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Spotting Veterans Fundraising Scams

It seems like everywhere you look these days, there’s a sketchy character with a sub-regulation haircut and 5 o’clock shadow and standing on a median at a traffic light, carrying a bucket of cash, and wearing ACUs with patches removed and usually the wrong kind of boots.

They’ll say they’re collecting money for veteran’s organizations and charities. I’ve never given them a cent, and it turns out my suspicions may have been justified:

Acting on a tip earlier this month, law enforcement traced a suspect to a bar in Portland, Oregon. He was wanted in Ohio for embezzling up to $100 million in charitable donations, which he collected primarily from Navy veterans. The scam is an old one: Analysts refer to it as “affinity fraud.” This is a common form of fraud in which the criminal gains the victims’ trust by exploiting supposed commonalities – a shared racial, ethnic or religious heritage, membership in the same church, or in this case, an affiliation with the military and veterans.

Bobby Thompson – an alias (authorities still aren’t certain of the suspect’s real name), is accused of stealing millions in small contributions, mostly to the U.S. Navy Veteran’s Association, a legitimate charity in Tampa, Florida. The alleged crime spanned some 40 states. Donors thought their donations – often from $5 to $50 – were going to help needy veterans. Instead, prosecutors say, they simply lined Thompson’s pockets.

Veterans Affinity Fraud

Veterans tend to trust other veterans over just about anyone else. And most of us live up to that trust. In some cases, however, veterans are hired as sales representatives, specifically to gain the trust of other veterans. These recently retired officers and NCOs then go back to their former colleagues and leverage the trust and bond others have with them to form business relationships. In 99.9 percent of the cases, there is no fraud going on. Other times, there is, but the veteran may not be in on the game. Perhaps he just used his own influence to gather other veterans together in a seminar, and then turned it over to a guest speaker.

In other cases, the veteran is in on the scam.

And in still other cases, the con-man is lying about being a veteran.

The tragedy is this: So many legitimate veterans support organizations are doing terrific work in many niches. The criminals make it much more difficult for the legitimate operators to raise the much needed money for these charities to function.

Fraud Prevention

There are really two levels of fraud you have to worry about: The first is agent-level fraud. This occurs when you have a legitimate charity that hired a bad, dishonest agent or representative. The agent then pockets some or all cash donations, and may launder other donations or misdirect them to his own bank account.

In other cases, the whole organization may be corrupt. You can have a hard-working, honest representative, but the charity’s executive director may be corrupt or incompetent. She could be stealing money from the organization, or she may be a weak executive who has failed to implement the necessary accounting controls within the organization.

To guard against agent-level fraud, give directly to the organizations, rather than via an agent, if at all possible. For example, a credit card donation on a secure website of a reputable and well-known charity is better and safer than a cash donation, handed to an agent you may barely even know.

To guard against organizational fraud, stick to charities you are already familiar with – particularly agencies whose effective work you’ve seen first-hand.

You can also use, an online resource for investigating and evaluating charity organizations.

A few other tips:

  • Don’t give directly to a telethon or other pitch that involves a middleman or intermediary. A significant portion of your donation will go to the cost of the event or fundraising drive itself. Instead, do your own investigation, and give directly.
  • Be careful of charities with names that sound very close, but not quite alike. Unscrupulous people will attempt to exploit donor confusion by naming themselves very similarly to established and reputable charities.
  • Verify the 501(c)(3) tax-exempt status of charitable organizations independently.
  • Compare executive compensation to the mission. Executive director salaries at the average charity that tracks exceeds $150,000 per year. In some cases, large charities can warrant paying a capable and experienced executive competitively with the private sector. A huge salary for the director of a small and/or inefficient charity should be a yellow flag – your money may be better donated elsewhere.

Contributed by Jason Van Steenwyk

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