FTC, states, target bogus veterans' charities in new crackdown: 'It's war profiteering'

Generous Americans give more than $2.5 billion a year to some 40,000 charities with missions designed to help veterans.

Lately, however, this crowded field has been inundated by fraud, according to the Federal Trade Commission.

The FTC launched Operation Donate with Honor in July to spotlight the problem of fraudulent and deceptive fundraising on behalf of military and veterans’ causes.

“It’s war profiteering,” Joshua Starks, commander of the Veterans of Foreign Wars chapter in Tulsa, Okla., told Fox News. “They’re stealing from people who raised their hand and took an oath to serve our country and then went overseas to protect the rights of all of us--including the people who are stealing from them.”

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Help the Vets hit up donors with shameless solicitations exploiting the misfortune of veterans who lost a limb in combat.  (FTC)

As part of Operation Donate with Honor, the FTC distributed a list of 102 law enforcement actions 34 states have lodged against bogus veterans’ charities. Some are recent. Others are newly filed. The FTC is a partner in two of the new cases.

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The list laid bare the many ways these groups solicit donations—online, on the phone, by mail, door-to-door and at stores and supermarkets.

Officials said these legal actions share a common theme: the false promise to help needy and disabled vets, to provide veterans with employment counseling, mental health counseling or other assistance and to send care packages to deployed service members.

In many cases, the lion’s share of each dollar donated was paid to telemarketers instead of veterans. In some cases these telemarketers charged a fee of 85 cents of every dollar.

One charity that is named is Help the Vets.

Donors contributed $20 million to the Florida charity from 2013 to 2017. But the charity spent few of the dollars that were collected to assist veterans, the FTC said.

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Help the Vets' Neil "Paul" Paulson Sr.

“Help the Vets spent more than 95% of the millions it collected paying its founder, fundraisers, and on expenses,” FTC Chairman Joe Simons said.

The charity swindled donors through shameless solicitations, according to a lawsuit the FTC filed to coincide with the kick-off of Operation Donate with Honor.

“But for thousands of disabled veterans who served in Iraq and Afghanistan, ‘giving an arm and a leg’ isn't simply a figure of speech- it's a harsh reality,” says one Help the Vets solicitation. “Your $10 gift will mean so much to a disabled veteran.”

However, Help the Vets’ assistance to these unfortunate veterans consisted of vouchers for chiropractic treatment at a clinic, the FTC charged. Only five vouchers were ever redeemed.

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Oklahoma Attorney General Mike Hunter announced a 20-count indictment charging a Tulsa man with charity fraud. On hand were AARP's Wayne Blackmon (left) and Oklahoma VFW Commander Joshua Starks.  (Oklahoma Attorney General's Office)

The lawsuit also charges that donors sent Help the Vets $776,000 to support veterans diagnosed with breast cancer. However, not a single grant ever went to a veteran fighting the disease, according to the FTC.

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In coordination with the lawsuit’s filing, Help the Vets settled the charges and agreed to a dissolution.

No criminal charges were ever filed against Help the Vets’ founder Neil "Paul" Paulson Sr., a one-time unsuccessful Orlando mayoral candidate.

The same can’t be said for Oklahoma businessman Jeff McDougal, the founder of a small charity American Oklahoma Veterans of Green Country.

As part of Operation Donate with Honor, McDougal was charged in an 18-count indictment with defrauding individuals who believed they were giving to a legitimate charity with a similar name called the Green Country Veterans Association.

Barbara Weaver of Owasso, Okla., told an investigator for Oklahoma Attorney General Mike Hunter that she donated $325 to American Oklahoma Veterans of Green Country last October.

“Weaver stated to this agent that she told them that American Oklahoma Veterans of Green Country contacted her and that she assumed that they were the same organization as Green Country Veterans Association because she had given to them before,” the investigator said, according to court papers.

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Washington Attorney General Bob Ferguson sued Fallen Hero Bracelets and its director, Michael Friedmann, alleging that they misled donors believing their purchases were benefiting veterans’ charities.  (Washington Attorney General's Office)

Hunter said McDougal swindled at least 600 Oklahomans out of around $35,000. Bank records show that none of the funds McDougal solicited were used to assist veterans.

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Starks, who stood next to Hunter when the indictment was announced, told Fox News that everyone should be outraged that disreputable veterans’ charities are stealing funds from reputable ones.

“As a society our responsibility is to take care of the vets when they come home from war,” Starks said. “We made that promise to them and our promise to care for them is being broken if we don’t hold the people to account who are stealing the dollars that should go to veterans.”

Another Operation Donate with Honor action was brought in Washington State, where Attorney General Bob Ferguson announced a lawsuit accusing a local charity called Fallen Hero Bracelets of misleading charitable solicitations.

Fallen Hero Bracelets sells bracelets engraved with the names of soldiers killed in action, along with t-shirts and other items. The charity said the proceeds would fund scholarships for children of soldiers killed in Iraq and Afghanistan and to give trained service dogs to soldiers suffering from Post-Traumatic Stress Disorder.

Ferguson said Fallen Hero Bracelets claimed to have sold 1.2 million bracelets but it has never paid for a scholarship or presented a trained dog to a veteran.

Mugshot for Jeffrey McDougal.  (Tulsa County Jail)

He also said that the charity’s founder Michael Friedman once sued a donor who purchased a $40 t-shirt and then canceled the transaction after waiting more than 60 days for the item to arrive.

The FTC said Operation Donate with Honor also seeks to help donors recognize which veterans charities may be unscrupulous.

“It can be kind of scary or overwhelming when you hear about charities that are scamming people,” Maureen Elias, a former counterintelligence agent in the US Army, says in a new FTC educational video. “To promise service to veterans who need and not deliver on that promise is reprehensible.”

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Foundation for American Veterans' Bob McDonald poses with flag (right)  (Facebook)

In Michigan, Attorney General Bill Schuette announced an Operation Donate with Honor action against a local charity with a connection to President Trump.

Schuette said he was investigating Foundation for Americans Veterans for deceptive solicitations and for “dubious withdrawals” by the group’s treasurer Bob McDonald. The withdrawals totaled $200,000.

Foundation for American Veterans agreed to a dissolution in response to the investigation, Schuette said.

The charity's tax filings show that in 2015, the group paid $6.9 million--or 85 percent -- in fees to a professional fundraiser that raised $8.1 million on its behalf.

Foundation for American Veterans said its mission to help vets included presenting cash grants to hospitals and small organizations. In 2016 those grants totaled all of $91,000, according to the tax filings. Its budget that year was $13.7 million.

In 2016, Trump sent Foundation for American Veterans a $75,000 donation after holding a telethon-style fundraiser for veterans before the Iowa caucuses. Trump organized the event rather than attend a Fox News debate he was boycotting.

McDonald’s attorney told Fox News that his client has done nothing wrong.

In an email, McDonald told Fox News the Trump contribution to Foundation for American Veterans was donated to Fisher House, a recognized national charity that builds housing for veterans near Department of Veterans Affairs hospitals.