boston.com Business your connection to The Boston Globe
CONSUMER BEAT

Fund-raisers' questionable claims prompt reminder for cautious giving

The Veterans Charitable Foundation is making a patriotic fund-raising pitch to many Massachusetts residents: 100 percent of every donation goes directly to help veterans with wheelchairs, medical equipment, and family aid.

But the pitch has a fatal and possibly illegal flaw: It's not true.

The fund-raising calls are being made by a Florida for-profit corporation that is pocketing most of the money. The foundation's most recent tax filing indicated it raised $118,000 in 2005 and donated only $3,120, or just 2.6 percent of the total, to seven Veterans Administration hospitals and medical centers. Nearly $98,000 went for fund-raising expenses and $14,000 for management costs. From 2002 through 2005, the average amount donated to the charity's programs as a percent of total revenue was 7.7 percent.

The foundation's sales pitch appears to be an attempt to conceal from would-be donors how little of their contributions would actually benefit veterans. There are no laws mandating how much a charity should spend on program services, but watchdog groups say nonprofits should devote at least 30 to 40 percent of their budget on programs and services.

"They're playing on your patriotism, on your willingness to help the poor returning veteran," said Vic Hamburger of Westborough. "It's about as sleazy as you can get."

Hamburger said the fund-raiser who called him told him 100 percent of his donation would go to the foundation's cause. Hamburger said the fund-raiser also told him he had given to the foundation the previous year, but his tax records indicated he hadn't.

John Leonard of Hingham said he specifically asked the person calling on behalf of the Veterans Charitable Foundation whether he was working for a contracted fund-raising organization. He said the person told him it was an all-volunteer effort with all the money going to veterans. Leonard became suspicious and contacted the Globe.

I heard the same pitch myself when a fund-raiser called me at home. Even after I told the caller that I knew the charity's fund-raising was being handled by a for-profit company, he denied it. He referred me to the charity's website, vcfusa.org. On the website, president Frank Cariello of Boynton Beach, Fla., acknowledges using professional fund-raisers.

Such fund-raisers are not allowed to mislead potential donors. The Massachusetts attorney general's office, which regulates charities and professional fund-raisers, publishes a guide that warns legal action may be warranted if fund-raisers fail to disclose that they are professionals, misrepresent the percentage of funds that will be used for charitable purposes, or reference a prior pledge when none was made.

Cariello, in a telephone interview, said 100 percent of the donated money does go to the charity, but only after his hired-gun telemarketers cover their expenses. He said he and the other members of the foundation's board take no salaries. He said he got into charity work because many of his friends are veterans.

Cariello said his telemarketers are supposed to follow a script when soliciting donations. "Sometimes they try to make a sale so bad they say things they shouldn't," he said.

Cariello said the foundation's 2005 tax filing understated spending on programming because of a bank mix-up toward the end of the year. He said foundation contributions to the voluntary service operations of Veterans Administration hospitals were higher in previous years and have increased recently.

Tax filings for 2002 through 2005 indicate the foundation raised a total of $464,762 over the four-year period and allocated only about $36,000, or 7.7 percent, to program services. The current contract between the foundation and its Massachusetts telemarketer, CMR Marketing Group of Medford, indicates its year-long campaign is expected to raise $98,000, of which 82 percent will go to the fund-raiser and 18 percent to the charity.

Officials at CMR said the company's telemarketers are paid $8 an hour whether they secure a contribution or not. The officials said some volunteers make calls and pick up checks from donors.

"We are not the only charitable organization in Massachusetts, but we are the only ones that continue to support the VA hospitals here," the officials said in a written statement faxed to the Globe.

Ralph Marche , director of voluntary service and recreational therapy for the Boston-area Veterans Administration hospitals, is pictured on the foundation's website receiving a check. Marche said the foundation has donated two $1,000 checks and a third check in the $5,000 to $10,000 range. He said other groups also donate money.

Marche said individuals could make donations directly, which would ensure that none of their money is siphoned off to telemarketers. He said donations are used to purchase services and equipment the Veterans Administration cannot buy, including recreational equipment, TV sets, bedside phones, and clothing.

Tax filings indicate veterans' charities are similar to police and fire charities in that they tend to rely more on telemarketers for fund-raising. The high cost of telemarketing fund-raising means there is less money left over for the charity's stated purpose.

A Globe survey of the most recent tax filings of veterans charities indicated the amount of money going to services varies dramatically. For example, Amvets Boston said 83 percent of the $59,000 it raised went to services, while the figure was 67 percent at the Boston-based New England Shelter for Homeless Veterans, which raised $5.1 million.

By contrast, only 14 percent of the $5.4 million raised by the National Veterans Service Fund of Darien, Conn., actually went to program services. Only 13 percent of the $722,000 raised by the Tennessee-based American Ex-Prisoners of War Service Fund went to programs.

Laurence Fitzmaurice , chief executive of the New England Shelter for Homeless Veterans, said his organization doesn't raise money exclusively through telemarketing, which is very expensive. Using telemarketing, he said, costs the shelter about 50 cents to raise a dollar. He said the shelter is trying to reduce that cost to 40 cents.

Sandra Miniutti , a spokeswoman for Charity Navigator, a New Jersey-based watchdog group, said it gives a zero rating to any nonprofit that spends less than a third of its budget on programs and services. Of the 5,200 charities rated by Charity Navigator, she said, 70 percent spend at least 75 percent of their budgets on programs and services.

She urged consumers to be very cautious in dealing with charities calling for donations. She said consumers should ask who is calling them and where their money will go, and then hang up and do more research. Charity Navigator and the Better Business Bureau (Give.org) both evaluate charities and Guidestar.org provides the most recent tax filings of nearly all charities.

"We always tell donors to send their check directly to the charity and not go through a middleman," Miniutti said.

Bruce Mohl can be reached at mohl@globe.com.

(Correction: Because of an editing error, a story in Sunday's Business & Money section about the Veterans Charitable Foundation incorrectly said its for-profit fund-raising company is in Florida. It is in Medford.)

SEARCH THE ARCHIVES