Whistleblower: Revoke tax-exempt status for embattled veterans nonprofits
By SARAH KLEINER | Center for Public Integrity | Published: October 26, 2018
A former staffer at a Virginia charity alleges in a new whistleblower complaint that his former employer is bilking donors out of millions of dollars — money intended to help homeless veterans.
The staffer, James C. Edgar of Virginia, formally asked the IRS to revoke the not-for-profit status of the Circle of Friends for American Veterans and the Center for American Homeless Veterans, two nonprofits run by retired Army Maj. Brian Arthur Hampton in Falls Church, Va.
Hampton’s organizations, and the telemarketers he’s paid millions of dollars to raise money, were the focus of a months-long investigation by the Center for Public Integrity, a nonprofit investigative journalism organization. Attorneys general in New York and Virginia subsequently launched investigations into Hampton’s Center for American Homeless Veterans. Both offices declined to comment on the status of their investigations.
“Using paid fundraising companies, Brian A. Hampton — the owner and president — has been paying himself hundreds of thousands of dollars from the millions of dollars the fundraisers generate,” Edgar wrote to the IRS. “He also pays back to the fundraisers over 90 percent of what is raised. Virtually none of that money goes to any public purpose.”
The IRS responded to Edgar’s complaint in a letter dated Oct. 4, according to a document provided to the Center for Public Integrity by Edgar. If an investigation is launched based on his allegations, it could potentially “take several years until final resolution of all tax matters,” Layne Carver of the IRS wrote. Bruce Friedland, a spokesman for the IRS, declined to discuss Edgar’s complaint, citing confidentiality laws.
Hampton, who has denied wrongdoing, did not respond to multiple requests for comment for this story.
Hampton employed Edgar as director of programs for his charitable organizations from February through mid-September. Edgar also worked as political director for Put Vets First! PAC, a veterans-focused political action committee that Hampton also operates.
Edgar said Hampton fired him because of a pay dispute involving Ricardo Manoatl, a staff member who reported to Edgar. Hampton had told Edgar and Manoatl to cut back their hours because the organizations weren’t bringing in as much money, but Edgar said he authorized pay for Manoatl anyway.
Edgar is seeking a financial reward from the IRS through the agency’s whistleblower program, should the IRS collect money from Hampton — but he says he’s not motivated by money. Rather, he said he wants to hold Hampton accountable.
“While performing my duties, I discovered I was not providing any benefit to homeless American veterans,” Edgar wrote to the IRS, according to documents he provided to the Center for Public Integrity.
Nonprofits are exempt from paying corporate income tax. Edgar said he believes the Circle of Friends for American Veterans and the Center for American Homeless Veterans have illegally benefited from this exemption.
Recent filings submitted to the Federal Election Commission by Put Vets First! PAC, which Hampton operates out of the same Virginia office as his nonprofits, indicate he continues to raise significant sums of money — but Hampton spends almost all of the money on fundraising, wages for himself and others and overhead costs, federal records indicate.
Put Vets First! PAC spends little on veterans-backing politicians.
Hampton, the founder of the Put Vets First! PAC, has spent the majority of the money his political action committee has raised during the past three years on fundraising services and his own salary. Very little has gone to politicians’ committees.
Put Vets First! PAC has raised about $1.5 million from January through Oct. 17, mostly from people making contributions of $200 or less. In the same time period, Hampton’s PAC spent nearly $1.4 million on fundraising.
With the exception of $10,000 Put Vets First! PAC spread among 10 political candidates early this year, the PAC spent the rest of its money on fundraising, staff salaries and other administrative costs.
When informed of Put Vets First! PAC’s financial record, some of the candidates who received the PAC’s money told the Center for Public Integrity they planned to return it or donate it to charity. Since then, Put Vets First! PAC hasn’t given any money to politicians while still continuing to raise hundreds of thousands of dollars.
For the past three years, Hampton’s Put Vets First! PAC alone has raised $4.6 million, according to Federal Election Commission filings. About $4.1 million of that has gone toward fundraising expenses. In that time, Hampton has paid himself more than $173,500 from PAC money.
Hampton also draws significant salaries from his two veterans nonprofits. According to the latest tax filings available, Hampton earned $340,000 in 2016 from the two charities. Very little of the millions raised went toward efforts that benefit veterans.
In previous interviews with the Center for Public Integrity, Hampton defended his use of telemarketers.
He said hiring others to raise money for him saves him time and energy that can be devoted to “programs.” Decades ago, he ran a homeless shelter for veterans, but he decided it was too time- and money-intensive, so he has limited his charitable activity to calling political candidates to urge them to focus on helping veterans.
“Over the course of 24 years, I have tried every other fundraising technique known to me in over four decades with fundraising experience, most of them over and over again, with different variations,” Hampton said previously in an email to the Center for Public Integrity. “None of those efforts produced revenue remotely close to the revenue generated by telemarketing.”
He also defended his compensation: “I am the head of three organizations. I am always working.”
Manoatl, a 23-year-old political science graduate student, who worked part-time for Hampton until he was fired in September, said he believes Hampton’s organizations should be “shut down.” Manoatl believes Hampton fired him because he did not have the money to continue paying him.
“Any organization that tries to profit off of veterans who have served this country and who have made the ultimate sacrifice should be brought to justice,” Manoatl said.
This article is co-published with NBC News, Public Radio International and the Buffalo News.