Know Your Charity: Some of the Best Sounding Names Might be Frauds

Know Your Charity: Some of the Best Sounding Names Might be Frauds

This week the Federal Trade Commission announced enforcement actions against four charities with great names: Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services, and Breast Cancer Society. The complaint charges the charities and their top officers with wasting nearly $200 million of donations.

The attornies general of 50 states including Pennsylvania joined the FTC in announcing enforcement actions. However, as the New York Times noted, “Given the charities’ reputations, some questioned why the action announced on Tuesday had taken years. … William Josephson, a retired partner at the law firm of Fried, Frank, said it was important that the FTC waited to take action until all states were on board. ‘You need to keep these charities from re-incorporating elsewhere’ said Mr. Josephson, a former leader of the New York State Attorney General’s charities bureau, noting that he had seen charities that had been shut down in New York reestablish themselves in New Jersey.”

Pennsylvania has a charitable solicitation law with requirements for annual filings with the state and a procedure for the public to access some of that information, by mail or on line. <www.charities.pa.gov>  From time to time an enforcement action by the state makes the news, but it is usually a civil action to shut the fraudulent charity down and garner a penalty, usually not too large.  The statutory criminal remedy is cited in just three decisions of courts of record in Pennsylvania, the most recent dated 1962.

The events this week were no exception. Two of the four charities charged have agreed to a settlement under which the charities will be dissolved and key officers will be barred from fund raising. The announced actions and settlements are civil, not criminal enforcement.

Common sense tells us to utilize the state charitable bureau information services to learn more about the charities we consider supporting. However, even that caution is no panacea. The FTC lawsuit charges the four charities with falsifying their financial documents.

A further difficulty is the interpretation of information on file with the state. Accounting and reporting methods utilized are themselves far short of transparent.

Most major charities also publish an accounting of their fundraising, spending and distributions annually, composed for the use of the general public. These statements are usually accompanied by an explanation to help those who are not versed in public accounting.

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