All Charitable Leaders Need to Help Protect the Sector

By Ohio Attorney General Mike DeWine The news of the spring capture of the man known as Bobby Thompson was an exciting development for my office. Many hours of hard work from the Charitable Law Section, the Bureau of Criminal Investigation (BCI), and the Ohio Organized Crime Investigations Commission have gone into this case. Ohio has led the way on national efforts to put a stop to the fraudulent activities of Thompson and the sham organization he ran, the United States Navy Veterans Association (USNVA). Efforts to freeze funds and redirect them to organizations that truly assist veterans were top priorities for the Charitable Law Section after news accounts highlighted disturbing findings about the man and the organization. Thompson went on the lam, moving from place to place and living like a pauper. He was found and taken into custody in Portland, Ore., where law enforcement discovered a storage locker containing almost a million dollars in cash and materials related to multiple aliases. Thompson is awaiting trial in Cleveland and has not yet revealed his real name. He stole the identity of man named Bobby Thompson of Washington state and also used a variety of other identities. Following Thompsons capture, the Attorney Generals Office received e-mails from across the country offering thanks and congratulations on its successful investigation. I wanted to say thanks for finally finding Bobby Thompson, wrote a Florida veteran. There are so few organizations that will help disabled veterans anyway. So who is hurt by this man? All disabled veterans. The USNVA case is an example of a huge, complex, multi-million-dollar scam that required substantial resources for regulators and investigators to track and act upon. And while the Bobby Thompson situation may be unique in terms of its size, the charitable sector can be a target for scam artists who operate on a smaller, but just as damaging level. Unfortunately, too many people are willing to misuse the sector with less than charitable intentions and take advantage of Ohioans generosity. Often, they dont start with that intention. Many find opportunities through loosely organized and poorly governed organizations. All of these situations cast a shadow on the truly remarkable work of charities that enhance our quality of life and meet important community needs. I encourage all charitable leaders to protect the integrity of the charitable sector. Here are some suggested steps: Help elevate the visibility of sound board governance among all of your groups. Organizations with strong governance are less likely to be targeted for fraud, and if problems develop, they are more quickly discovered. My office has materials online, such as our Guide for Charity Board Members, that can help board members understand how to fulfill their legal obligations. Newsletters, webinars, and live trainings are some of the services we provide in an effort to prevent problems. Please spread the word.

If you observe problems, please file a complaint through my website at www.OhioAttorneyGeneral.gov or contact the Charitable Law Section at 800-282-0515. Whether it is an odd solicitation call at dinner time or a local organization you think might not be legitimate, we want to know. If we can take action right away, we can help limit the funds available to scam artists. Talk to your friends and family members about the importance of being wise donors. Too many people respond to charitable solicitations without asking questions or reviewing information about the group. Donors should know what kind of difference their investment will make. In addition to using the various online tools available, potential donors often can learn a lot about a charity by asking others if they know of a groups impact.

Protecting the charitable sector and its integrity is a job too big and important to leave to just state charity regulators and the IRS. It requires a commitment and action from everyone who values the importance of ensuring a vibrant and dynamic charitable community.

Register Now for Joint Annual Nonprofit Conference Sept. 67

The Ohio Association of Nonprofit Organizations and the Ohio Attorney Generals Office are cosponsoring an annual conference Sept. 67 that will bring together hundreds of representatives from charities throughout the state. The conference, to be held at the Renaissance Hotel in downtown Columbus, will feature numerous workshops and presentations on issues of importance to the charitable sector. Breakout sessions will address such topics as charitable registration, gaming, charitable fraud, resource development, and social enterprise. Special sessions will cover creativity and collaboration, and a reception will give attendees a chance to network. Maria Cornelius will present highlights from the CompassPoint study of more than 3,000 nonprofit executives nationwide. Cornelius, one author of the Daring to Lead 2011 report, will talk about the findings implications. The event will conclude with the Ohio Nonprofit Excellence Award Luncheon. Registration information can be found at www.oano.org.

HB 386 Brings Vast Changes to Bingo

The bingo landscape for charitable organizations was significantly altered recently when Gov. John Kasich signed House Bill 386. The legislation, which attracted much attention for the many provisions affecting casinos and video lottery terminals at race tracks, opened the possibility of bingo as a fund development tool for thousands of charitable organizations across the state. The legislation, which became effective immediately because of the emergency provisions included in the bill, opens up the availability of bingo licenses for all 501(c)(3) organizations meeting certain requirements, such as having been in existence for at least two years. Previously, only 14 specifically defined types of organizations qualified for bingo licenses. Other types of organizations also eligible to apply for licenses include volunteer rescue service organizations, volunteer firefighter organizations, veterans organizations, and fraternal and sporting organizations exempt under the IRS 501(c)(4), (c)(7), (c)(8), (c) (10), or (c)(19). The law change also expanded the types of organizations that can hold raffles. Although licenses are not required for raffles, the law previously limited raffles to organizations that qualified for bingo licenses. Now all 501 (c)(3)s that have been in existence at least two years can hold raffles, which still do not require a license.

To apply for a bingo license, organizations should file an application online at www.OhioAttorneyGeneral.gov. A range of bingo-related services and information is available under the Services tab. Bingo is a licensed activity, and organizations need to be aware of the various recordkeeping and other requirements. The Attorney Generals Office provides training on these provisions at its Bingo Schools throughout the state. Groups considering applying for bingo licenses may register for bingo schools through the Attorney Generals website. We expect a number of new organizations to apply for bingo licenses, said Pete Thomas, chief of the Ohio Attorney Generals Charitable Law Section. The section licenses and regulates bingo. Bingo can be a wonderful opportunity for some organizations to raise funds. But it takes a lot of work and a lot of volunteers to do things properly. And, unfortunately, many scam artists are able to take advantage of charitable organizations that do not adequately track and monitor bingo proceeds. While most people think of bingo as a traditional board game with numbers, instant bingo is a significant activity that also is licensed. These tickets can be sold in conjunction with traditional bingo or at other locations approved as part of the license. The legislation made multiple changes to the instant bingo provisions, including allowing a charitable organization to reimburse owners of a Type III instant bingo location for certain expenses. For instance, a bar can seek limited expense reimbursements from a charity when it sells instant tickets on behalf of the organization. All of this must be outlined in the application and included in reports. The Attorney Generals Office has created a model invoice to be used in conjunction with these expense payments. It is available at www.OhioAttorneyGeneral.gov. The legislation also removes limitations on the number of premises where instant tickets can be sold, but all locations must be located in the same county as the sponsoring organization. As much as $2 billion a year can change hands through Ohio bingo activities, Thomas said. It is generally an all-cash business with constantly changing volunteers and staff. So there is a great risk that charitable funds can be compromised if there arent sufficient controls in place. Bingo makes a significant contribution to Ohios charitable community, and we want to be certain that organizations understand that responsibility. Thomas urges lawyers with questions about advising charitable clients in the bingo area to contact the section at 614-466-3181. Bingo provisions can be found in Ohio Revised Code Section 2915. In addition to bingo, the bill contained many provisions affecting casinos and video lottery operations at Ohios race tracks. It also included a moratorium on opening new sweepstakes/Internet caf establishments. All such businesses were required to file an affidavit of existence with the Charitable Law Section by mid-July. A listing of all such establishments can be found at www.OhioAttorneyGeneral.gov. Local officials will be monitoring the list to ensure that new establishments dont open during the moratorium period. Lawmakers are expected to study the issue of Internet cafes and decide if additional legislation is needed.

Alleged Solicitation Violations Lead to Settlement

Akron-based InfoCision Management Corp. this spring signed an Assurance of Discontinuance with the Ohio Attorney Generals Office regarding its professional solicitation services on behalf of various charitable organizations. Charitable contributions are vital to our communities, and donors must be confident their funds are properly and honestly solicited, Attorney General Mike DeWine said in relation to the InfoCision case.

An investigation by the Attorney Generals Charitable Law Section found reason to believe InfoCision violated several sections of the Ohio Charitable Organizations Act, including making misleading statements and failing to make required disclosures during the course of charitable solicitations, and failing to comply with statutory filing requirements. InfoCision denies the Attorney Generals conclusions that it violated the law, and these facts were never litigated. However the settlement agreement was reached in order to resolve the matter. In the assurance, InfoCision agreed to fully abide by the states laws on soliciting charitable contributions from Ohioans by: Stopping all misleading behavior and misrepresentations as to the percentage of donations that a charity will receive Submitting a copy of a sample script and sample pledge form to the Attorney General before starting a solicitation campaign during the next two years Submitting at least 15 audio recordings of its solicitation calls to the Attorney General monthly for the next year Clearly and conspicuously disclosing its status as a professional solicitor, its name, and the charitys name and address during solicitations Paying stipulated penalties for any future violations of filing and disclosure requirements In addition, InfoCision will pay $75,000 to the Attorney Generals Office to be distributed for charitable purposes. Attorney General DeWine reminds potential donors to ask questions about who is calling and what their connection to the charity is when they receive calls seeking donations. Professional solicitors, who are paid by charities to solicit on their behalf, must provide basic information about the charity and its location in addition to their own name, their status as a professional solicitor and, if requested, the percentage of gross revenue that will be retained by the charity. Citizens are urged to ask for written information in advance of making a gift and to refrain from sharing bank or credit card information on unexpected telephone calls. Consumers also should not provide bank or credit card information over the phone. Warning signs of a bogus charity include overly aggressive or pushy tactics, callers who are unable or unwilling to answer questions, callers who offer to pick up contributions, or callers who suggest there are prizes awarded for contributions. At any point during a call, consumers are encouraged to hang up if they feel uncomfortable. Consumers can get additional information about wise giving strategies or access lists of registered professional solicitors in Ohio by visiting www.OhioAttorneyGeneral.gov or calling 800-282-0515. Consumers are urged to contact the office with information about fraudulent or worrisome charitable solicitations by filing an online charitable complaint or calling the office.

IRS-Related Reminders for Charities

It will be hard to miss the onslaught of campaign commercials hoping to catch the attention of Ohio citizens between now and Election Day. But leaders of 501(c)(3) organizations need to remember that there are restrictions on what types of activities in the political realm groups can participate in. The most obvious restriction prohibits the use of charitable funds for contributions to candidates campaigns. The IRS maintains a number of resources online at www.irs.gov describing the limitations that charities have in political activities. The penalties for engaging in prohibited activities can include revocation of the organizations taxexempt status and taxes on the funds spent. The IRS recently shared word that many nonprofit organizations are improperly including Social Security numbers of individuals on the Form 990. With the exception of information related to

donors, the 990 is publicly available. The IRS urges care in protecting Social Security numbers and not inappropriately sharing them in public filings.

Charitable Law Training Opportunities

The Ohio Attorney Generals Charitable Law Section routinely provides multiple training opportunities. A webinar is held at noon on the first Wednesday of each month to highlight the legal duties of charitable board members. A webinar on the charitable registration system is held at noon on the third Wednesday of each month. Advance registration for these webinars is required. Details can be found at www.OhioAttorneyGeneral.gov. Bingo School is a training program held at various locations throughout the state. These trainings provide an overview of the legal requirements for administering bingo. Separate sessions are held based on whether a 501(c)(3) or a veteran/fraternal/sporting organization is involved. Advanced registration is required, and details can be found at www.OhioAttorneyGeneral.gov. While it is not possible for employees from the Charitable Law Section to visit board meetings of individual organizations, section staff members are pleased to provide board governance training if an organization is willing to host a gathering of multiple organizations. Board members are the first line of defense in protecting the organization from fraud or theft. To discuss hosting such a gathering, send an e-mail to CharitableLaw@OhioAttorneyGeneral.gov.

Please Share your Model Policies

The Ohio Attorney Generals Office is building a library of sample board policies. Do you have a good conflict-of-interest policy or other policies that might be helpful to share with other charitable organizations that are reviewing board governance matters? If so, please send a copy to CharitableLaw@OhioAttorneyGeneral.gov.