Charity mails sweepstakes notices asking for donations to combat disease; but charity has no real charitable programs
LANSING – Michigan Attorney General Bill Schuette today announced a Notice of Intended Action and Cease and Desist Order against National Emergency Medicine Association of Edgewood, Maryland for over 600,000 violations of the Charitable Organizations and Solicitations Act. Violations included operating a fundraising scheme to defraud the public and diverting funds raised to other purposes. Over 30,000 donations – totaling nearly $200,000 – were received from Michigan donors.
“This group has been scamming people for years, preying on the generosity of Michigan’s donors and inflating the numbers on their financial statements,” said Schuette. “Donors can also protect themselves by researching charities before donating, and by reporting suspicious solicitations to my office.”
National Emergency Medicine Association (NEMA) has seven days to comply with the cease and desist order and 21 days to respond and work on reaching an appropriate agreement. If an agreement cannot be reached the Attorney General intends to bring action in court.
National Emergency Medicine Association (NEMA) came to the attention of the Attorney General’s Charitable Trust Section through an audit of its charitable solicitation registration and IRS Form 990. The Charitable Trust Section questioned certain statements on the IRS Form 990, including that almost all NEMA’s reported charitable programs were “educational” and resulted from aggressive “joint cost” allocations of fundraising expenses to charitable programs. While joint cost allocations can be justified if certain conditions are met, past investigations have revealed misuse of these allocations as a way of inflating a charity’s reported activities.
The Attorney General’s investigation required NEMA to produce its solicitation materials, to document its charitable programs, and to justify its joint cost allocations. NEMA’s responses revealed numerous violations.
For years, NEMA has been mailing millions of sweepstakes fundraising mailers nationwide using the names National Heart Council, National Stroke Council, and National Alzheimer’s Council. The mailers generally inform the recipient that they are “approved” to win a major prize of $10,000 or $1 million, that the winner has been selected, and that they simply need to respond or they will miss their chance to win. The recipient is also asked to include a donation to help fight heart disease, stroke, or Alzheimer’s. Some mailings specify that donations will fund vital research or fund other grants. Using these tactics, NEMA has regularly raised more than $1 million per year, sending between 1 million and 2 million mailings per year.
Where Donations Actually Went
However, the money raised by NEMA does not actually go to grants or research to fight these diseases, instead it almost exclusively goes to sending additional sweepstakes and fundraising campaigns, which it categorizes as its “educational program.” But these so-called educational campaigns are really fundraisers sprinkled with a few generic educational slogans usually placed on the back of a sweepstakes announcement and under the small print legal disclosures.
Apart from these “educational” fundraising campaigns, NEMA does not have any programs to fight stroke, heart disease, or Alzheimer’s. NEMA’s responses to the Attorney General admit that their last equipment grant to combat stroke was in 2002, last stroke grant for education was in 1995 and their last research grant was in 1994. Despite this, NEMA told donors that it had recently “expanded” its stroke education grants and that funds raised would be used to “help fund vital research to find a cure” for Alzheimer’s disease.
Even though NEMA’s nearly exclusive activity has been sending millions of sweepstakes mailers they have not had a sweepstakes winner since 2013.
In addition, in the past three years, NEMA had just six grants totaling $13,965, two of which were $200 grants to send disabled children to the circus—a purpose not mentioned in any mailings. In 2015, NEMA raised nearly $1 million in donations, but reported just $650 in grants. They admitted, however, that this overstated their grants for the year, which were limited to one $200 grant for the circus.
Despite making minimal charitable grants and having almost no meaningful charitable programs (and few sweepstakes winners), during the years 2006 to 2016, NEMA’s President Kelly Herzog received total compensation and benefits of $1,786,826, an average of $162,438 per year.
Michigan a Leading State in Fighting Charitable Solicitation Fraud
Over the last two years, Attorney General Schuette’s Charitable Trust Section has ramped up its enforcement of Michigan’s law prohibiting deceptive charitable solicitations.
Below are some of Michigan’s recent charitable solicitations fraud actions:
- Schuette Leads Multi-State to Shut Down Deceptive Veterans Charity
- Florida Charity to Pay Over $100K to Breast Cancer Research, and is Banned From Soliciting in Michigan for Ten Years Due to Deceptive Fundraising
- Utah Fundraiser to Pay $90K and Cease Michigan Solicitations Through 2020 for Fundraising Misrepresentations
- Schuette: Deceptive Charity to Cease Operation after Misleading Donors
- Schuette Obtains Fine Against Dearborn-based Fundraiser for Illegally Operating Clothing Donation Bins
- Schuette: Texas-based Fundraiser Pays $75,000 for Operating Deceptively Labeled Clothing Bins
- Schuette alleges deceptive solicitations violations against Florida-based veterans charity
- Schuette Seeks Dissolution of Opus Bono Sacerdotii Charity for Lack of Governance, Diversion of Assets, and Deceptive Fundraising Practices
Charitable Solicitations Resources
Complaints regarding charitable solicitations may be filed through the Attorney General’s online complaint form, or by mailing the Charitable Trust Section at P.O. Box 30214, Lansing, MI 48909-7714, or by emailing the Charitable Trust Section.
To assist individuals in making wise decisions regarding which charitable donations to support, Attorney General Schuette established an online searchable database for charities. The Attorney General also publishes an annual professional fundraising charitable solicitation report, available at on the Attorney General website. Through these resources, users have access to information to aid them in determining which charities are worth supporting—and which are not. The Attorney General’s Charitable Trust Section is also available at 517-373-1152 to answer inquiries about a charity.