Colorado’s AG wants charities over­sight unit

The Denver Post - - FRONT PAGE - By Christo­pher N. Osher

Growth in charities in Colorado has the state’s top pros­e­cu­tor seek­ing more funds to cre­ate a new unit to fer­ret out non­profit fundrais­ing fraud.

Colorado At­tor­ney Gen­eral Cyn­thia Coff­man wants to spend about $350,000 an­nu­ally on a new charities over­sight unit. The money would fi­nance two full-time at­tor­neys, an in­ves­ti­ga­tor, of­fice equip­ment and op­er­at­ing costs. The work cur­rently is done by at­tor­neys in the con­sumer fraud unit of her of­fice, who must jug­gle other re­spon­si­bil­i­ties.

“Most of us do­nate to a char­ity think­ing that our money goes to a cancer vic­tim or a child’s base­ball team,” Coff­man said dur­ing a re­cent pre­sen­ta­tion to the Joint Bud­get Com­mit­tee, which sets fund­ing pri­or­i­ties the full leg­is­la­ture votes on. “We don’t back­track to find out if the money was spent

in the way we des­ig­nated it or if it was squan­dered by the char­ity or if it went to the op­er­a­tors. We are trust­ing in that re­gard.”

She said the new unit is needed be­cause there are more than three times as many charities reg­is­tered in Colorado as there were in 2006 — 13,663 to 4,168 — ac­cord­ing to the Colorado Sec­re­tary of State’s of­fice. Part of the in­crease is due to an ini­tia­tive in 2008 by the Sec­re­tary of State’s of­fice to reach out to charities that weren’t reg­is­tered, which re­sulted in a 33 per­cent surge in reg­is­tra­tions that year, ac­cord­ing to statis­tics.

“We have been limp­ing along in this area in the last cou­ple of years,” Coff­man told the leg­is­la­tors. “But the work­load now ex­ceeds our ex­ist­ing re­sources, and it re­quires a more con­sci­en­tious re­sponse from the de­part­ment.”

The unit also would over­see con­ver­sions for non­prof­its to for-profit en­ti­ties in the health care sec­tor, Coff­man said.

She is propos­ing to fi­nance the new unit with $231,000 in gen­eral fund dol­lars and $118,000 in funds her of­fice over­sees. At­tor­neys gen­eral in 13 other states have es­tab­lished char­ity over­sight units.

The pro­posal gen­er­ated skep­ti­cism from at least one mem­ber of the Joint Bud­get Com­mit­tee. Sen. Kevin Lund­berg, a Repub­li­can from Berthoud and as­sis­tant ma­jor­ity leader, said he feared cre­ation of the pro­posed unit would put too “much fire­power in place.”

“I’m ex­tremely con­cerned that we will set up this full-time unit with po­lice pow­ers,” Lund­berg said dur­ing the re­cent com­mit­tee hear­ing. “With thou­sands of char­i­ta­ble or­ga­ni­za­tions out there, I think we’re mak­ing more trou­ble than good.”

He said charities al­ready are re­quired to meet state reg­u­la­tions to seek dona­tions in Colorado. They must register and file fi­nan­cial re­ports with the Sec­re­tary of State’s of­fice. That of­fice also has three in­ves­ti­ga­tors who han­dle com­plaints about charities, no­taries, and bingo and raf­fle op­er­a­tions, but they have no crim­i­nal en­force­ment pow­ers. If in­ves­ti­ga­tors find sus­pected crim­i­nal vi­o­la­tions, they re­fer them to law en­force­ment.

“A per­ma­nent unit, I fear, will find them­selves look­ing for is­sues to solve and cases to fix,” Lund­berg said of Coff­man’s push.

The pro­posal isn’t gen­er­at­ing any push-back from the non­profit sec­tor.

“The Colorado Non­profit As­so­ci­a­tion sup­ports en­force­ment of char­ity reg­u­la­tions that pro­tect the non­profit com­mu­nity and char­i­ta­ble dona­tions,” said Renny Fa­gan, pres­i­dent of the Colorado Non­profit As­so­ci­a­tion. “While the at­tor­ney gen­eral is seek­ing to cre­ate this unit, it’s re­ally to catch up to the work­load they have rather than to re­spond to more fre­quent cases of fraud.”

Coff­man, a Repub­li­can, said she would mon­i­tor the new unit if it’s es­tab­lished and would phase it out if it’s not needed. She noted that her of­fice plans to re­al­lo­cate some of the re­sources ded­i­cated to fight­ing mort­gage fraud to con­sumer fraud be­cause the num­ber of mort­gage fraud com­plaints to her of­fice has dwin­dled from a high of 1,185 in 2012 to 277 this year as the hous­ing mar­ket has re­cov­ered. She said her of­fice re­ceives about four com­plaints about charities each month.

“We’re not in­ter­ested in pur­su­ing a com­mu­nity char­i­ta­ble or­ga­ni­za­tion that makes mis­takes in how it ac­counts for pro­ceeds,” Coff­man said. “We’re in­ter­ested in ed­u­cat­ing folks like that. We are tar­get­ing those who go out to de­fraud donors and take money from un­sus­pect­ing folks.”

Coff­man pointed to her of­fice’s 2013 law­suit against the fake non­profit Boo­bies Rock! as the type of fraud that can pro­lif­er­ate with­out proper over­sight of charities by her of­fice. The founder, Adam Shy­rock, sold T-shirts, hats and other goods with the prom­ise that the money would go to char­i­ta­ble or­ga­ni­za­tions fight­ing breast cancer.

“In fact, the vast ma­jor­ity of that went to sup­port the busi­ness owner’s lav­ish life­style, in­clud­ing his dat­ing ser­vice and his bar tab,” Coff­man said.

In Jan­uary 2014, Shy­rock was or­dered to spend six months in jail for vi­o­lat­ing a 2013 court or­der bar­ring him from sell­ing mer­chan­dise for any char­i­ta­ble cause. Shy­rock also pleaded guilty in May to an­other bo­gus char­ity scam af­ter pros­e­cu­tors in Adams County ac­cused him of pock­et­ing $1 mil­lion. He told donors that mat­tresses he ob­tained un­der a war­ranty pro­gram were be­ing dis­trib­uted to refugees.

“To me, this is some of the worst fraud that peo­ple can com­mit be­cause the re­sources they are steal­ing and con­vert­ing to per­sonal use are re­sources that aren’t go­ing to the peo­ple who need that money,” Coff­man said.

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