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Falls Church Veterans Organizations Under Investigation

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by Jim McCarthy and Michael Fruitman, cross posted from Vox Fairfax at their request

UPDATE by Lowell: According to this article from February, “Virginia’s attorney general has launched an investigation into a veterans charity that allegedly misled donors by spending millions of dollars on telemarketing and salaries rather than on veterans…The attorney general’s actions came just two weeks after publication of a Center for Public Integrity investigation into the Center for American Homeless Veterans and its founder, Brian Arthur Hampton.”

When the call ended, you probably whispered to yourself that the $20 contribution to American homeless veterans could not have been better spent. Or was it well spent?  If you knew that $15.90 of your $20 gift paid for the folks who called you and the compensation of the persons running the organizations, you might not be smiling.

In this busy and information-saturated world we share, there are any number of offensive events or items that may pass over or under our radar. Occasionally, however, through the blur of words and pictures, something catches our eyes and attention. And so it was that the Center for American Homeless Veterans (CAHV) emerged into view along with a related not-for-profit, Circle of Friends for American Veterans (COFAV). To make a long story shorter, referenced here is a report from the Center for Public Integrity (CPI) concerning these two groups. In addition, we are publishing some summary data from the tax returns for the two organizations. For readers wishing to dive more deeply into such information, it is available to the public by registering with CharityNavigator.org.

CAHV is a 501(c)(4) organization generally classed as a social welfare entity. Contributions to it are not tax-deductible and its authorized purposes are advocacy. COFAV is a 501(c)(3) entity to which contributions are tax-deductible and is generally classed as a public charity, meaning that its activities benefit a defined group of persons. Judge for yourself:

2014 2015 TOTALS
CAHV Total Income $2,784,350 $2,447,420 $5,231,770
COFAV Total Income 1,449,975 1,492,469 2,992,444
Combined 4,234,325 3,939,889 8,230,214
CAHV Compensation 245,993 242,699 488,692
COFAV Compensation 273,291 239,230 512,521
Combined 519,284 481,929 1,001,213
CAHV Fundraising Fees 1,863,449 1,637,896 3,501,345
COFAV Fundraising Fees 862,245 881,006 1,743,251
Combined 2,725,694 2,518,902 5,244,596

The data evidence that over the 2-year period, compensation to individuals managing the organizations are just over $1 million, equaling 12% of the gross income; total fundraising fees are 64% of gross income. Together, the two items total $6,245,809, or 76% of the 2-year combined income figure. Ah, you say, that leaves nearly $2 million [$8,230,214 minus $6,245,809] to distribute to homeless veterans. Well, not quite.

A combination of accrued expenses and consulting contracts in the hundreds of thousands of dollars are also among itemized expenses. Even more interesting through the magic of fund accounting for not-for-profits, the returns shows that the two organizations reported negative balances between respectively for 2014 and 2015. This red ink indicates that they are living off the annual stream of income while siphoning compensation for personal benefit.  Finally, there is virtually no evidence that the organizations distributed any funds above $2,800 to outside organizations. There is no evidence that any veterans—homeless, disabled, or otherwise—have benefited from these two organizations.

The chutzpah does not end there. The best part of the story you will learn is that—included on Schedule O of their tax returns—the organizations advise that the “…president has been paid less that what his cumulative salary should have been over the past 4 years” and “is still owed deferred compensation.” This will be covered by the other $4.10 of your $20 gift.  It may be fairly concluded that two poorly managed not for profits grossing millions of dollars per year provided a living wage for their management; millions of dollars to fund raising organizations; and zilch to the homeless veterans.

In meeting the objectives of their stated missions, proclaimed to be the “education of the public” and “public officials” concerning the plight of homeless veterans, there are serious questions on the results of the use of more than $8 million in funds raised from the public for those purposes.

We believe that the Attorney General of Virginia possesses statutory authority to issue a cease-and-desist order to these organizations and may have the legal authority to seek a court-ordered injunction. In the absence of legal authority in Virginia, Attorney General Mark Herring should request that New York Attorney General Eric Schneiderman undertake such action. Alternatively or concurrently, the Virginia Division of Consumer Protection has authority to intervene on behalf of the public. The donor public should not be exposed to the fundraising appeals of so-called charities that ostensibly are to benefit needy persons but are actually only charities that begin at home.

Call Attorney General Herring at 804.786.4718, or the Virginia Division of Consumer Protection at 804.786.3983.