Fundraisers made millions from donations to disabled vets

Fundraisers hired by a national charity to raise money for disabled U.S. veterans duped the organization, soliciting contributions with tall tales that enriched the firms but did little to help former service members, an investigation by New York state prosecutors has found.

The Washington-based Disabled Veterans National Foundation (DVNF) became entangled with the fundraising firms Quadriga Art and Convergence Direct Marketing, according to New York Attorney General Eric Schneiderman, whose office investigated the charity's tactics. The fundraising firms ultimately netted more than $100 million from donations to the charity, while the DVNF ended up close to $14 million in debt. More than 90 cents of every dollar donated by consumers went to the for-profit fundraisers, the probe revealed.

The tactics Quadriga and Convergence used to raise that money were shady. The direct mail campaigns that solicited money from consumers used a moving -- but fake -- story about a veteran who had purportedly been wounded and helped by the charity. The firms also made claims about services DVNF provided around the country that didn't exist.

"This investigation sheds light on some of the most troublesome features of direct-mail charitable fundraising as it is practiced in the United States today," Attorney General Eric Schneiderman said in a statement. "Taking advantage of a popular cause and what was an unsophisticated startup charity, these direct mail companies used cleverly designed but misleading mailers to raise tens of millions of dollars in donations from generous Americans, nearly all of which went to the fundraisers and their agents, and left the charity nearly $14 million in debt."

The Attorney General's office built a case against the fundraisers and the board of the charity, which resulted in a $24.6 million settlement (PDF). The founding members of the board of DVNF are required to step down by the end of the year.

The charity was started in 2007 and quickly was manipulated by Quadriga, Schneiderman said. That included providing a supposedly "unpaid financial consultant" to the DVNF board who was paid more than $2.3 million in commissions from money raised for the charity. That same consultant's daughter also was hired as chief administrative officer of the charity.

Schneiderman's office heaped most of the blame on Quadriga, which agreed to pay $9.7 million to settle the charges. Convergence, which designed the allegedly misleading solicitations, agreed to pay $300,000. The $10 million will go to benefit disabled veterans. Quadriga also agreed to forgive the nearly $14 million DVNF owed the firm, and to pay another $800,000 to New York state to cover the costs of the case.

In agreeing to the settlement, the firms did not admit to any wrongdoing.

Consumers who are planning to donate to charity should do some homework first. Many charities have names that sound like those of reputable organizations, but are largely profit-centers for fundraising firms. Some organizations that provide background on charities include the Better Business Bureau Wise Giving Alliance, Charity Navigator and Guidestar.