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Millions in Future Donations to Vets Charity Will Pay Debt Owed to Vendors

   Aug 01, 2010

** Article Updated May 2012 **

A CNN investigation inspired by CharityWatch article Millions in Future Donations to Vets Charity Will Pay Debt Owed to Vendors reveals further details showing that only a small portion of donations raised by Disabled Veterans National Foundation (DVNF) goes to assist injured veterans. Thanks to CNN's continued reporting on F rated DVNF, two US Senators have now launched "an investigation into the potential abuses of tax-exempt nonprofit status" by DVNF and are looking into "questionable financial ties between DVNF and Quadriga Art."

CharityWatch president, Daniel Borochoff, comments about the waste at this and other veterans charities. This follow-up video features veterans charities that have received useless in-kind donations from DVNF, and the group's president refusing to explain why DVNF provides so little aid to veterans. DVNF's responses to CNN take a "bizarre and nonsensical" twist and J.D. Simpson, who operates a shelter serving homeless veterans, says that DVNF diverts much-needed funds away from groups helping veterans in need.

(Pictured above: Mary Alice Dick, a CharityWatch member for years, expresses her concerns about F rated Disabled Veterans National Foundation to CNN.)

Millions in Future Donations to Vets Charity Will Pay Debt Owed to Vendors

"100 percent of your donation will go to the charity." This is the language that telemarketers of Donor Services Group (DSG), a fundraising company soliciting for Disabled Veterans National Foundation (DVNF), are instructed to use when on the phone with potential donors, according to a 2009 fundraising statement filed in Massachusetts. Contradicting this claim on the very same form, and also in DVNF's solicitation notice in Colorado, the solicitor estimated that its fees would amount to 98% of donations collected on behalf of DVNF in 2009. Donors may be even more disappointed to learn that the charity is contractually obligated to allow another fundraising company it hired, Brickmill Marketing Services to keep 100% of what it raises from donors until the charity's debts to this company are paid off.

DVNF's contract with Brickmill states that Brickmill will be responsible for managing production of solicitation materials and oversight of vendors. By far the largest vendor of DVNF is Quadriga Art, Inc., which shares the same phone number and address in Wilton, New Hampshire with Brickmill and, according to its web site, is the parent company of Brickmill. DVNF was billed over $14.7 million by Quadriga in 2008, according to the charity's tax form of the same year, which is an amount equivalent to an astounding 90% of DVNF's total spending. Billings of $1.4 million from Brickmill accounted for nearly 9% of the rest of DVNF's total spending in 2008.

The fundraising contract between DVNF and Brickmill states that the charity "agrees to assign to Brickmill the net proceeds from all future donor file mailings until paid." Unfortunately for unsuspecting donors, what this means is that future donations to the charity given in response to solicitations run by Brickmill must be used to pay off DVNF's debts to Brickmill before any funds can be made available to the charity for its programs.

AIP also fears that this part of DVNF's contract with Brickmill also extends to what the charity owes to Brickmill's parent company, Quadriga. Brickmill advances the money used for fundraising campaigns, according to a report on DVNF's web site by Prof. Richard Steinberg, which was commissioned by the charity. This arrangement suggests that, while DVNF may be billed primarily by Quadriga for fundraising services, the funds that Brickmill fronts to Quadriga for DVNF's solicitation campaigns must be paid back by DVNF before the charity will receive any of the donations raised by these fundraisers. A note in the charity's 2008 audit refers to an $8.4 million debt owed to an unnamed production vendor. AIP believes that this refers to money owed to Quadriga that was fronted by Brickmill.

When AIP contacted DVNF for clarification on this issue the charity's Chief Administrative Officer, Raegan L. Rivers, claimed to not even be aware that Brickmill and Quadriga are related companies. "It is my understanding that Quadriga Art is not the parent corporation of Brickmill. It is a separate corporation."

Claims made about the percentage of donations going to charity are not the only contradictions AIP found when investigating DVNF. "For 35 years we have been putting service to others before ourselves," says one DVNF solicitation. This is an interesting statement considering the charity was not incorporated until November 2007, according to its 2008 tax form. (Note: AIP does not rate groups until they have three years of financial reports.)

In addition to soliciting over the phone, the charity also sends out fundraising letters. An AIP member, curious about the group, described the first solicitation she received from DVNF and forwarded to us the follow-up solicitation she received. According to that AIP member, DVNF first sent a large plastic envelope containing a calculator and planner which she had not requested, along with a contribution form. They later sent her a follow-up solicitation asking "Did you receive the Patriotic Calculator and Planner Set I sent you?" This statement was printed in red letters above her name and address on the envelope next to a photo of an injured soldier being carried into a helicopter on a stretcher. Charities that mail unrequested gifts while at the same time requesting contributions are trying to guilt you into giving, in AIP's opinion. Donors should be aware that they are under no legal or, for that matter, moral obligation to send contributions in response to gifts they have not requested.

Donors should also be careful not to read too much into the emotionally-charged language or sad photos included in many charity solicitation letters. DVNF's appeal references the "hell of combat" and says, "You'll put meaning behind the words 'Support Our Troops,' with your gift to DVNF today!" The language in this solicitation could lead potential donors to believe that the charity seeks funds primarily for direct assistance to veterans, which is not the case. According to DVNF's 2008 audit, only $127,421 or less than 1% of DVNF's $16.3 million budget could have been spent on grants or aid to individuals. Except for this amount and a $40,000 unrestricted grant to a related party, all the rest of DVNF's reported program expenses of $4.5 million were direct mail related.

Donors may also be interested to know that according to DVNF's 2008 audit, it incurred $482,137 of fundraising mailing costs, which it allocated to program expenses, for another organization, the National Association of State Women Veterans Coordinators. This group shares five of DVNF's board officers and has entered into a strikingly similar contract with Brickmill Marketing Services.

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