Types Of Crimes For Charity Fraud
Charity fraud typically falls into three categories: (i) the theft or other unlawful taking of money or property belonging to an individual or organization that solicits donations on behalf of a cause (e.g., false pretenses, larceny by trick, or fraud); (ii) the misrepresentation of an organization’s charitable status in order to solicit donations from individuals or businesses; and (iii) the misappropriation of funds raised by a charity for its intended purpose.
In false pretenses cases dealing with charity fraud, the crime of false pretenses is committed when a person accepts money by offering charitable goods or charitable services through intentional false statements, with the intent to never deliver the goods or services that were promised or agreed upon.
Some states have the added element of “an existing material fact.” In other words, some jurisdictions require that in order to be charged with false pretenses, there has to be a false statement of an existing fact such as the charitable work to be performed. If the charity is fake, and you lie or misrepresent the facts to something that doesn’t exist (like a fake charity), then you may not meet the statutory requirements of false pretenses.
In larceny by trick cases, the false representation may involve false statements about what will be done with donated funds. However, it also can include the non-disclosure of facts that would influence a donor’s decision whether or not to donate to the charity.
For example, someone who starts a foundation for terminally ill children and then through misrepresentation, steals the donations or does not perform as promised. False representations about what will be done with donated funds is the most common type of charity fraud.
This can involve false statements about what percentage of donations will go to the charitable cause, misrepresenting how the donated money will be used, or failing to disclose relevant information about the charity or its directors.
The second most common type of charity fraud is misrepresentation of an organization’s charitable status in order to solicit donations from individuals or businesses is also a common type of charity fraud. This can involve claiming to be a registered charity when the organization is not, making false statements about the percentage of donations that will go to the charitable cause, or failing to disclose details about how the donated money will be used.
The third most common type of charity fraud is misappropriation of funds raised by a charity for its intended purpose. In many states this type of theft is referred to as embezzlement. This often occurs when an employee of a charity or non-profit uses donated funds for personal gain rather than for the charitable cause they were meant to support.
State Variations: In some states, there is an added element to the crime of false pretenses, and it is that of “an existing material fact.” In these states, this means that the false statement of an existing fact, such as the type of charitable work to be performed, is required for a charge of false pretenses.
Florida law regulates charities closely under its Solicitations of Contributions Act (SCA). Florida law requires certain people involved with charities to register with the Florida Department of Agriculture and Consumer Services (FDACS). They must also comply with certain regulations, e.g. a requirement to provide authorities with financial information about income and expenditures.
Violations of Florida regulations can be charged as a third-degree felony in Florida. If a person is convicted, they can be sentenced to a maximum of 5 years in Florida state prison. Among the violations that can be charged as a felony include the following:
- Failure to comply with the registration and renewal requirements for charitable organizations that solicit contributions
- Failure to apply charitable contributions consistently with the solicitation of funds
- Obtaining charitable contributions by means of fraud
- Making misrepresentations or using sponsors to solicit charitable donations
- Filing false information with the Department of Agriculture and Consumer Services
- Failure of the charitable organization to surrender records.
Other offenses can be charged under Florida’s grand theft, fraud or white collar crime laws.
Pennsylvania also regulates charitable organizations closely. The state works strenuously to protect the public from fraudulent activities and punishes criminal offenses involving charity fraud severely through sentences that require the payment of substantial fines and imprisonment.
Reportedly, in Pennsylvania and in other states as well, there has been a significant increase in reported cases of charity fraud. As in Florida, the law in Pennsylvania requires charities to register with the state before they can lawfully solicit donations from the public. Registration includes providing financial statements as well as a clear description of the organization’s charitable mission.
Additionally, Pennsylvania law prohibits deceptive practices, such as fraudulent misrepresentations regarding the purpose of donations or how donated funds are used.
Charity fraud can lead to felony charges for which the punishment can be lengthy prison sentences and/or the payment of large fines. For example, the theft by felony fraud of over $500,000 can lead to a prison sentence of up to 20 years. The state can also revoke the charitable status of organizations that are found guilty of fraudulent activities.
Eligibility: As has been noted, one type of charity fraud is that committed by an organization that is itself fake or grossly misrepresents its charitable impact. These operations collect money on behalf of a cause, but in reality do not operate any real charitable programs. A common sign of this type of charity is their “pop-up” character; they appear soon after a natural disaster of some kind, e.g. a hurricane or wildfire. They exploit the sympathy of people and their genuine wish to help the victims, but they collect as much as they can get and then disappear.
Another sign of a questionable charity is if it requests cash, gift cards, wire transfers, or cryptocurrency instead of checks or credit card payments. Such payment methods as cash or crypto are used intentionally, because they are impossible or almost impossible to trace or reverse. A legitimate charity will accept a check or credit card payment and provide a receipt.
The Federal Bureau of Investigation (FBI) warns that charity fraud scams can come in many forms and from any type of non-profit, even religious organizations. However, you want to be especially wary of emails, social media posts, crowdfunding platforms, cold telephone calls, and the like. A person should always be skeptical of a request for a charitable donation and research a non-profit before donating. The same holds true for organizations that present themselves as political in nature.
Another common form of charity fraud is the misuse of funds by people employed by a legitimate nonprofit. For example, an executive might use donations to pay their personal luxury expenses. Or a treasurer might transfer charitable donations to their private account. The charity is real, but people involved in it are engaged in embezzlement. In both cases, the donors and beneficiaries whose trust is violated are harmed.
Additional Charity Fraud Crimes
Nonprofits and charitable organizations are particularly vulnerable to fraud schemes. This is because they often come into contact with significant sums of money that can be diverted for personal use by internal personnel.
In addition to the crimes discussed above, a person can be charged with money laundering, wire fraud, bank fraud, or IRS violations for misappropriating funds, fraud, theft, or other offenses. This depends on the severity of the crime and the way in which the mismanagement or scheme is carried out.
A charity cannot make a small grant as part of its philanthropic activity, and then use the majority of the donations for the personal expenses of the members. In addition, no part of the net earnings from a charity should solely belong or give benefit to any private shareholder or individual.
If you are convicted of fraud against a nonprofit, you may also have to pay back taxes on any income you received that was related to the fraud. You may also be subject to additional penalties and interest. In some cases, you may even lose your right to claim tax deductions and credits for future years.
What Are The Penalties For Charity Fraud?
Process/Steps: Uncovering charity fraud may begin when someone makes a complaint or provides a tip to a person in authority. An investigation may then be started. It would involve gathering evidence through audits, reviews of documents and interviews of people who may have knowledge of what has transpired.
Evidence/Documents: The types of documents that would be most helpful to the investigation would be records of financial transactions such as bank statements, copies of checks, internal accounting records, receipts, emails, text messages and documents regarding solicitations of donations. Records of the registration of the charity, or the absence of them, as the case may be, would also be helpful.
If enough evidence is found, the investigator may report the situation to law enforcement, which would review the evidence gathered and possibly do additional investigating. The evidence would then be presented to the prosecuting authority who would decide on the defendants to be charged and the nature of the charges.
The case would proceed through the stages of criminal prosecution, i.e., potential plea bargains, and a trial if necessary.
The penalties for committing charity fraud and the other financial crimes associated with theft by non-profit organizations, real or fake, can be severe. They often include incarceration in jail or prison, the payment of significant fines, and the payment of restitution to the victim.
Costs/Fees: In some cases, a person may also be subject to civil penalties such as the forfeiture of assets. In addition, they face the possibility that their victim will file a civil lawsuit seeking damages to compensate them for their losses. If they should be successful, the perpetrator would be liable to pay their victim compensatory damages in an amount determined by a jury. They would also have to pay a civil attorney to defend them in the civil lawsuit.
Charity fraud can occur on a small scale, with one individual being defrauding someone they know. It can also occur on a large scale when several perpetrators join forces to fleece the public of millions of dollars each year through bogus appeals and fake fundraising campaigns.
The consequences of charity fraud go beyond the criminal justice system. Not only does it deprive legitimate charities of much-needed funds, it also can erode trust in the charitable sector. This means that genuine organizations may find it harder to raise money in future.
Timelines: As noted above, a person who is the victim of charity fraud might, in some situations, be in a position to sue the perpetrator of the fraud in a civil suit. They would seek to recover monetary damages to compensate them for any economic loss they suffered as a result of the fraud.
As is always the case with civil cases, each state has a statute of limitation for fraud and misrepresentation. It set a specific deadline by which a legal claim must be started. Generally, the time period for filing a lawsuit starts from the date the fraud or misrepresentation is discovered or reasonably should have been discovered.
Each state has its own statute of limitations, but generally they range from 2 to a maximum of 6 years. A person who has been the victim of fraud should speak to an attorney as soon as they learn that they may have a reason to file a lawsuit, so they do not miss any deadline.
The Importance of Hiring a Lawyer: While you have a right to represent yourself in a criminal case, dealing with charges of charity fraud is not the case in which you want to do this. You need an experienced fraud attorney to protect your rights and respond effectively to complex legal charges. Charity fraud cases are often about intricate financial transactions and complex legal statutes, making it unwise to proceed without professional legal assistance.
Do I Need To Hire A Charity Fraud Lawyer?
If you are contacted by law enforcement, it is important to seek legal counsel immediately. An experienced fraud attorney can help protect your rights and work to get the best possible outcome in your case.
One of the most important aspects of charity fraud is that it can lead to prison time and hefty fines. If you’ve been accused or convicted for this crime, don’t delay in taking action. Hire a criminal defense attorney today who knows how to navigate these complex legal waters and provide your best chance at avoiding serious consequences.
They will be able to advise you on what steps should be taken next based on your unique situation and ensure that all possible options are explored in order to protect yourself from more severe penalties.
If you have any questions about the tax implications of fraud against a nonprofit, please contact an attorney who can discuss your options further.
