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Chapter 7 |
He claimed to be a retired Naval commander and raised more than $100 million from generous Americans for his charity in Tampa. He told his lawyer he got funding for a U.S. Navy Veterans Association from a “black box” CIA budget and said in court filings that he was working under “non-official cover” for the agency. But in the end, a jury here decided that Bobby Thompson, 66, was less James Bond and more run-of-the-mill con man. … They convicted him on 23 counts of fraud, money laundering and theft in a charity scam.123
Charities
It was December. I was feeling the holiday spirit and decided to give money to a school for poor American Indian kids in Oklahoma. They thanked me profusely by mail and even sent me a “genuine” spirit necklace made out of plastic. But then, just when I was feeling good about myself, I decided to look up the charity on an online charity evaluator—and you guessed it—it was one of the worst in America. The kids got about 12 percent of the funds; the rest went to the fundraising organization. And, of course, I keep getting cards, address labels, calendars and more pleas for donations, from that school and many other ‘schools’.
I’m sure we all have made donations to dubious organizations that sounded like they were doing good work, whether it was for tornado victims, cancer patients or a veteran’s organization. How many of us have had our arms twisted to donate to one cause or another by our friends, pledge drives at work or even the schools our kids attend?
A ballpark figure for a reputable charity is about 10 percent administrative cost, about 10 percent cost for personnel, and about 25 percent cost for advertising. The rest should go to the purpose of the charity whether it is disaster relief, fighting a disease, ongoing charitable relief for the poor or saving wildlife.
The 50 worst charities in America devote less than four percent of the donations they collect 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. Even as they plead for money, the organizers and fund raisers pay themselves exorbitant salaries and consulting fees or arrange 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.124
Your decision to make a donation is generous, but you need to be vigilant if you plan to make that donation online. Scammers are looking to steal not just your money, but also your personal information. Bogus groups are hard to tell apart from legitimate non-profits, and there are now almost two million non-profits in the United States125—all of them looking for money.
The most recent data shows that in 2012, individual Americans donated $45 billion to charity.126 But while giving has increased, so has the number of fraudulent charities, reports the U.S. Department of Justice. The tactics range from the high-tech to low-tech. Phishing, for example, is a real hazard; users simply click on an email link that leads to a bogus Website that appears legit but isn’t. Instead, the users’ credit card information and passwords are stolen. Another tactic is to use a celebrity as the “face” of the charity because most people believe a celebrity wouldn’t lend his face and name to a bogus scheme.127
The purpose of any charity is to provide some public benefit to a community or to people’s lives. To determine if a charity is getting good results, you can begin by learning about a charity’s programs, accomplishments, goals and challenges. You can do this by reviewing its website where they should list how their programs lead to results. Beware of “sound alike” organizations that have names similar to responsible, reputable charities. Don’t be swayed merely by a benevolent-sounding name. Scammers will use guilt, compassion, poverty and hardship as manipulation tactics. And never, ever give out credit card, bank account or other personal information over the phone.
Some experts advise against giving small amounts of money because they say it will only cause you to end up on many mailing lists. Donations under $25 barely cover the costs of soliciting the gift. To recoup those costs, many charities will simply sell the donor’s name to another charity doing similar work. These same experts say that giving one larger gift instead of many small ones will protect you because charities are in competition with each other for your donation. The revenue generated by selling your information simply doesn’t outweigh the risk of losing you to another charity. However, there are many organizations who welcome donations of $25. Many of them are local charities, such as food banks and homeless shelters that have no intention of selling your data.
Unless you’ve signed up to receive a charity’s electronic communications, be skeptical of email solicitations. Although you may receive an email that appears to come from a valid organization, as a general rule legitimate organizations do not solicit funds through email. Despite how official an email may seem, it could very well be a scam. Many scams use the names of actual organizations and include a link to a website where you can make a donation. Do not follow any links within the message; these tend to be fake websites that are made to look like the organization’s official site. Email solicitations may also include information about a foreign bank account where you can send your contribution. An organization requesting you to send funds to a foreign bank is always a sham.
9-11 set the criminal standard for using the Internet to take advantage of a crisis; every Internet-based scam was either used or originated from the 9-11 Internet frauds. Through relief scams, false charities and variations, cyber-hustlers literally used every trick in the book to dupe and steal from financial contributors worldwide when people were the most emotionally vulnerable. Not everyone walks into the well-laid traps of these Internet predators. 9-11, and the fraud that ensued, also awakened individuals to the dangerous world of scam artists outside of American borders as well as within their own broadband.128
The best course of action is this: never respond to unsolicited emails, commonly referred to as SPAM. Do not open any attachments to these emails even if they claim to contain pictures of a particular tragedy. These attachments are probably viruses that may allow hackers to gain access to your computer. If you are genuinely interested in donating to a charity, initiate contact directly with the organization. Investigate the organization’s Web address or call them directly. Make sure you seek out the charity’s authorized website and be on your guard, the results of a general Web search on Google, Yahoo! or another search engine may actually include a fraudulent site designed to look like a legitimate charity’s website.
Charities and organizations may use people, animals or religious figures to lure in victims to participate. Some claim the money will be used to educate and feed poor children in another country or provide medical help. Charities or organizations create commercials or articles demonstrating how important donations are to the success of that group’s mission. Other organizations claim that donations are needed to increase the life span of an endangered species. Pictures of the endangered animal are shown to create a selling opportunity by appealing to your emotions.129
Following the 2005 devastation of the American Gulf Coast, the FBI estimates around 4,000 websites sprang up to misdirect genuine signs of charity into the bank accounts of shameless scammers. At least 60 percent of these were hosted on foreign servers, a move that generally sends up warning signs to anyone scanning for legitimacy. Some of the more egregious offenses solicited donations from the well-intentioned by posing as the Red Cross and other real charities doing real work—a sneaky strategy that worked before and, unfortunately, continued to do so.130
Social networking tools like Twitter, Facebook, YouTube and blogs deliver heart-wrenching images and information about charitable causes to our computers and phones. Many of them include pleas to donate. Television ads show us pictures of abused animals or starving children. While these methods can be powerful tools to inspire your desire to help, you should not blindly give because of a touching picture. Take the time to investigate the groups behind such pleas for help to ensure that it comes from a legitimate nonprofit, and then go to that charity’s website to make your donation.
What Can You Do?
Don’t give directly to anyone alleging to be a victim of a disaster. One thing that never changes: scammers follow the headlines—and the money. People affected by a disaster are in no position to contact you directly for assistance. Instead, find a charity with a proven track record of success with dealing with the type of disaster in the region in which the disaster occurred. Avoid fly-by-night charities created specifically to deal with a new crisis. Even well-meaning organizations created for that particular tragedy will not have the infrastructure to efficiently utilize your gift.
How can you determine if a site is valid? Start by examining the Web address. Most non-profit Web addresses end with .org and not .com. Avoid Web addresses that end in a series of numbers. Also, bogus sites often ask for detailed personal information such as your social security number, date of birth or your bank account and PIN information. Be extremely skeptical of these sites as providing this information makes it easy for them to steal your identity.
When you make a donation online, make sure you ‘opt-out’ and tell the charity that you do not want to have your personal information distributed to any other entity. Depending on the charity, you can ‘opt-out’ either by calling, writing to the charity or clicking a button to opt-out when making an online donation.131
The best way to protect yourself is to search out consumer and charity watchdog sites like the Better Business Bureau, Charity Navigator or GuideStar, which list nonprofits’ official Web addresses as well as tax forms and financial data. The BBB also rates charities based on 20 standards of accountability including the structure of the board of directors and the transparency of financial data.132
You do not always have to be afraid to make a donation online, as millions of dollars in online contributions make it safely to charitable organizations, but you do need to be cautious and determine that you’re giving to an established, reputable and honorable organization.
The Federal “do-not-call” legislation has allowed most Americans to finally enjoy dinner in peace without being hassled by unwanted phone calls from telemarketers. However, when Congress passed the do-not-call legislation, they exempted nonprofit organizations. Since most telemarketing firms have lost for-profit accounts as a result of these laws, many are now turning to nonprofit organizations for new business, and we still can’t get a decent evening without interruption of telemarketers!
Here are some tips if you think you are interested in listening to a telemarketing pitch for a donation:
- Find Out Who’s Calling. Many phone calls soliciting charitable donations come from for-profit professional telemarketers that keep a sizable portion of your donation for themselves and don’t really care about the cause they’re promoting. Find out if the person with whom you are speaking works for a telemarketing company or is a volunteer or employee of the charity itself. Remember that you have the right to end the phone call whenever you wish. You should never feel coerced into giving. And although you are still eligible to receive calls soliciting contributions after you’ve registered your phone number with the National Do Not Call Registry, you do have some recourse. If you receive a call from a third-party telemarketer on behalf of a charity (rather than the charity itself), then you can ask that firm to stop calling. If the telemarketing firm calls again soliciting for the same charity, then that firm could face a fine.133
- Ask Where Your Donation Goes. Professional, for-profit telemarketers typically negotiate their fees ahead of time and know exactly how much of every dollar raised goes to the charity and how much stays with the telemarketer. Companies often keep a significant portion of each dollar raised, and sometimes no money is returned to the charity. So be sure to ask the person on the other end of the line to tell you how much of your donation will actually end up with the charity.
- Get It In Writing. Ask the person calling to send you a copy of the charity’s annual report or a brochure describing its mission and accomplishments. Effective and efficient charities are proud of their accomplishments and are able to provide written materials describing their mission, program accomplishments, and financial information. Warning flags should go up if an organization refuses to send you a copy of their financial report or similar information; by law, all charities are required to provide financial and governance details to the public.134
- Eliminate The Middle-Man. If you determine that the telemarketer is calling you on behalf of a charity that you wish to support, contact the charity and find out how to donate to it directly. That way you avoid having part of your donation taken by a for-profit company.
- Resist Giving Online to Police and Firefighters. Most solicitations for police and fire service organizations are made by paid professional fund-raisers. Ask how your contribution will be used and what percentage of your contribution will go to the fire or police organization or program. You can also call your local police or fire department to verify a fund-raiser’s claim to be collecting on behalf of the organization or department. If the claim cannot be verified, report the solicitation to your local law enforcement officials. Be wary if a fund-raiser suggests you’ll receive special treatment for donating and don’t feel intimidated if you decline to give.
To help you determine which charities are committed to protecting your privacy, go to the Charity Navigator website. It has accountability and transparency evaluations including an assessment of each charity’s donor privacy policy. To meet its criteria, a charity must have a written donor privacy policy that states it will not sell or trade the personal information of its donors. And that policy must be prominently displayed on the charity’s website or in its marketing and solicitation materials.135
Another way to check up on a charity is to make sure the organization is a registered entity. Most states have registration and licensing rules that charities are required to abide by. In order to obtain tax-exempt status from the IRS (in the U.S.), an organization must file certain documents to prove their charitable operating procedure. The IRS provides information on these organizations via their Exempt Organizations Select Check tool.136 Ask if your contribution is tax-deductible. Make your check payable to the official name of the group or charity. Avoid cash gifts since cash can be lost or stolen.
Crooks use clever schemes to defraud millions of people every year. They often combine sophisticated technology with age-old tricks to get people to send money or to give out personal information under the guise of soliciting for a charity. They add new twists to old schemes and pressure people to make important decisions on the spot. The worst part about these scammers is that legitimate charities now face fierce competition from fraudsters, and the average person often doesn’t know who to trust. Don’t assume that most charitable organizations are corrupt, however. Most philanthropic organizations are working for very good causes and putting as much of the proceeds as they can towards making a lasting impact. At the end of the day, it’s your due diligence that will weed out the worthy charities from the unscrupulous.