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Authorities Pose No Obstacle to Shady AIDS Charity’s Fundraising

An investigation raised red flags about the Center for AIDS Prevention's fundraising. Three months later, the group is still at it—even though authorities are aware of its activities.

| Thu Jun. 25, 2009 1:06 PM EDT

This story first appeared on the ProPublica website.

In late March, we published an investigation of the Center for AIDS Prevention, a Beverly Hills, Calif., charity that wages high-profile fundraising campaigns, spreads inaccurate health information and dodges questions about how it spends donations. Three months later, the group is still at it—despite the fact that authorities are aware of its activities. The case is a window into the fractured and often ineffective oversight of nonprofits.

The center's 18-month advertising campaign has made it to the Web pages of the New York Times, Chicago Tribune (PDF), Los Angeles Times (PDF) and USA Today, and the print edition of the Wall Street Journal (PDF), urging viewers to "Donate Now." The most recent series of ads appeared on the Web site of the LA Times (PDF) between May 28 and June 9.

 

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While the center invested heavily in soliciting the public's money, its services appear to include little more than a Web site that long featured inaccurate information, such as the suggestion that birth control pills prevent the spread of HIV (PDF), a claim that has since been revised. Until March, it promoted ineffective herbal remedies (PDF) marketed by a now-defunct for-profit company with ties to the center's director, Steve Neely.

The charity's sparse financial records (PDF) show no expenses or revenues from donations, even though the center was fundraising with advertisements in a national newspaper during one financial reporting period. The group has not registered with state officials, a minimum requirement for fundraising, despite the high visibility of its campaigns.

The center, and Neely's other activities, have sparked suspicions at city offices in Los Angeles, where the charity does business now, with the attorney general of Illinois, where it is incorporated, and with the federal Food and Drug Administration. The center and Neely have repeatedly dodged inquiries by these authorities and members of the public, who have complained to attorneys general in both states. But officials have often not followed up on their concerns, allowing the charity to continue raising money and revealing fault lines in the oversight of nonprofits.

The Internal Revenue Service keeps an eye on nonprofits' financial reports, but it falls to state agencies — usually attorneys general, as in California and Illinois — to address concerns about misrepresentations in fundraising appeals. A spokesman for California Attorney General Jerry Brown said the Charitable Trusts section investigates complaints, but “we also have 98,000 charities who file documents with our office, and that's a large number.”

Last year, Belinda Johns of the California Charitable Trusts section told the U.S House of Representatives (PDF) oversight committee that her 11 lawyers and seven auditors struggled to “effectively protect charitable assets given our limited staff and budget resources.”

California's oversight problems aren't unusual. “The challenges that most of these agencies have is the limitations of resources available to them,” said Bennett Weiner, an executive at the Better Business Bureau's Wise Giving Alliance, a national charity-monitoring organization. “This is not a field where state governments devote a lot of resources.”

The shortfalls leave would-be donors as the first line of defense against bogus charities. “The lesson of any charitable appeal for donors is that you can't assume what the charity is doing based on the name,” Weiner said. “You should look at not only what the charity says it's going to do, but also what it's achieved so far.”

Meanwhile, the California legislature's budget committee voted last week to cut about half—$33.5 million—of the state's funding for certain AIDS services. That funding stream helps support grants to nonprofits that provide preventive, educational and treatment services. (Gov. Arnold Schwarzenegger had proposed cutting nearly all funding for those programs.)

The cut threatens the existence of charities that depend both on government grants and private contributions, local advocates say, and make it more important than ever for would-be donors to keep Weiner's advice in mind as they consider charitable appeals.

Among the center's latest questionable appeals was a golf tournament that was scheduled to be held at the Desert Springs, Calif., JW Marriott last Saturday. The center first pitched the "Help Stop AIDS Golf Classic" to other AIDS organizations in April, asking them to collaborate by sharing the costs of the center's campaigns.

 According to the fliers (PDF) distributed by a board member, the center planned to charge $250 per person, and for $15,000 or more, individuals could become “sponsors.” A spokeswoman for the Marriott resort confirmed the event earlier this month and said that the hotel had reserved rooms in Neely's name.

Promotional materials touted an appearance by Tiger Woods, but the golf division at Woods’ public relations firm, IMG World, said by e-mail, “[T]heir event is being held on the Saturday of the U.S. Open, on opposite sides of the country, so he obviously won't be participating.”

The hotel reservations were later canceled, the resort spokeswoman told us. Lomax Burnett, the center's board member who planned the tournament, said in an e-mail last week that he quit working on the project after Woods declined the invitation, and that the center's director, Neely, had taken over.

Burnett said in the e-mail, which was forwarded to ProPublica, that he "officially" ended his role as the center's top fundraiser as of June 1. He added that the center planned to hold a “Help Stop AIDS seminar” on June 27, but he would not attend. Burnett did not reply to an e-mail request for an interview with ProPublica.

The center first surfaced more than two decades ago, drawing scrutiny within months of its inception in Chicago. Illinois authorities quickly shuttered the organization, but that didn’t prevent its reincarnation, in 2007, on the West Coast.

The center incorporated in Illinois on June 8, 1987, to raise money for the burial of one of Neely's cousins who died of AIDS, Neely told us in a March interview. According to the center's original application (PDF) for tax-exempt status, Neely planned to provide referrals and information to people with AIDS, make research grants and pursue what still appears to be its main activity: fundraising.

“In the coming months, we will organized [sic] an national televised program with actors and actresses donating their time to raised [sic] funds," the application (PDF) explained.

The “coming months” were all the center had. The Illinois attorney general revoked the center's charitable status on Oct. 27, 1987, saying Neely had lied on charity registration forms (PDF) about whether an unnamed center official had ever been “charged or convicted of a misdemeanor involving the misapplication or misuse of money, or any felony.” (The center's three board members at the time are listed on the initial application (PDF).)

Harris Brown, another member of the center's board, said the official in question is dead, but did not identify the person. He added that Neely and other center staff were “neither available nor willing” to comment.

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