November 6, 2017; Chicago Tribune
NPQ has long written about the exploitation of first responders by nonprofits and fundraising firms that raise money in their names but retain most funds for themselves. In particular, the use of veterans in such scams seems like a never-ending scourge. This week, however, one of the best known of these public trust violators has finally been closed through the careful work of 25 states’ attorneys general.
Over their 30 years of existence, VietNow and their for-profit fundraising partners have been under the scrutiny of various attorneys general and nonprofit watchdog groups for famously observing an 85-to-15-percent split between program and fundraising, only in their case, the 85 percent went to various telemarketers.
Cases against them and their telemarketers are well documented in the literature on fundraising law. The Supreme Court has a history of siding with telemarketers on the basis of free speech rights, but in 2003, the Supreme Court heard and decided the case of Madigan v. Telemarketing Associates, setting a precedent for suing fraudulent nonprofits. Still, the court also upheld that the organization was justified in spending 85 percent of a donor’s dollar with telemarketing associates—a dialing-for-donors firm passing a mere 15 percent along to charity—as long as it was not lying about it. Telemarketing Associates was working for VietNow at the time. As CharityWatch described it then:
The Supreme Court sent the case back to a lower Illinois court not because the telemarketer was keeping most of the donations and not disclosing this important fact to donors but because of alleged fraudulent statements made over the phone including “90 percent or more goes to the vets” and that donations would not be used for “labor expenses.” Other alleged phone statements claimed that contributions would be used for “food baskets given to vets [and] their families for Thanksgiving,” paying “bills and rent to help physically and mentally disabled Vietnam vets and their families” and “rehabilitation [and] other services for Vietnam veterans.” This was promising a lot considering VietNow only spent $118,000, or four percent of its $3,173,000 budget, on program services in its 2001 financial statements.
But now, 14 years later, after its most recent financials showed it had raised $2 million and distributed only five percent of that to charity in FY 2016, VietNow has finally been shuttered in coordinated settlements reached with the Illinois attorney general and 24 other states. (It is worth noting that Lisa Madigan still is the Illinois attorney general.)
The order dissolved the board, and a receiver has been appointed to distribute VietNow’s assets between two real veterans service organizations. It also requires the cooperation of VietNow officers and directors in investigations of its professional fundraisers and bans four directors—Joseph Lewis, Steven Rucki, Richard Sanders, and Terry Buscher—from any oversight of nonprofits and for-profit fundraising firms.
In an absurd moment, Lewis described himself as “very heartbroken.” The Chicago Tribune goes on to quote Lewis:
He said there was “no malice” on the charity’s part but that he and other officers failed to provide proper oversight of its finances.
“This is the culmination of 34 years of helping veterans, and to go down this way really hurts,” he said.
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VietNow’s attorney, Carl Metz said, “Their motives were altruistic…. Unfortunately, they relied upon professional fundraisers to raise money and to assist them in complying with the necessary financial regulations. This reliance ultimately led to the unfortunate downfall of VietNow.”
This, we would suggest, is highly unlikely, in that either VietNow or its fundraisers have ended up in court a number of times over its arrangements. The organization possesses the relatively rare distinction of being named a high-concern nonprofit by Charity Navigator and making the list of America’s Worst Charities in 2013.
In 2004, Madigan won a court injunction against another of VietNow’s fundraising partners, permanently enjoining Troia from charity fundraising in Illinois.
But the Tribune reported in 2015 that Troia continued to recommend telemarketers to VietNow and also handle the paperwork required by government agencies around the country, taking a fee of 3 percent from what the solicitors gathered in donations.
In fact, in 2015, just days before he died, Rick Cohen wrote a Veteran’s Day column about fundraising scams using veterans as bait, in which he named VietNow as an especially egregious example of this type of miscreant.
Why mention VietNow specifically? This charity has been a cause of action by government agencies concerned about the probity of veterans’ charities for more than a decade, with a case reaching the Supreme Court aiming to declare its practices beyond the bounds of accountable charitable fundraising (the case was called Madigan v. Telemarketing Associates). The court didn’t agree, as many nonprofit trade associations supported VietNow’s reprehensive telemarketing practices as “free speech.”
Suits have also been recently settled in Illinois with Safety Publications, a fundraising firm in use by VietNow, and they have agreed to no longer fundraise in Illinois.
But, in the meantime, the organization has been functioning this way for at least a full three decades—scamming donors and besmirching the credibility of the nonprofit sector across the country. Perhaps worst of all, the money that good people thought was going to vets in need ended up in the pockets of fraudsters, all in the name of charity.
NPQ has previously pointed to the excellent new collaborative environment among state charity offices and attorneys general when it comes to stopping nonprofit groups that violate the public trust. Readers will recall that we wrote about one such case in which 50 states and the District of Columbia participated in a suit against a group of sham cancer charities, which were also shuttered. One can only hope actions will be brought even more quickly as time goes on.—Ruth McCambridge