fraud
December 1, 2011 8:18 PM Subscribe
How do I report a 501c3 non profit that is fraudulant?
There is plenty of proof & many witnesses. The sheriff says its not his concern. The volunteers have seen her make many personal purchases on the charity's credit card. She has no board of directors, she is in direct violation of the charities mission statement, she emptied the donation jar to buy beer. And much, much more.
For 5 years people have tried to get this charity shut down, we live in a touristy area, and so there are always new folks for her to scam.
There is plenty of proof & many witnesses. The sheriff says its not his concern. The volunteers have seen her make many personal purchases on the charity's credit card. She has no board of directors, she is in direct violation of the charities mission statement, she emptied the donation jar to buy beer. And much, much more.
For 5 years people have tried to get this charity shut down, we live in a touristy area, and so there are always new folks for her to scam.
I don't know what state you are in but a lot of State Attorney General Offices regulate charities. For example.
posted by Sylvia Plath's terrible fish at 8:26 PM on December 1, 2011 [5 favorites]
posted by Sylvia Plath's terrible fish at 8:26 PM on December 1, 2011 [5 favorites]
Yeah, somewhere in the state government there is an office where the charity is registered as a corporation, and there are legal requirements for remaining in good standing. Similarly, to be an actual 501(c)3 non-profit -- a status that has to be applied for and approved -- there are forms to file and the IRS would be very interested.
Is there no news media where you are? This is a story that somebody would probably love to run a series of muckraking exposes on. Find that somebody.
posted by dhartung at 10:51 PM on December 1, 2011 [1 favorite]
Is there no news media where you are? This is a story that somebody would probably love to run a series of muckraking exposes on. Find that somebody.
posted by dhartung at 10:51 PM on December 1, 2011 [1 favorite]
Here's how I did it...
I contacted my state's Attorney General's office and asked for advice. They directed me (for my particular circumstances) to the IRS. I forget why, but I remember doing some FOIA's with the IRS.
The next step won't apply because my 501c3 was embezeling from the city government, but once the city was investigating, it was the Feds that took over the case and brought it to Federal Court for indictment. The object of the investigation and indictment plead guilty. Because they were.
I'm sorry, I don't know which Federal agency got involved. I do know every single person in authority I explained this situation to took it very very seriously and gave me good advice. I remained ENTIRELY anonymous throughout the process - the IRS FOAI's, although sent directly to me, apparently were not known to my target. Use a false name and address if you need to. I remember faxing my written FOAI request (it must be written) to the IRS. You could use a fake name on the request and a friend's address (someone out of state or in another city?) to complete the transaction. Fax from your local Fed Ex office.
The IRS is not a Federal Agency, BTW. But they might be the ones who will prosecute your particular case since this concerns them directly.
Start with your Attorney General's Office, take their advice when dealing with the IRS. Gather your documentation. You need a paper trail, NOT accusations.
You might have to bide your time to collect documentation. The IRS and Attorney General can tell you what types of documentation you need - for sure I remember this was the part they were most helpful with.
That said... I'm not sure what you describe is exactly illegal. My understanding of charities is that they can spend a majority on "overhead" and only a fraction on the actual charity.
What you describe may be unethical, but within the law.
posted by jbenben at 12:16 AM on December 2, 2011 [6 favorites]
I contacted my state's Attorney General's office and asked for advice. They directed me (for my particular circumstances) to the IRS. I forget why, but I remember doing some FOIA's with the IRS.
The next step won't apply because my 501c3 was embezeling from the city government, but once the city was investigating, it was the Feds that took over the case and brought it to Federal Court for indictment. The object of the investigation and indictment plead guilty. Because they were.
I'm sorry, I don't know which Federal agency got involved. I do know every single person in authority I explained this situation to took it very very seriously and gave me good advice. I remained ENTIRELY anonymous throughout the process - the IRS FOAI's, although sent directly to me, apparently were not known to my target. Use a false name and address if you need to. I remember faxing my written FOAI request (it must be written) to the IRS. You could use a fake name on the request and a friend's address (someone out of state or in another city?) to complete the transaction. Fax from your local Fed Ex office.
The IRS is not a Federal Agency, BTW. But they might be the ones who will prosecute your particular case since this concerns them directly.
Start with your Attorney General's Office, take their advice when dealing with the IRS. Gather your documentation. You need a paper trail, NOT accusations.
You might have to bide your time to collect documentation. The IRS and Attorney General can tell you what types of documentation you need - for sure I remember this was the part they were most helpful with.
That said... I'm not sure what you describe is exactly illegal. My understanding of charities is that they can spend a majority on "overhead" and only a fraction on the actual charity.
What you describe may be unethical, but within the law.
posted by jbenben at 12:16 AM on December 2, 2011 [6 favorites]
The fraudulence you are describing, where the director is personally benefitting as a result of her insider control, is called inurement.
posted by Short Attention Sp at 1:47 AM on December 2, 2011 [1 favorite]
posted by Short Attention Sp at 1:47 AM on December 2, 2011 [1 favorite]
It isn't the sheriff's concern. What's she's doing is scummy, but it doesn't sound as if it's actually illegal in a way that the sheriff has any jurisdiction over, at least not given the few facts we know. Local government authorities aren't in the business of enforcing federal tax compliance. That's what the IRS is for.
Other people have directed you to file a complaint with the IRS. Do your homework, gather your evidence, and do that.
posted by valkyryn at 5:58 AM on December 2, 2011
Other people have directed you to file a complaint with the IRS. Do your homework, gather your evidence, and do that.
posted by valkyryn at 5:58 AM on December 2, 2011
This is a response to people saying that "there is nothing illegal."
I am not a lawyer and different states are different. Where I'm from, NPO's absolutely must have an accountable board, and financial controls in place if there is any public money being spent (state or federal grants, for example.) Financials are public record, as are board minutes, which is probably what the previous poster FOIA'd. Previous years 990 reports are also public record, you can pull those at your leisure, generally you do that when you're applying for an administrative position to get an overall picture of the health of the organization.
If there is demonstrable misuse of funds and/or funds misreporting with the presence of state or federal grants, you can reign in some additional weaponry by contacting the agency issuing funds and/or the state AG's office. They don't generally abide by misuse of public funds. (Unless you're elected...)
Additionally, and as with a non-profit where I previously worked and subsequently made a stink about (I still work in the non-profit world, just not for the same agency), the "Director" was not a "Director" or "Executive Director", she was a "CEO" and was "entrusted by the board to make decisions without board approval", which they all have to some extent---her extent was just greater than anything that makes any kind of sense. So, what I'm saying is that your mileage will vary.
posted by TomMelee at 6:05 AM on December 2, 2011 [2 favorites]
I am not a lawyer and different states are different. Where I'm from, NPO's absolutely must have an accountable board, and financial controls in place if there is any public money being spent (state or federal grants, for example.) Financials are public record, as are board minutes, which is probably what the previous poster FOIA'd. Previous years 990 reports are also public record, you can pull those at your leisure, generally you do that when you're applying for an administrative position to get an overall picture of the health of the organization.
If there is demonstrable misuse of funds and/or funds misreporting with the presence of state or federal grants, you can reign in some additional weaponry by contacting the agency issuing funds and/or the state AG's office. They don't generally abide by misuse of public funds. (Unless you're elected...)
Additionally, and as with a non-profit where I previously worked and subsequently made a stink about (I still work in the non-profit world, just not for the same agency), the "Director" was not a "Director" or "Executive Director", she was a "CEO" and was "entrusted by the board to make decisions without board approval", which they all have to some extent---her extent was just greater than anything that makes any kind of sense. So, what I'm saying is that your mileage will vary.
posted by TomMelee at 6:05 AM on December 2, 2011 [2 favorites]
The sheriff won't care because those kinds of crimes aren't under his purview. The State may have some jurisdiction if the "owner" is breaking laws based on the charter of the corporation. But mostly, it sounds like federal tax laws are being broken, and so the people to talk to would be the IRS.
Also, even though the things you witness seem wrong, if she goes back and reimburses the money to make the books right, she probably isn't breaking any laws.
posted by gjc at 7:04 AM on December 2, 2011
Also, even though the things you witness seem wrong, if she goes back and reimburses the money to make the books right, she probably isn't breaking any laws.
posted by gjc at 7:04 AM on December 2, 2011
I agree that this is something the IRS and possibly the State AG will be interested in, if anybody is.
I just wanted to point out to the OP that your example of inurement is one that will be particularly hard to prove. There's a donation jar, and she's taking beer money out of it? Even with eyewitnesses, I'm not sure I'd expect a lot of response because you're talking petty cash with minimal record-keeping. Not saying it's right, just that it's the kind of wrong it's hard to prove.
I suspect that the other issues (absence of a Board; direct violation of mission) are likely to be more intersting to the relevant authorities. If you want to get their attention, I'd say you should lead with those.
posted by gauche at 7:35 AM on December 2, 2011 [1 favorite]
I just wanted to point out to the OP that your example of inurement is one that will be particularly hard to prove. There's a donation jar, and she's taking beer money out of it? Even with eyewitnesses, I'm not sure I'd expect a lot of response because you're talking petty cash with minimal record-keeping. Not saying it's right, just that it's the kind of wrong it's hard to prove.
I suspect that the other issues (absence of a Board; direct violation of mission) are likely to be more intersting to the relevant authorities. If you want to get their attention, I'd say you should lead with those.
posted by gauche at 7:35 AM on December 2, 2011 [1 favorite]
Weird. You can't be a 501(c)-anything without directors. It's right there on the yearly 990 you have to fill out. In fact, you can look those up online--they are public records. Is this person pulling a scam and just telling people that she runs a not-for-profit charitable organization? If the org has no 990s up online, I'd think it's a scam from whole cloth. That's an easily checked angle to add fuel for the fire.
If there are actually 990 forms out there, they will provide interesting information.
posted by graftole at 3:10 PM on December 2, 2011 [1 favorite]
If there are actually 990 forms out there, they will provide interesting information.
posted by graftole at 3:10 PM on December 2, 2011 [1 favorite]
Graftole is probably correct, in that, one of the bigger transgressions of my subject was they had applied for 501c3 status, but it had never been granted, yet they had operated for YEARS as though they were a legal non-profit. While stealing or misusing funds.
posted by jbenben at 9:31 AM on December 3, 2011
posted by jbenben at 9:31 AM on December 3, 2011
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How Do You Report Suspected Tax Fraud Activity?
posted by McCoy Pauley at 8:21 PM on December 1, 2011