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5 Of The Largest Recent Charity Scams

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5 Of The Largest Recent Charity Scams

Anyone with a telephone is familiar with calls from charities seeking money. Such calls increase in number after a tragedy like an earthquake or a hurricane that makes landfall in a populated area. Sometimes the calls are treated as though the charity soliciting the money is a simple telemarketer. In such cases the telephone is slammed home to the receiver after a shout of “don’t call me again.” Other times, a small sum of money is promised simply to end the lengthy pitch regarding the urgency of the situation and the need for funds.

That latter method for handling the call is what charities count on. Many philanthropic organizations are formed because it is believed that, in times of stress, people will willingly donate to support a good cause. Other times charities believe that the promise the money will support firefighters, policeman, or children with cancer will provide a sufficient reason for someone to part with his or her hard-earned cash.

But all too often only pennies from each dollar received actually make it to the intended destination. Many charities funnel money back into themselves. Through complicated legal maneuvers, the money is channeled to trusts and associated fundraising companies. This enriches the charity’s executives and keeps the self-perpetuating money mills operating.

In 2013, The Center for Investigative Reporting and the Tampa Bay Times collaborated to expose such organizations. The work culminated in a report of America’s 50 worst charities.

The worst offender on the list shocked many. It was the Kids Wish Network. The report found that the well-known charity distributed less than 3 cents of every dollar back to the children for whom it was ostensibly raising the money.

The most astounding part of the story is that it was all apparently quite legal. The Kids Wish Network still operates today although it was forced to hire a “crisis management specialist” to deal with the fallout from the report.

Such swindling may anger many who have donated to what they believed to be good causes, but it turns out that few charities face prosecution for operating in this manner. It is certainly a case where legality does not approach morality.

But some who crossed the moral line — if it is agreed that one exists — also eventually cross the legal line. Here is a list of five charities that were found not to be distributing money to their advertised recipients, and the consequences the organizers faced.

Santa Clara County Police And Sheriff’s Athletic League

$3.5 Million

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Former sheriff’s deputy for Santa Clara County, California, Armand Tiano once ran a charity called the Santa Clara County Police and Sheriff’s Athletic League.

He organized the charity and hired telemarketers to solicit money. The donations, people were told, would go to “the children of dead or injured police officers” or to pay for “holiday food baskets for the poor.”

The whole thing turned out to be a lie.

In 2004 a jury found that Tiano used most of the $3.5 million that the charity collected to pay fellow associates, fund a large sports car collection and buy a new home.

He was convicted of conspiracy, grand theft, insurance fraud, embezzlement, perjury, tax fraud, and money laundering. The impressive list of convictions earned him a sentence of more than 17 years in prison.

Nine others involved in the scam plead guilty to related charges. Two other associates stood trial with Tiano. They received lesser sentences. Authorities only recovered $50,000 of the ill-gotten money.

Joe Shambaugh – 3 California Charities

$7 Million

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Police charities can bring in a lot of money. So too can firefighters and veterans charities. Joe Shambaugh undoubtedly knew this when he founded four separate organizations based on the lucrative trifecta.

Shambaugh operated the Association of Disabled Firefighters, the Coalition of Police and Sheriffs and the American, the Veterans Relief Foundation, and the Disabled Firefighters Foundation in California until 2005.

That was the year FBI agents started questioning directors at the four charities about where the money was going. Shambaugh severed ties with the organizations, but that didn’t save him. He was indicted for fraud in 2006, but fled the country before he could stand trial.

He was arrested in 2009 when he tried to visit his mother. He was held in custody until a plea deal was reached in 2012.

Court documents indicated that Shambaugh was responsible for defrauding donors out of $7 million through three of his charities. The Disabled Firefighters Foundation was not mentioned in the plea deal.

Prosecutors were able to prove that only one penny for every dollar collected ever made it to those in need.

The deal stipulated that Shambaugh would only serve a maximum of 60 months in prison.

Bernie Madoff And The Eli Wiesel Foundation For Humanity

$15.2 Million

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The name Bernie Madoff is unknown to few. In 2009 the investment manager was sentenced to 150 years in prison for operating a massive Ponzi scheme that lost investors up to $18 million in actual funds. Nearly overnight $65 million that never truly existed disappeared from the life savings of those who trusted Madoff with their money.

One of those people was famous author and Holocaust survivor Elie Wiesel. Apart from the personal savings Wiesel lost, his charity The Eli Wiesel Foundation for Humanity lost $15.2 million.

To be clear, unlike others on the list, Wiesel is just as much a victim as those whose donations evaporated because of Madoff’s actions. Wiesel’s foundation was a legitimate enterprise but its funds, because of Madoff, never were spent as intended.

Wiesel called Madoff a “thief, scoundrel, [and] criminal.”

Asked what a proper punishment for Madoff would be, Wiesel responded:

“I would like him to be in a solitary cell with only a screen, and on that screen for at least five years of his life, every day and every night, there should be pictures of his victims, one after the other after the other, all the time a voice saying, ‘Look what you have done to this old lady, look what you have done to that child, look what you have done,’ nothing else.”

Deniz Feneri

$20.6 Million

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The Deniz Feneri charity was a German organization that collected donations from European Muslims that were supposed to be redistributed to poverty-stricken Palestinians and Pakistani refugees.

But in 2008 a German judge found that three executives from the charity were actually redistributing the funds and investing the money in real-estate ventures.

It is unclear exactly how much money was redirected away from the charity. $20.6 million is the low figure, though some reports say as much as $30 million were invested surreptitiously. That would be more than half of the $56 million the charity collected.

At the time of the conviction the judge said it was the largest fraud case in German history.

Mehmet Gurhan was the founder and one-time director of the charity. He received the harshest sentence: 70 months in prison.

U.S. Navy Veterans Association

$100 Million

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Perhaps it can be taken as a good sign that Bobby Thompson was treated so harshly by a sentencing judge late last year. It might mean that authorities are finally getting serious about hunting down fraudulent charities and convicting their organizers.

Thompson’s sentence and the amount of money he squandered tops this list.

Investigators and prosecutors say Thompson was actually born as John Donald Cody. Whatever his name, he was sentenced by a judge in Ohio in December for a laundry list of convictions including racketeering, money laundering, records tampering, theft and identity theft.

He had been convicted the previous month. Prosecutors argued that Thompson raised over $101 million through his Florida-based charity the U.S. Navy Veterans Association but most of the money never went to help veterans.

It is unclear exactly what Thompson did with the money. Authorities said they were able to recover $101,000 from some of his bank accounts and they confiscated a whopping $980,000 in cash that Thompson had in a suitcase when he was arrested.

For his crimes Thompson was sentenced to 28 years in prison and saddled with more than $6.3 million in fines.

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