Charity fraud is when someone takes advantage of a charitable or non-profit organization for their own personal gain. Fraud is defined as intentional deception or misrepresentation made for personal gain. Defrauding a charity can be anything from falsely claiming to be a victim of the disaster in order to get money from the charity, to stealing donations from the collection tin, to setting up a fake charity and pocketing the donations.
Fraudulent activity can also occur when people make dishonest or inflated claims about how much money they have raised or how much it has helped the cause.
Some of the most common ways to commit charity fraud include:
- Pretending to be a charity or falsely claiming to be affiliated with a legitimate charity in order to solicit donations
- Making false representations about the cause or the amount of money that will be donated to the cause
- Diverting funds raised for charitable causes to personal use
- Falsifying receipts or other documents to make it appear as if donations were made when they were not
- Fraudulently inflating the value of donated items or services
- Tampering with books or records
Types Of Crimes For Charity Fraud
Charity fraud typically falls into three categories: (i) the theft or other unlawful taking of money or property belonging to an individual or organization that solicits donations on behalf of a cause (e.g., false pretenses, larceny by trick, or fraud); (ii) the misrepresentation of an organization’s charitable status in order to solicit donations from individuals or businesses; and (iii) the misappropriation of funds raised by a charity for its intended purpose.
In false pretenses cases dealing with charity fraud, the crime of false pretenses is committed when a person accepts money by offering charitable goods or charitable services through intentional false statements, with the intent to never deliver the goods or services that were promised or agreed upon.
Some states have the added element of “an existing material fact.” In other words, some jurisdictions require that in order to be charged with false pretenses, there has to be a false statement of an existing fact such as the charitable work to be performed. If the charity is fake, and you lie or misrepresent the facts to something that doesn’t exist (like a fake charity), then you may not meet the statutory requirements of false pretenses.
In larceny by trick cases, the false representation may involve false statements about what will be done with donated funds. However, it also can include the non-disclosure of facts that would influence a donor’s decision whether or not to donate to the charity.
For example, someone who starts a foundation for terminally ill children and then through misrepresentation, steals the donations or does not perform as promised. False representations about what will be done with donated funds is the most common type of charity fraud.
This can involve false statements about what percentage of donations will go to the charitable cause, misrepresenting how the donated money will be used, or failing to disclose relevant information about the charity or its directors.
The second most common type of charity fraud is misrepresentation of an organization’s charitable status in order to solicit donations from individuals or businesses is also a common type of charity fraud. This can involve claiming to be a registered charity when the organization is not, making false statements about the percentage of donations that will go to the charitable cause, or failing to disclose details about how the donated money will be used.
The third most common type of charity fraud is misappropriation of funds raised by a charity for its intended purpose. In many states this type of theft is referred to as embezzlement. This often occurs when an employee of a charity or non-profit uses donated funds for personal gain rather than for the charitable cause they were meant to support.
Additional Charity Fraud Crimes
Nonprofits and charitable organizations are particularly vulnerable to fraud schemes. This is because they often come into contact with significant sums of money that can be diverted for personal use by internal personnel.
In addition to the crimes discussed above, a person can be charged with money laundering, wire fraud, bank fraud, or IRS violations for misappropriating funds, fraud, theft, or other offenses. This depends on the severity of the crime and the way in which the mismanagement or scheme is carried out.
A charity cannot give out a small grant as part of its philanthropic capacity, and then use the majority of the donations for personal expenses of the members. In addition, no part of the net earnings from a charity should solely belong or give benefit to any private shareholder or individual.
If you are convicted of fraud against a nonprofit, you may have to pay back taxes on any income you received that was related to the fraud. You may also be subject to additional penalties and interest. In some cases, you may even lose your right to claim tax deductions and credits for future years.
What Are The Penalties For Charity Fraud?
The penalties for committing charity fraud and the other financial crimes associated with theft by non-profit organizations, real or fake, can be severe. They often include incarceration, significant fines, and restitution.
In some cases, a person may also be subject to civil penalties such as the forfeiture of assets. It is important to remember that individuals who commit these crimes will likely face criminal prosecution.
The penalties for committing fraud or other financial crimes can be severe, and often include incarceration, significant fines, and restitution. In some cases, a person may also be subject to civil penalties such as the forfeiture of assets, and paying damages.
Charity fraud can occur on a small scale, with one individual being defrauding someone they know. It can also occur on a large scale when several perpetrators join forces to fleece the public of millions of dollars each year through bogus appeals and fake fundraising campaigns.
The consequences of charity fraud go beyond the criminal justice system. Not only does it deprive legitimate charities of much-needed funds, it also can erode trust in the charitable sector. This means that genuine organizations may find it harder to raise money in future.
Do I Need To Hire A Charity Fraud Lawyer?
If you are contacted by law enforcement, it is important to seek legal counsel immediately. An experienced fraud attorney can help protect your rights and work to get the best possible outcome in your case.
One of the most important aspects of charity fraud is that it can lead to prison time and hefty fines. If you’ve been accused or convicted for this crime, don’t delay in taking action. Hire a criminal defense attorney today who knows how to navigate these complex legal waters and provide your best chance at avoiding serious consequences.
They will be able to advise you on what steps should be taken next based on your unique situation and ensure that all possible options are explored in order to protect yourself from more severe penalties.
If you have any questions about the tax implications of fraud against a nonprofit, please contact an attorney who can discuss your options further.