Fund-Raising Agency Investigated for Finances, Methods : Donations: The organization raised more than $500,000 in a 19-month period but less than 7% went to programs.

The Glendale-based American Veterans Committee, a nonprofit corporation, was founded in 1986 to raise money for people who defended their nation in the armed forces.

Today the organization, which seeks donations by telephone, is itself under attack. Government officials, other veterans groups and even some of the committee’s beneficiaries have accused it of deceptive tactics, inefficient use of funds and faulty financial reporting.

According to records submitted to the city of Los Angeles, the committee raised more than half a million dollars during a 19-month period from 1986 through 1988 and gave less than 7% of it to charitable programs. Most of the remaining donations paid for fund-raising expenses, including solicitors’ fees and telephone bills.

The committee’s expenses far exceed the average for Los Angeles fund-raisers and the voluntary standards set by national watchdog groups. But the U.S. Supreme Court has ruled that states and cities cannot mandate how much a fund-raiser must give to a cause.

Nevertheless, state and local officials are investigating the American Veterans Committee on other fronts:

* A division of the California attorney general’s office recently revoked its state tax exemption, saying that the committee has not filed the required financial statements for the past three years.

* The Los Angeles Social Service Department has denied the committee a license to seek donations in Los Angeles, saying it lacks a federal tax exemption. It also alleges that the group improperly raises money by phoning on behalf of non-existent organizations that purport to serve battered women and blind children.

* Glendale police are investigating more than a dozen written complaints and about 30 telephone inquiries concerning the committee’s telephone pitches over the past year. The department also is reviewing the committee’s financial records. No criminal charges have been filed, however.

Frank E. Burford, 67, the Glendale accountant who heads American Veterans Committee on a volunteer basis, denied any fund-raising improprieties. He said the group operates within the law and raises money for respected programs such as the Veterans Administration Medical Center in West Los Angeles.

While acknowledging that his fund-raising costs are high, he insisted that no one is profiting from the committee.

A grandfatherly man with white hair and bushy eyebrows, Burford said he takes no salary for supervising the group from his modest office in an older Central Avenue high-rise. Burford, who originally was the accountant for American Veterans Committee but took over as president after its founder, Harry Reid, left the group in late 1987, dismissed the criticism by Los Angeles officials.

“I don’t know why they’re trying to do this to the little organization I head up,” he said. “All I’m getting is a lot of flak from a lot of bureaucrats down there who probably don’t give 10 cents a year to charity. All I’m doing is requesting a license. They could certainly put us on probation if they want to. They can come in and inspect our books.”

Burford said his committee’s expenses include about 30 employees, among them solicitors, drivers and managers. But he said no one in the organization has ever made more than $30,000 per year.

Burford, a Los Feliz resident, said his interest in helping veterans dates back to his frequent visits to the VA hospital in Westwood, where his father received treatment. Burford said he served in the South Pacific with the U.S. Navy during World War II.

Residents of Glendale, the San Gabriel Valley and Los Angeles have complained to Glendale police about telephone solicitations from Burford’s organization.

Tania Peneno, a financial crimes investigator for the Glendale Police Department, has asked law enforcement agencies throughout the region to relay to Glendale police any complaints received about American Veterans Committee.

Burford has provided police with some financial information regarding his organization, but Peneno said Glendale lacks the resources to conduct a full audit.

The low-profile committee is seeking a professional fund-raiser’s license that would allow it to phone Los Angeles residents and, Burford said, increase the percentage of donations that can be given to worthy causes. A license for telephone fund-raising is not required in Glendale and other small cities.

In turning down the request, Robert D. Burns, general manager of the Social Service Department, said Burford’s solicitors also claim to represent the Child Abuse Network, Battered Women’s Society, Blind Children’s Society and United Missions Society. The city official described these as “non-existent organizations” that Burford’s solicitors use to generate sympathy--and donations.

In a letter denying Burford’s application, Burns wrote, “If you were granted a professional fund-raiser’s license, you and your representatives would commit fraud and/or deception upon the residents of Los Angeles.”

Burford said his other organizations are legal because he has registered the names with the county.

He has appealed Burns’ decision to the city’s Social Service Commission. A March 26 hearing was postponed until April 23 after Burford, an accountant, asked for a delay until the end of the tax season.

To demonstrate that he has funded worthy programs, Burford sent Los Angeles officials a copy of a $200 American Veterans Committee check, dated Aug. 26, 1987, given to the Women’s and Children’s Crisis Shelter in Whittier.

Yet some beneficiaries have sent donated money back to American Veterans Committee to avoid being tainted by its tactics. They feared that the veterans group would damage their reputation and their own fund drives.

Sandy Baker, director of the Whittier shelter, said she at first welcomed the unsolicited donation. Soon afterward, however, she received calls from shelter supporters, asking if a fund drive were under way.

Baker said she learned that American Veterans Committee solicitors were calling for donations on behalf of the shelter.

Shelter supporters were concerned because immediately after they agreed to donate, a committee member came to their homes to pick up the check, a practice that is frowned upon by most fund-raising groups.

The Council of Better Business Bureaus, in a “Tips on Charitable Giving” pamphlet, recommends that donors not “succumb to pressure to give money on the spot or allow a ‘runner’ to pick up a contribution; the charity that needs your money today will welcome it just as much tomorrow.”

Baker visited a Downey office where American Veterans Committee solicitors were calling for donations. She asked the group to stop and later put a warning notice regarding the calls in the shelter’s newsletter.

She told Burford’s committee that it was not authorized to use the shelter’s name. On Oct. 30, 1987, the shelter issued a $200 refund check to American Veterans Committee, but Baker said it was never cashed.

On Aug. 11, 1988, the shelter received another check from American Veterans Committee, this time for $1,000. The shelter’s attorney, Kathleen A. Tomeo, returned the check a few weeks later with a “cease and desist” letter.

She added, “Rest assured that we will continue our efforts to thwart your fraudulent solicitation on behalf of this organization.”

The director of a second battered women’s shelter in south Los Angeles County said she returned $500 donated by Burford’s committee because its solicitors similarly sought money on behalf of that shelter without its permission. Because of concerns about negative publicity, she asked that the shelter’s name not be published.

Not everyone is critical of Burford’s group. The Glendale committee has received letters of gratitude for its donations to the Veterans Administration Medical Center in West Los Angeles.

Burford gave Los Angeles city officials a list of activities the committee sponsored last year at the hospital, including patient trips to Disneyland, Universal Studios, the Los Angeles Zoo and Dodger Stadium.

The financial value of these trips was not listed.

“They’re one of the better groups,” said Ed Spohr, a hospital spokesman. “They have done a fair amount. Most of the time, there’s no money exchanged. They purchase the tickets for Disneyland or Universal Studios or wherever the veterans are going to visit.”

Burford blamed his poor ratio of expenses to donations on high start-up costs and a lack of volunteers that more familiar charities rely on. He described his committee as an umbrella agency that channels money to worthy causes--similar to the United Way.

But in contrast to the 7% that Burford’s group gave to charity, the United Way of Greater Los Angeles states that 86.5% of its donations go to programs and services.

Burford said the share he donates to worthy causes today is “up around 20%” and would be closer to 30% if he could seek donations in Los Angeles. He provided the city with no documentation to confirm he is now giving a larger share to charity.

A statement for the eight-month period ending May 31, 1988, said the committee received $269,145 in donations. The group’s contributions to charity totaled $18,511. Overall expenses, including these contributions, were $237,304. This figure included $112,707 for solicitors’ commissions and $20,318 for telephone service. Unspent revenue totaled $31,841.

Los Angeles Social Service Department records indicate that most local nonprofit groups have had better luck with the economics of fund raising.

In fiscal 1988-89, 762 direct-appeal fund drives reported generating $552 million. From this total, 13% went to cover expenses.

The majority used 20% or less to cover expenses.

Two watchdog groups--the National Charities Information Bureau and the Council of Better Business Bureaus--recommend that a nonprofit group not spend more than 35% to 40% of its donations on fund-raising expenses.

But these voluntary limits on fund-raising costs cannot be imposed by law.

In its most recent ruling, the U.S. Supreme Court in 1988 overturned a North Carolina law that prohibited fund-raisers from keeping an “unreasonable” share of charitable donations. In that case, state officials had considered the retention of more than 35% of the funds as too high.

While regulators may object to such operations, their legal tools are limited. If the American Veterans Committee files the proper paper work for its state and federal tax exemptions, Los Angeles officials may have no grounds for stopping the group from seeking donations in the lucrative Los Angeles market. Burford said he plans to file the missing statements to regain his state tax exemption.

“I don’t understand these attacks,” Burford said. “They’re inferring that this organization is for personal gain. But whose personal gain? It’s not mine. And I have no relatives in the organization.”

An independent hearing examiner hired by the city of Los Angeles to review Burford’s appeal recommended his fund-raiser’s license be denied solely because American Veterans Committee does not have federal tax-exempt status, as required by the city.

Burford said he applied for an IRS tax exemption in Los Angeles in 1987. He said he has no idea why federal officials have not acted on the application. The accountant said his committee has continued to represent itself as federally tax-exempt while the IRS reviews the application.

Carole Levitzky, an IRS spokeswoman in Los Angeles, confirmed that the Glendale organization has no federal tax exemption, which normally takes no more than a year to process. She declined to comment further regarding the status of American Veterans Committee’s application, citing privacy laws.

But in testimony before the hearing examiner, city investigator Shirley Flucus suggested Burford cannot get a federal tax exemption because the Washington-based American Veterans Committee, founded in 1943, already has one under that name.

That group and the American Veterans of World War II, Korea and Vietnam have written to the city denying any connection with Burford’s organization.

“If the tax exemption is denied by the IRS, I will close the organization down,” Burford said.