Federal Charity Fraud
Charity fraud is the deceptive solicitation or use of charitable contributions and could be charged as a federal offense based on the nature of the scam.
Charity fraud is a serious offense that undermines public trust in philanthropic institutions and diverts resources from those in need. At its core, charity fraud involves deceptive practices that mislead donors, misappropriate funds, or falsely represent charitable activities for personal or organizational gain.
While every state has laws under which charity fraud may be charged as a crime, it becomes a federal offense, mainly when the activities utilize federal services or cross state lines. Charity fraud schemes typically seek donations from organizations that do little or no work. The money goes to the fake charity's creator.
Charity scams are more prevalent after high-profile disasters, as some use tragedies to exploit people who want to help. They can reach people through emails, social media, crowdfunding platforms, cold calls, and GoFundMe.
Charity scammers typically want money quickly and pressure people to donate immediately. They ask for cash, gift cards, cryptocurrency, or wire transfers but refuse to send information about the charity or explain how the money will be used.
Many kinds of charity scams exist, designed to mislead donors or government authorities. Charities fraud scams are often perpetrated via the Internet, although some charity scams are telemarketing scams that involve calling people to solicit donations for fake charities or false causes.
The federal government takes these offenses seriously, employing a range of statutes to prosecute fraudulent activities. Being convicted of charity fraud can result in significant fines and prison time.
While charities serve a crucial purpose, there is also a real potential for fraud with these organizations. If you are accused of involvement in a charity fraud scheme, you need to understand the federal crimes you are charged with and discuss a strategic approach to responding to charges with a criminal defense lawyer to avoid a conviction.
What is Charity Fraud?
Charity fraud is essentially the deceptive solicitation or use of charitable contributions. The perpetrator may pose as a legitimate charity, misleading donors to contribute funds under false pretenses.
Alternatively, they might be part of a genuine charity but use the donated resources for personal gain or other unauthorized purposes. Specific examples of charity fraud may include:
- Misrepresentation of Charitable Activities: An organization claims to support causes or communities but fails to allocate the collected funds appropriately.
- Diversion of Funds for Personal Use: Individuals within a charity use donations for personal expenses instead of the charity's stated mission.
- Fake Charities Soliciting Donations: Creating fictitious charities or events to solicit donations from unsuspecting donors.
For instance, an individual or group might set up a charity claiming to support disaster relief efforts. They conduct extensive fundraising campaigns, collecting significant amounts from the public and businesses. However, the money collected is diverted for personal enrichment instead of channeling it to the disaster-affected areas.
What are the Federal Statutes for Charity Fraud?
While no specific statute addresses charity fraud, federal prosecutors can utilize numerous federal statutes to prosecute the offense. The statutes used depend primarily on the nature of the scam and how it is carried out. The laws most used to prosecute charity fraud include, but are not limited to:
- Mail Fraud (18 U.S.C. 1341): This federal statute is invoked when the U.S. Postal Service or any private interstate carrier is utilized in executing a fraudulent scheme. It typically applies to cases where fraudulent donation solicitations are mailed to potential donors.
- Wire Fraud (18 U.S.C. 1343): Wire fraud applies when fraud is carried out using wire, radio, or television. This can include scenarios such as email scams or fraudulent online donation platforms.
- Tax Evasion (26 U.S.C. 7201): A fraudulent charity providing donors with tax receipts for non-existent donations could lead to tax evasion charges under this statute. Both the charity and the donor could be involved.
- Bank Fraud (18 U.S.C. 1344): If the charity fraud involves fraudulent activities affecting financial institutions, such as fake bank transfers or fraudulent transactions, the perpetrator could be prosecuted under this statute.
- Identity Theft (18 U.S.C. 1028): The identity theft statute might be used in cases where charity fraud involves misusing another person's identity or personal information.
- Money Laundering (18 U.S.C. 1956 & 1957): If the funds obtained through charity fraud are funneled through a series of transactions to disguise their origin, the accused may face additional money laundering charges.
- Impersonating the Red Cross (18 U.S.C. 917): Federal law criminalizes explicitly the act of falsely posing as a member or agent of the Red Cross to solicit or collect donations.
What are the Possible Penalties for Charity Fraud?
The penalties for charity fraud can vary depending on the specific statutes used for prosecution, the severity of the offense, and any aggravating factors.
Generally, convictions under federal laws relating to charity fraud can result in fines ranging from thousands of dollars to millions and significant prison sentences.
For example, convictions for mail or wire fraud carry a potential sentence of up to 20 years in prison and significant fines. If the fraud affects a financial institution or is connected to a presidentially declared disaster or emergency, the potential prison term can increase to 30 years.
Tax evasion convictions can result in up to five years in prison and a fine of up to $250,000 for individuals or $500,000 for corporations. Convictions under money laundering laws can result in fines of up to $500,000 or twice the value of the funds involved, whichever is greater, and a maximum prison sentence of 20 years.
What are the Common Defense Strategies?
Defending against accusations of charity fraud requires a nuanced and strategic legal approach. Common defense strategies include the following:
- Lack of Intent to Defraud: A powerful defense can demonstrate that the accused did not intend to deceive donors or misappropriate funds. This might involve showing that misrepresentations resulted from misunderstandings or errors rather than deliberate deceit.
- Good Faith Belief: Arguing that the accused genuinely believed in the legitimacy of the charity's operations and that any issues were not due to fraudulent intentions but rather to administrative or operational oversights.
- Misidentification or Misunderstanding: Sometimes, individuals are wrongfully accused because they misidentify or misunderstand their role within a charitable organization. Clarifying these issues can be crucial for the defense.
For more information, contact our federal criminal defense attorneys at Eisner Gorin LLP, which has offices in Los Angeles, California.
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