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A Crackdown on Fake Charities Exploiting Veterans

Bob Edwards talks with FTC experts about scams that make money off of vets

Take on Today Podcast

AARP

Bob Edwards

Hello. I'm Bob Edwards with an AARP Take on Today. This week we'll hear about a sweeping crackdown by federal and state law enforcement agents on charities that allegedly sought to bilk people under the guise of helping veterans. Also, learn how you can turn that flood of unsolicited robocalls seeking to rip you off into a trickle. But first this week, Americans cast their votes for members of Congress, governors, and state and local officials across the country. The results were mixed and included the Democratic Party taking control in the House and the Republicans expanding their majority in the Senate. While the narratives may vary, Americans age 50 and older once again made up the majority of voters, but national exit polls showing 50 plus voters making up 56 percent of the electorate. In a statement AARP Executive Vice President, Nancy LeaMond urged policy makers to come together to lower prescription drug costs, to protect people with preexisting conditions, to protect them from an age tax and to strengthen and safeguard Medicare and Social Security.

Bob Edwards

Scammers and spammers spend about 438 million dollars a year on robocalls and it's a sound investment. These calls generate more than 20 times that amount in income, almost 10 billion dollars. Between 2014 and 2017 Americans donated 20 million dollars to Help The Vets, an organization with an appropriately philanthropic name, but a far more sinister mission and that's because Help The Vets along with others so called charities with cleverly crafted monikers like Medal of Honor, Saving Our Soldiers and Act of Valor are fake, bilking generous and compassionate Americans out of millions of dollars. Plus, they're diverting money from legitimate charities and the veterans they serve, which is why federal and state law enforcement agents this summer carried out a sweeping crackdown on charities that allegedly sought to bilk people under the guise of helping veterans. According to the Federal Trade Commission, more than 100 actions were taken against sham charities accused of fraud. I caught up with Tracy Thorleifson and Carol Kando-Pineda with the FTC to hear more about their work to protect veterans. Thank you both for joining us today and tell me about your roles and how you work together.

Tracy

At the FTC, I organized the Operation Donate with Honor with our partner, the National Association of State Charities Officials. So, I was the one who coordinated the organizing phone calls, encouraged states to participate, pulled together the list of enforcement actions and then I also worked on the case against Help The Vets.

Bob Edwards

Carol?

Carol

I'm an attorney with our office of consumer and business education and I manage our outreach to service members, veterans and their families.

Bob Edwards

The FTC recently led Operation Donate with Honor that busted scam veteran charities. Tracy, tell me about the operation and how many organizations did you bust?

Tracy

Well, collectively the 70 plus state government entities and the FTC busted ... We had 102 enforcement actions against sham charities and professional fundraisers and a handful of businesses who claimed to sell goods and services that benefited veterans when they didn't.

Bob Edwards

How did you identify these bad actors?

Tracy

As with identifying any fraudulent charity, we look to the public records. We can look at a charities 990's, which are their tax filings and see what they report. Paying fundraisers, paying themselves, and how much they claim to spend on program. And you can often see right there on the publicly available tax filing that 90 percent or more is being paid to fundraisers, the individuals behind the organization are paying themselves tens of thousands of dollars in benefits or salary and not spending the money on the programs that they promise donors their donations will benefit.

Bob Edwards

Oh, that overhead. It's a terrible headache.

Tracy

Overhead is real and it's not fair to ding charities if they have to pay overhead, some overhead, but every donor has to decide for themselves how much is okay and when you get up to 95 percent and you tell donors that their money will be spent helping veterans, giving grants to disabled veterans, then it becomes something that the FTC would allege is a false or misleading statement.

Bob Edwards

You mean five percent actually went to veterans?

Tracy

According to their tax returns.

Bob Edwards

So, what happens when they're caught?

Tracy

So, at the FTC we have civil authority and in the Help The Vets case we partnered with six states and we negotiated a civil settlement with Help The Vets where the organization, I won't call it a charity because we alleged it was a sham, the organization agreed to close its doors and the individual behind the organization agreed to be banned from soliciting charitable fundraising, from having control over charitable money and from assuming any leadership roles in charity. And in addition, the remainder of the money that the charity, the organization had is going to the states as is 1.75 million dollars that the individual will pay and the states will then identify one or two legitimate charities to give the money to so that at least some of donor's intent will be fulfilled.

Bob Edwards

Are there particular examples that surprised you the most? Perhaps someone particularly shameless?

Tracy

Well, Help The Vets was pretty shameless. He paid himself a lot of money and took a lot of benefits. I think one of the things I found interesting was how very many sham charities and scam businesses promised donors that their money would be used to send care packages to the military. It seemed like every single charity we looked at that was one of the false claims that they made and sometimes they maybe did send one or two packages or maybe even out of 2 million dollars in donations they might've sent 19 packages, but it seems to be a popular thing to say to get people to donate.

Bob Edwards

Carol, why are people falling victim to these organizations?

Carol

Well, that's an excellent follow-up question because what Tracy raised there was some of the common claims that she saw in those cases and that really illustrates perfectly how these scammers will try to find an affinity for you to latch onto. They'll try to appeal to your emotions and in this case, they'll appeal to someone's desire to help the military community or to help veterans. And these scammers are very wise. They know exactly what they're doing. They're professionals. They know how to craft that message to make it plausible, to make it appealing and they know how to approach you so that you'll give.

Bob Edwards

And the names. I mean, who doesn't want to give to Saving Our Soldiers, right?

Carol

If you go onto our website at FTC.gov/charity, you'll see the consumer information that we put together as a corollary to the campaign to educate people on some of the lessons that we learned from the cases and one of the things I think that's most compelling is a infographic that lists the names of a number of charities and it says, would you give to any of these? And most of them are very appealing and they sound similar to names that you've heard before and they certainly make you, if you're so inclined to want to support veterans, you might want to donate to one of these groups and each one of them is an entity that somebody has sued for these deceptive kinds of claims.

Tracy

Healing American Heroes, Healing Heroes Network, Foundation for American Veterans, National Vietnam Veterans Foundation, American Foundation of Disabled Veterans.

Bob Edwards

Oh man. I'm a vet and an AARP member. I'm doubly outraged. What steps can people take to make sure that they're giving to a legitimate organization?

Carol

I would say from the consumer education standpoint, and Tracy please jump in at any point, we advise people to do some research and to really look into the groups that you would like to donate to. You might even want to develop a whole plan for giving over the course of the year so that you know exactly who you're donating to and your money is spoken for and you don't feel that pressure if somebody calls you because you've already come up with your plan and you know where your money is going to go. You want to check out the name of the organization if somebody approaches you because it could be a lookalike or a sound alike and that's just what we were talking about. You don't want to just rely on something that sounds kind of familiar because that's that sweet spot that the scammers find to try to throw you off balance just long enough to get your money.

Bob Edwards:                What steps do you think are needed to stop future scam charities?

Tracy

The best step is to educate donors. I heard a great line the other day that really rang true to me. You pick your cause with your heart and the organization you support with your head and if people take a breath and don't give the moment they see the picture of the disabled veteran or the starving puppy or the malnourished child, take a breath. Is that a cause I want to support? Great. That's wonderful. Those are causes that need to be supported, but go do some research and find a charity that effectively will use your money.

Bob Edwards

Now, our focus here has been on veterans, but this is widespread among other areas, right?

Tracy

Right.

Bob Edwards

Sick puppies.

Tracy

Any charity. It's true of any charity. There are a couple of other things that people can do. Carol was absolutely right that the solicitations are tailored to be helpful. The telemarketers test them and when they find a successful line they'll repeat it over and over. So, the things to listen for or to look for in a direct mail piece are not what a sexy sounding mission is or the poster child example, but to look for specifics. We help disabled veterans. Well, that's great. How many have you helped? How much money did you raise? We provide grants to disabled veterans. Okay. How much money did you spend on grants? How many people got grants? How much did they get? Was it $100? That's not going to be very useful. Was it a thousand? Did it by them a new needed piece of medical equipment? Did you buy one wheelchair or did you have a program to identify people who needed wheelchairs and give out hundreds or thousands of them? Look for specifics. Don't be fooled by a sexy sounding mission.

Bob Edwards

There are also scams that target veterans themselves, right?

Carol

Sure. I mean, veterans can be targeted to give towards veteran's charities or to military charities or to any number of other charities.

Bob Edwards

Appealing to their comradeship.

Carol

It's sort of a twist on affinity fraud. Trying to appeal to your affinity with the military or ... And wanting to help the troops and to support the troops.

Bob Edwards

What does the benefits buyout offer?

Tracy

The benefits buyout offer is something, it can be called a pension loan or a pension advanced loan, pension buyout, and so somebody may approach you or you may get a call or a text or something like that that offers to buy the rights to your pension for a lump sum money payment upfront. So, sometimes if people are a little bit cash strapped, they see these ads or they get a call from somebody and they think this might be appealing. It might help them get out of a financial situation that they're in at that moment and I think it might be a good option, but I would caution people to really look long and hard and to really think about it, do some research, because it may be the worst possible option for you, because you may not be eligible to sell the rights to your pension.

Tracy

There are certain pensions, certain federal government pensions that you can't sell the rights to. So, you may be paying a fee to somebody and paying money for a benefit that you're not going to get. You're not going to be able to get that lump sum from them and they're gone with your money. There may be other costs involved and fees that may not make it worth your while. If this is something that you really want to look into, you want to try to find out what all those costs and fees are in writing. You don't want to depend on anything somebody said to you in a phone conversation or in a face to face solicitation. You want to get all of that in writing, especially the annual percentage rate because that could add a lot of hidden fees and hidden costs that you don't know about. Sometimes these deals in order to buy your pension, they will require you to buy life insurance and name them as the beneficiary so that if you pass away before they've received their value back of your pension payments, that's their guarantee that they will get all of those pension payments. So, that may have ramifications that you certainly didn't intend and you may not want to have another life insurance policy and then there could be tax implications as well. If you get a lump sum payment that could affect your taxes.

Bob Edwards

So, what are some things that veterans or family members of veterans should watch out for?

Carol

Well, I think if somebody approaches you with one of these offers you really want to think long and hard before you consider it. If folks feel like they need a little bit more liquidity with cash, there are probably other avenues that would be a little bit more beneficial for them, whether it's going to their credit union or to a bank to try to get a loan. If they're trying to lower their debts, maybe contact their creditors and try to negotiate a payment plan or a lower interest rate. Some combination of those things may serve them way better in the long run than selling their rights to their pension.

Bob Edwards

Thank you both very much. Carol Kando-Pineda and Tracy Thorleifson with the Federal Trade Commission. So, before you open your wallet to charity, it's best to follow law enforcement's most important tip research a charities records so you can donate with confidence. Check out the charity by visiting charitynavigator.org or charitywatch.org. Visit AARP.org/fraudwatchnetwork to learn more.

Bob Edwards

Scammers and spammers spend about 438 million dollars a year on robocalls, but it's a sound investment. Those calls generate more than 20 times that amount in income, almost 10 billion dollars. So, don't be fooled if you think robocalls are going away anytime soon because they work, but with a little work on your part there are things you can do to turn that flood of unsolicited calls seeking to rip you off into a trickle.

Bob Edwards

Trap them with an app. Smartphone users have plenty of options, some free, some not that flag and block some fraudulent calls and text messages or simply try not picking up although a voicemail greeting could flag that yours is a working number and ripe for future calls. Robocalls tend to be highest on Friday and Tuesday, which would be good days to turn off the greeting if you want to take that route. Just don't get hung up on hanging up. If you do happen to pickup and the pitch sounds suspicious, it probably is. For more visit AARP.org/podcast. Become a subscriber and be sure to rate our podcast on Apple podcast, Google Play, Stitcher, and other podcast apps. Thanks for listening. I'm Bob Edwards.

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On this week’s episode, experts from the Federal Trade Commission join host Bob Edwards to discuss a sweeping crackdown on charities that allegedly sought to bilk people under the guise of helping veterans.

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