Oregon Wants to Shut Nonprofit Vet Group

Oregon's Attorney General wants a popular nonprofit that awards honorary medals to military veterans shut down for deceiving donors.

John Kroger said that Veterans of Oregon telemarketers told donors their money would feed, house and provide medical care for homeless and ill vets. Instead, 80 percent of the cash raised over two years -- about $500,000 -- went to the Michigan telemarketing firm making the calls.

The Department of Justice has sued the nonprofit veterans group and its for-profit fundraiser, Associated Community Services, saying it "spent nothing or only token amounts on the programs described" in solicitations. The state alleges that much of the remaining 20 percent went to founder John Neuman and his associates' expenses for the $6 medals and travel to award ceremonies.

Neuman was featured in a 2009 Veterans Day story in The Oregonian for his work awarding more than 9,600 vets the medal since 2006, including Gov. Ted Kulongoski and President George W. Bush. Neuman's organization also produces the Field of Honor, a travelling memorial of 1,000 flags planted in dramatic locales, including at the Portland Rose Festival.

On Monday, Neuman called the allegations "a crock," saying his organization is being caught up in the Attorney General's campaign against telemarketers and Kroger's political aspirations. An Air Force veteran who served in Vietnam, Neuman has worked for nearly 20 years to honor veterans with memorial highways, monuments and now medals. He defended using telemarketers to launch his nonprofit from his Welches garage in 2006, saying he could account "for every penny" and plans to fight the charges in court.

"I've never been in it for profit, helping veterans is what I do, it's my own therapy and we're going to win this thing," says Neuman, 62.

The complaint is part of a larger Kroger campaign to stop charities that keep most of the money they raise. Veterans are among the "hero" charities, like firefighters and police, that enjoy wide support and are thus easily exploited, charity watchdogs say. There are 187 active nonprofits registered in Oregon with names indicating they serve veterans or Soldiers.

Since the wars in Iraq and Afghanistan, there has been "a proliferation of new veterans' groups being formed," says Daniel Borochoff, president of the American Institute of Philanthropy, a prominent independent watchdog group. That comes as giving overall dropped 3.2 percent in 2009, the steepest decline since 1956, according a just-released report by AIP. In Borochoff's view, spending $35 or less to raise $100 is reasonable for most charities

"Unscrupulous fundraisers are taking advantage of America's concern for veterans. It's a national scandal," Borochoff says. "And there is a broad concern that over $1 billion [annuall]) is raised in the name of veterans in this country, and that so little of that is going to help the people in need."

Kroger asked his staff to investigate after he noticed that three of the 20 worst in Oregon in 2009 raised money for veterans. The Department of Justice lists the charities that spend 80 to 98 percent of donations on overhead.

Kroger, a Marine Corps veteran, said that in the midst of two wars, a nonprofit can easily exploit the desire to support and honor military service.

"People would not donate if you were honest and said, 'By the way, 80 percent of your donation will go to the telemarketing firm,' " he said. "Every dime that goes to all that overhead is a dime that doesn't go to a worthwhile group."

In May, the Justice Department also sued a Central Point non-profit, No Veterans Left Behind Association. Its founders sold embroidered vet hats and raffle tickets outside large retail stores in Marion and Klamath counties. They told donors 80 percent went to needy veterans.

Instead, the organizers, including registered sex offenders David Gilbert and Jeffrey Grischkowsky and associates Kenda Young and Molly Hicks, allegedly spent 80 percent of the $17,000 raised on themselves. They paid for rent, food, salaries and a truck for their landscaping company, Attorneys at Lawn. The complaint was filed after they failed to show up for a May meeting with the Department of Justice staff. They could not be reached for comment.

The state also sued and settled with The Veterans Fund and its Florida telemarketing firm for making false statements. The two agreed to pay a combined $180,000 in fines and to never solicit money in Oregon again.

Neuman's Veterans of Oregon is the largest and best-known vets group being sued. Volunteers award medals at every major veterans event in the state and monthly at the Portland Veterans Affairs Medical Center. They are scheduled to be in Lakeview on July 31.

The state says Neuman failed as a nonprofit director by entering into the telemarketing agreement and failing to monitor the fund-raising.

Neuman defended himself, saying he was quickly trying to build a nonprofit and didn't have the experience or the ability to do fundraising. ACS guaranteed a higher cut of the revenue than other telemarketers he talked to. Nonetheless, he and his board have discussed discontinuing that arrangement.

The AIP rates charities "satisfactory" if at least 60 percent of donations go to the program and "highly efficient" those that send 75 percent or more to direct services.

Kroger said that he is not trying to clamp down on telemarketing as much as stop improper practices.

"We're pretty adamant that in Oregon, charities have to be honest about where the money is going."