Category: Federal/State Actions

May 30, 2019 – Attorney General Becerra has proudly sponsored Assembly Bill 1181 to tackle lack of transparency and improper valuation of gift-in-kind-donations

SACRAMENTO – California Attorney General Xavier Becerra filed a lawsuit against a charitable organization, Aid for Starving Children. The lawsuit alleges that Aid for Starving Children improperly reported inflated revenue on its financial reports by valuing donated pharmaceutical drugs using U.S. drug prices when it never had possession or control over the drugs. While Aid for Starving Children informed its donors that its charitable program worked to feed starving children and their families, in reality, its main program service consisted of shipping donated pharmaceuticals abroad, and the majority of these drugs did not benefit starving children. By inflating the value of the pharmaceutical donations, potential donors were misled into believing a greater percentage of their cash donations would go towards feeding starving children, when in fact most of the money went towards fundraising and overhead expenses. 

Attorney General Becerra is committed to protecting donors and honest charities. This year, Attorney General Becerra has proudly sponsored Assembly Bill 1181, to tackle the lack of transparency in the valuation and reporting of non-cash, gift-in-kind donations.  

“We are taking action against Aid for Starving Children because our investigation determined that the charity does little of what its name suggests,” said Attorney General Becerra. “California donors and honest charities deserve transparency. Assembly Bill 1181 is a necessary and promising first step to ensure transparency in the reporting and valuation of non-cash donations to protect donors, and to promote a level playing field among charities operating in California. My office is committed to protecting generous donors from the harm caused by misleading accounting gimmicks. We will continue to hold unscrupulous charities accountable.”

The complaint alleges that Aid for Starving Children was able to deceive donors into believing that from May 2011 to April of 2018, it had raised $105 million in revenue to support its charitable program of assisting starving children, but that amount included $97.4 million in improperly valued pharmaceuticals. Less than $1.3 million of the cash donations received were used to feed starving children. The complaint alleges that Aid for Starving Children was accepting pharmaceutical drugs that treat diseases such as dementia and high cholesterol, illnesses not commonly associated with starving children. It also alleges that Aid for Starving Children paid a for-profit company to procure the donations of pharmaceutical drugs, locate international organizations to receive them, and then to ship those goods overseas on the charity’s behalf. Even though all pharmaceutical drugs were shipped overseas, Aid for Starving Children used U.S. drug prices to report their value as revenue on its financial reports.

Assembly Bill 1181 was introduced by Assembly Member Monique Limon, and it is aimed at promoting transparency in the reporting and fair valuation of non-cash donations. It will further promote an equal playing field among charities operating in California. The legislation would require charities operating in California to consider donor restrictions in valuing their non-cash donations. For example, if a pharmaceutical company restricts drugs so that they cannot be used in the U.S., charities should not value these donated drugs using U.S. prices. 

A copy of the complaint is available here. More information on Assembly Bill 1181 can be found here.

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FOR IMMEDIATE RELEASE: May 24, 2019

Haueter family operated four sham charities, keeping more than $1M from Washington donors for themselves

SEATTLE — Attorney General Bob Ferguson today announced that as a result of his lawsuit, a family who operated a group of sham charities are banned for life from all activity in the charity sector and must pay nearly $300,000 to the Attorney General’s Office. A judge previously ruled that the Haueters broke the law in multiple ways operating its charities.

Over many years, the family used its four charities in an elaborate, deceptive scheme to solicit donations from Washingtonians that they instead used to enrich themselves by more than $1 million.

“The Haueters used an elaborate, deceptive scheme to use donors’ money for their own personal gain,” said Ferguson. “As a result of my office’s lawsuit, this family will no longer take advantage of the generosity of Washingtonians.”

Continue reading “WASHINGTON – AG LAWSUIT LEADS TO LIFETIME BAN FOR FAMILY WHO USED CHARITIES TO DECEIVE WASHINGTONIANS”

May 24 2019

Haueter family operated four sham charities, keeping more than $1M from Washington donors for themselves

SEATTLE — Attorney General Bob Ferguson today announced that as a result of his lawsuit, a family who operated a group of sham charities are banned for life from all activity in the charity sector and must pay nearly $300,000 to the Attorney General’s Office. A judge previously ruled that the Haueters broke the law in multiple ways operating its charities.

Over many years, the family used its four charities in an elaborate, deceptive scheme to solicit donations from Washingtonians that they instead used to enrich themselves by more than $1 million.

“The Haueters used an elaborate, deceptive scheme to use donors’ money for their own personal gain,” said Ferguson. “As a result of my office’s lawsuit, this family will no longer take advantage of the generosity of Washingtonians.”

Today’s resolution prohibits Roy Bronsin Haueter, his wife, and two of his children and their spouses from soliciting for any charitable cause in any state, unless it supports a minor child or grandchild’s fundraiser and the amount is less than $2,000. As a result of the lawsuit, the family members cannot serve in any executive or financial role at any charitable organization, cannot own or operate a commercial fundraiser, cannot act as fundraising consultants and cannot serve as trustees of any charitable trust.

The Haueter family must pay nearly $300,000 to the Attorney General’s Office. Additionally, the family is required to sell most of their Leavenworth, Maple Valley, and Moses Lake properties and use the proceeds to fulfill the payment. Based on the family’s financial disclosures, this represents most of their current assets.

If the family members violate the terms of the resolution, they could face civil penalties up to $5 million.

Case Background

Attorney General Ferguson filed a lawsuit in December 2017 asserting that the Haueters’ charities were a sham that the family used to enrich themselves by more than $1 million. 

The family operated four charities, most recently named Children’s Hunger Relief Aid, Children’s Safety Society, Emergency Relief Network and Search and Rescue Charities. After Ferguson filed his lawsuit, the Haueters dissolved two of these, but continued to operate the remaining two using the same deceptive tactics.

The charities’ financial documents sometimes claimed the organizations spent up to 99 percent of donations on their charitable programs. In reality, the Haueters’ charities provided little, if any, benefit at all.

The Attorney General’s investigation, which included a review of tax and other financial records, revealed that the Haueter family was the primary beneficiary of the donations. Between 2011 and 2017, the charities reported that they collected $3.6 million from donors through their deceptive outreach. Out of that money, it appears the family retained around $1.4 million for themselves. Records indicate that most of the remaining funds went toward administrative costs, such as postage and rent.

In his motion for partial summary judgment, Ferguson outlined the family’s deceptive behavior: enriching themselves with charitable donations, failing to give donors the true name and location of the charities they were donating to, exchanging funds between charities with very different missions and providing little, if any, assistance to the needy people they claimed to help.

In November 2018, a King County Superior Court judge agreed with Ferguson that the Haueter family’s deception violated the Charitable Solicitations Act and the state Consumer Protection Act. As a result of Ferguson’s lawsuit, the court required the Haueters to dissolve all of their remaining charities.

Haueters deceived donors with donation solicitations

Roy Bronsin Haueter, his wife, and his children and their spouses operated four charities and a commercial fundraiser. Over many years, the four charities went by 23 official names and 19 “doing-business-as” entities and claimed to benefit several vulnerable groups, including foster children, war widows and cancer patients.

Over the past eight years, the fundraiser exclusively served the four charities, making millions of calls and disseminating tens of thousands of donation solicitations.

The four charities often solicited the same donors multiple times a year under the guise of different local charities, without disclosing where the donor’s money actually went. One Sumner resident received eight solicitations using six different names from the Haueters’ four charities in 12 months.

Many Washingtonians donated to the Haueters’ organizations believing their money would go toward one beneficiary, when in fact that money went toward a completely different person in need, or to enrich the Haueters themselves.

No matter the charities’ claimed missions, they all, with minor exceptions, provided “charity” in the same way: A small portion of the donations and grants went toward gift cards distributed either to Head Start programs or to low-income children at “shopping sprees.”

Deceiving donors into believing their donations would help local people in need and using donations for causes other than the donor intended, as the Haueters did, are violations of the Charitable Solicitations Act and the state Consumer Protection Act.  

Assistant Attorneys General Joshua Studor and Lynda Atkins handled the case.

More information about how individuals can protect themselves from charity scams can be found here.

The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.