Wish Network.

Breiner relied on professional fundraisers and donated items to build his charity into a nearly $20 million annual operation.

He is among the beneficiaries. The charity he founded has paid him or his companies nearly $4.8 million in the past 10 years — $1.5 million more than what the charity spent on direct cash to children, according to tax filings.

While Breiner was still president of Kids Wish, earning $130,000 a year, he joined a former employee as a partner in a fundraising company called Dream Giveaway.

In 2008 and 2009, Kids Wish paid Dream Giveaway nearly $1.7 million in consulting fees to run automobile give-aways that raised money for the charity. The charity's IRS filings do not specify how much it netted on these early sweepstakes.

Breiner continued making money after he retired from Kids Wish in mid-2010 and left his mother-in-law on the seven-member charity board. In 2010 and 2011, the charity paid two of Breiner's companies $2.1 million for licensing, consulting and brokerage fees.

Kids Wish violated IRS rules by waiting four years to disclose the money it paid Breiner's companies.

The charity first reported the payments in amended tax filings last year after an employee took her concerns about insider dealings to the charity's board.

Meanda Dubay, who had been a wish coordinator for six months, told Kids Wish's directors she was seeking protection under the charity's whistle-blower policy.

She was fired immediately after she raised her concerns.

Kids Wish officials accused Dubay of stealing proprietary information from the company's database and said they had been preparing to dismiss her prior to her appearance before the board.

The charity asked the FBI to investigate Dubay. The FBI found no wrongdoing.

Kids Wish then sued Dubay for breach of contract and defamation. Dubay, who declined to talk to reporters, has denied all allegations in the civil case, which is pending.

Kids Wish officials said in an email that the omissions in the IRS filings resulted from "inadvertent errors made by the former accounting firm."

Officials at the Tampa accounting firm, Guida & Jimenez, did not return calls seeking comment.

Breiner declined to answer questions about his fundraising and consulting businesses, which received an additional $1.26 million from Kids Wish for a car giveaway in 2012.

But he said in an email that the charity recently completed an IRS audit that included a review of its contracts with his companies.

"They found no indication of private inurement or conflict of interest with founders or board members," Breiner said.

An IRS spokesman said federal law prohibits the agency from commenting on a specific individual or organization's tax issues.

Breiner has cashed in on other close relationships in the charity industry as well.

His consulting business was paid nearly $1 million over two years by a charity founded by a former Kids Wish board member. And when Kids Wish's longtime telemarketer started a charity so his son could have a job, he turned to Breiner for fundraising help.

"Mark's a genius," said Robert Preston, who paid Breiner's companies more than $375,000 in 2011 to run a Porsche giveaway for the charity, WorldCause Foundation.

Breiner's consulting arrangements may be perfectly legal, but such relationships are bright red flags to charity experts. They create the appearance of a conflict of interest and make it easy to turn charitable donations into personal profit, experts say.

Putnam Barber at the University of Washington, who has been writing and teaching about nonprofits for more than 20 years, said, "That kind of arrangement makes me fume."

Kendall Taggart is a reporter for The Center for Investigative Reporting. Times researcher Caryn Baird, computer-assisted reporting specialist Connie Humburg, and web developer Bill Higgins contributed to this report, along with CNN senior producer David Fitzpatrick. Times staff writer Kris Hundley can be reached at khundley@tampabay.com.

America's 50 worst charities rake in nearly $1 billion for corporate fundraisers 06/06/13 [Last modified: Friday, June 7, 2013 12:12pm]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:08 am

PART 2
Lack of regulation and meager penalties allow worst charities to thrive
by Kendall Taggart and Kris Hundley, Times/CIR special report

NOTICE: THIS WORK MAY BE PROTECTED BY COPYRIGHT

YOU ARE REQUIRED TO READ THE COPYRIGHT NOTICE AT THIS LINK BEFORE YOU READ THE FOLLOWING WORK, THAT IS AVAILABLE SOLELY FOR PRIVATE STUDY, SCHOLARSHIP OR RESEARCH PURSUANT TO 17 U.S.C. SECTION 107 AND 108. IN THE EVENT THAT THE LIBRARY DETERMINES THAT UNLAWFUL COPYING OF THIS WORK HAS OCCURRED, THE LIBRARY HAS THE RIGHT TO BLOCK THE I.P. ADDRESS AT WHICH THE UNLAWFUL COPYING APPEARED TO HAVE OCCURRED. THANK YOU FOR RESPECTING THE RIGHTS OF COPYRIGHT OWNERS.


Friday, June 7, 2013 12:01pm

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WHERE THE CALLS COME FROM One of the telemarketing offices of the Police Protective Fund, at 10438 US 19 in Port Richey, is buzzing with activity on a Thursday evening. DOUGLAS R. CLIFFORD | Times

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A dry-erase board is used to log calls and donations at the telemarketing office of the Police Protective Fund at 6452 Ridge Road in Port Richey. DOUGLAS R. CLIFFORD | Times

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Damian Muziani is an aspiring actor whose website lists credits on the dating show Average Joe and an episode of America’s Most Wanted. He is listed as the sole owner of Outreach Calling.

Four years ago, charity regulators in 38 states banded together to take down one of the most deceptive charity solicitors in America.

In an unusual show of force, they marshaled resources from across the country and targeted Community Support Inc.

An investigator in Iowa posed as a donor and secretly recorded calls coming from boiler room operations around the country. Investigators in Missouri spent five months digging through the company's records.

Again and again, they found evidence that the company's employees were lying to donors. Phone operators exaggerated how much money would get to the needy and falsely promised that help would go to people nearby, regulators said.

When it was all done, state officials levied a $200,000 penalty and hoped they had sent a message to the charity industry.

The effort failed.

Within months, the same people who had built Community Support into a multimillion-dollar business had moved on to a new telemarketing company. Boiler room workers were once again dialing unsuspecting donors on behalf of America's worst charities and collecting huge fees for their services.

In a few short years, the new telemarketer was collecting millions of dollars annually on behalf of many of the same charities that had benefited from Community Support's lies.

This is how charities and their for-profit solicitors are regulated in America.

Unscrupulous operators collect hundreds of millions of dollars each year while fooling donors. When they get caught, they have little to fear, even if regulators try to shut them down. They simply reopen in another place or under a new name, leaving regulators none the wiser.

The Tampa Bay Times and The Center for Investigative Reporting interviewed regulators in more than 20 states and took the first national accounting of actions against charities and solicitors by piecing together documents from across the country. Of more than 8,000 violations, reporters identified about 1,000 serious cases and tracked what happened to the offenders in many of them.

Among the findings:

• More than 35 charities and their hired solicitors have been caught breaking the rules multiple times but continue to take money from donors. The most frequent violators have been cited five times or more. One solicitor has been cited 31 times and is still in business.

• Bans issued by state regulators are meaningless. Over the past decade, at least a dozen solicitation companies and charities have been forced out of one state only to continue raising donations elsewhere.

• State regulators make it easy for operators to start over. Instead of targeting individuals, they often ban only the charity or the fundraising company, leaving executives free to move to a new organization. Regulators have not even created a national list to track charity violators or a formal system to share information.

• Charity regulation offices nationwide are consumed with paperwork. They collect reams of information on charities but don't analyze it for signs of fraud. Florida has issued hundreds of fines for late paperwork, but has blocked only a handful of charities from soliciting in the state over the past decade.

• When states do take action they typically issue a small fine and require no admission of guilt, even for the worst offenders. The most common penalty is $500, a small price for organizations that collect millions.

Most reputable charities raise money using their own employees. They don't rely on professional solicitors, whose profits are dictated by the success of cold calls to potential donors.

Charities that do rely on telemarketers direct millions of dollars annually away from worthwhile causes and into their fundraisers' pockets.

The Times and CIR spent a year identifying the 50 worst charities in America based on the enormous sums they divert to for-profit solicitors.

Over the past decade, these charities have relied on deception to generate more than $1.3 billion in donations. About 75 percent went to pay charity executives and the solicitors who raise the donations.

While most charities never run afoul of regulators, three-quarters of the charities on the Times/CIR list have been cited at least once.

Eight of the 50 have been banned in at least one state but continue collecting donations elsewhere.

Repeated efforts to crack down on high-cost solicitors and to stop fraudulent organizations from moving to another state have failed. In part that's because well-respected charities have lobbied to prevent stricter regulations.

More than a decade ago, several states tried to pass rules to limit how much money charities could pay to professional solicitors. That would have given regulators a clear-cut way to go after the worst offenders.

But in 2003, more than 200 charities, including the American Heart Association, Easter Seals and the National Wildlife Federation, supported arguments before the U.S. Supreme Court to prohibit states from limiting how much a charity can pay its solicitation companies.

The court, citing First Amendment free speech rights, agreed, preventing states from implementing a powerful enforcement tool.

"The laws are so weak in this area that when you finally get someone it's pretty much a slap on the wrist," said Dean Zerbe, who investigated charities while he was senior counsel for the U.S. Senate Finance Committee. "It's probably the most frustrating part of it. There are some really bad actors and when you finally bring the book on them, they're back at it."

The Internal Revenue Service grants charities their tax-exempt status and can audit their annual financial filings. Once charities start raising money, oversight is largely left to the states. The system is so fractured it's difficult to know even who is in charge.

In Pennsylvania, it's the Department of State; in California, the attorney general. Florida leaves its charity regulation to the Department of Agriculture and Consumer Affairs. Texas has two different departments enforcing three different statutes that apply only to certain types of charities.

The rules from state to state are even harder to follow.

At least 39 states and the District of Columbia require charities or professional solicitors to register before they start collecting donations. Twenty-three states require charities to undergo an annual audit.

In at least 20 states, charities must report the results of every solicitation campaign run by a professional telemarketer.

Some states ban these telemarketers from hiring anyone convicted of a financial crime. And a few force telemarketers to file copies of their phone scripts, to make sure the pitches don't mislead donors.

But every state agency's authority ends at the state line, leaving them ill-equipped to stop bad charities, which typically operate on a national scale.

The IRS could do more.

Some charity experts say the federal agency does not aggressively go after fraudulent nonprofits because they don't pay taxes. That means cases against them don't generate revenue.

The IRS has been even more reluctant to take on charities for high fundraising costs because such cases are difficult to win, experts say.

As a result, regulation falls largely on a patchwork of state agencies, said Paul Streckfus, a tax lawyer who formerly worked for the IRS.

"The IRS needs somebody at the top with real guts, who says, 'It's my responsibility to weed out this corruption,' " Streckfus said. "There's a great vacuum out there when it comes to the regulation of charities. And there's no evidence there will be any improvement."

IRS officials would not comment on how their agents monitor charities. Citing financial privacy laws, they also declined to provide the names of any charities that lost their tax-exempt status because of fundraising abuses.

To chart how charities are regulated, the Times and CIR went state by state, examining laws and interviewing authorities across the country.

Reporters also asked regulators in each state to provide a list of disciplinary actions taken against charities and solicitation companies.

Regulators in 38 states had no such list. Many of them said the only way to identify charities that had been cited was to look at old press releases and comb through newspaper reports.

These states offer donors no way to check on past violations. As a result, the public continues giving blindly to the nation's worst charities.

The Times and CIR pieced together the available information going back at least a decade to create the first public database of regulatory actions against charities and their fundraisers.

It contains more than 8,000 actions involving everything from minor paperwork violations to outright fraud.

And it reveals what state regulators have been missing: An operator's ability to stay in business despite multiple actions is a chronic problem.

This year, the Iowa Attorney General's Office secretly recorded a call from Telequal, an Iowa company that runs a boiler room for charities.

During the call, a Telequal employee tried to persuade an undercover investigator to donate to Youth Development Fund — No. 12 on the Times/CIR list of America's worst charities.

Over the past decade, Youth Development Fund has raised about $30 million and paid nearly 83 percent to its for-profit solicitors, IRS tax filings show. About $230,000 has been given directly to those in need.

Instead of noting the meager amount of cash given to the needy, Telequal's solicitor told the undercover donor that "a lot" of money went to children. Iowa regulators called the solicitation misleading and accused Telequal of routinely trying to fool donors. In April, a judge banned Telequal and its president, Travis Held, from ever again soliciting in Iowa.

But Held stayed one step ahead of regulators.

A month before the ban, he had moved his operation to Plymouth, Ind., and formed a new telemarketing company, Held Marketing.

Held declined to comment for this story.

The Times and CIR found similar stories across the nation, in Indiana, Oregon, Alabama and Florida.

In each case, unscrupulous solicitors were banned in one state but continued raising donations in others.

The case against Community Support was supposed to be different. Instead of one state acting alone, regulators from 38 states joined together.

They pieced together dozens of complaints from people across the country who said telemarketers called them at home repeatedly and lied to get their money. The most common problem: Solicitors falsely claimed donors had previously given to the charity.

Investigators relied heavily on recorded conversations made in Iowa, where a secretary in the Attorney General's Office had for years pretended to be a potential donor.

She had secretly been recording hundreds of calls from solicitors across the nation, including those from Community Support.

In those calls, telemarketers for the company claimed 80 percent of donations for various causes would go to the charity. The reality was closer to 20 percent.

With lies caught on tape, the investigation culminated in the spring of 2009 with settlement talks at the state Attorney General's Office in Kansas City, Mo.

Representatives from the Federal Trade Commission, Texas, Iowa and Missouri sat across the table from Thomas Berkenbush, the man listed on contracts as the company's president. Regulators from more than 20 states listened in by phone.

Berkenbush admitted no wrongdoing but agreed to pay a $200,000 fine. He also agreed to submit to aggressive new reporting requirements. Regulators thought the rules would be so onerous that Community Support would be forced to shut down.

It was a three-hour meeting. When it ended, regulators went out for barbecue.

"The goal was to put the organization down and we did do that," said Hugh Jones, the chief charity regulator in the Hawaii Attorney General's Office.

But the action against Community Support proved meaningless.

Within months, at least one-third of Community Support's charity clients had migrated to a new telemarketing company, Outreach Calling.

The men behind this seamless transition included Mark Gelvan.

Officially, Gelvan has nothing to do with Community Support or Outreach Calling.

But he has been a puppet master behind the scenes of both companies for nearly a decade. By acting as a broker and consultant, Gelvan operates outside regulators' view.

He dropped out of sight in 2004 after New York's attorney general banned his telemarketing company from raising money in that state.

Just as Gelvan's company came under scrutiny, his 71-year-old father-in-law, a longtime home health aide, launched Community Support.

Gelvan arranged contracts between many of his old charity clients and his father-in-law's company.

Then, when regulators went after Community Support, Gelvan started moving charity clients to Outreach Calling, a newly formed solicitor started by an associate.

Damian Muziani, the owner of Outreach Calling, is an aspiring actor and a telemarketer who had done business with Gelvan years prior.

With Gelvan steering clients there, Outreach Calling became a multimillion-dollar operation in its first three years.

Muziani, who said he is the sole shareholder of Outreach Calling, lives in an apartment above a New Jersey liquor store next to one of his company's offices, a store clerk said. According to his website, Muziani was once a contestant on NBC's dating show Average Joe, and he played a fugitive in an episode of America's Most Wanted.

Gelvan, who owns a $2.6 million gated home less than an hour outside Manhattan, said he has no ownership interest in Outreach Calling or Community Support. Over the years, he said, he has advised many charity operators looking for a telemarketer. He said he often gave them a list of several options.

But three charity operators said that Gelvan was their primary contact when dealing with Outreach Calling and that he gave them the impression he owned the company. All three said they had never heard of Muziani or had met him only once.

Jacqueline Gray, president of Woman to Woman Breast Cancer Foundation in Lauderdale Lakes, showed reporters a document from 2010. It was signed by Gelvan on Community Support letterhead. She said Gelvan also handled her transfer from Community Support to Outreach and gave her a tour of its phone room in New Jersey.

In addition, New York's attorney general stated that "Outreach Calling is run by Mark Gelvan" in a 2011 complaint filed against one of the telemarketer's clients. New York officials declined to provide additional information.

Gelvan calls himself a "service provider to the nonprofit and for-profit sectors."

His company acts as a one-stop shop for fledgling charities, creating their marketing materials, lining them up with telemarketers, even arranging startup funding when necessary. In return, the company gets exclusive rights to direct their fundraising and gets a cut of every donation.

Berkenbush, the president of Community Support when regulators went after the company, now works at Gelvan's consulting firm. Gelvan's company does not report to a single regulator.

Charities play the same game as their solicitors, changing names and moving their fundraising efforts from state to state to survive run-ins with regulators.

Since 1992, Phil LeConte and David Dierks have run three police charities and been sued by regulators in at least six states, including Illinois, Ohio and Massachusetts.

States accused charity employees of falsifying documents and overstating charitable deeds. Telemarketers went as far as pretending they were police officers to raise money, according to complaints filed by California and Illinois.

In 2010, California Gov. Jerry Brown, the state's attorney general at the time, banned LeConte and Dierks' Police Protective Fund from raising money in the state.

But it made no difference. Today, Police Protective Fund runs its own boiler room operations, raising money in seven other states, including Florida. It collects $6 million a year — as much as it did before it was forced to stop calling California residents.

From 2001 to 2010, Police Protective Fund raised $50 million and spent more than $14.5 million on outside soliciting companies. It spent an additional $27.7 million on in-house fundraising efforts, including its own telemarketing boiler rooms.

California widely announced its action against the charity, notifying other attorney general offices around the country, including Florida's. But that message was not always passed to the people who monitor charities day to day.

In Florida, that's the Department of Agriculture and Consumer Affairs. Officials there say no one from California or the Florida Attorney General's Office told them about the ban, even though Police Protective operates all five of its call centers in Florida, four of them in the Tampa Bay area.

These charity-run boiler rooms are tucked behind unmarked doors in low-rent, mostly vacant strip centers. During a visit to one earlier this year, reporters saw about 20 men sitting at long tables, hunched over computers and wearing headsets. Working to raise enough money to hit bonus levels scrawled out on a whiteboard, they asked donors to give to help the families of officers killed in the line of duty.

Police Protective Fund's Florida operations were ignored by state regulators until 2010.

That year, a local Sheriff's Office fielded a complaint and raided one of the charity's phone rooms in Port Richey.

According to the Pasco County Sheriff's Office report, deputies found that 11 of the 27 employees who were calling for donations and taking down credit card numbers were convicted felons.

Florida law bars telemarketers from hiring felons who have been convicted of fraud, theft or other financial crimes. When officials at the Department of Agriculture and Consumer Affairs were confronted with the potential violation, they did nothing.

Instead, they closed the case. They said they had no authority to run criminal background checks on employees of the charities they are supposed to monitor.

The Agriculture Department warned Police Protective Fund not to hire felons, but it did not follow up to ensure workers with convictions for grand theft and burglary were dismissed.

Erin Gillespie, Agriculture Department spokeswoman, said there was no followup because "no one has lodged a complaint."

In fact, at least four complaints about Police Protective Fund have been received by Florida Attorney General Pam Bondi's office since 2010. They were not passed on to the Agriculture Department.

A retired police officer in Maryland asked regulators to investigate the organization after he was solicited. A North Carolina woman complained that Police Protective Fund had fraudulently obtained her 95-year-old mother's personal information and charged her credit card.

It was only after the Times and CIR began asking questions in April that Florida regulators acted. Gillespie said the Agriculture Department has asked Police Protective Fund for a list of its employees so it can check their backgrounds. That investigation is pending.

David Dierks of the Police Protective Fund said the group has provided information requested recently by Florida regulators.

He said the Florida law would only apply to telemarketing employees calling numbers in Florida. Although the charity solicits Florida residents, the call center that was raided only calls outside of the state, Dierks said.

"To my knowledge the Sheriff's Department found nothing of concern during their 2010 visit as no action was taken or requested by them as a result of that visit," he said.

Regulators in some of the nation's largest states say they don't have enough bodies to seek out and stop bad charities.

In Florida, Agriculture Commissioner Adam Putnam is supposed to regulate everything from fair rides to propane tanks, as well as 16,500 charities and 120 professional solicitors.

The office has the equivalent of about 25 people overseeing charities, with half handling registration issues, and three investigators. Putnam's spokeswoman said the department has revoked the solicitation licenses of only a handful of entities over the past decade.

In New Jersey, where Mark Gelvan is based, the Attorney General's Office has the equivalent of 11 employees responsible for overseeing 25,000 charities. New Jersey has banned two for-profit solicitors and 12 individuals over the past decade.

"People out there are overwhelmed and dejected. They're trying to keep up," said Ed Shevenock, a former senior charity investigator with the Pennsylvania Department of State.

Though more states are now requiring charities and solicitors to file reports electronically, for decades they have spent the vast majority of their resources handling paperwork. The same basic information is sorted, filed and sometimes typed into computers manually in state after state, until hundreds of thousands of pages become millions.

The sheer volume is on display in California, where office workers at the Registry of Charitable Trusts spent more than four years scanning 5 million paper documents into computers.

The office has been described by lawmakers as a massive filing cabinet. Today, about a dozen clerks spend their days sorting, scanning and cataloging 1.2 million pages every year filed by more than 230,000 charities and fundraisers registered to do business in the state.

The regulatory office has 11 lawyers and eight auditors to keep up with the never-ending onslaught. Although the office says it has opened dozens of cases in the past 18 months, few enforcement actions have come of it. In the past year, the state has taken just one legal action against a charity.

A soft-spoken prosecutor in Iowa has done far more with a staff of four. Steve St. Clair has worked in the attorney general's consumer protection division in Des Moines for 26 years and still arrives at the office each morning around 7.

More than a decade ago, he trained his secretary to run miniature sting operations. She answers solicitation calls and records what telemarketers say.

That work has allowed the state to ban 14 operations in the past 10 years. That's more than many states with far more resources.

While other states might not be able to replicate Iowa's success, there are steps they could take to become more effective.

Experts say fines could be increased so that they become deterrents, not just a cost of doing business.

States could formally share information on troublesome charities and solicitors, just like they share driver history records and information on physicians who have been disciplined.

Some regulators have advocated using the wealth of paperwork they accumulate to identify potential fraud.

Bill Josephson is the former head of the New York attorney general's charities division. Years ago he argued that his agency could make better use of the data it had collected.

Every year, the office uses the finance reports filed by solicitors to tell the public how much solicitors raise and how much goes to charity.

New York's "Pennies for Charity" report highlights the high cost of fundraising and tries to educate the public about the issue.

But the effort stops there, Josephson said.

He suggested using the data to zero in on every charity that paid their professional solicitors 90 cents on the dollar or more over a five-year period.

Said Josephson, "It's such an obvious thing to try to do."

His suggestion was never adopted.

Kendall Taggart is a reporter for The Center for Investigative Reporting. CNN senior producer David Fitzpatrick, CNN researcher Haimy Assefa and CIR interns Alyssa Jaffer and Yousur Alhlou contributed to this report along with Times researcher Caryn Baird, computer-assisted reporting specialist Connie Humburg and Web developer Bill Higgins. Times staff writer Kris Hundley can be reached at khundley@tampabay.com.

Gelvan timeline

1989: Mark Gelvan launches All-Pro Telemarketing Associates in New Jersey.

1993-96: State and federal regulators bring three cases against Gelvan and All-Pro, claiming his employees pretended to be affiliated with the state police and lied to donors about whether they had given previously. He does not admit wrongdoing.

2002: New York's attorney general sues Gelvan and All-Pro, alleging they fraudulently collected more than $5 million in charitable donations.

April 2, 2003: Gelvan's father-in-law, a 71-year-old home health nurse, incorporates a new telemarketer, Community Support Inc., with Thomas Berkenbush. Many of Gelvan's charity clients sign contracts with the newly formed company.

January 2004: As part of a settlement agreement with the New York attorney general, Gelvan is banned from raising money for charity in that state. He does not admit wrongdoing.

May 2009: Charity regulators in more than 30 states reach a settlement agreement with Community Support after accusing its employees of lying to donors during fundraising calls. Berkenbush does not admit wrongdoing but agrees to a $200,000 fine and other sanctions state officials believe will shut down Community Support. Gelvan is not scrutinized.

September 2009: Outreach Calling, a new telemarketing company, incorporates in Nevada. The president listed in documents is a small-time actor and telemarketer who had previously done business with Gelvan. Gelvan begins transferring charity clients.

Today: Outreach Calling has worked with one-third of the charities that previously did business with Community Support. It has grown to a more than $3-million-a-year operation.

Lack of regulation and meager penalties allow worst charities to thrive 06/07/13 [Last modified: Wednesday, June 12, 2013 10:10am]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

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PART 3
Intricate family connections bind several of America's worst charities
By Kris Hundley and Kendall Taggart, Times/CIR Special Report

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Thursday, June 13, 2013 7:00am

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James T. Reynolds Sr. looks at a bulletin board covered in photos of cancer patients he says received assistance from Cancer Fund of America. Over the past decade, the charity has received nearly $100 million, but only 2 percent of that has gone to directly help cancer paitents. ADAM BRIMER / Knoxville News Sentinel (2009)

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Cancer Fund of America president James T. Reynolds Sr., looks through boxes of donated hygiene, food and entertainment products on Dec. 29, 2009. The items were to be distributed to cancer patients across the country. ADAM BRIMER | Knoxville News Sentinel (2009)

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This is the headquarters of Cancer Fund of America in Knoxville, Tenn. The charity has been ranked No. 2 on the Times/CIR list of America’s worst 50 charities. SCOTT KEELER | Times

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Jula S. Connaster, left, president of the American Association For Cancer Support, of Knoxville, Tenn., talks with Tampa Bay Times reporter Kris Hundley recently. Connaster previously worked at the Cancer Fund of America and is the daughter-in-law of Rose Perkins. SCOTT KEELER | Times

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Rose Perkins, CEO of the Children’s Cancer Fund of America, in Knoxville, Tenn., enters the charity’s headquarters in April. Perkins, the one-time wife of James T. Reynolds Sr., declined an interview with Times about the charity’s operations. SCOTT KEELER | Times

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Charity president James T. Reynolds Jr. was recorded by CNN as he sped away from the offices of the Breast Cancer Society in Mesa, Ariz., as a reporter tried to ask him questions. In 2008, Reynolds held full-time positions in both the Breast Cancer Society and his father’s Cancer fund of America. CNN

Carol Smith still gets angry when she remembers the box that arrived by mail for her dying husband.

Cancer Fund of America sent it when he was diagnosed with lung cancer six years ago. Smith had called the charity for help.

"It was filled with paper plates, cups, napkins and kids' toys," the 67-year-old Knoxville, Tenn., resident said. "My husband looked like somebody slapped him in the face.

"I just threw it in the trash."

Over the past decade, tens of thousands of people have donated nearly $100 million to Cancer Fund of America. In telephone calls and letters, the Tennessee-based charity touts the direct financial aid it gives to people like the Smiths.

But the real beneficiaries are not dying cancer patients and the families who have gone broke trying to save them.

While Cancer Fund provides care packages that contain shampoo and toothbrushes, the people in charge have personally made millions of dollars and used donations as venture capital to build a charity empire. Less than 2 cents of every dollar raised has gone to direct cash aid for patients or families, records show.

For years, Cancer Fund founder James T. Reynolds Sr. and his family have obscured that fact with accounting tricks, deceptive marketing campaigns and lies, the Tampa Bay Times and The Center for Investigative Reporting have found.

Stories about ripping people off in the name of a cause are as old as the concept of charity itself.

But the Reynolds family is something different.

After spending nearly 20 years building Cancer Fund, the family began spinning off new cancer charities, each with a similar mission and a relative or close associate in control.

The family has founded five cancer charities that pay executive salaries to nearly a dozen relatives.

During a yearlong investigation, the Times and CIR identified America's 50 worst charities based on the money they divert from the needy by paying professional solicitation companies.

At least a dozen of these operators have built networks of multiple charities, some with interlocking boards or family connections.

They include multimillion dollar operations in Florida, Louisiana and Pennsylvania.

None are more brazen and incestuous than the Reynolds network.

To track the family connections, the Times and CIR reviewed thousands of pages of financial records and investigative documents from regulators in eight states, interviewed vendors and recipients and traced donations from the phone banks to their ultimate destination.

In the past three years alone, Cancer Fund and its associated charities raised $110 million. The charities paid more than $75 million of that to solicitors. Cancer Fund ranks second on the Times/CIR list of America's worst charities. (Florida's Kids Wish Network placed first.)

Salaries in 2011 topped $8 million — 13 times more than patients received in cash. Nearly $1 million went to Reynolds family members.

The network's programs are overstated at best. Some have been fabricated.

"Urgent pain medication" supposedly provided to critically ill cancer patients amounted to nothing more than over-the-counter ibuprofen, regulators determined. A program to drive patients to chemotherapy, touted by the charity in mailings, didn't even exist.

One Reynolds family charity, Breast Cancer Society, told the IRS it shipped $36 million worth of medical supplies overseas in 2011. But the two companies named as suppliers of the donated goods said they have no record of dealing with the group.

Over the past 20 years, Cancer Fund has run afoul of regulators in at least six states, paying more than $525,000 to settle charges that include lying to donors. It hasn't slowed the network.

The fines amount to about one-third of one percent of the $177 million raised by Cancer Fund of America over the same period.

Since 2002, Cancer Fund has benefitted from a separate charity that claims to help patients but is nothing more than a boiler room operation. Hundreds of callers solicit donations, then send the cash to Cancer Fund to make its fundraising costs look lower.

Over the past several months, the Times and CIR repeatedly asked to interview Reynolds family members. Charity officials turned reporters away at one office in Knoxville. Approached by a reporter, Reynolds' son drove off in a black pickup truck while flashing an obscene gesture.

Reynolds Sr. spoke briefly and asked that questions be submitted in writing.

"I've been in this 42 years and I've learned you don't do hardly anything with the media unless you run it through the attorneys," Reynolds Sr. said.

In emails, the charities defended their programs.

Kristina Hixson is spokeswoman for Breast Cancer Society and married to its president, James Reynolds Jr.

"We have made a difference in the lives of tens of thousands of men and women," she said.

Carol Smith was one of those. After her husband's bout with cancer, she was diagnosed with breast cancer. Smith knew Reynolds' daughter, who arranged for Smith to receive an unusually large grant — $150 a month for a year — from the Breast Cancer Society.

Smith said she is grateful. But she said it's wrong for charity operators to profit if the sick and dying get so little in comparison.

"You don't make six-figures a year off somebody's misery," Smith said.

Building the prototype

Jim Reynolds Sr. is a former Army medic with no college degree who worked his way up to lead the Knox County, Tenn., chapter of the prestigious American Cancer Society.

In 1984, after eight years with the charity, his boss told him to resign or be fired.

The organization accused Reynolds of sloppy bookkeeping, irregular hours and taking title to a 1968 Mustang meant to be auctioned for the charity.

After resigning, Reynolds started his own charity. He eventually settled on the name Cancer Fund of America, mimicking American Cancer Society. He even rented a mail drop that shared a similar Atlanta address.

Then he sent volunteers door-to-door soliciting donations at about the same time as the American Cancer Society's neighborhood fund drive.

Officials at American Cancer Society in Tennessee complained to reporters at the time that Reynolds was confusing donors and draining money that might otherwise have gone to their charity.

Reynolds also turned to for-profit solicitation companies to drum up donations.

In its first year, Cancer Fund of America raised $7.7 million. Half went to its hired-gun fundraisers. Less than a dime of every dollar was spent on patient assistance, which took the form of supplies as well as cash grants.

As Cancer Fund grew, its solicitors continued to tell the public that their donations would be used to provide "direct aid" to cancer victims. But that seldom meant paying patients' medical bills.

Instead, Reynolds convinced businesses to donate everything from overruns on underwear to surplus screwdrivers. At his warehouse, the goods were repackaged and sent for free to individuals and other nonprofits throughout the eastern United States.

All Reynolds had to do was pay shipping costs — about $600,000 a year — and the rest of the millions raised for Cancer Fund could be spent paying his professional fundraisers and salaries for his extended family.

The IRS no longer requires charities to report salaries of employees who make less than $100,000 a year. But records from 2007, before the change, show a son, step-son, sister-in-law and son-in-law each made more than $75,000.

At the time, Cancer Fund also was making payments on six new cars, all Kias, for employees. The total cost for the cars peaked in 2007 at $40,000.

Today, at age 70, Reynolds pays himself $237,000 a year and still has at least three family members on Cancer Fund's staff. He owns a half-million-dollar home on Cherokee Lake, about an hour outside Knoxville.

Cancer Fund's tally over the past decade: Family members nearly $5 million. Cancer patients $890,000.

The biggest winners were the fundraising companies. They earned more than 80 cents of every dollar donated for a total of $80.4 million.

A family affair

Reynolds' original formula was so successful that family members began to replicate it.

Today there's Cancer Support Services, Children's Cancer Fund of America, Breast Cancer Society and American Association for Cancer Support, each run by a family member or close business associate.

The Reynolds charities also swap board members, with directors playing musical chairs on the various boards, sometimes serving on two at once. In several cases, an officer at one charity has a spouse on the board of another.

Reynolds' estranged wife, Rose Perkins, makes $227,000 as head of Children's Cancer Fund of America, about 15 minutes from Cancer Fund in the Knoxville suburb of Powell. She has hired a son-in-law to do her charity's computer work.

Reynolds' son James, head of Breast Cancer Society, earned six-figure salaries from two family charities in 2008. According to IRS filings, Reynolds Jr. worked 45 hours a week for his father's charity in Tennessee while simultaneously putting in a 40-hour week at the breast cancer group in Arizona. He took home a combined $262,000 that year. In 2011, his total compensation was nearly $300,000.

Reynolds Sr. says he has no control over his relatives' charity operations.

"Everyone thinks it's Jim Reynolds' mini-empire," he said. "I have nothing to do with these other organizations."

But over the years, Cancer Fund has helped the new ventures with start-up capital. Instead of giving grants to existing organizations, Reynolds family members started their own charities and Cancer Fund gave them money.

Three of the spinoffs were launched with nearly $700,000 from Cancer Fund, according to IRS tax filings.

Reynolds Sr.'s charity also paid the Breast Cancer group $100,000 in 2008 to do telemarketing, IRS records show.

When Perkins' daughter-in-law, Jula Connatser, launched her charity in 2011, Cancer Fund gave her donated medical supplies and personal care items valued at $20,000 to pass along to patients. Connatser said her charity aims "to relieve the financial burden of cancer patients."

The goal is nearly identical to that espoused by Reynolds Sr. when he started 30 years ago. But Connatser, who worked at Cancer Fund for four years before striking out on her own, promises to be different.

Of Cancer Fund she says, "Oh, they don't give out money, honey."

Interviewed recently in her Knoxville office, Connatser was busy repackaging stacks of donated DVDs — including Land of the Lost and Mamma Mia — to ship to cancer patients around the country.

"They don't get to go to movies," she explained.

Disputed works

With little money making it to cancer patients, this is what passes for charity at Cancer Fund of America and the other charities run by Reynolds family members:

Vitamins and vinyl gloves.

Toothpaste and teddy bears.

Every year, truckloads of the stuff make their way across the country, boxed up in care packages for patients or for other charities that get the items to sick people.

In annual IRS tax filings, the charities list dozens of recipient hospices and service agencies across the country.

Many are thankful to get any help at all. But some of the recipients questioned the value Cancer Fund assigned to their donations.

In 2011 tax filings, Cancer Fund reported that it gave donated items worth $14,000 to Farragut Church of Christ in Knoxville. The boxes were filled with supplies for a mission trip to Ghana.

"The most I ever got was two cardboard boxes of stuff," said David Gentry, the foreign mission leader at Farragut Church. "I walk through the Cancer Fund warehouse and pick up children's cold medicine and toothbrushes and floss. It ain't a big item."

Several groups that Cancer Fund reported as recipients say they got nothing.

In 2011, Cancer Fund told the IRS it gave $20,000 of goods to the Martin-Tyrrell-Washington District Health Department in Plymouth, N.C.

"I have double checked with some of the staff and no one has ever heard of the Cancer Fund of America, nor have we ever received any supplies or donations from any group with 'cancer' in its name," the agency's health director, Kathleen DeVore Jones, wrote in an email. "And, by the way, we could sure use some donations!"

Cancer Fund officials said they have documentation of all shipments but declined to provide it.

Overseas donations

It's even harder to track donated items when they are shipped overseas to be given out in developing nations.

Charities pay pennies on the dollar to procure these goods from third-party suppliers and then pay shipping costs. Several charities can claim credit for the same shipment of goods.

These arrangements are permitted under IRS rules. But they have been criticized by nonprofit experts who say the donations artificially inflate a charity's balance sheet.

Although the donations are never physically held by the charity, they report their value as income, boosting revenues. That makes it look like charities spend more on programs and less on fundraising.

The added income can also make it easier to justify higher salaries.

The Reynolds family charities appear on paper to be generous providers of donated drugs and medical supplies to groups overseas.

In 2011 alone, five Reynolds charities claimed shipments valued at nearly $61 million to Africa and Central America.

Charities are not required to report publicly the names of the suppliers that procure the items on their behalf or the specific recipients overseas. That usually makes it impossible to verify the shipments or their value.

In July 2012, the Times and CIR tried to track a shipment of medical supplies to the Order of Malta in Guatemala.

When a reporter arrived at the medical clinic featured in a picture on Cancer Fund's website, she was turned away by an armed guard.

Reached by phone, an Order of Malta official declined to answer questions about medical shipments.

In 2011, Breast Cancer Society reported in a public financial filing that all its donated medical supplies, valued at more than $36 million, came from two sources, World Help in Virginia and Containers of Hope in Canada.

But both suppliers told reporters they had no record of providing goods to Breast Cancer Society or shipping them overseas on its behalf.

A spokeswoman for Containers of Hope wrote that she "had not done business with The Breast Cancer Society in many years."

A spokesman for World Help said in an email, "We cannot correlate The Breast Cancer Society records with the records we have on file."

Breast Cancer Society officials initially said the charity had "ample documentation" to prove it sponsored the shipments.

In late April, World Help revealed that it had overstated the value of goods it shipped for many of its charity clients. In a revised audit, World Help reduced the value of its 2011 shipments from $227 million to $5 million.

Afterward, Breast Cancer Society's spokeswoman said the charity had "fallen victim" to World Help's errors and was reviewing all its overseas donations.

A better way

The Reynolds family charities have little in common with the hundreds of thousands of nonprofits that operate in the United States.

Only about 6,000 charities hire for-profit fundraisers, IRS records show. And only a few hundred rely on them for the majority of their income.

The rest raise money with their own staff by holding fundraising events, seeking sponsorships or running programs that generate income to support themselves.

According to experts, good charities have independent boards that make sure money gets spent on a charity's cause. Boards filled with a charity founders' family members and close associates raise red flags. So do charities that pay salaries to multiple family members.

All charities have overhead and salaries to pay. But charity watchdogs say no charity should spend more than 35 cents to raise a dollar.

Each of the Reynolds family charities fails that test. On average, the Reynolds charities that use professional solicitors pay them 77 percent of everything raised.

Reynolds and his relatives say if it weren't for telemarketers, they would have nothing to give destitute patients. But it doesn't have to work that way.

Cure Childhood Cancer is a Georgia charity unrelated to the Reynolds family. It holds 5K fun runs and golf tournaments to raise money. In 2011, it reported raising $2.56 million and spent 54 percent on research and grants to children with cancer.

In comparison, Cancer Fund raised about $6 million that year. It gave out $15,000 in cash to patients, tax filings show.

Regulatory run-ins

The Reynolds' charities frequently have been criticized by regulators and consumer watchdogs for waste and broken promises.

But that has not slowed fundraising.

In 1989, Cancer Fund was among a group of charities sued by a dozen states for running sweepstakes that promised winners thousands of dollars but handed out checks for pennies.

Reynolds, whose fledgling charity shared in a $2.1 million fine, said at the time he hoped to be on sound enough financial footing to stop using direct mail campaigns within three years.

That did not happen.

Instead, Cancer Fund of America ratcheted up its use of for-profit fundraisers, with 10 listed in its latest tax filing.

From 1992 to 2007, five states cited the charity for misleading donors. Reynolds has repeatedly blamed his fundraisers, written a check to cover financial penalties and kept going.

In 2007, Georgia regulators sued Cancer Fund, saying it sent out solicitations claiming that the charity provided patients with transportation to chemotherapy treatment when no such service was provided.

The charity signed a settlement that required no admission of guilt. All Cancer Fund had to do was write a $50,000 check to a charity chosen by Georgia regulators, the Georgia Cancer Coalition.

Cancer Fund had raised $8.9 million that year.

In IRS paperwork filed the following year, Reynolds' charity reported the financial penalty as cash paid out for charitable works. It was the single largest cash donation Cancer Fund has ever made to an independent charity.

Georgia's action didn't hamper Cancer Fund. In the five years of tax forms filed since then, the charity has reported raising a total of nearly $34 million.

About $46,000, less than one-tenth of one percent of what was raised, went to patients.

Tricks of the trade

In 2002, Reynolds' then-wife Perkins, his son James and Cancer Fund of America board members transformed space in a telemarketer's phone room in Michigan into a brand new charity.

Their section of the telemarketer's building became Cancer Support Services.

Despite its tax-exempt status, Cancer Support functions as nothing more than a boiler room for Cancer Fund of America.

It uses the same managers and is staffed by the same employees who had been previously soliciting for a corporate telemarketer.

Through this sleight of hand, $10-an-hour telemarketers with headsets suddenly became employees of Cancer Support Services, collecting donations for their own charity.

Transferring workers from a telemarketer's payroll to a charity's has distinct advantages. It allows callers to say 100 percent of donations go to the charity. It also shields the phone bank operation from regulators.

Unlike professional solicitors, charities that run their own telemarketing operations are not required to file financial reports or get scripts approved by regulators.

After paying expenses each year, Cancer Support Services has only 10 cents on the dollar left to ship to Cancer Fund.

But that has helped make Cancer Fund's books look better by boosting revenue and putting expenses on someone else's ledger.

Including more than $1 million from the Michigan operation in 2011, Cancer Fund reduced the percentage of total revenue it spent on fundraising from 83 percent to 68 percent, according to its IRS filings.

Cancer Support Services has operated for 11 years, largely under the radar of regulators. Now the charity is under review by a multistate task force, according to the group's chairwoman, who said she had been recently deposed.

Reynolds Sr., meanwhile, denies that he has any connection to the Michigan charity even though Cancer Fund is its sole beneficiary.

He said it's irrelevant that his chief financial officer is volunteer president of the Michigan operation.

"He can volunteer for anything he wants," Reynolds said.

Kendall Taggart is a reporter for The Center for Investigative Reporting. CNN senior producer David Fitzpatrick and CNN reporter Haimy Assefa contributed to this report along with Times researcher Caryn Baird, computer-assisted reporting specialist Connie Humburg, and web developer Bill Higgins. Times staff writer Kris Hundley can be reached at khundley@tampabay.com.

Intricate family connections bind several of America's worst charities 06/13/13 [Last modified: Thursday, June 13, 2013 7:07pm]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:09 am

PART 4
One telemarketing company's aggressive tactics show how wasteful charities make millions from easy targets.
By Kendall Taggart and Kris Hundley, Times/CIR

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Thursday, November 14, 2013 10:30am

http://www.tampabay.com/news/they-never ... ow/2152293

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Judith Johnson of Stacyville, Iowa, doesn't get out much anymore. Legally blind and living on a small Social Security pension, the 72-year-old used to go to church once a week. She stopped out of fear that her new walker would snag on the railroad tracks she had to cross to get there.

But Johnson, whose tiny apartment is decorated with crucifixes, still believes it's her duty to help those less fortunate.

So when telemarketers call on behalf of cancer patients, homeless veterans or disabled firefighters, the retired secretary finds it hard to say no.

That penchant for giving made Johnson the target of America's billion-dollar charity fundraising industry.

In one recent year, callers persuaded her to write 25 checks to 11 different charities.

The repeated calls were no fluke.

Each one can be traced back to a single source — Associated Community Services, a Michigan-based company that is one of the nation's largest charity telemarketing firms.

After Johnson gave to one charity, the firm put her on a list that got her bombarded with calls for nearly a dozen more company clients. Telemarketers sometimes called several times a day.

Johnson told one phone solicitor she couldn't afford to give to a charity called Children with Hair Loss.

"She said, 'You're going to let this poor little child be bald-headed when they're only 4 years old?' " Johnson recalled. "I really felt bad for the children so I think I gave her around $10."

Unbeknownst to Johnson, about $1.75 of that donation made it to the charity. The telemarketing firm pocketed the rest.

Johnson's story is just like that of millions of Americans who give once over the phone only to find themselves flooded with calls for more causes.

To track how this happens, the Tampa Bay Times and The Center for Investigative Reporting scrutinized how a single company, Associated Community Services, operated in one state that has amassed a treasure trove of data.

Reporters interviewed 10 current and former employees and examined internal company documents subpoenaed by the Iowa attorney general. Iowa regulators used the records, which provide a rare glimpse into the inner workings of the charity industry, to build a case against the firm. Earlier this year, a judge in Iowa ordered Associated Community Services to stop soliciting in that state until it fully complied with a subpoena. The telemarketer is appealing the ruling.

In interviews, phone solicitors described the tactics they used to persuade donors to give. Along with the records, which include details about every Iowa donor who gave 10 times or more, their descriptions reveal a deliberate strategy of targeting trusting donors and exploiting their generosity to fuel profits in the name of charity.

From March 2010 through June 2011, nearly 400 Iowans made 10 or more donations to the firm's charity clients. Total number of donations from the frequent-donor group: more than 5,500, worth a combined $102,000.

Associated Community Services would hit up its most reliable givers dozens of times in a year, with no regard for their age or financial situation.

Calls came so often that nearly half of the repeat donors gave to two different charity clients in a single day.

In an email, company officials said they call people on their hot list randomly and do not purposefully call multiple times a day.

"If the stars aligned properly, it is possible that a potential donor phone number could be called for several charities in one day," president Richard Cole wrote. "But this would be an unusual incident."

Cole also said the company does not target the elderly and has no way of knowing the age or financial situation of the people they call.

But the Iowa attorney general found that most of the company's prolific donors — those who gave 20 times or more — were 69 or older.

The top donor was a man in his 80s in Dubuque. In just over a year, he made 38 donations totaling $1,375 to 13 of the telemarketer's charities.

Six times, he gave to two of the firm's clients on the same day.

The Iowa data details one company's operations in a state with roughly 3 million residents. But industry experts and the firm's employees who worked the phones say it is representative of how Associated Community Services and many other telemarketers do business across the nation.

Industry experts said such practices are used primarily by telemarketing companies that do cold-calling and take a percentage of the donations raised, rather than a flat fee, for their service.

The vast majority of the nation's 1.6 million nonprofits do not use telemarketing firms. Charities that hire these phone solicitors wind up with a fraction of what gets raised. Financial filings by clients represented by Associated Community Services show the firm and its related companies keep as much as 85 cents of every dollar donated. Once charities pay their own administrative costs ­— including rent and salaries — it often means only pennies on the dollar ever make it to the needy.

Earlier this year, the Times and CIR examined thousands of charities that hire professional solicitors and identified the 50 worst based on how much they had paid these outside fundraisers over a decade. Nine of the 50 worst charities hired Associated Community Services to raise donations in Iowa and elsewhere nationwide.

The company collects donations in small amounts, meaning even repeat donors typically spend just a few hundred dollars a year. But the money adds up. IRS records filed by charities show that Associated Community Services raised nearly $40 million for its clients in 2011.

Cole said the company, which employed 1,000 telemarketers in 2010, instructs phone solicitors not to collect money from people who seem disoriented or can't hear well.

But former employees said any such guidelines were widely ignored in the rush to generate profits.

Ex-workers said they felt pressured to keep pitching even if people were crying about their own losses or if they were elderly and confused.

Some people seemed starved for conversation, workers said. One former employee said he got a $50 pledge from a woman who kept him on the line for two hours. By the end, she had invited him to come visit and offered to include him in her will.

Another caller, Dwight David "Spyder" Turner, worked at the company for two years. He said he was fired in January for failing to push hard enough to make the "sale."

"You'd get people on the phone who sounded like they were dying or not all there," said Turner, a 66-year-old resident of Detroit. "With that job, you had to leave your conscience and compassion at the door."

Inside the phone room

John Abraham never met the people on the other end of the line.

But for four years, he made his living off their generosity, handling 300 to 400 calls a day as an employee of Associated Community Services

Though Abraham, 43, left the company last year, he can still launch into a persuasive charity pitch at will.

"I won't lie," he said recently. "I was pretty good at it."

Abraham learned to sell in the Detroit area, where Associated Community Services has two locations packed full of $10-an-hour telemarketers.

New hires rarely stay long in these high-pressure jobs. But for those who excel, the rewards can be great. In good years, the company raffled off TVs and cars at the office Christmas party, Abraham said.

In his job as a cold caller, Abraham was among those making the first pitch to prospective donors. If he persuaded someone to give, that person was marked as a "reload" — a designation that meant they would be hit up again for the same charity.

Reloads would also immediately go into the company's dialing system so they could be solicited for other charity clients.

Sometimes, Abraham said, another pitch would come the very same day.

"They'd call you for breast cancer in the morning and veterans at night," he said.

Although legal, the practice is frowned upon by many in the nonprofit world.

Instead of helping charity clients cultivate loyal benefactors, it drains generous donors by tapping them frequently for an array of causes, said Roger Craver, a 50-year veteran of the fundraising business.

"They're ripping the charity and the donor off because they're not permitting a relationship to grow between the two," Craver said.

Because so many contributions are $10 to $20, it puts even more pressure on telemarketers to dial relentlessly to drive profits in a high-volume business.

To hit their quotas, the employees who spoke to the Times and CIR said they were trained to push hard under almost any circumstance.

Abraham said he once reached a man on his cellphone at a funeral.

"You get in trouble if you didn't pitch them anyway," he said. "You're supposed to say, 'I'm sorry for your loss, but our veterans are struggling every day.'"

Company documents submitted to Oregon regulators in 2010 show that telemarketers were trained to keep pushing even when they got a wrong number.

"I'm terribly sorry," the instructions say, "we're calling as many residents as possible in (their state) to let you know what we're doing, so I'll be brief (immediately go to opening)."

Spyder Turner said the firm was constantly pressing workers to get people to give by credit card, rather than check, so the sale could be processed immediately.

"If I had an old lady on the phone who was sick in bed, I wasn't about to tell her I'll hold on while she goes and gets her credit card," Turner said. "But that's what you were supposed to do."

High pressure pays off

One Iowa donor, Sonja Molitor, is proof that the persistence of telemarketers pays off.

Molitor, 76, is a retired nurse. Until a few years ago, her husband ran the couple's 400-acre farm in northeast Iowa, raising corn, hay and oats.

Now all the animals — except for a black Lab named Molly and 20 barn cats — are gone. And Molitor, a petite brunette with a pixie cut, spends her days caring for her husband, who has dementia, and hauling buckets full of cat food to the red barn.

"I'm a huge lover of animals," she said as cats swarmed around her feet at feeding time. "But not in the house."

Though the couple, who had no children, live a comfortable retirement, Molitor tries to be mindful of where her money goes. But when a telemarketer calls while she's cooking or while she's helping her husband, Molitor often donates just to end the call.

"Sometimes it's easier to give them $10 and be able to get them off the line than listen to all the reasons you should give," she said.

That response put Molitor on the hot list at Associated Community Services.

Iowa records show that over 10 months, the firm's employees persuaded her to give 15 times.

Molitor said they called even more, but she sometimes hung up.

They called her twice on the same day in March 2011 and persuaded her to give to two different charities with similar-sounding names — Cancer Fund of America and Breast Cancer Charities of America.

"The names are so confusing," Molitor said. "And then they say, 'If you donate this one time, we won't bother you again for another year.'"

Four former phone solicitors told the Times and CIR they found ways to imply that the charity's fundraising drive was an annual event.

Juantai Phillips, who worked at Associated Community Services for about three years, said he told people he would call "only once a campaign."

What he did not say was that the campaign took place four times a year, Phillips said.

Fundraising experts say the distinction is important because donors are more likely to give if there is a sense of urgency or timeliness to a fundraising drive.

A script submitted by Associated Community Services to Oregon regulators in 2010 shows that the firm used this tactic to nudge prospective donors who said they needed to consult a spouse before giving.

"Well since it's a nonprofit," the caller was instructed to respond, "we only get one chance to call."

Calling practices described by the firm's employees are backed up in government records across the nation.

Since 2002, at least nine states have brought actions against Associated Community Services, accusing the company of a variety of infractions including misleading donors.

In 2010, the Iowa attorney general recorded company callers on an undercover phone line. Based on those calls, the state accused the company of fooling donors into thinking they were giving to a one-time charity campaign. On the same recorded calls, telemarketers and managers implied that 100 percent of donations would go to the charity — rather than the roughly 15 percent figure cited in documents.

Company officials signed a $35,000 settlement, but admitted no guilt.

Cole, Associated Community Services' president, said employees are trained to give "accurate and appropriate answers" to donors' questions. "Individuals who fail to follow ACS policies are subject to discipline," he said.

Little for the needy

Earline Williams wouldn't be so upset if more of her money had gone to help those in need.

The 74-year-old Waterloo resident is a church-going Presbyterian with a sharp mind and a strong sense of giving.

Though her husband is a retired medical technologist with a comfortable income, Williams proudly says she draws from her own retirement funds when it comes to charitable contributions.

She tries to set aside 10 percent of her Social Security checks, earned from her time as a day care worker.

One year recently she was surprised when she realized her donations had ballooned to $1,800, in part because of her generosity to telemarketers like those at Associated Community Services.

The Times and CIR found that in one year she made 21 donations to nine different charities represented by the firm. The checks totaled $340.

"Coming from kind of a small income, that was a lot of money," said Williams, who tallies her donations at tax time using her check registers. "I suppose it's just thinking there's a need and I need to try to help."

Williams, who has four children, tries to keep track of all the charities she supports. But she's given to so many, she can't even remember their names.

"There were so many different cancer groups, and I know I've done a couple of 'wish charities,' " she said. "The names are so identical that sometimes I find I've given to a different charity than the one I thought I was giving to." The Times and CIR found that Williams gave three times each to Cancer Fund of America and Children's Cancer Fund of America, charities run by a man and his ex-wife in Tennessee.

Both of the groups ranked among America's worst charities based on the amount they have paid professional solicitors.

The calls to Williams came so frequently that she could recognize the voices of certain telemarketers, even when they were calling for different charities. She said she felt guilty if she turned them down.

"They have such a terrible job," she said.

Williams said she realized some of her donation would go toward paying those workers, but she did not think it would be 85 percent.

Of the $25 she gave to Foundation for American Veterans in January 2011, for instance, just $3.75 made it to the charity, according to the charity's IRS filing.

After years of giving, Judith Johnson, the legally blind woman, only recently realized how little of her money went to charity.

In one year, she donated almost $400 to Associated Community Services clients. Less than $80 remained after the telemarketer took its cut.

A few hundred dollars may not mean much to some people. But Johnson said in some months she was giving away a quarter of her income to the various charity telemarketing companies calling her.

About a year ago, Johnson had the phone company put a message on her answering machine. It warns callers that her line no longer accepts telemarketing calls and tells them to put her name on their "Do Not Call" list.

Since then she hasn't been bothered as much, and her finances have improved, allowing her to buy some winter clothes and treat herself to a Bible study guide.

But she's still stung when she thinks of how often she fell for telemarketers' pitches.

"I'm shocked at how double-tongued these people can be," Johnson said. "Sooner or later these fraudulent people are going to have to face their maker."

Computer-assisted reporter Connie Humburg and researcher Caryn Baird contributed to this report. Kendall Taggart can be reached at ktaggart@cironline.org. Kris Hundley can be reached at khundley@tampabay.com.

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Of the telemarketers who call her, Sonja Molitor of Waukon, Iowa, says: “Sometimes it’s easier to give them $10 and be able to get them off the line than listen to all the reasons you should give.” SCOTT KEELER | Times

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Earline Williams of Waterloo, Iowa, donated 21 times in a year to clients of Associated Community Services. SCOTT KEELER | Times

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Sonja Molitor, a retired nurse, tends to several of the 20 barn cats on her farm. The cats and a black Lab are the only animals that remain on the farm that until a few years ago was run by Molitor’s husband, Don, who has dementia. SCOTT KEELER | Times

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Earline Williams sits on the stoop of her Waterloo, Iowa, home. SCOTT KEELER | Times

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Judith Johnson of Stacyville, Iowa, Johnson, is legally blind and lives off Social Security. She had been on telemarketing company hot lists, but she now tells solicitors to put her on their “do not call” lists. SCOTT KEELER | Times

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Judith Johnson of Stacyville, Iowa, sits next to a box containing mail solicitations she received over six months from various charities. SCOTT KEELER | Times

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A crucifix sits next to a phone in Judith Johnson’s apartment in Stacyville, Iowa. Johnson donated 25 times in a year to charities represented by telemarketing company Associated Community Services. SCOTT KEELER | Times

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In early October, a cancer awareness balloon floats in the window of the headquarters of telemarketer Associated Community Services, located in Southfield, Mich. SCOTT KEELER | Times

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Richard Cole, president of Associated Community Services.

CHARITIES THAT RELY ON REPEAT DONORS

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Associated Community Services, one of the nation's largest charity telemarketers, raised money for about two dozen charities in Iowa, according to records filed with that state. Most of the charities rely heavily on for-profit solicitors and as a result have little cash to spend on those in need.

The following charities attracted the most money from repeat donors in Iowa, according to documents subpoenaed by the state.

Children's Cancer Fund of America

Powell, TN
Amount raised by solicitors (2012): $6.19 million
Amount paid to solicitors (2012): $5.28 million
Amount paid to ACS and related companies (2012): $3.94 million
Since it was founded in 2004, the charity has raised $44 million using professional solicitors and paid them about $34.5 million of that. After salaries and overhead, the charity was left with $2 million in direct cash aid for cancer patients and their families. Children's Cancer Fund is one of five cancer charities run by the same family. Associated Community Services sometimes collected a donation for one of the family's charities, only to call back later asking for money for another, records show.

Foundation for American Veterans

West Bloomfield, MI
Amount raised by ACS (2011): $6.25 million
Amount paid to ACS and related companies (2011): $5.32 million
The Foundation supports veterans by providing grants to hospitals and other veterans' charities, and by sending clothing to homeless veterans. It has an exclusive contract with Associated Community Services and it paid the firm and related companies 85 percent of the $6 million raised from donors in 2011, according to recent tax filings. Of the five veterans charities the telemarketer calls for in Iowa, the Foundation raised the most from repeat donors — nearly $12,000 from March 2010 through June 2011.

Law Enforcement Education Program

Troy, MI
Amount raised by solicitors (2011): $1.56 million
Amount paid to solicitors (2011): $1.26 million
Amount paid to ACS and related companies (2011): $970,000
LEEP supports educational programs for the general public and law enforcement community. It produces public safety videos to discourage drunk driving and to teach children how to use 911. Of the $1.6 million it raised in 2011, it spent less than 4 cents of every dollar on these programs, according to its most recent tax filing.

Cancer Fund of America

Knoxville, TN
Amount raised by solicitors (2012): $5.07 million
Amount paid to solicitors (2012): $4.19 million
Amount paid to ACS and related companies (2012): $2 million
Cancer Fund of America is one of five cancer charities that are tied to James T. Reynolds, Sr. It is No. 2 on the Times/CIR list of the 50 worst charities in America based on the amount of money paid to professional solicitation companies over a decade. Of the $98 million raised in that time, less than 1 percent was spent on direct cash aid to cancer patients, IRS tax records show. Despite the small amount of money that makes it to cancer patients, Associated Community Services callers tell potential donors, "Just wanted to thank you for your help providing cancer patients with DIRECT PATIENT AID," according to a list of talking points provided to the Times and CIR by an Associated Community Services employee. Company President Richard Cole said the document "is not and has never been an authorized or approved ACS document."

HOW THIS STORY CAME ABOUT

To track how telemarketing companies target donors, the Tampa Bay Times and The Center for Investigative Reporting focused on one company, Associated Community Services, and examined how it did business in one state, Iowa.

Associated Community Services is one of the largest charity fundraisers in the country, according to data compiled by Guidestar, an organization that gathers federal filings by nonprofits. Financial filings by about two dozen of the company's charity clients show Associated Community Services raised about $40 million nationwide on their behalf in 2011.

Its fundraising efforts in Iowa make up a small fraction of its total collections. The Times and CIR focused on Iowa because that state's attorney general had subpoenaed internal records from the company as part of its own investigation. Iowa regulators agreed to provide copies of the documents with the names of individual donors redacted.

The Iowa documents list every donation collected by the company's operators for people who gave 10 times or more.

They also list the dates of each donation, the amount, the charity that received the money and the name of the telephone operator who made the call.

In total, Associated Community Services collected at least 10 donations from 400 Iowans from March 2010 through June 2011.

Over 16 months, those donors were contacted a bare minimum of 5,500 times — the combined number of times they donated. The actual number of calls was far greater, because donors did not give every time they answered the phone.

One telemarketing company's aggressive tactics show how wasteful charities make millions from easy targets. 11/14/13 [Last modified: Tuesday, November 19, 2013 1:38pm]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:09 am

PART 5
These telemarketers never stray from the script
by Kris Hundley, Times Staff Writer

NOTICE: THIS WORK MAY BE PROTECTED BY COPYRIGHT

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Thursday, November 14, 2013 10:30am

http://www.tampabay.com/news/these-telemarketers-never-stray-from-the-script/2152303

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Amanda Thomas is the perfect telemarketer. She's always perky and pleasant. She races through her pitch without a stumble or pause. She never deviates from the script.

"We know it's a bad time right now with the economy and all," she told a South Carolina resident during a call recorded last year. "But the folks we're helping are fighting cancer and they're in need and they're struggling."

Over the past several years, Amanda has called millions of people and helped generate millions of dollars in donations, never once asking for so much as a bathroom break.

"Amanda Thomas" and "Jeff Stewart," her male counterpart, are the latest advancement in charity telemarketing.

But they aren't real people.

They are computer-generated pitchmen designed to seem lifelike on the phone without the messiness of actual humans talking.

Call center workers no longer have to say a word. Instead, they monitor up to three calls at once and tap on separate computer keyboards to choose a pre-recorded response.

When in doubt, employees orchestrating the calls can fill in with phrases that punctuate casual conversation: "yeah," "un-huh" and "no worries."

Many people never realize they are talking to a computer. In the past year, 20 consumers complained to the FTC about "Amanda" from Associated Community Services. Only one guessed she was a recording.

But occasionally someone gets wise.

A South Carolina man recorded a call from Amanda last year and shared it with that state's charity regulators.

Skeptical of who he was talking to, the man asked Amanda to spell "cat."

Her response: "Anything off my script, I'm supposed to get my manager to answer, so hold on just a second, OK?"

Corporations for Character, a telemarketing firm in Murray, Utah, started developing the software now known as the "Echo System" in 2005. Chief executive Forrest S. Baker III said he was looking for a way to increase efficiency because so little money raised by telemarketers actually goes to charity.

Today, the technology is used by Baker's firm and has been licensed by a third party to at least two other telemarketing companies. Among them is Associated Community Services, one of the nation's largest telemarketers, which calls on behalf of about two dozen charities.

When the Echo system was first introduced at the company in 2011, workers monitored two calls at a time. Today, thanks to a recent expansion, they monitor up to three, employees say.

Mike Bills is chief executive of CallAssistant LLC, whose company licenses the Echo system. He said the software ensures that callers make all required disclosures, thereby avoiding regulatory problems. But this month, Corporations for Character paid a $2,000 fine after "Amanda Thomas" failed to identify herself as a paid solicitor on a call taped by regulators.

In a letter to the South Carolina secretary of state, an attorney for the telemarketer blamed their employee for the mistake. They wrote that they had provided "immediate and additional training for the employee that made the call."

Critics of the Echo system point out that it primarily benefits telemarketers, who double or triple the number of calls handled by a single employee.

And with telemarketers keeping as much as 95 percent of money raised, they stand to benefit the most from increased donations.

The agreement between Corporations for Character and Cancer Fund of America shows how lucrative the arrangement can be.

The Knoxville charity agreed to pay Baker's telemarketing firm 95 percent of all initial donations using the Echo system, then 80 percent of all subsequent donations by the same person.

In 2012, Cancer Fund netted about $40,000 of more than $414,000 raised using the software. The rest went to Baker's company, according to reports filed with North Carolina regulators.

Regulators are also concerned that the Echo system is deliberately designed to trick people into thinking they're talking to a live person.

When a curious caller in South Carolina asked if she was talking to a recording, the telemarketer hit a button that responded with a laugh and the phrase, "Do I sound that bad?"

"You are actually talking to a live person," the recording continued, "but I'm using a computer for quality-control purposes."

CallAssistant's chief executive defends the subterfuge.

"The answer is being played by a live agent," Bills said. "There's absolutely someone at the other end of the line."

But the deception was too much for one South Carolina woman, who was disgusted when Amanda kept insisting she was a real person.

"I'm ending this ridiculous call," the woman said before hanging up.

Amanda didn't miss a beat.

"Thank you so much. Bye-bye."

Kris Hundley can be reached at khundley@tampabay.com.

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SCOTT KEELER | TimesIowa regulators have used this phone in the state attorney general’s office for years to secretly record telemarketing calls.
These telemarketers never stray from the script 11/14/13 [Last modified: Monday, November 18, 2013 11:43am]


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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:09 am

PART 6
Large telemarketer for charities declares bankruptcy
by Kris Hundley, Times Staff Writer

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Friday, March 14, 2014 4:20pm

One of the nation's largest charity telemarketing firms filed for bankruptcy Thursday.

But the Chapter 11 filing by Michigan-based Associated Community Services is unlikely to end the phone calls from its employees, who solicit in Florida and 40 other states for some of America's poorest performing charities.

In a court filing, company president Richard Cole asked for approval to continue paying Associated Community Services' nearly 900 employees in order to remain in business.

In an email to the Tampa Bay Times, Cole said, "The bankruptcy will offer our company the opportunity to restructure and serve our clients more efficiently."

Associated Community Services, co-owned by Cole and Robert W. Burland, was profiled in the Times' and Center for Investigative Reporting's series on charities that routinely allow outside solicitors to retain the majority of funds raised. Founded in 1999, the telemarketer keeps as much as 85 percent of every dollar donated by the public. It solicits for dozens of charities, including nine of the 50 worst named in the Times'/CIR series. Among its clients are Cancer Fund of America and Children's Cancer Fund of America, Nos. 2 and 10 respectively.

IRS records filed by charities show that Associated Community Services raised nearly $40 million for its clients in 2011.

The telemarketer has been repeatedly disciplined by state regulators for misleading donors in its fundraising calls. Last year it was banned from soliciting in Iowa; last month it was fined $45,000 by Michigan's attorney general for deceiving senior citizens. The company denied any wrongdoing.

Though it kept the vast majority of the money raised, Associated Community Services said in court documents that its revenues have been declining by more than $100,000 a week over the past year. Meanwhile, its debts have risen, with the landlord of its call center in the Detroit suburb of Southfield threatening to terminate the lease for unpaid rent.

The company also owes more than $15 million in unpaid taxes to the IRS and more than $1 million in unpaid state tax.

In financial projections provided to the court, Associated Community Services said it expects to be "nominally profitable" by early May, netting about $50,000 on more than $5 million in revenue over the coming eight weeks.

Large telemarketer for charities declares bankruptcy 03/14/14 [Last modified: Friday, March 14, 2014 5:06pm]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:10 am

PART 7
Overhaul of Florida charities law seems headed for passage
by Tia Mitchell, Times/Herald Tallahassee Bureau

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Thursday, April 3, 2014 6:56pm

TALLAHASSEE — A sweeping charities reform package is breezing through the Legislature despite earlier concerns that legitimate philanthropies might be harmed by new rules.

The House bill received unanimous support in three committees and is now ready for a vote on the floor. The Senate bill has one more committee, and members who had been worried about reputable charities now say their issues have been addressed.

"I believe that those concerns have been worked out with the bill sponsor and I've been assured that those concerns are no longer valid," said Sen. Kelli Stargel, R-Lakeland, who was one of two senators to vote against the proposal during its first committee hearing.

State Agriculture Commissioner Adam Putnam started working on what has been called the most extensive rewrite of state charities laws after reading an investigation by the Tampa Bay Times and the Center for Investigative Reporting called "America's Worst Charities.'' His office's responsibilities include charity oversight, and his staff has been tweaking the bill to deal with concerns as they arise.

For example, charities initially complained about a requirement that they submit audited financial statements to state regulators to remain in good standing. They insisted this was costly and duplicative because they already give similar information to the federal government.

The bills have since been amended to allow charities to provide the state copies of their IRS Form 990, an annual statement certain tax-exempt organizations must file. This step would make it easier for consumers to see this document.

"That should provide a lot of transparency to the public in order to get a clear picture of the organization's finances," said David Biemesderfer, president & CEO of the Florida Philanthropic Network.

Under the proposal, the state also would overhaul its charities website to include more detailed contact and financial information.

Nonprofits that receive more than $1 million in contributions but spend less than 25 percent of it on programming will have even more requirements. This provision is targeted at organizations like Allied Veterans of the World, the now-defunct Internet cafe operator that for years justified its dealings using the state's lax charities laws.

The measure also requires paid fundraisers, who mostly seek donations over the telephone, to meet similar requirements as telemarketers.

And it also addresses a ubiquitous but often ignored aspect of charity: clothing receptacles in parking lots. Under the proposal, groups with these boxes would have to display a sign with contact information on the bins and clearly state whether the organization is a for-profit or not.

Rep. Jim Boyd, R-Bradenton, is the sponsor of House Bill 629. He said the bill should have no problem gaining the approval of the full House and Senate so it can land on Gov. Rick Scott's desk for his signature.

"I think there is a lot of desire by the members to address the issue," Boyd said. "I expect it to succeed."

Sen. Jeff Brandes, R-St. Petersburg, is the sponsor of the Senate version, SB 638, and said he expects it to be heard in the Appropriations Committee as soon as next week.

Tia Mitchell can be reached at (850) 224-7263 or tmitchell@tampabay.com.

Overhaul of Florida charities law seems headed for passage 04/03/14 [Last modified: Friday, April 4, 2014 8:48am]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:10 am

PART 8
Newspaper report triggers investigation and fine for charity consultant
by Kris Hundley, Times Staff Writer

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Wednesday, April 23, 2014 9:27pm

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Telemarketing consultant Mark Gelvan was fined $50,000 for violating a ban on fundraising.

New York regulators fined a telemarketing consultant for some of America's worst charities $50,000 on Wednesday after officials determined he had violated a lifetime ban on raising money there.

New York's attorney general began investigating Mark Gelvan of Montville, N.J., after the Tampa Bay Times and The Center for Investigative Reporting revealed in June that Gelvan remained active in the fundraising industry despite his ban.

The Times/CIR report ranked America's 50 worst charities based on the money they spent hiring professional solicitors. Gelvan acted as a fundraising consultant with several of those charities.

In a press release, New York Attorney General Eric Schneiderman said Gelvan violated his ban when his company brokered fundraising agreements for two charities.

Schneiderman's office said Gelvan arranged for a telemarketer to call New Yorkers on behalf of Woman to Woman Breast Cancer Foundation in Florida and the National Vietnam Veterans Foundation in Virginia.

Gelvan received more than $37,000 in money raised for the two charities from New Yorkers, the state's investigation found. Gelvan did not return a call for comment.

In 2004, Gelvan agreed to a lifetime ban on raising funds for charity in New York while admitting no wrongdoing. Regulators had accused him of making false claims to donors, including saying donations to a police charity would be used to benefit families of slain troopers.

Gelvan remains barred from soliciting for charities or profiting from charity fundraising in New York.

Newspaper report triggers investigation and fine for charity consultant 04/23/14 [Last modified: Wednesday, April 23, 2014 9:56pm]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:10 am

PART 9
Lawmakers agree on legislation to crack down on fraud by Florida charities
by Steve Bousquet, Times/Herald Tallahassee Bureau

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Tuesday, April 29, 2014 6:48pm

TALLAHASSEE — The Senate and House struck agreement Tuesday on legislation to crack down on fraud by Florida charities after agreeing to drop a proposed $50 application fee for criminal background checks on solicitors.

Instead, taxpayers will pay for the background checks.

The legislation is the most significant tightening of the laws overseeing charitable solicitations in Florida in two decades and is a rare case of increased government regulation by a pro-business, free market-oriented Republican Legislature.

Agriculture Commissioner Adam Putnam has called Florida "a destination of choice for hucksters," and lawmakers embraced his call for new laws after reading an investigation by the Tampa Bay Times and the Center for Investigative Reporting called "America's Worst Charities," which exposed rogue charities that pocketed millions of dollars in profits under the pretense of raising money for veterans or sick children.

The legislation adds new reporting requirements for charities and bans them from Florida if they've been cited for fraud or other crimes in other states. Charities that raise more than $500,000 a year must have their financial statements reviewed by auditors and charities that collect more than $1 million must be audited.

Charities that raise $100,000 in response to a disaster, such as a hurricane, tornado or wildfires, must file quarterly reports with the state.

"It adds a lot of transparency and accountability," said Rep. Jim Boyd, R-Bradenton, sponsor of the House bill. "It holds people accountable who are acting inappropriately. The news stories were instrumental in breaking open the issue."

The House version (HB 629) included a $50 individual application fee, but Boyd said Gov. Rick Scott's office raised objections to the new fee, so it was taken out when the bill came up on the Senate floor Tuesday afternoon.

"I personally felt that the fees were reasonable, and we have fees attached to a lot of other business services in Florida," Boyd said. "But certainly if he felt there was a need to take it out for the good of the cause, I support that, because the bottom line is that we get our hands around the issues that have been created by these rogue charities."

Sen. Jeff Brandes, R-St. Petersburg, sponsor of the Senate bill, said that throughout the session, lawmakers have broadly tried to prevent new fees on consumers from being attached to any bills. "It's an ongoing concern," Brandes said.

The revised bill allocates about $416,000 from the state treasury to hire three full-time employees in Putnam's Department of Agriculture and Consumer Services to oversee the checks, which include mandatory registration and fingerprinting for people who work for telemarketing firms hired by charities to raise money.

Brandes emphasized that the background checks do not apply to people who serve without pay as volunteer fundraisers for charities.

The Senate is expected to pass the revised bill today and will send it for a final vote in the House, which will send it to Scott's desk.

Lawmakers agree on legislation to crack down on fraud by Florida charities 04/29/14 [Last modified: Wednesday, April 30, 2014 9:15am]

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Re: America's Worst Charities, by Kris Hundley and Kendall T

Postby admin » Tue Jun 24, 2014 3:10 am

PART 10
New law will give regulators more oversight of charities
by Kris Hundley, Times Staff Writer

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Sunday, May 25, 2014 9:21pm

Image
SCOTT KEELER | Times (2013)This telephone line in the Iowa Attorney General’s office is answered by a staff member who records telemarketers’ pitches. The recordings can later be used to bring lawsuits against charities and telemarketers for making misleading statements.

Telemarketers with criminal backgrounds will no longer be able to call Floridians for charitable donations.

Nonprofits and professional solicitors banned in one state will be banned in Florida as well.

And consumers will be able to go online for more details about how a charity uses its donations under a bill Gov. Rick Scott is expected to sign into law.

Lawmakers proposed the sweeping changes following a yearlong investigation by the Tampa Bay Times and the Center for Investigative Reporting that ranked the worst charities in America based on which groups spent the most on professional solicitation companies. Of the 50 charities with the worst records, 11 were based in Florida, more than any other state.

With the reforms, Florida will have the tools to transform itself from one of the nation's most lax charity regulators to among the most aggressive. And because the rules apply to any organization that raises money in Florida, the impact of the changes could be felt nationwide.

Ken Berger, president and chief executive of Charity Navigator, an industry watchdog group, praised the changes, saying, "I'm in favor of anything that provides further enforcement and oversight to eliminate unethical and fraudulent behaviors."

The pending law gives Florida's Department of Agriculture and Consumer Services, which oversees more than 17,000 charities and 130 professional solicitors, additional manpower and stronger financial penalties for wrongdoers.

Three positions will be added, at a cost of about $415,000, to investigate charity-related complaints. Maximum fines will be increased to $5,000 for most violations and $10,000 for fraud.

The bill would also give Florida regulators the power to revoke a charity's state sales tax exemption for certain violations.

Bigger charities also will get additional scrutiny starting in July.

Under the new rules, charities with more than $500,000 in contributions will be required to have an independent certified public accountant review their finances; those with more than $1 million must publicly file an annual financial audit. Audits already are required by several states and give the public a more complete picture of a charity's finances, including related-party transactions, than its IRS filing.

All charities that raise donations in Florida would be required to file a financial statement that shows how much they spend on their mission. Any charity that raises more than $1 million but reports spending less than 25 percent on program services would be required to file additional information about salaries, travel expenses and fundraising costs.

The bill also gives regulators more time to check an applicant's record by extending the mandated turnaround time on annual registrations from 15 to 90 days. If the charity or fundraiser has had its right to solicit revoked in another state, Florida officials will be able to block the group from operating in Florida. Berger said he was not aware of any other state that had such a provision.

The Times/CIR report found at least a dozen cases where a charity or a solicitor had been forced out of one jurisdiction but continued operating elsewhere because state regulators don't systematically share information.

A spokeswoman for Agriculture Commissioner Adam Putnam's office said the department will rely on information from other states, as well as tips from media and charities to identify wrongdoers.

The bill also puts teeth into an existing law prohibiting people convicted of certain financial crimes from soliciting for charities.

Previously, employers were not required to do background checks of their employees. Under the new rules, such screening is mandatory for telemarketers who take donors' financial information.

Kris Hundley can be reached at khundley@tampabay.com or (727) 892-2996.

New law will give regulators more oversight of charities 05/25/14 [Last modified: Monday, May 26, 2014 8:35am]

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