AGs and the Charitable Sector: In the News

Massachusetts Attorney General Issues Charity Scam Warning After Boston Marathon Bombings (Apr. 17)

Massachusetts Attorney General Martha Coakley wants people to be aware of potential charity scams related to the Boston Marathon bombing. Most charities that solicit donations during tragedies are reputable and worthy of financial support, such as The One Fund Boston, Coakley’s office said in a prepared statement. But others may “engage in questionable tactics or mislead the public about the use of donations,” she said. More than 125 website domain names related to the Boston Marathon explosions were registered within an hour of Monday’s attack, according to Coakley.

Connecticut Attorney General Make Information on Newtown Charities Public (Apr. 16)

Connecticut Attorney General George Jepsen and Consumer Protection Commissioner William M. Rubenstein today made public the information collected to date from dozens of charities related to the shooting deaths at Sandy Hook Elementary School. The 43 charities reporting by noon Monday have collected nearly $20.4 million and have distributed nearly $2.9 million. Among their charitable purposes are: to provide direct financial support or other assistance to the 26 families who lost loved ones; to create scholarships and an endowment to support Newtown’s children and youth; to purchase memorial trees; pay for construction of a physical memorial to those lost; and to recognize, support and inspire acts of kindness.

Connecticut Attorney General Seeks Info From Newtown Charities (Mar. 29)

Connecticut Attorney General George Jepsen and Consumer Protection Commissioner William M. Rubenstein are seeking more information about the amount of money collected and the intended purposes of dozens of charities related to the Newtown school shooting. Officials cited estimates that more than $15 million has been donated to Newtown-related charities since the Sandy Hook Elementary School shooting in December in which 20 children and six educators were killed. The Attorney General and Consumer Protection Commissioner have sent a request for information to 69 charities registered with the state or identified as having accepted donations related to the tragedy.

Ohio Attorney General Reaches Agreement with AMVETS Organization Over Charitable Assets (Mar. 27)

Ohio Attorney General Mike DeWine announced he has reached an agreement with three AMVETS organizations to protect charitable assets raised by those organizations for unemployed veterans and other veteran’s services. The agreement follows an investigation by the Attorney General that uncovered the misappropriation of millions in charitable funds held by the three AMVETS organizations for the benefit of unemployed veterans, veterans in need of career training, ROTC programs, veterans scholarships, veterans hospitals and homeless veterans.

Michigan AG's Report Indicates That Michigan Charities Get Thirty-Five Percent of Third-Party Funds Raised (Mar. 12)

Michigan Attorney General Bill Schuette issued its first annual report, “Professional Fundraising Charitable Solicitation Report” focusing on third-party fundraising on behalf of charities. The report contains data detailing charities, professional fundraisers, their contracts, and their fundraising results. The big news from the report is that charities receive less from third-party fundraising than the professional fundraisers do, with fundraisers getting almost $2 for every dollar charities that use these third-party services receive.

New York Attorney General Continues Charity Disclosure Tour (Mar. 1)

New York State Attorney General Eric Schneiderman held a public hearing in Buffalo last Thursday, his second of three such hearings, relating to the disclosure of charity funds used in elections. Under the new rules, nonprofit organizations spending more than $10,000 related to elections would be required to file and disclose itemized schedules of expenses and contributions. The regulations would largely affect organizations with 501(c)(4) "social welfare" status.

New Jersey-based Hurricane Sandy Charity Must Freeze Donations (Feb. 28) 

The New Jersey Attorney General’s Office has temporarily barred the operators of a purported Sandy relief charity from soliciting contributions and ordered them to put the $631,000 raised thus far into an escrow account. This mandate comes one week after the state filed a lawsuit claiming that the foundation was not properly registered as a charity and that its principals had engaged in fraud. The state’s lawsuit alleges that the foundation misled donors by telling them contributions would be used “toward immediate relief” of storm victims, but then leaving most of what was raised sitting in bank accounts.

Experts at 2013 Charities Regulation Policy Conference Says Government Regulators Need More Money and Data (Feb. 12)
State charity regulators need more money, better tools, and greater access to information so they can monitor rapid changes in the nonprofit environment, including new ways of raising money for social causes, participants in a conference on charity regulation said last week. Speakers at the conference, which was organized by Columbia University Law School’s Charities Regulation and Oversight Project and attracted regulators from 40 states, called for new laws or a new federal regulatory body more fitting for today’s nonprofit environment.

New Jersey Attorney General Reviewing Proposed Sale of Nonprofit St. Mary's Hospital to California For-Profit Hospital Company (Jan. 21)
The New Jersey Attorney General's Office is reviewing the proposed sale of nonprofit hospital St. Mary's, which is the last hospital operating in Passaic, to California For-Profit hospital company Prime Healthcare Services (PHS). Under New Jersey law, the Attorney General is required to review any proposed conversion of a charity to for-profit status, in order to ensure that benefits the institution enjoyed as a nonprofit are protected for the public. Among the questions being asked by Attorney General is why St. Mary's trustees are willing to accept only a five-year commitment by PHS to maintain the hospital as an acute-care facility.

Ohio Attorney General DeWine Files Complaint Against Ministry for Alleged Violation of Charity Act (Jan. 16)
Ohio Attorney General Mike DeWine has filed a 37-count complaint against the Ministry in Marketing and its president for misappropriating funds that it raised by selling coupon books in the name of charity, and for misleading donors and consumers. Specifically, the AG alleges that the Ministry failed to register with the state before engaging in solicitation there, falsely presented itself as a 501(c)(3) nonprofit, and failed to give charities sole control over the funds it collected on their behalf. A Richland County judge granted the AG's request for a temporary restraining order prohibiting the ministry from soliciting for charity in the state and freezing its bank accounts. The Ministry, through its lawyer, called the AG's allegations "wholly untrue."

Price of Board Inaction $5.5m for One Charity (Jan. 14)
In this Chronicle of Philanthropy piece, attorney Michael Peregrine details the consequences for a nonprofit student housing organization in New York whose board's actions and inaction drew the ire of the NY Attorney General's Office. The Board allegedly failed to properly review the organization's financial relationships with its CEO and with a separate company owned by the CEO's wife, as well as its executive and trustee pay decisions. For their alleged lack of due diligence, the organization's CEO and its five board members paid a total of $5.5 million to settle the matter, of which the board members were required to pay $1 million while resigning from their positions and agreeing never to serve in a fiduciary role in a New york nonprofit. Peregrine emphasizes the need for boards to closely scrutinize their organization's financial relationships, and to make use of outside advisers in their assessments.

NY Attorney General Releases Report on Charitable Solicitation by For-Profit Telemarketing Firms (Jan. 3)
The New York Attorney General's Office has released a report, "Pennies for Charity: Where Your Money Goes" concluding that state-wide, telemarketers keep nearly 40% of the funds they collect on behalf of charitable organizations.  The report examined 602 fundraising campaigns by professional telemarketers, who generated $240.5 million in donations. Just 49 campaigns saw charities receiving more than 65% of donations, which is the threshold identified as acceptable by the Better Business Bureau. The AG's Office is following up on the report with an investigation to determine if any charitable solicitation laws have been broken, focusing particularly on campaigns that repeatedly result in little or no money going to charity.

Access the 2012 report here.

Connecticut Attorney General Jepsen Cautions Residents to Beware of Charitable Giving Scams in the Wake of Newtown Tragedy (Dec. 24)
Connecticut Attorney General George Jepsen and Department of Consumer Protection (DCP) Commissioner William M. Rubenstein are warning residents to be wary of those seeking to exploit the mass shooting in Newtown through charitable giving scams. They asked potential donors to charitable requests to take a number of precautions, including giving only to well-known charities, specifying the purpose of any donation, be suspicious of email, social media or telephone solicitations (which are more likely to be used for fraud), do not give if coercive tactics are used, avoid cash donations, do not make checks out to individuals and do not provide personal financial information to solicitors.

New York Attorney General Schneiderman Announces Electronic Filing for Charities (Dec. 17)
New York Attorney General Eric Scheinderman has announced the launch of an electronic filing system for charities registered with the state to submit required financial filings. The system will allow charities to submit their federal and state forms simultaneously using the website Form990.org, a service provided by the Urban Institute's National Center for Charitable Statistics. Efiling was recommended by the Attorney General's Leadership Committee for Nonprofit Revitalization, composed of nonprofit leaders from across the state, and will not only provide convenience to filing charities but will allow expedited dissemination of filing information to the public

Charities Head Calls Vermont Fundraising Report Misleading (Dec.13)
The head of a prominent Vermont charity is disputing the significance of a Vermont Attorney General report on the percentage of charitable donations kept by professional fundraisers misleading.  Matt Vinci, head of Professional Firefighters of Vermont, argues that the report, which shows that 75 percent of money donated to Vermont charities through paid fundraisers goes to the fundraiser rather than the charity, is misleading because it fails to recognize overhead and other expenses that go into fundraising, and the fact that some organizations are simply not equipped to organize and carry out their own fundraising campaigns. The Vermont Attorney General's office insisted that the report is not intended to "get into the weeds" of who pays for what but is simply intended to show that some significant portion of a donation through a paid fundraiser does not go to the charity. The Vermont Attorney General's Office is looking to identify alternatives to the current paid fundraiser model for charities that lack the capacity to do their own fundraising.

New York Attorney General Adopts New Nonprofit Rules (Dec. 13)
New York Attorney General Eric Schneiderman has proposed new regulations that would require nonprofit organizations registered in the state to report their spending on political campaigns. Under the regulations, which would take effect early next year, organizations spending $10,000 or more on local, state and federal elections in New York would be required to submit itemized reports detailing that spending, which would be released publicly. The New York Attorney General, who oversees the state's charities, is empowered to unilaterally change disclosure rules.

Independent Sector Defends Charitable Deduction (Dec. 11)
Independent Sector, a leadership network for nonprofits, foundations, and corporate giving programs, has published a two-page ad signed by 945 organizations urging President Obama and Congress to  “preserve the charitable deduction" as they negotiate to avert what is being called "the fiscal cliff," tax increases and spending cuts scheduled to begin January 2. President Obama's current proposal is reported to include a reduction in the tax deduction that wealthy people get for their charitable gifts from 35 percent to 28 percent. Republicans, meanwhile, are reported to favor a limitation of all itemized deductions. Independent Sector and many nonprofit leaders argue that any such limitations would depress giving, but are declining to take political sides on the issue.

Vermont Attorney General Report Finds That Paid Fundraisers Continue to Keep Lion's Share of Donations (Dec. 11)
The Office of Vermont Attorney General Bill Sorrell has released a report analyzing fundraising data in the state over the last two years, and finding that more than two-thirds of the total dollars donated to charity through professional fundraisers went to the fundraiser rather than the charity.  The report found that Vermont charities using paid fundraisers received a smaller proportion of the money raised than out-of-state charities that used paid fundraisers. The Report recommends that charities and donors alike educate themselves as to the percentage of donated dollars going to charity, highlighted a database on the Attorney General's website allowing them to do just that, and pointed to private organizations that rate charities based on various factors, including their fundraising expenses.

Commentary: A Step Backward for Religious Accountability Measures (Dec. 10)
In this piece fo commentary, Nonprofit Quarterly columnist Rick Cohen examines the conclusions of a 91-page report released by the the Evangelical Council for Financial Accountability (ECFA) on new measures for the financial accountability of the more than 1 million nonprofit religious institutions in the United States, submitted at the request of Iowa Senator Charles Grassley. According to Cohen, the report essentially argues that religious organizations should be permitted to self-regulate and that establishing accountability should be the responsibility of the organizations' donors. Cohen considers this position highly dubious, given the huge number of donors giving to religious organizations - giving rise to a collective action problem - and the lack of transparency resulting from the fact that such organizations are not required to file full form 990s.

AG Schneiderman Obtains $5.5m Settlement For Self-Dealing at Leading Not-for-Profit Provider of Student Housing (Dec. 10)
New York Attorney General Eric Scheiderman has announced a $5.5m settlement with not-for-profit student housing provider Educational Housing Services, Inc. (EHS) over alleged self-dealing by the organization's President and breach of fiduciary duty by the EHS board. Former EHS President George Scott - who has been removed - and his wife are alleged to have siphoned off millions of the organization's funds for personal use through the use of a shell company they created. The EHS board breached its fiduciary by providing Scott with an excessive salary and lavish benefits, including paying for transportation between Scott's Aspen Colorado home and New York and a stipend for a Brooklyn Heights penthouse apartment.  Under terms of the settlement, Scott and the shell company Scott and his will pay $4.5 million in restitution and the directors on EHS's board will pay another $1,000,000.

Texas AG to Seize Assets of Christmas Bureau Charity ( Dec. 6)
The attorney general of Texas has received permission from a judge to seize the assets of Christmas Bureau of Austin and Travis Counties, a charity that purports to provide assistance to needy families around the holidays.  The Attorney General alleges that the  organization breached its fiduciary duties by spending donations on personal expenses.  The charity has received more than $26,000 in recent months yet claims it has less than $100 in its accounts.  Probate Judge Guy Herman has issued a restraining order against all individuals involved with Christmas Bureau, including its current president, former president and former executive director.

The Texas Workforce Commission Supports Cracking Down on Payroll Fraud (Dec. 5)
The Texas Workforce Commission has unanimously voted to urge the legislature to crack down on employers who commit payroll fraud, as more employers report their inability to compete in a marketplace where such cheating occurs on a rampant basis.

Religious Leaders Tell Congress No New Laws are Needed to Curb Abuse (Dec. 5)
In a report by the Commission on Accountability and Policy for Religious Organizations, religious leaders from a variety of faiths have strongly rejected the notion that new laws may be needed to curb tax abuses by religious organizations, such as excessive spending on salaries and other perks. The Commission - which was organized by the Evangelical Council for Financial Accountability - issued the report in response to a request by Iowa Senator Charles Grassley, and concluded that some of the proposed legislation, such as narrowing rules that exempt churches from filing tax documents or specifying who can qualify for clergy tax-free housing allowance, were either unconstitutional or unnecessary. Senator Grassley agreed that efforts to limit abuse should minimize burdens on aboveboard organizations, but that the report failed to address some key issues, including how to prevent organizations from exploiting vagaries in the law for individual benefit.

NY Charity Corps Expands Resources for Nonprofits (Dec. 4)
Charity Corps, a joint initiative of the New York State Attorney General's Office and the New York State Bar Association, will seek in its second year to double the number of nonprofits it serves, matching them with volunteer lawyers who can assist in navigating the state's complex laws regulating charities. According to Charity Corps' chair Lesley Rosenthal, who is also general counsel of the Lincoln Center for the Performing Arts, New York state is home to more than 80,000 charities, only one quarter of which have regular access to legal counsel. Charity Corps' volunteer lawyers are drawn from top local firms as well as legal services organizations and are trained to assist with a variety of legal issues that charities face, including regulatory, fundraising and registration matters. Nonprofits seeking assistance from Charity Corps beginning next year must apply by Jan. 15; the Charity Corps website can be accessed here.

A Hospital War Reflects a Bind for Doctors in the U.S. (Nov. 30)

(Vastly) Exaggerating the Value of Donated Goods (Nov. 29)
An international Christian aid organization, World Help, has self-reported that it overestimated the value of goods donated to it in 2011 by $127 million. World Help claims that the value of medical supplies it received from Direct Relief International was accurately recorded as $3.3 in shipping records and Direct Relief's own tax return, but that the documentation World Help received stated the value at $106 million. World Help attributes the change in the documentation to tampering.  Nonprofit Quarterly  columnist Ruth McCambridge expressed skepticism at the notion that World Help would not have discovered this discrepancy earlier. She noted that Forbes magazine has recently been investigating cases of goods overvaluation, in light of the fact that the magazine's list of top 100 largest charities includes many that receive a large portion of their donations in the form of in-kind gifts.

Tacoma, WA to Tax Nonprofit Health Systems Like Businesses (Nov. 29)
The City Council in Tacoma Washington has voted to tax two large nonprofit health systems - Multicare and Franciscan - the standard business-and-occupation tax rate, which would raise approximately $5.5 million for the city in fiscal year 2013-2014. The tax applies only to healthcare nonprofits with gross income with $30 million or above.  A number of localities, primarily in the Northeast and Midwest, have taken similar action, on the grounds that nonprofit hospitals act and run much like businesses and regularly pay their CEOs upwards of $1million per year.  The hospitals in Tacoma object to the new tax, arguing that they should not be responsible for filling the city's budget gaps, and that in fact Tacoma's fiscal problems are systemic and would resist such short-term fixes.

Michigan Attorney General Schuette Teams With Nonprofits to Fight Charities Scams (Nov. 17)
Michigan Attorney General Bill Schuette is partnering with the Michigan Nonprofit Association, Council of Michigan Foundations and Michigan Association of United Ways on a brochure providing the public with information and tips to avoid scams in their charitable giving. The publication, entitled "Giving Wisely," is designed to coincide with the flurry of charitable giving and fundraising appeals that come around end-of-the-year holidays. “Giving Wisely is the commitment of Michigan nonprofits to work with government to educate and protect our donors from fraud, waste and abuse,” said Kyle Caldwell, President and CEO of the Michigan Nonprofit Association.

Tennessee Comptroller Audit Finds Community Health Network Misspent Funds (Oct. 19)
According to an audit by the Tennessee Comptroller, nonprofit Community Health Network - an organization which helps doctors deliver healthcare in rural areas using video and computer technology - misspent more than $1.2 million in a three-year period, with $90,000 simply pocketed by two of the organization's leaders.  When the organization's former CEO, Keith Williams, abruptly resigned in January 2010, its board began to uncover Williams' mismanagement, through which he gave himself more than $80,000 in unauthorized benefits and, along with the group's former assistant director Paul Monroe, falsified grant invoices and grant reports, misused state funds and spent $1.47 million on a computer system that was never used. After Williams' resignation, Community Health Network hired an accountant to perform a forensic audit and reported its concerns to the state.

Top Breast Cancer Charities Agree to Clearly Disclose Terms of Cause Marketing Campaigns (Oct. 18)
The NY Attorney General has announced that the nation's two largest breast cancer charities, Susan G. Komen For The Cure and the Breast Cancer Research Foundation, have agreed to apply a set of best practices recommended by the NY AG's Charities Bureau to their "pink" cause marketing campaigns. The guidelines will apply  where companies sell products adorned with the charities' pink ribbons and similar symbols, to ensure that consumers know whether their purchase triggers a donation - and if so, in what amount - or merely draws attention to the cause. Companies involved in the campaigns will also disclose any limitations or restrictions on their giving and to post the total amount raised on their website. Combined, the two charities raised more than $70 million through cause marketing campaigns in the fiscal year 2012.

NY Attorney General's Charities Bureau Releases Guide on Best Practices for Cause Marketing (Oct. 18)
The Charities Bureau of the New York Attorney General's Office has released "Five Best Practices for Transparent Cause Marketing," which provides guidelines to charities and companies that collaborate to market products with a pledge that some portion of proceeds will go to charity. The guide emphasizes disclosure, noting that any promotion, the amount going to charity for each purchase, and any limitations or conditions should be clearly defined. For campaigns using social media platforms, the same approach to disclosure should apply, and companies should provide real-time data on the amount of donations generated. The guide additionally emphasizes that charities and consumer should know their rights and obligations when participating in cause marketing campaigns.

Michigan Senate Passes Blue Cross Overhaul Legislation (Oct. 17)
The Michigan Senate has passed legislation that would end Blue Cross Blue Shield of Michigan's tax-exempt status and regulate the insurer under the same regulatory framework as its competitors; previously, Blue Cross of Michigan been regulated under a separate statute in its capacity as the state's insurer of last resort (meaning it must provide insurance coverage regardless of a customer's health status). That status has been made redundant by federal legislation requiring all insurers to provide coverage regardless of health status. The measure would require Blue Cross to pay taxes - estimated at $100 million annually - and to contribute $1.5 billion over 18 years to a foundation that would perform "social mission work" including improving public health and health care access. Michigan Attorney General Bill Schuette praised some of the bill's measures as "a step in the right direction" but opposes it - along with the Consumers Union, advocacy arm of Consumer Reports, and senior advocacy group AARP of Michigan - because it does not go far enough. The legislation now goes to the Michigan House for consideration.

Michigan AG Approves Proposed Marquette Hospital Sale (Aug. 31)
Michigan Attorney General Bill Schuette has approved the sale of Marquette General Hospital to Duke Lifepoint LLC. After assigning an eight-person team to review the proposed sale, Schuette concluded, in a formal report, that the hospital's board of trustees had fulfilled its fiduciary duties duties, properly preserving the hospital's charitable assets.The sale is valued at $483 million and will allow the hospital to pay off more than $100 million in long-term debts. As part of the approval, Duke Lifepoint will pay an additional $8 million to the Marquette General Foundation, must provide periodic reports to the Foundation detailing the hospitals operations for ten years, and both parties recognize the Attorney General's ongoing authority to enforce the terms of the sale, including Duke Lifepoint's duty to provide charity care, continue core services and invest capital.

Texas Troopers Charity Under State AG Scrutiny Closes Doors (Aug. 28)
The Texas Highway Patrol Museum, which was sued by state Attorney General Greg Abbott for misusing charitable donations, has closed its doors.  The Museum raised more than $12 million between 2004 and 2009 claiming to benefit state troopers and their families, but spent less than 1% of every dollar raised on that charitable purpose. Under the terms of a settlement with the state, the charity running the museum will be dissolved, and a court-appointed receiver will sell some of the museum's assets, providing $10,000 death benefits to a number of troopers' widows who were promised them. Additionally, most of the museum's top employees are banned from managing any entity in Texas that purports to benefit law enforcement.

Illinois Attorney General Madigan Sues "Animals for Autism" Charity, Alleging Fraud (Aug. 24)
Illinois Attorney General Lisa Madigan has announced a settlement with state resident Lea Kaydus, who ran a charity that claimed to provide service dogs to children with Autism Spectrum Disorder.  The lawsuit alleges that Kaydus and her organization, Animals for Autism, solicited donations and took payments from families around the country, promising - but never delivering - service dogs for their children. Madigan says that Kaydus collected at least $5,190 from the families in violation of the Illinois Consumer Fraud Act and Solicitation for Charity Act. The settlement requires Kaydus to provide restitution to the families from whom she accepted money and to come into compliance with state charitable protection and consumer fraud laws.

Massachusetts AG Sues Veterans' Charity (Aug. 16)
Massachusetts Attorney General Martha Coakley has sued Bay State Vietnam Veterans Inc. (BSVV), alleging that the veterans' charity engaged in deceiving fundraising practices. According to the AG's office, the charity and a professional fundraising company it hired, Dynamic Marketing Solutions Inc., claimed that all donations would go directly to benefit veterans when in fact 85 percent of each donation was kept by Dynamic. Dynamic representatives additionally are alleged to have claimed they were volunteers for BSVV and on several occasions, that they were themselves veterans' returning from Afghanistan. The suit seeks$5,000 in civil penalties for each deceptive act committed by the defendants, and the Superior Court judge has issued a temporary restraining order preventing either organization from transferring funds raised or destroying any relevant records.

Iowa AG Files Suit Against  Florida For-Profit Fundraiser (Aug. 16)
Iowa Attorney General Tom Miller has filed a lawsuit against Florida-based for-profit fundraising company Courtesy Health Watch Inc. (CHW), alleging that the company made false and misleading statements to Iowa residents in the course of its telephone solicitations. According to AG Miller, CHW representatives told potential donors that making a donation would stop future solicitation calls when doing so in fact led to more solicitations, insinuated that they were directly connected with the charities for which they were soliciting rather than a paid fundraiser, and misrepresented how much of each donation went to the charities. CHW also allegedly called Iowans repeatedly despite asserting that they would call only once per year. The lawsuit seeks an injunction requiring CHW to cease making deceptive statements in its solicitation calls to Iowans and seeks attorneys' fees and civil penalties.

California Attorney General Sues Wounded-Veteran Charity (Aug. 9)
California Attorney General Kamala Harris has filed a lawsuit against the charity Help Hospitalized Veterans, which claims to run programs for military veterans and active-duty personnel but has allegedly been engaging in self-dealing, and has spent donations on excessive salaries and perks such as an $80,000 golf membership and the use of a condominium. The organization, which has been in existence since 1968, has been criticized for spending a meager percentage of donations received on its programming; in 2011, for example, the organization spent only 35% of it $45 million revenue to assist military personnel. The lawsuit seeks the recovery of $4.3 million in illegally-diverted funds and the removal of several of the organization's board members and officers.

New York Attorney General Investigates Nonprofit Groups' Political Spending (Aug. 9)
New York Attorney General Eric Schneiderman is investigating dozens of tax-exempt groups that are spending massively in this year's election. AG Scheiderman is requesting tax and other financial information from the groups in question, known as 501(c)(4) or social welfare organizations, which purport to be educational in nature and therefore need not disclose their donors as super PACs, candidates and political parties must do. While social welfare organizations are permitted engage in some political activity, such activity may not consume the majority of their spending and resources, and Schneiderman's inquiry appears designed to determine whether the nonprofits he is investigating are exceeding the permitted amount of political activity, even though IRS guidelines do not clearly define this threshold.

Illinois AG Madigan Sues Charity Director for Misuse of Funds (Aug. 3)
Illinois Attorney General Lisa Madigan has sued the director of Chicago-based charity Organization of New City for spending over $350,000 in contributions on himself, more than $200,000 of which came through checks written to casinos or withdrawals from casino ATMs  The Organization, which purported to provide support and services to the poor and elderly, was a registered charity in Illinois through 2011, but had its registration cancelled when it failed to file annual reports for 2008-2010 as required by law. AG Madigan's lawsuit seeks an injunction, an accounting of the organization's finances, fines, punitive damages and reimbursement to the AG for costs of the investigation.

Iowa AG Secures Ban on Telemarketer Making False Claims (July 31)
Iowa Attorney General Tom Miller has secured a temporary injunction requiring an Arizona based telemarketing company, Action Point LLC, to stop making sales calls Iowans, alleging that representatives  for the company falsely claimed to be seriously disabled veterans and that a portion of proceeds from the sale of consumer goods would go to support services for disadvantaged veterans. AG Miller's lawsuit seeks to permanently enjoin the defendants from making deceptive calls to Iowans, require the company to pay civil penalties, honor refund requests and reimburse the state for attorney fees.

New Jersey Sues Two Men for Running Bogus 9/11 Charity (July 30)
The New Jersey Attorney General's Office has filed a lawsuit against two state residents for allegedly accepting tens of thousands of dollars in donations for a fraudulent 9/11 charity. The lawsuit alleges that one of the men falsely claimed to be an ex-Navy SEAL while soliciting donations, and that both used the donations on personal expenses and failed to register the charity as required by law.

Ohio AG: New Indictment in Navy Charity Scam Case (July 25)
An Ohio grand jury has reindicted a man, known only as Bobby Thompson, for his role in a $100 million charity scam collecting donations for Navy veterans. The 24-count indictment includes charges for complicity in money laundering and identity fraud against the man, whose identity is unknown. "Thompson" was arrested in Portland, Ore., in May and has pleaded not guilty.

'Three Cups of Tea' Charity Expands Its Board in Settlement (July 19)
The Central Asia Institute, a charity founded by "Three Cups of Tea" author Greg Mortenson, has agreed to add seven new board members to its current three-member board as part of a settlement over allegations that Mortenson mismanaged the organization. The board expansion was spurred by a Montana Attorney General investigation that concluded that the Institute's board did not exercise proper oversight of Mortenson's management and activities, leading to improper expenditure of organizational funds on Mortenson's personal expenses.  The settlement additionally calls for Mortenson to reimburse the Institute more than $1 million and relieves him of any financial oversight within the organization, although it allows him to remain as a nonvoting board member.

California Attorney General Actively Reviewing animal Charity Executive (July 13)
The California Attorney General is "reviewing" SPCA executive Terri Crisp, who had agreed in 2007 not to serve as an officer or executive at any nonprofit as part of a settlement between the State and the charity Crisp headed, Noah's Wish. Noah's Wish, an animal rescue charity, and Crisp were alleged to have improperly handled donations intended to support rescue and car for animals affected by Hurricane Katrina, agreeing to return more than $million dollars in donations. Crisp responds that she is an employee, not a director, at SPCA.

Freeh Report Raises Penn State Accountability Questions (July 12)
An independent report by Former FBI chief Louis Freeh and his law firm into allegations of sexual abuse of young boys by former Penn State assistant football coach Jerry Sandusky concludes that  in their failure to properly investigate allegations of abuse, "the most senior leaders at Penn State" displayed "total and consistent disregard" for Sandusky's victims. Although Sandusky met many of his victims through the charity he founded, "Second Mile," the report asserts that whether they were clients of Second Mile or participants in Penn State programs, the University was responsible for their safety and protection. The report concludes that Penn State officials were motivated more by concern for the reputation of the University itself than by the well-being of its constituents, and that the Board of Trustees, largely unaware of its legal duties to report allegations of sexual abuse and responsible for a culture of little accountability, failed in its oversight duties.

Read the full report and watch the press conference here.

NH Center Gauges Exec Pay at Nonprofit Hospitals (July 2)
The New Hampshire Center for Public Policy Studies has released a study on executive compensation at nonprofit hospitals in the state that was requested by the New Hampshire Attorney General's Office. The report found that average salaries increased 18% between 2006 and 2009, although there was great variation between hospitals, with some CEOs salaries dropping while others increased by 50%. The report also found no correlation between executive pay and either hospital cost or quality of care, and found that most but not all hospitals met Internal Revenue Service standards for determining executive pay levels.

Access the full report on the NH Dept. of Justice website 

Opinion: what to Expect Now That the Supreme Court Has Upheld Health Care Reform Law (June 28)
In this Nonprofit Quarterly piece, Rick Cohen details the potential impact on nonprofits following from the U.S. Supreme Court's decision upholding the Patient Protection and Affordable Care Act (PPACA). Cohen makes several specific predictions: an increase in advocacy from nonprofit groups that oppose aspects of the law, such as Catholic organizations; resistance among some states to instituting the Act's reforms, particularly state-based health insurance exchanges; conflict over how and where funding to implement the bill is directed; a number of legislative and regulatory fixes to flaws in the current reforms, including increasing the incentives for small businesses and nonprofits to provide insurance to their employees; increased scrutiny of nonprofit hospitals; and the need for nonprofits who support the reforms to assist in implementing them by continuing funding, educating clients and providing services.

New York Attorney General Inquiry Looks Into a Shield for Donors in Elections (June 26)
New York Attorney General Eric Schneiderman has begun an inquiry into contributions to tax-exempt organizations heavily involved in politics.  A focus of the inquiry is a foundation funded by the U.S. Chamber of Commerce, from which Scheiderman e-mails, bank records and other documents to determine whether the foundation illegally funneled $18 million to the chamber for political and lobbying activities. The investigation is the first into tax-exempt groups that are expected to spend hundreds of millions on issue advertisements attempting to influence the upcoming presidential and Congressional elections.

Kentucky Nonprofit Hospice Found to Do Business with Firms Connected to Board, Executives (June 23)
Based on its tax returns from 2005 through 2010, the Kentucky nonprofit Hospice of the Bluegrass has entered into more than $1.82 million worth of business deals with firms associated with board members and spouses of its executives. While not strictly illegal, such insider transactions are ethically precarious, as they create potential conflicts of interest. Assistant Attorney General David Spenard, who represents the state of Kentucky in its supervision over non-profits and charitable trusts, noted that if at all possible, nonprofit organizations should avoid such transactions, known as "self-dealing," saying, "I don't think it's per se wrong, but it's something you should try to navigate around." The Hospice asserted through an attorney that its board of directors approved all of the transactions at issue and that the services were necessary and the prices paid were reasonable.

Delaware AG Alleges That DuPont Trust Run Improperly (June 18)
Delaware Attorney General Beau Biden is alleging that overseers of the $4 billion Alfred I. duPont charitable trust have deviated from the trust's intended purpose by shifting the proportion of its distributions from Delaware to Florida. The duPont trust funds the work of the Nemours Foundation, which runs the Alfred I. duPont  Hospital for Children in Delaware and other facilities in Delaware, Florida, New Jersey and Pennsylvania, as well as the Nemours Mansion and Gardens in Wilmington Delaware. Officials claim that by counting $72 million used to reniovate the Nemours Mansion and Gardens against Delaware's share of the Nemours Foundation distributions , and unevenly assigning other costs to Delaware,  trust officials have deprived Delaware of its proper share of trust distributions. Biden is seeking a declaratory judgment to ensure proper governance and financial accounting of the trust, after intervening in a case in which the duPont trustees are attempting to modify the trust for tax reasons.

NH Passes Ban on Sweepstakes Gambling Machines (June 8, 2012)
Both houses of the New Hampshire legislature have passed a bill that would close most of the state's 150 to 200 video slot machines. The machines operate through a system in which users buy phone or internet time cards and receive credits that they can spend on the machines. The new law expands the definition of gambling to include circumstances where it is clear that what customers are purchasing is really the opportunity to play the sweepstakes.  The bill was drafted by the state attorney general's office, includes fines of up to $5,000 per day for each machine, and gives authority to local officials to close gaming centers. New Hampshire's governor is expected to sign the bill. 

How Businesses Raise Money for Charity on Social Networks (June 5, 2012)
In this podcast, Alison Fine, an expert on nonprofit communications and technology, and Heather Campion, Northeast Bancorp's chief administrative officer, discuss how an internet savings bank - Ablebanking - uses social media to market its services as well as encourage customers to donate to charity. Under Ablebanking's model, the bank charges no fees and promises to donate to charity the advertising dollars it saves without the overhead of physical branch locations and by using social media instead of traditional advertising methods. The bank gives new customers $25 to give to any nonprofit they choose, as well as .25% of each customer's account balance each year. Finally, the bank's website offers a series of resources to facilitate giving, including a series of promotional videos for partner charities and a search function that provides a list of charities close to a provided zip code.  The bank does not charge any fee to the customer or to the charities that receive donations through its platform.

How Nonprofits Can Prevent Fraud (June 5, 2012)
The Chronicle of Philanthropy's hosted on live online discussion on the topic, How Nonprofits Can Prevent Fraud, featuring two guests: Michael S. DeLucia, a trustee for the Agnes Lindsay Trust and former director of Charitable Trusts in the New Hampshire Attorney General’s Office from 1996 to 2010; and Bradford E. Cook, who works with nonprofits as an attorney for Sheehan, Phinney, Bass and Green in New Hampshire. Responding to questions posed by a Chronicle moderator and by online participants, the two discussed topics including the role that board members, top executives, and staff can play in preventing fraud and how nonprofits can identify and eliminate weaknesses in their financial systems that make embezzlement easy for employees to accomplish.

Real Innovation in Social Change Lies in Reinvention, May 23

Real Innovation in Social Change Lies in Reinvention
This piece in the Chronicle of Philanthropy argues that innovation in the field of social change depends not on new ideas but on a restructuring of the field itself. It describes some of the ways in which this restructuring is beginning to occur, including new mechanisms of financial support (growth capital, foundation loans, social-impact bonds, and investments that seek both financial and social returns); a convergence of business, government and nonprofit models and functions; and increasing demand for measurable public benefit as a return on investment. The piece then argues for finding ways to expand new platforms currently garnering capital and management support for social businesses to nonprofit social entrepreneurs as well.

Massachusetts Senate Considering Budget Amendment Limiting Compensation of Directors and Officers of Public Charities, May 22

Massachusetts Senate Considering Budget Amendment Limiting Compensation of Directors and Officers of Public Charities
The Massachusetts Senate is considering a state budget amendment that would limit the compensation paid to officers and senior managers of public charities and would wholly prohibit compensation of members of boards of directors. The amendment would apply to charities with gross revenue over $1,000,000 and would limit compensation of executives to no more than $500,000 per year, while prohibiting board compensation. The bill would additionally establish a commission to which charities could apply for exemption. Organizations found to have violated the prohibitions would be subject to loss of their designation as a public charity.

Without State Oversight, Charities Disclose Scant Fundraising Costs, May 21

Without State Oversight, Charities Disclose Scant Fundraising Costs
A new study by the Scripps Howard News Service concludes that in states that carefully monitor how charities raise money, such organizations are far more likely to accurately disclose their fundraising costs to the IRS.  The study, which examined financial records of 37,987 major nonprofit groups provided by the watchdog group GuideStar, found that a majority of nonprofits in nine states reported to the IRS that they had incurred zero fundraising costs, a claim that charities watchdogs call ridiculous. The states from which the highest percentage of nonprofits reported zero fundraising costs to the IRS - including Indiana, South Dakota, and Idaho - were also the states with the least charitable oversight. By contrast, only 34 percent of nonprofits claimed zero fundraising expenses in states such as Massachusetts, Oregon and Colorado that review fundraising costs and issue "Do Not Give" lists of charities.

Michigan VFW's Receives Only 9.4% of Funds Raised by Its Commercial Fundraisers, May 20

Michigan VFW's  Receives Only 9.4% of Funds Raised by Its Commercial Fundraisers
In 2010, the Michigan Veterans of Foreign Wars received only 9.4% of the funds collected on its behalf by commercial fundraisers, a fact that angers donors but which the VFW's director calls a "necessary evil."  The VFW employs the services of a Canadian fundraising company called Xentel, Inc., which raised $1,047,563 in 2010 for the VFW but kept all but $20,000 of that sum for its own expenses. While the VFW explored doing the fundraising itself, start-up costs were prohibitive at over $100,000. Xentel submits an accounting of its expenses each year to VFW, which then reviews the report and passes it on to the Michigan state Attorney General's Office. Xentel's accounting reports are not highly detailed but the corporation claims that its net profit is approximately only 5 or 6 percent of funds raised. Meanwhile, the VFW's 990s for 2008, 2009 and 2010 listed zero professional fundraising expenses based on a loophole that allows such an assertion if a nonprofit never holds any of the funds collected and kept by a commercial fundraiser.

Cuomo Unveils N.Y. Nonprofit Reform Plan, May 18, 2012

Cuomo Unveils N.Y. Nonprofit Reform Plan
New York Governor Andrew Cuomo has released a plan to cap the amount of state funding that may be used by a nonprofit organization to compensate its executive directors in the state at $199,000. The cap applies to organizations receiving more than $500,000 from the state in a given year and for which state money represents more than 30% of total annual funding. Exceptions to the cap would be permitted if an organization can provide outside funding for the amount above the cap that they wish to pay, but only where the executive's pay falls below the top 25 percent in the field. Additionally, the regulations require nonprofits to spend at least 75%  of state funding on programming rather than overhead . 

Nonprofit Sector?s Big (Often Feared) Question Briefly Arises at House Hearing, May 18, 2012

Nonprofit Sector’s Big (Often Feared) Question Briefly Arises at House Hearing
Questioning and testimony during the House Ways and Means Oversight Subcommittee hearing on Tax Exempt Organizations largely focused on nonprofit organizations' concerns about recent changes in the form 990, and IRS responsiveness to those concerns. But a short colliquy between Los Angeles Congressman Xavier Becerra (D-Calif.) and Roger Colvineaux, an associate professor of law at the Catholic University of America in Washington, D.C., touched on an existential issue for nonprofits: whether the tax-exempt status of nonprofit organizations should depend on the affirmative public good provided by organizations rather than simply their adherence to proscriptions against particular actions, such as political activity. To follow Colinveaux's suggestion that it was time to consider favoring certain charitable activities over others would amount to a redefinition of what is a "charity." The issue is of critical import to many big charities, universities, hospitals, museums, and foundations and it remains to be seen whether the Ways and Means Committee will consider it.

American Democracy Demands Increased Nonprofit and Philanthropic Transparency, May 10, 2012

Opinion: American Democracy Demands Increased Nonprofit and Philanthropic Transparency (May 10)
In this opinion piece, the Nonprofit Quarterly's Rick Cohen explores arguments for and against increased transparency in the nonprofit and philanthropic realms, particularly as they relate to organizations affecting the political process. Cohen concludes that the American democratic system is sufficiently threatened by anonymous political expenditures that the fear of chilling support for unpopular causes is outweighed by the need  for accountability.  Cohen proposes a series of reforms to balance increased transparency with the risk that disclosure will be exploited to chill unpopular charitable activity.

Suspect Who Ran Fraudulent US Navy Veterans Charity Arrested, May 1, 2012

Suspect Who Ran Fraudulent US Navy Veterans Charity Arrested (May 1)
Ohio's Attorney General and the U.S. Marshalls Service have announced the arrest of a man alleged to have collected as much as $100 million for a fraudulent Florida-based charity claiming to serve U.S. Navy veterans. The man, who is known only by the false identity Bobby Thompson, has been a fugitive since being indicted in Ohio in 2010 on charges of theft and money laundering. Ohio investigators tracked the man through Arizona, Florida, Indiana, Massachusetts, Rhode Island, Washington and West Virginia, to Portland Oregon where he was arrested; U.S. District Judge John Acosta of Portland has ordered Thompson to be returned to Ohio. The man fled after legal counsel for the charity identified irregularities in the group's financial records and took her concerns to the Ohio and Florida attorneys general.

Minnesota AG Swanson Issues Investigative Report Criticizing Hospital's Debt-Collection Methods, April 27, 2012

Minnesota AG Swanson Issues Investigative Report Criticizing Hospital's Debt-Collection Methods
Minnesota Attorney General Lori Swanson has issued a report criticizing nonprofit Fairview Health Services for employing a company, Accretive Health Inc.,  that used what the AG called overly aggressive tactics in attempting to get patients to pay their bills. Among the report's allegations are that Accretive demanded payment before and during treatment, and that Accretive employees were improperly given full access to Fairview patients' medical records. Fairview CEO Mark Eustis maintained that the organization had not done anything to impair the individual care of any patient, but acknowledges patients' feelings to the contrary, and said that Fairview would not renew its contract with Accretive.

Ohio AG DeWine Settles with InfoCision Over Alleged Charity Call Violations, April 20, 2012

Ohio AG DeWine Settles with InfoCision Over Alleged Charity Call Violations
Ohio Attorney General Mike DeWine has settled with telemarketer InfoCision over allegations that the company failed to make required disclosures to consumers when it made solicitation calls on behalf of its nonprofit clients.  Among the disclosures that InfoCision callers failed to make were that InfoCision is a paid solicitor and how much of the funds raised would go to charity. In addition, the company failed to file timely financial reports of its activities with the state. InfoCision has agreed to pay $75,000 in fines, change its calling practices and send advance copies of scripts it will use for its calls to the Attorney General for review.

Arizona Attorney General's Office Sues Charity That Continued to Illegally Solicit Donations, April 18, 2012

Arizona Attorney General's Office Sues Charity That Continued to Illegally Solicit Donations
The Arizona Attorney General's Office, Charitable Trusts and Organization Section, has sued an Arizona charity for soliciting donations from Pennsylvanians without registering in that state. The charity, known as the Ironwood Pig Sanctuary, signed a consent agreement with Pennsylvania in 2010 requiring the organization to pay a fine for unregistered charitable solicitation in the state and to register before undertaking any further solicitation. Ironwood paid the fine but failed to register and then continued to solicit funds from Pennsylvania residents after a cease and desist order from the Pennsylvania Secretary of State. The lawsuit seeks an account of all funds raised while the Sanctuary was not registered, fines for solicitations that violated the Charities Act, costs and restitution.

Should Charities Be Protected from the Claws of Fraudulent Transfer Laws?, April 17, 2012

Should Charities Be Protected From the Claws of Fraudulent Transfer Laws?
This article explores the question of whether charities should be exempt from "clawback" provisions that allow victims of financial fraud, such as Ponzi schemes, to access funds that were transferred to third parties by the perpetrator of the fraud. In a Ponzi scheme, the fraud is maintained by using the principal investments of later investors to generate artificial “false profits” for early investors. The use of clawback provisions to recover donations to charities and religious organizations by fraudulent actors can have devastating effects on those organizations, and some are now arguing for leniency in such circumstances by shortening the statute of limitations under which a defrauded investor can access funds given to a charitable organization. The article sets out the basic structure of Ponzi schemes, federal and state clawback provisions and arguments for and against limiting their application to charities.

N.J. Division of Consumer Affairs Files Suit Against Unregistered Charity Marketer, April 13, 2012

N.J. Division of Consumer Affairs Files Suit Against Unregistered Charity Marketer
New Jersey Attorney General Jeffrey S. Chiesa and the New Jersey Division of Consumer Affairs have filed suit against a telemarketing company that is alleged to have solicited New Jersey residents on behalf of charities that are not registered in New Jersey.  The company also allegedly failed to keep financial records that are required to ensure that solicited donations are provided to charities as promised, and used for charitable causes. The company used teenage telemarketers to solicit consumers both inside and outside the state, according to the complaint. Telemarketers claimed that they represented charities with missions to help cancer patients, missing children, American veterans, or police officers. The State’s lawsuit seeks full restitution to consumers who made donations based on the company's solicitations, as well as civil monetary penalties.

Texas Department of Public Safety "Charity" Relinquishes its Assets, April 13, 2012

Texas Department of Public Safety "Charity" Relinquishes its Assets
The Texas State Highway Museum has voted to relinquish more than $1.2 million in assets, including the museum's building in downtown San Antonio, as the result of a lawsuit brought by Texas Attorney General Greg Abbot.  AG Abbot alleges that the charity squandered donations, with employees hiding questionable expenses from the Museum's board, including vacations, vehicle leases, visits to amusement parks and six-figure salaries. The Board, which is composed of current and former Department of Public Safety officials, voted in a recent meeting to relinquish the assets, which will be transferred temporarily to a court-appointed receiver and then to a yet-to-be-named nonprofit organization. A court filing by the Attorney General says the Board was not informed of the questionable expenditures and asked few questions, despite its responsibility to oversee the organization's finances.

Combined Federal Campaign Admits "Three Cups of Tea" Charity, April 12, 2012

Combined Federal Campaign Admits "Three Cups of Tea" Charity
The Central Asia Institute (CAI), a charity run and directed by "Three Cups of Tea" author Greg Mortenson, has been approved by the U.S. Combined Federal Campaign to be a recipient of the money raised through the Campaign's workplace fundraising.  The approval was made despite a report issued by the Montana department of Justice detailing Mortenson's and CAI's misuse of charitable assets, and a settlement with the Montana AG in which Mortenson agreed to repay $1 million to the charity he founded. The U.S. Combined FederalCampaign - which is like a United Way for federal workers - found that CAI met its requirements, while stating that the Campaign remained  “concerned about the charity’s lack of internal controls, as identified by the Montana Attorney General’s Office.”

State has a long list for charitable taxpayers, April 2, 2012

State Has a Long List for Charitable Taxpayers
New York State’s income tax form features a growing list of optional charitable donations for taxpayers. Line 60 of the state form offers eight causes to which taxpayers may donate via their tax bill, including the Department of Environmental Conservation; research into breast or prostate cancer, as well as Alzheimer's disease; and dedicated funds to help missing or exploited children, recruit firefighters and EMTs, or build and maintain the 9/11 memorial. The list has grown by legislation since the DEC was the first to be included in 1983, with the Volunteer Firefighting & EMS Recruitment & Retention Fund added only last year. The total raised via the tax form for each organization ranged from approximately $474,000 for the breast cancer research and education fund, to approximately $34,000 for the U.S. Olympic Training Center in Lake Placid. At least four additions to the list are currently being proposed.

Number of Charities and Foundations in U.S. Drops Sharply as New Law Goes Into Effect, March 29, 2012

Number of Charities and Foundations in U.S. Drops Sharply as New Law Goes Into Effect
The number of charities and foundations registered with the Internal Revenue Service dropped by 16 percent in 2011, largely as a result of the more than 272,000 organizations that lost tax-exempt status after running afoul of a 2006 law requiring organizations with annual revenue of $25,000 or less to file informational tax forms within three years. According to IRS figures, the number of groups classified under Section 501(c)(3) of the Internal Revenue Code totaled nearly 1.1 million in 2011, down from nearly 1.3 million in 2010. The IRS moved slowly in implementing the 2006 law, in part to give nonprofits time to submit the new information, but announced the organizations that had failed to comply in June of 2011. The latest figures signal a continued slowing in the number of charities created in the United States.

Colorado attorney general alleges Fort Collins shelter founder mishandled funds, March 23, 2012

Colorado Attorney General Alleges Fort Collins Shelter Founder Mishandled Funds
Colorado Attorney General John Suthers has sued a Fort Collins homeless shelter, alleging that its founder, Reverand Richard Thebo, used charitable donations to pay personal expenses, including his mortgage, credit card and veterinary bills, and a speeding ticket. The lawsuit names Thebo, Full Spirit Ministries and several of its board members, and seeks t a court order barring those parties from operating the shelter or any other nonprofit. Thebo responded that the allegations are “ridiculous” and says he has no plans to shut down the shelter. The complaint alleges that Full Spirit Ministries and its principals have misused at least $31,000 in charitable assets.

Idaho Attorney General Lawrence Wasden to St. Luke's: Put Brakes On Saltzer Buy Out, March 17, 2012

Idaho Attorney General Lawrence Wasden to St. Luke's: Put Brakes On Saltzer Buy Out
Idaho Attorney General Lawrence Wasden has sent a letter to St. Luke's Health System informing them of an investigation into recent st. Luke’s acquisitions by the AG’s Office and the Federal Trade Commission under federal antitrust law and under Idaho's Competition Act. The letter requests that St. Luke’s halt its  current acquisition of Saltzer Medical Group and any other acquisitions, in order to avoid additional expense and complications. A St. Luke’s representative stated that the health group would cooperate fully with the investigation. St. Luke's is Idaho's largest health care system with six hospitals and more than 100 outpatient centers and clinics throughout the state.

Getting Faith Out of the Gutters: Resolving the Debate Over Political Campaign Participation by Religious Organizations Through Fiscal Subsidiarity (2011)

 Getting Faith Out of the Gutters: Resolving the Debate Over Political Campaign Participation by Religious Organizations Through Fiscal Subsidiarity
This article proposes a solution to the debate over political campaign participation by religious organizations. Under this solution, section 501(c)(3) organizations would be allowed to increase political campaign activity in exchange for paying a “self-directed tax.” Organizations would then be able to direct government how to allocate the proceeds from the tax, by selecting from a preset group of spending choices. This approach represents a philosophical compromise, in which 501(c)(3) organizations receive the right to participate in political campaign activity in exchange for subjecting themselves to taxation, while maintaining a partial right not to provide a portion of their proceeds to government to do with as it pleases. 

NJ Attorney General Cites Questionable Law Enforcement Charities, March 7, 2012

NJ Attorney General Cites Questionable Law Enforcement Charities
The New Jersey Division of Consumer Affairs has released its most recent report on the spending of the state’s “10 Most Inquired About Charities.” The report allows consumers and donors to examine the annual expenditure reports of the charities that have generated the most calls from consumers to the Division's Charities Registration hotline during the most recent two-month period. The Better Business Bureau standards for Charitable Accountability state that a charity should allocate at least 65% of its expenses toward program expenses. Half of the charities in the most recent report failed to meet this standard.

A Nonprofit with Shareholders? The Koch Brothers? ?Hostile Takeover? of Cato Institute, March 2, 2012

A Nonprofit with Shareholders? The Koch Brothers’ “Hostile Takeover” of Cato Institute
A dispute at the libertarian think tank the Cato Institute involving the Koch Brothers, billionaire supporters of conservative causes, is bringing attention to that organization’s unusual and questionable governance structure. The institute was founded as a nonprofit in 1977 under a structure in which four “owners” each controlled 4 shares of stock worth $1 apiece. The Koch brothers now control half the stock and are arguing that the widow of a recently deceased shareholder must sell or give her shares to the remaining owners, which would give the Koch’s a controlling stake. Former IRS Exempt Divison head Marc Owens calls the Institute’s ownership structure “completely at odds with the requirements for [a nonprofit]” and says that the Institute is at “risk of retroactive revocation of its tax-exempt status back to 1977.” Cato’s tax lawyer acknowledges that while the structure may not be preferred by the IRS, the shares are a “strange breed of stock that doesn’t have any economic advantage to it.” He said that despite the use of the ownership nomenclature, the structure “is more of a control mechanism and in practice it’s not much different than a membership.”

Putting Your Money Where Your Mom and Pops Live, March 1, 2012

Putting Your Money Where Your Mom and Pops Live
A new movement, called Locavesting, seeks to make it easier for individuals to invest in local businesses, using mechanisms from credit unions to crowdfunding. Crowdfunding is currently restricted by securities laws that limit the types of projects and entities which may offer equity to their financial supporters. A new law in Congress that would relax the securities restrictions, the Entrepreneur Access to Capital Act (HR 2930), has passed the House of Representatives, has the support of President Obama and is now before the Senate. Until that bill passes, however, advocates are promoting “social investing,” which allows “investors” to provide “loans” to businesses in exchange for perks such as free products or services. These ventures are continuing to blur the increasingly hazy line between nonprofits and for-profits by combining entrepreneurial and charitable instincts and models in a variety of new ways.

SEC Commissioner Calls for Corporate Disclosure of Contributions to Political Nonprofits, February 27, 2012

SEC Commissioner Calls for Corporate Disclosure of Contributions to Political Nonprofits
Securities and Exchange Commission Commissioner Luis Aguila is advocating for mandatory disclosure of corporate political expenditures on the grounds that without disclosure, investors are deprived of crucial information regarding the activities of the companies they own. The argument against disclosure, that investors might withdraw funds from organizations engaging in political spending, is the same that major nonprofit leadership organizations have made in response to calls for corporate disclosure of charitable donations. Cohen calls for disclosure of both corporate philanthropic spending and political spending, which in fact overlap. “After all,” he notes “the primary instruments for undisclosed corporate campaign financing are 501(c)(4) ‘social welfare organizations’ which fund super PACs or themselves spend on behalf of their secret donors.”   

Medical Institutions Pay Big Salaries for Top Fundraisers, February 23, 2012

Medical Institutions Pay Big Salaries for Top Fundraisers
A number of large nonprofit medical institutions pay their fundraisers salaries over $500,000 per year, with one fundraiser earning $1.4 million in 2010 for Sloan-Kettering Memorial Center, a year in which Sloan-Kettering raised a total of $244.6 million. The institutions employing these fundraisers raised between $107.4 million and $698 million in 2010. An official at Morris & Berger, a firm that fills top jobs at nonprofit firms, stated that few fundraisers make more than $600,000 and that the majority make between $200,000 and $300,000.

How Governments Should Help Philanthropy: The Council on Foundations Perspective, February 23, 2012

How Governments Should Help Philanthropy: The Council on Foundations Perspective
In this piece, Cohen summarizes his conversation with Andrews Schultz, COF Vice President for Legal and Government Relations at the Council on Foundations, on how government can promote philanthropy, in particular through tax policy.  Schultz also discussed the future of the foundation community as it approaches its centennial, the Council's intentions to shift its legislative approach, streamlining the process of Program Related Investments (PRI), and the upcoming "Foundations on the Hill" day planned for late March.

New Deal Helps Small Charities Use Text Appeals, February 23, 2012

New Deal Helps Small Charities Use Text Appeals
The Mobile Giving Foundation - which connects charities to mobile carriers - and the BBB Wise Giving Alliance - a nonprofit connected with the Council of Better Business Bureaus - have developed a cooperative effort to allow small charities to solicit and receive donations by text. Under the deal, the two organizations will monitor participating charities to ensure they are meeting a set of 20 standards, in order to reassure mobile carriers who process the donations for free. Mobile Giving Alliance previously enabled mobile giving only for organizations that raise more than $500,000 per year.  The new standards will require charities to demonstrate governance, financial, and fundraising practices and policies; approval may be denied if charities' annual reports lack key information, if they hold too few governing board meetings, or if they don’t share their informational tax return online.

Understanding the Mortgage Deal: A Primer - and Battle Cry - for Nonprofits, February 17, 2012

Understanding the Mortgage Deal: A Primer - and Battle Cry - for Nonprofits
Here, Cohen explores nonprofits' stake in the $25 billion settlement between 49 state attorneys general and five of the nation's largest mortgage servicers over the servicers' improper mortgage foreclosure practices. In general, nonprofits will play a crucial role in monitoring and ensuring enforcement of the settlement's provisions.  Nonprofits will also provide housing counseling, legal assistance and other services funded by the $2.5 billion allotted for state-level anti-foreclosure initiatives. In neighborhoods with high foreclosure rates, nonprofits will participate in programs aimed at preventing blight and in redevelopment. Finally, nonprofits' organizing and advocacy will be crucial to continuing the settlement's first step towards cushioning the impact of the housing collapse, assisting mortgage holders and reinvigorating the market.

As an Increasing Target for Claims, Nonprofits Seek More D&O Coverage, February 6, 2012

As an Increasing Target for Claims, Nonprofits Seek More D&O Coverage
Potential legal liabilities for nonprofits are extensive, including employment-related matters, civil rights, fiduciary duty, conflicts of interest, and fund misappropriation. Individual board members may be liable for board actions even if not present when a decision was made, and their finances are accessible if the nonprofit is unable to pay for damages arising out of a lawsuit. At the same time, the financial ability of nonprofits to weather legal problems is limited as compared to for-profit corporations. As a result, more nonprofits and board members are seeking to purchase directors & officers liability insurance, purchasing policies that cover more potential risks, or increasing the amount of coverage.

This Is What a Backlash Looks Like: Komen for the Cure and Planned Parenthood, February 1, 2012

This Is What a Backlash Looks Like: Komen for the Cure and Planned Parenthood
The public response to the announcement by breast cancer charity Susan B. Komen for the Cure that it was withdrawing funding for breast cancer screening at Planned Parenthood has been swift and dramatic. This piece examines the political overtones of the announcement, the impact it has had on public support for Komen and Planned Parenthood, and the internal response of these organizations.

Nevada AG Investigates Henderson City Taxpayer Funds Directed to Local Nonprofit Organizations, January 30, 2012

Nevada AG Investigates Henderson City Taxpayer Funds Directed to Local Nonprofit Organizations
Former Henderson city councilwoman Kathleen Vermillion is being investigated by the Nevada Attorney General’s office for expenditures of city funds she authorized while on the council. Henderson city council members are permitted to assign up to $15,500 each fiscal year from the city’s general fund to go to programs and services that benefit the community. The investigation was launched after a complaint from the Executive Director of a homeless services nonprofit for which Vermillion served at the Chief Operating Officer, alleging that Vermillion misappropriated city funds in directing them to the organization. Vermillion maintains that she has committed no wrongdoing and Henderson city officials are not investigating the expenditures, with a city spokesman saying, “The donations she made out of her funds, from what we've seen, she was able to do.”

California Charity Health Care Initiative Enters Circulation, January 20, 2012

California Charity Health Care Initiative Enters Circulation (Jan. 20, 2012)                
California Secretary of State Debra Bowen, having received the official summary of a Charity Health Care Initiative from the Attorney General of California, has granted permission to petitioners Nisa L. Walker and Jimi Hardy to start collecting signatures for the measure. The petition would require nonprofit hospitals to provide health care to the needy of at least 5 percent of their net patient revenues, and authorizes penalties for non-compliance. A minimum of 504,760 signatures of registered voters is required to qualify for the ballot. The signatures must to be collected by June 18, 2012.

Troubles Plague Youth Charity, Chief Officer, January 20, 2012

Troubles Plague Youth Charity, Chief Officer
The Interim Executive Director of the Nevada Partnership for Homeless Youth (NPHY), Arash Ghafoori, has filed a claim with the Nevada Attorney General’s office against Kathleen Vermillion, the organization’s Chief Operating Officer. According to Ghafoori, Vermillion has misappropriated funds, and has been misusing restricted donations to the charity. Since December, seven NPHY board members have resigned while raising concerns about the organization's finances. The AG office would not comment on whether or not an investigation has been launched, but Vermillion has faced criticism for appropriating $10,500 to the Nevada Partnership for Homeless Youth in her role as a member of the Henderson City Council and then transferring hundreds of thousands from NPHY to another organization of which she is COO, Partnership of Homeless Youth.

Telemarketer for Defunct Veterans Charity Settles with Virginia Attorney General, January 17, 2012

Telemarketer for Defunct Veterans Charity Settles with Virginia Attorney General
Virginia Attorney General Ken Cuccinelli has reached a settlement worth over $65,000 with Associated Community Services (ACS), a telephone solicitor which raised money for the United States Navy Veterans Association (USNVA), a fraudulent charity that raised millions but spent little on the veterans is purported to serve. Bobby Thompson, USNVA founder, disappeared in 2010 and remains at large. ACS did not admit any wrongdoing under the settlement, but has agreed to refund all contributions to Virginians, and pay civil penalties and the state’s attorneys fees. Cuccinelli said that his “office will continue to work to ensure that those responsible are held accountable for what they have done.”

South Carolina AG Requests Financial and Governance Information from Shuttered Nonprofit Mentoring Group, January 6, 2012

Penn State?s Advice to Fund Raisers After the Sex Scandal, January 5, 2011

Massachusetts AG Coakley Releases Report on Charities, December 29, 2011

Charities That May Have Benefited From Hacking Seek to Make Refunds, December 28, 2011

Ohio Attorney General Goes After Bingo Assets, December 22, 2011

Texas Busts Shameless Police ?Charity,? December 21, 2011

Four Reasons Why NOT to Use Social Media . . . and Why to Use It Anyway, December 20, 2011

Second Mile board: CEO Never Warned Them of Sandusky, December 19, 2011

Oregon attorney general posts 2011 edition of 20 worst charities, December 14, 2011

The Voice from Outside: Stakeholder Resistance in Nonprofit Organizations, December 13, 2011

Missing In America Project Receives $6,000 Grant, December 7, 2011

California AG Releases Report on Charities? Use of For-Profit Fundraisers, December 7, 2011

Ohio Attorney General Puts Charity Info Online, December 6, 2011

'Charity Corps' Formed by New York Attorney General and State Bar Association, December 6, 2011

Avoiding Trouble: What Nonprofits Can Learn From the Penn State Sex-Abuse Scandal, November 29, 2011

To Advance Their Cause, Foundations Buy Stocks, November 24, 2011

The For-Benefit Enterprise, November 2011

Second Mile CEO: Closing One Option, November 19, 2011

Second Mile CEO: Closing One Option

The charity founded by former Penn State Assistant Coach Jerry Sandusky, who is charged with abusing numerous children he met through the organization, may close its doors by year’s end.  According to new CEO David Woodle, the organization – The Second Mile – is considering three possibilities: closing the charity’s program for at-risk youth, continuing to run scaled-down versions of its programs, or transferring the programs to other nonprofit groups.  The decision will depend in part on discussions with Second Mile’s donors aimed at determining whether they will continue to support the organization.  Second Mile’s annual revenue is approximately $2.9 million and it employs 20 staff in three offices; Sandusky was the group’s primary fundraiser until his resignation in September 2010.  The organization’s Board of Directors has hired former Philadelphia Aistrict Attorney Lynne Abraham and the law firm Archer & Greiner to conduct an independent investigation of Sandusky’s contact with children through the charity.

Salvation Army Goes Digital This Season (Nov. 15, 2011)

Three Illinois Dioceses Drop Foster Care Lawsuit Against State, November 15, 2011

Three Illinois Dioceses Drop Foster Care Lawsuit Against State (Nov. 15, 2011) 

Jerry Sandusky's Second Mile Charity May Be as Culpable as Penn State, November 14, 2011

Jerry Sandusky’s Second Mile Charity May Be as Culpable as Penn State

County Assessor in Illinois Moves to Tax Hospital Property, November 15, 2011

 County Assessor in Illinois Moves to Tax Hospital Property

Congress Questions the I.R.S. About Delays in Its Oversight of Nonprofit Hospitals, October 31, 2011

Oregon Attorney general's Office Settles Misconduct Suit Against Veterans Charity and For-profit Telemarketer, October 27, 2011)

Nonprofit hospitals' huge tax breaks under increasing scrutiny, October 22, 2011

NY's AG launches probe of cancer charity claims, October 20, 2011

New Jersey Division Of Consumer Affairs Charges Charity With Fraud, October 13, 2011

A Quest for Hybrid Companies That Profit, but Can Tap Charity, October 12, 2011

Colorado State Attorney General Reviewing Proposed Nonprofit Hospital Expansion, October 12, 2011

N.J. Lawmakers Seek to Strengthen Law Requiring Attorney General to Oversee Transfer of Non-profit Hospitals, Sept. 23, 2011

California Attorney General Denies Sale to Controversial Hospital Chain, September 20, 2011

Nonprofits Edge Closer to Managing California?s State Parks, September 2, 2011

Massachusetts Attorney General Selects Overseer of Hospitals, Insurers, August 29, 2011

Connecticut State Officials Warn Retailers About Fraudulent Veterans Charities, August 9, 2011

?Questionable? Veterans Charity Vows to Resume Operations, July 25, 2011

Missouri AG Sues Internet Radio Operator for Charity Fraud, July 25, 2011

Kentucky AG Conway Announces $26.4 Million Settlement with Passport Members, July 22, 2011

Oklahoma Officials, Charities Work to Meet New Regulations, July 20, 2011

Oklahoma Officials, Charities Work to Meet New Regulations
Oklahoma state officials are working with charities to ensure their compliance after a law reforming Oklahoma's nonprofit registration system went into effect July 1.  The law requires nonprofits, as well as professional fundraisers and solicitors, to register with Oklahoma's secretary of state.  Nonprofits are additionally required to keep certain documentation for at least five years.  According to Tom Bates, chief of the Oklahoma Attorney General's Public Protection Unit, the requirements will assist both the public and law enforcement in distinguishing upstanding nonprofits from potentially unreliable ones.  Marine Taylor, executive director of the Oklahoma Center for Nonprofits, says that leaders in her sector are supportive of the new plan but are still working to fully understand it. To that end, the law's author, Susan Paddack D-Ada, and other state officials have spoken to more than 350 nonprofits around the state.

Unions Say City Opera Invalidates Endowment, July 19, 2011

Attorney General Closes Humane Society Investigation, July 13, 2011

Schneiderman says Breast Cancer Charity Funneled Donations, June 28, 2011

Schneiderman says Breast Cancer Charity Funneled Donations

Internal Revenue Service Revokes Tax-Exempt Status of 275,000 Organizations, June 10, 2011

Health Board Pay Ban Could Affect Charities, June 10, 2011

Foster Care May See Upheaval Over Same-Sex Unions, June 9, 2011

Massachusetts Foundations Consider Proposed Restriction on Board-Member Pay, June 7, 2011

Telemarketers for Iowa charities keep most of the money raised, May 22, 2011

Alabama Attorney General Clarifies Gambling Enforcement, May 18, 2011

State Officials Say Charity Review Just Beginning, May 16, 2011

Squeezed Cities Ask Nonprofits for More Money, May 11, 2011

Illinois?s Hospital Tax Exemption Status in Limbo, May 3, 2011

Pennsylvania Hospital Sales Finalized, May 3, 2011

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