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The Three Worst Charity Scandals

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The Three Worst Charity Scandals

Thanks to television and the internet, people today are aware of the terrible things that happen around the world in a way that has never been possible before. Sometimes this knowledge can overwhelm, and sometimes it can paralyze, but often it inspires people to try to lend a helping hand. Unable to travel to other countries, or lacking the skill set needed to help, people will often search out charities and other non-governmental organizations that promise to make a difference in ways that the average person can’t.

These organizations say they’ll be the people’s watch dogs. They promise to fill the gaps and cracks that individual governments can’t or won’t. So, donators send money and hope that they’ve done something worthwhile. They have to trust that when the money gets there, the funds will be used as promised.

According to the 2014 Edleman Trust Barometer, NGOs are the most trusted public institutions in 20 of 27 countries surveyed, ranking above business, the media and, trailing in fourth place, government. But even these most valued of institutions can occasionally let us down. A lack of unified oversight and jurisdictional grey areas mean that unscrupulous or greedy people can take advantage of public generosity.

According to U.S. District Attorney Amanda Marshall, “Anyone who defrauds a charity for their own personal gain should expect to be found, caught, and prosecuted. This conduct harms the charity, its donors, and, most importantly, the intended recipients of the fraudulently diverted funds.” So, in honor of catching and condemning those who are harming the only institutions we seem to trust anymore, here are some of the worst scandals to hit some of the biggest NGOs out there, and what happened to the people responsible.

Foundation For New Era

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Foundation for New Era Philanthropy may have been funded by well-meaning people who wanted to help, but it was founded by a man who wanted nothing but to help himself.

In 1989 after writing a bad cheque and finding himself in need of some cash, John G. Bennett, Jr. had what seemed at the time to be a brilliant idea – he formed a charity. Well, more like a ponzi scheme, really. Announcing to his friends that he had started a charity called Foundation for New Era, and letting them know that they had the opportunity to get in on the ground floor, Bennett promised his friends that if they each donated $5000 for a period of three months, he would double their money and give it back to them. He had, Bennet claimed, found a group of generous secret donors who would match charitable donations. And, despite how flimsy and unlikely the pitch sounds in retrospect, donors started to pile on board.

Over a period of six years, Bennet conned thousands of donors into giving him contributions, using the money of the new subscribers to pay back the donations of early investors and shaving off a healthy cut for himself. His offer to double investments proved attractive to a number of charities, colleges such as Princeton and Harvard, and even former Treasury Secretary William E. Simon, all of whom wanted a chance to double their money.

Strained by the pressure to pay out earlier investors, Foundation for a New Era eventually collapsed under the weight of a $44 million lawsuit demanding payment. In 1995, when the bubble burst, Bennett had raise over $354 million in contributions from 1,400 investors and skimmed $7.7 million off for himself. Bennett was charged with 82 counts of wire, mail and bank fraud, as well as tax evasion. On September 27, 1996, he was sentenced to 12 years in prison. The bankruptcy of Foundation for New Era would be the largest financial scandal in American charity history.

United Way Of America

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William Aramony is credited by many with making the United Way what it is today. After joining the organization in 1954 as an administrator of a tiny branch in South Bend, Indiana, he quickly rose through the ranks to become the chief executive of the organization, then called United Community Funds and Council of America, in 1970. Once installed, he rebranded the group “United Way,” handpicked a number of promising executives for local branches, and commenced his drive to make the charity the veritable juggernaut we now know. But, for all of the good he did in the 22 years he was CEO, Aramony also wounded the organization more seriously than anyone before him or since.

In 1992, in response to allegations from a number of affiliates, United Way officials began an investigation into Aramony. When the investigation concluded, the CEO stood accused of misuse of funds, fraud, and running satellite business operations. Investigators claimed he had used charitable funds to support his lavish lifestyle – trips on the Concord, a limousine, an expensive condo, and gifts for his teenaged mistress.

During his tenure Aramony had paid himself close to half a million dollars a year in salary, plus benefits. When the two year investigation finished, the man who had helped build one of the most respected NGOs in the world stood convicted of defrauding the United Way, tax evasion, and falsifying records to hide the money he had diverted. Aramony was sentenced to seven years in prison.

In response to the discovery of Aramony’s, donations to the United Way dropped dramatically, some sources say up to 30 percent in certain branches. Even after the legal dust had settled, the ripples Aramony had cause continued to be felt. In the years following, despite instituting strict reforms to prevent fraudulent activity, at least three of Aramony’s handpicked executives would be charged with misappropriation of funds.

National Relief Charities

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Nothing ruins the relaxing afterglow from a month-long trip to Thailand quite like being arrested by both the IRS and the FBI shortly after stepping off the plane. Brian J Brown was the former president of National Relief Charities, an organization that devotes its energy into improving the quality of life for Native Americans. He was arrested in October of 2013 after being charged with embezzling $4 million dollars from the charitable group over a period of three years.

Shortly after stepping down from his position as president of the NRC in 2005, Brown formed an organization called Charity One Inc, a group ostensibly devoted to promoting education for First Nations children. Prosecutors allege that Brown and two co-conspirators (who have yet to be named) induced the NRC to fund the bogus charity from 2006 to 2009, allegedly using all of the money for personal benefit, including the purchase of a $275,000 condo in Thailand where he maintained his residence from 2006 to 2013.

Though this situation is ongoing, Brown has already begun to feel the effects of what he’s done. Much of the $4 million dollars that was taken has been located. Though the judge in charge didn’t deem that he should await his trial in prison, Brown has had his passport seized, and is currently under limited house arrest, sporting a dapper GPS ankle bracelet. Seeing as U.S. District Attorney Amanda Marshall is the one prosecuting the case, you can expect the book to be thrown at the guy.

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