Monday, September 15, 2008

#8. Charity scams

Not content with stealing money and financial information through “product sales” and investment schemes, scam artists also impersonate charitable organizations.

Every year when the circus came to town Frank got the same phone call. The caller identified himself as a representing the Friends of the City Police. The man would always ask him if he wanted to support his local police department. Frank didn’t want to seem uncooperative, so he always agreed to listen to the sales pitch. The man explained that the Friends of the City Police were raising money to take underprivileged children to the circus. He always got Frank to sponsor the five children. Frank felt good about sponsoring underprivileged children to go to the circus since he enjoyed going to the circus when he was young. Frank didn’t have time to go to the circus himself but he always felt that sometime he would like go with the children.

One day, Frank attended a block awareness program in his neighborhood put on by the local police department. After the short meeting, he found himself talking to the police officer and mentioned that every year he gave money to the friends of the City police to take underprivileged children to circus. He was very surprised and upset when the police officer told him that not only was the organization not affiliated with the police department, but that it was a well-known phony charity they had been trying to prosecute for years. Frank was a victim of charity scam.

Elements of the charity scam:

  • Unsolicited contacts concerning donations to an unfamiliar charity.
  • Emotional or hard sell appeals.
  • Names deceptively similar to well-known charities.
  • Failure to provide background information concerning salaries and other expenses of the charity.

Older people are targeted for solicitation by charity scams because people over 75 give the highest percentage of their income to charity of any age group. Many charity scams use names either associated with legitimate organizations or deceptively similar to legitimate charities. The “Friends of the City Police” is a classic example. Other scams might use names like “North American Cancer Society” or “Open-Air Preservation Society.” There is seemingly no end to the inventive types of scams in the name of charity.

The important fact to know about any charity is the percentage of the funds raised that go for the charitable purpose. Some “charities” spend almost all of their money in fund-raising, giving only a very small percentage to the charitable purpose. In a charity scam none of the money goes to the charitable purpose. As in the example above, the “Friends of the City Police” may not actually be taking any children to the circus and may not be affiliated with the City police at all.

In contrast, there are legitimate charities where 100% of the funds raised goes to the charitable purpose. Any legitimate charity would be glad to provide you with the information concerning the percentage of funds spent in all the various activities. Even if the amount given his very small, it is absolutely important to know where your money is going. The real tragedy is that the charity scams siphon money away from legitimate charities.

Always ask for written information about the charity and its operations before giving. Never respond to charitable requests over the telephone. If you’re truly interested in the cause, and ask the person to send you information in writing about the charity, including the names of the officers and directors, financial information, and affiliated organizations or sponsors. Real charities will bend over backward to provide you with adequate information and may even give you an opportunity to volunteer your time.

Charity scams may make their appeal by charging a high price for an ordinary item indicating that the extra amount paid will go to support the charity. Often the only charity is the pocket of the fundraiser. Sometimes the appeals for contributions will be deceptively similar to an ordinary bill or invoice. The expectation being that the unwary victim will pay the bill without thinking. Many charity scams use high-pressure tactics, telling “heart-wrenching” stories to make you feel bad about not contributing to their charity. If you ask for time to consider making the contribution, the scam artist will quickly move on to another victim.

Many states require charitable or organizations to be registered with the Secretary of State’s office or other agency in order to do business in the state. At the very least, before donating to any charity you should find out whether the charity is registered and allowed to do business in the state. Never make a charitable contribution to an individual. Charitable contributions should be made by check payable to the charity. Particularly when giving large sums of money, it is important to verify that the supposed charity is a recognized non-profit charitable organization by the Internal Revenue Service so that your contributions are tax deductible.

Protect yourself by:

  • Insisting that all charitable solicitations be made in writing.
  • Verifying whether or not the charity is registered or listed with the Secretary of State’s office in your state or other administrative agency.
  • Making all contributions by check made out to the charity not an individual.
  • Requiring the charity to give you information concerning the percentage of contributions that go to the charitable purpose, names of the officers and directors, past history, and other pertinent information.
  • Verifying the tax status of the organization.
  • Reporting any violations to appropriate governmental enforcement agencies.

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