Numbers of Fraudulent Veterans Groups Rising : Fund raising: They are reaping a windfall and are harming legitimate charities, officials report.

SANTA ANA —  Burgeoning numbers of fraudulent groups purporting to raise money for needy veterans and other causes are reaping a windfall from unwary citizens and damaging legitimate charities, law enforcement officials report.

Investigators say dozens of groups, often using identical flyers and sales pitches, have sprung up in the past two years to take advantage of an unsuspecting public’s generosity, moving from one city to another after complaints begin cropping up.

The state Attorney General recently filed charges against one group--Helpline U.S.A. of San Bernardino County--for providing false and misleading financial statements, and officials expect to bring similar charges against three others within the month, Deputy Atty. Gen. Belinda Johns said Monday.

With the holiday season in full swing, authorities in Orange, Los Angeles, Riverside and San Bernardino counties fear that well-meaning people will be even more susceptible to questionable veterans groups that station themselves in front of supermarkets, department stores and post offices.

In some cases, young men soliciting for competing groups have gotten into shouting and shoving matches with each other in what is essentially a turf war for a piece of one of the most lucrative of charitable causes.

“These groups are killing it for legitimate charities that do fund-raising drives maybe once or twice a year,” said Mickey Conroy, the director of Disabled American Veterans Charities in Orange County. “They can rape the public and never be accountable to anyone.”

Indeed, law enforcement officials say they have few options to effectively deal with the problem. Many of the questionable groups operate on the edge of legitimacy, going so far as to obtain required business permits and tax-exempt status.

The groups also present jurisdictional problems because they operate in several counties at once. When complaints increase in one community, they simply move on.

“We’re talking about something that will consume an investigator for months for a prosecution that might result in a misdemeanor,” said Riverside Police Sgt. Audrey Wilson, who heads the fraud division. “It’s an investigation that law enforcement shies away from.”

Law enforcement officials say veterans funds have become a popular destination for charitable donations in Southern California, fueled by factors that include lingering guilt over treatment of Vietnam vets and a surge of patriotism over the buildup of troops in Saudi Arabia.

The problem has become so bad in Orange County that the local Veterans Advisory Council is drafting a report to the Board of Supervisors that will urge they be given authority to screen and approve groups that wish to solicit for donations.

Typically, the young men and women who solicit donations have little knowledge of their employers and have told authorities that they retain 25% to 50% of the money they gather.

Authorities identified one of the largest and most active of the questionable groups--although one not currently targeted by the Attorney General--as American National Veterans Inc., which operates from a post office box in Colton.

The company was formed in May, 1990, and is listed as a nonprofit corporation with the state and Internal Revenue Service for tax purposes. However, On Dec. 11, Los Angeles authorities revoked American National’s solicitation permit, finding that the group had engaged in deliberate “deception” of the public.

Robert Burns, general manager of the Los Angeles County Department of Social Services, said that American National falsely claimed that its solicitors are volunteers when in fact they are paid and that much of the donations are used to support fund-raising operations rather than to provide services.

Burns said that contracts signed by the solicitors indicate they receive about 30% of the first $100 they make, and 40% for the second $100. Crew chiefs who supervise the solicitors and the groups’ primary organizers apparently receive the bulk of the donations as pay, he said.

“There’s not much left over for services,” Burns said. “In and of itself what they are doing is not illegal, but what is inappropriate is to mislead the public about what they are doing.”

Mark Sporn, president of American National, denied Monday that his group has misrepresented its services or is in any way skirting the law.

“We have all of our records and they are open to inspection,” Sporn said. “We’ve also had our problems with the VFW (Veterans of Foreign Wars) and DAV (Disabled American Veterans) but we are willing to sit down with anybody and compare our record.”

Sporn said he was unaware of the revocation of the group’s permits in Los Angeles and said the group has attempted to cooperate fully with officials.

He said only 10% to 15% of donations go for administrative costs--including an 800 telephone hot line--and the rest is used for services that include commissions for soliciting and motel room and board.

Sporn said his group spends from $700 to $1,000 a week providing services, often wiring money to individual veterans for transportation, housing, food or other emergencies--and he has the receipts to prove it.

Sporn acknowledged that some solicitors are paid, but said that others are volunteers. He denied that any veterans are being exploited.

“We take homeless off the street and make sure they are free of alcohol and drugs,” Sporn said. “We help where other organizations don’t.”

Burns and other authorities said American National’s mode of operation mirrors activity that should raise warning signals:

* The men and women soliciting donations are recruited at homeless shelters and then lodged in a motel.

* A portion of the money they collect is used to defray room costs and the solicitors are told they must gather a minimum amount if they want to continue being housed and fed.

The group’s literature states that donated money is used for housing referral, food and job training services. However, several local veterans organizations contacted said they knew of no veterans who had benefited from the programs.

Last week, one American National solicitor--a 26-year-old veteran who identified himself only as Michael--sat in a wheelchair in front of a Ralph’s supermarket in Santa Ana. He said he had been soliciting donations there for two weeks, every day from 8 a.m. to 9 p.m.

“I get room and board for doing this and money for cigarettes and stuff,” he said.

The flyers he hands out describe American National as a “nonprofit public benefit corporation.”

He said he had not been told where services are provided or how much of the money he raises goes to veterans.

“I really don’t get involved in that because I’m concerned with getting myself back on my feet,” he said.

Another American National worker, who declined to identify himself as he stood at the doorway to the U.S. Post Office on Grand Avenue in Santa Ana, said he was recruited by a man he met two weeks ago at a county Social Services Agency.

“They told me what to say, took my picture, gave me an identification card, set me up and said: ‘Go grub.’ ” One of the things he said his boss told him to say was that 65% of the donations go to services for veterans, such as alcohol and drug-abuse treatment.

“I just say, ‘Help the Veterans?’ ” he said.

The worker said he collects an average of $150 a day and is given $35 out of that every night to pay for a motel room he shares with another American National solicitor. He said there are about 30 other American National workers who also stay at his motel, which he declined to identify.

Burns said questionable groups have been particularly active in the Inland Empire.

“They generally have sprung up in the Riverside-San Bernardino area,” Burns said. “Most of them are home-grown. But we understand they are branching out into other states. A lot of money is being diverted into organizations whose credibility can be challenged.”

Helpline U.S.A., which operated a veterans and child-abuse hot line out of Grand Terrace in San Bernardino County, was sued by the Attorney General and ordered on Aug. 2 to cease operations until it submitted financial statements to the state. Deputy Atty. Gen. Johns said the group was also under investigation by the San Bernardino County Sheriff.

National directors of established organizations such as the Veterans of Foreign Wars and Disabled American Veterans have issued bulletins to local offices to be on the alert for newly formed groups claiming to represent them or using similar names.

What is most alarming, these directors say, is the harm that has been done to their own fund-raising activities.

“It’s impossible to put a dollar figure on it but we know it is happening and it has an impact on our ability to raise funds,” said John P. Charlton, inspector general for the DAV in Cold Springs, Ky.

Authorities say they are often stymied because organizations that call themselves charities can engage in a range of activity that may appear dishonest but is not technically fraudulent.

Two years ago, the U.S. Supreme Court overruled a North Carolina statute that required nonprofit agencies to make public the percentage of funds actually used for charitable services. The court found that the statute was a violation of the First Amendment.

The charity in question, which represented the blind, had argued that such a requirement would discourage people from contributing to organizations with high operating costs.

California officials said that ruling has made a similar state law virtually unenforceable.

In another case, the Supreme Court ruled that states cannot restrict the amount of donations used by charities to cover administrative costs.

“What it means is that there is very little that is definable as fraud,” said Herchel Elkins, Senior Assistant Attorney General in charge of consumer complaints.

“It is extremely difficult to find out which ones are legitimate and which ones are not. There are veterans organizations . . . that will take 90% of the money and maybe 5% goes to charity but it’s not illegal unless they lie about it.”

What is most clearly fraudulent is misrepresentation of activities or services, Elkins said. If a group claims that its funds are used to take veterans out to ballgames, then it must do so. But discrepancies are not likely to come to light until formal financial statements are filed, which can be as long as 16 months after a group has claimed tax-exempt status.

By then most questionable groups have long since disbanded or reorganized under a different name, possibly even adopting a different cause.

Terrill McCarty, a member of the Orange County Veterans Advisory Council, said his group is drafting a measure that would give them authority to screen and license veterans charities and monitor their activities. Members of the council are appointed by county supervisors and act as a liaison to the veterans community.

“Major fraud has been escalating in this area and there is really no agency to monitor it,” said McCarty, who is an investigator in the Orange County District Attorney’s office. “The problem is people see a sign for disabled veterans or a guy in a wheelchair and they put money in the box. People give from the heart without asking questions.”

Mary Anne Perez contributed to this report.

TIPS ON DONATIONS TO CHARITIES

* Know the group or people you are helping. If unsure, check them out.

* Find out whether the group is registered with the state Office of Charitable Trusts. Nonprofit organizations must also file with the California secretary of state and the Internal Revenue Service for tax-exempt status.

* Ask to see the solicitor’s permit and identification, which most cities require. While solicitors are not required to tell you the percentage of money that goes directly for charitable services, representatives of most established organizations will do so anyway.

* If questions persist, the Better Business Bureau has a list of 22 voluntary standards that most established charities follow. A copy of the list is available from local BBB offices. Inquiries about specific groups may also be directed to the bureau.

Source: Better Business Bureau and law enforcement authorities