Charity Fraud

CHARITABLE organizations solicit funds from the public for philanthropic goals such as seeking cures for diseases, or aiding the families of slain police officers. Fraud occurs when donations are solicited in a deceptive manner or are used for purposes never intended by the donors. Charities are also subject to the kinds of fraud that plague all business organizations, such as embezzlement and misappropriation of funds by executives.

It is not always easy to establish and prosecute charity fraud. All scholars would agree that money[Page 155] solicited by persons or groups that are not legitimate charitable organizations would constitute charity fraud, but the question of fraud is complicated when considering charities that use, for example, a very high percentage of donations for administrative costs or additional fundraising rather than for the charitable cause. These kinds of issues, as well as the very large number of charitable organizations worldwide, make charity fraud difficult to monitor and eradicate.

Fraud affects only a very small percentage of the money Americans donate to charities, which totaled $212 billion in 2001, according to the Federal Trade Commission, but its effects are damaging far beyond the initial crime. Charity fraud is perceived as a particularly abhorrent kind of deceptive business practice because it abuses the trust of altruistic persons who offer donations with the expectation that they are assisting those in need.

Widespread or infamous cases of charity fraud can result in a lasting backlash because those responsible have manipulated the emotions of donors in order to elicit a donation, leading to anger and disillusionment if it is revealed that the charity and philanthropic promises were invalid. This disillusionment and suspicion caused by fraudulent charitable solicitation or misappropriation of funds has the additional very damaging effect of tainting the fundraising appeals of legitimate charities, which suffer by association with those who defraud donors.