Donations to Illinois veterans charity mostly go to pay telemarketers
By DAVID JACKSON | Chicago Tribune (Tribune News Service) | Published: August 31, 2015
To address the profound and unmet needs of veterans, Americans last year donated $1.4 million to a Rockford, Ill., charity called VietNow National Headquarters.
But most of the money — about 85 percent — went to for-profit phone solicitors, and most of the rest was spent on VietNow's own administrative costs and a convention, public tax filings show.
The fraction of donations spent on direct service to former military personnel and their families did not even reach 7 percent in 2014. The charity gives out scholarships to youths, but it reported only a handful, worth $3,985.
"It may not seem like much, but it's the best we could do. That's probably the best way to put it," said charity President Joe Lewis, who took the top office last year.
In all, more than 90 percent of the $24 million donated to VietNow since 2003 came through telemarketers who kept the lion's share, the Tribune found. After fielding questions from the Tribune, Lewis vowed to renegotiate VietNow's telemarketing contracts.
"I wish (critics) could show me another avenue or how to raise money that we could embrace that would provide us with the funds we need for our organization," Lewis said. "I understand from the public's perception how it seems like so little of it comes to us. Do I wish we could get more? Pardon the language but, hell yes."
Charities that receive high marks from watchdog groups sometimes use telemarketers to raise contributions. But they also deploy advertising, special events, direct mail appeals and corporate sponsorships, allowing them to spend a far higher percentage of the money they raise on programs. Philanthropy experts say at least two-thirds of every donated dollar should be spent on services for the needy.
"If you are under that, you are way out of the norm. You're just not meeting your mission," said Charity Navigator senior analyst Matthew Viola.
But scores of American nonprofits depend almost exclusively on for-profit call centers, drawing millions of dollars annually and spending most of it on the companies that brought in the money. At best, such charities are well-meaning organizations that fall far short of their heart-tugging promises and pleas — something donors often have no way of knowing when they pick up the phone.
A Rock Island rival to VietNow called Illinois Vietnam Veterans Inc. reported $20 million in donations through professional solicitors from 2003 through 2013. In that most recent year, the charity reported spending 90 percent of its donations on for-profit fundraisers and less than 5 percent on direct service to veterans.
"Nobody likes telemarketing, but it's necessary for us in order to run our service program," said charity President Al Huber, who helps former military personnel navigate benefit claims with the Department of Veterans Affairs.
Telemarketers are not just an inefficient way to raise money; some of VietNow's fundraisers have been accused by government regulators of deceptive pitches or other charity law violations.
As the Tribune reported Friday, the owners of VietNow's top fundraiser, Safety Publications Inc. of Chicago, settled civil fraud allegations by the Illinois attorney general in 2003 and then again in 2007 by agreeing to pay a total of $60,000 to the state without admitting it had misled the public. Safety raised $2 million for VietNow since 2008, and it also raised money for Illinois Vietnam Veterans Inc., records show.
Another telemarketer, Non-Profit Services Inc. of Nashville, Tenn., raised $1.2 million for VietNow in that seven-year period, keeping 83 percent, the Tribune found. Non-Profit in 2011 agreed to a five-year ban against doing business in Ohio after that state's attorney general said the firm's pitches inflated the amount of money turned over to charities and failed to make clear that callers were paid fundraisers.
The telemarketer Caring People Enterprises, based in New York, raised $135,000 for VietNow during the same seven-year period and kept 80 percent, the Tribune found. In 2010, the New York attorney general filed a civil complaint alleging that Caring People "brazenly flouted" state laws by filing a phony script with the state and by "systematically" misleading donors to raise money for two firefighters charities.
Non-Profit and Caring People did not respond to requests for comment.
Lewis said he believed in the integrity of VietNow's telemarketers: "From what I'm aware of, I trust in them to have good ethics," he said.
Helping to manage all of VietNow's fundraising is Richard Troia, a longtime telemarketer who in 2004 was permanently banned from charity fundraising in Illinois.
Troia bought more than $1 million worth of office and residential property in Florida and launched a company called United Publishing Inc. that since 2009 has been listed as a registered agent for VietNow in that state, the Tribune found.
Lewis told the Tribune that Troia and United Publishing recommend telemarketers to VietNow and also handle the paperwork required by government agencies around the country, taking a fee of 3 percent from what the solicitors gather in donations.
"He is the person we have the contact with," Lewis said of Troia, who did not respond to requests for comment.
Lewis recalled that he and other board members of VietNow's McHenry County chapter introduced Troia to VietNow's national leaders in the 1980s, after Troia made a pitch to increase charity revenues through his telemarketing.
In 1991, the Illinois attorney general sued Troia over alleged violations of charity laws in his fundraising for VietNow, stating in subsequent court papers that Troia's hefty fees rendered VietNow's public service "merely incidental to the fundraising effort (made) ... for the private pecuniary benefit of (telemarketers) and their agents."
Troia ultimately won the 2003 U.S. Supreme Court decision affirming the free speech rights of charities and for-profit fundraisers to split donations however they see fit.
Without admitting wrongdoing, Troia and his firms agreed to pay $70,000 to the Illinois Charity Bureau Fund to resolve separate state claims — a fraction of the estimated $6 million his firms had raised for VietNow by then.
Illinois Attorney General Lisa Madigan's 2004 court injunction "permanently enjoining" Troia from charity fundraising seemed sweeping; it prohibited Troia from "organizing ... consulting for, or participating in any manner whatsoever in any solicitation drive or charitable fundraising campaign in or from Illinois or from Illinois residents."
But a clause in the nine-page court document enabled Troia to take fees for "referring entities to other Professional Fundraisers" as long as he provided written notice to the attorney general about those arrangements.
Troia never provided such notice, a Madigan spokeswoman said. But he remained indispensable to VietNow.
To eliminate Troia as a middleman, Lewis said, VietNow would have to master the telemarketing business and its intricate contracts: "We would end up having to hire three people."
Criticism of VietNow goes as far back as 1996, when journalist Andy Rooney called VietNow "vultures" in a commentary on CBS' "60 Minutes."
"Their motto is 'Veterans helping veterans.' Sounds more as though they're helping themselves," he said.
And last year, when the Tampa Bay Times ranked the "50 Worst Charities in America" based on the percentage of donations kept by for-profit fundraisers, it placed VietNow in the bottom 20.
Lewis shook his head at those descriptions. "While we may not be one of the best, we are far from the worst," he said.
VietNow has only one paid employee — a $30,000-per-year office manager — and relies on volunteers to do as much good as it can with the limited money the telemarketers leave, he said.
"I do not get a penny," said Lewis, who added that he stays up many evenings at his home computer helping veterans navigate medical and disability benefits.
VietNow owns the Rockford headquarters building where it mails out 3,400 issues of a quarterly magazine to members and to veterans hospitals and meeting places across the country.
Last year, the McHenry County chapter of VietNow delivered box loads of food and presents to the families of 47 needy veterans at Christmas and held a trap-shoot picnic for Iraq and Afghanistan war veterans. "We pass out trophies," Lewis said.
The charity also has encouraged hunters to help feed the hungry through a "donate your deer" program, using the venison to make chili for homeless people.
Yet VietNow's administrative costs remain high, sapping its well-intentioned efforts.
Consider one of the charity's most prominent programs, which delivers about 800 sandwich packs every Sunday to homeless people on Chicago's Lower Wacker Drive and at shelters.
To prepare those sandwiches, VietNow pays $9,600 in annual rent on the Lombard property where the food is prepared and goods are stored, according to Lewis and charity records. The charity pays thousands more each year for utilities and insurance at that property — plus the thousands it takes to own, maintain and fuel the truck that delivers the meals.
Lewis said he and VietNow's new treasurer search constantly for ways to trim overhead and recently stopped ordering new stationery whenever the roster of top officers changed.
"We're finding ways to cut back our overhead costs and do things more efficiently," Lewis said. "Both of us are looking at things and saying, 'Is this the most efficient way to do it? Can we make some adjustments and maybe a little fine-tuning here and there?' "
Chicago Tribune's Gary Marx contributed.
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