Fund-Raiser in Bellflower Is Shut Down Again : Charity: The attorney general has alleged illegalities in the way American Veterans Committee operates.


A Superior Court judge has shut down the American Veterans Committee indefinitely after the state attorney general’s office charged the group engaged in illegal fund-raising for more than a year.

After reviewing documents filed by the state and the committee, Los Angeles Superior Court Judge William Huss last Friday issued a preliminary injunction against the group, which had been soliciting funds mainly from a Bellflower phone room. The ruling followed a temporary restraining order Huss issued Feb. 7, halting the committee’s fund-raising for 15 days while legal arguments were prepared.

Until recently, the committee was raising thousands of dollars each week, telling donors their gifts to veterans, blind children and battered women were “100% tax-deductible,” state authorities said. But the organization was denied a federal tax-exemption in April, 1989, and lost its state tax-exemption last May, court documents said.

State officials said the committee, administered by a Glendale businessman, also has failed to file annual financial reports with the attorney general’s Registry of Charitable Trusts for 1987 through 1989, as required by law.


“The key issue here is the lack of the proper accounting that the state requires,” the judge said Friday. “That hasn’t been done.”

Turning to Gerald McNally Jr., attorney for the fund-raising group, Huss added, “If human beings don’t comply until they’re hit over the head, then the state has to come in and hit them over the head. . . . You’re abusing the system, and your client is, too.”

State officials pursued a civil case against the group after Long Beach police and serval residents said they were suspicious of the committee’s fund-raising tactics.

The committee has “engaged in a continuing course of misconduct, in violation of the law,” the attorney general’s staff argued in a civil complaint. “It is anticipated that such misconduct will continue unless enjoined.”

In papers filed with the state, the committee has said that only 5% of the money it raises goes to charity, with the remainder going to the fund-raisers and their expenses.

At last week’s hearing, Huss was told that the group is the target of a second lawsuit filed in August by a Washington, D.C.-based veterans organization, also called American Veterans Committee. In its suit, the Washington group, formed in 1943, alleged that the organization, founded in 1986, “wrongfully and unlawfully” adopted its name “for the purposes of deceiving and misleading the public into donating money.”

Huss agreed to combine the state’s case with the suit filed by the Washington-based committee.

He ordered the two veterans groups and the attorney general’s staff to attend a voluntary settlement conference on April 4. If an agreement is not reached, a trial will be held on whether the court should issue a permanent injunction against the Glendale group.


“I believe that resolving it informally would be a better way,” Huss said.

After the hearing, Frank E. Burford, president of the organization, said the judge’s ruling would have its most serious impact on his fund-raising crew, which numbers about 30.

“The only people he’s hitting over the head now are a lot of poor people who don’t have a job,” he said. “For some people, this is the only work they can do.”

He added: “I think it’s going to be resolved. They’re going to see that everything we’ve sent them is in order. We are not doing anything illegal.”


Burford said his group has been sending financial statements to state officials since April.

“They have just wanted detail after detail after detail,” he said. “We have the best records in the world for this organization. We have sent them volumes.”

But Deputy Atty. Gen. William S. Abbey disagreed.

“The stuff he has submitted is totally inadequate,” he said. “There are 50,000 other charities operating in California that manage to meet the statutory reporting requirements. So why can’t Burford?”


The injunction prohibits further fund-raising or expenditures by Glendale’s American Veterans Committee and its affiliates: Blind Children’s Society, Battered Women’s Society, Child Abuse Network and United Missions.

Burford has said his group seeks donations, then gives money to programs that serve veterans, battered women and others.

Gregory S. Howard, a state charitable trusts auditor, said Burford’s most recent report stated that his organization raised $434,027 during the fiscal year that ended Aug. 31, 1989. From this sum, the group gave $20,814--less than 5% of its revenue--to service programs. Most of the remaining funds covered fund-raising costs, such as solicitors’ fees and office rent.

The percentage donated to charity is far below 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 donate to a charity.


Over the past year, however, city and state regulators have challenged the Glendale group’s bookkeeping and its lack of tax exemptions.

In an April 16 letter included in the court records, state auditor Howard told Burford that critical sections were missing from his financial reports. “When completing these pages, you should consider seeking professional accounting assistance,” Howard wrote.

Burford operates an accounting business in Glendale but is not a certified public accountant.

In the court case, the attorney general’s office presented evidence that the committee


filed an incomplete application to the Internal Revenue Service and was denied a federal tax exemption in 1989. In addition, California officials rescinded the group’s state tax exemption last May, again because it did not provide enough informa tion on its finances.

Residents who were suspicious of the group’s fund-raising tactics have also contacted authorities.

Los Angeles City Fire Department Capt. Norman M. Pate of Van Nuys said his wife received a call Feb. 7 from a solicitor who said the Blind Children’s Society urgently needed cash. Margaret Pate was told to make out her $35 check to “B.C.S.” and leave it in her mailbox for a messenger to pick up.

The next day, the check was gone, and a receipt was left behind, saying the gift was tax-deductible.


The Pates became suspicious when a friend who works at a school for the blind said she had never heard of the organization. They stopped payment on the check and wrote to the Los Angeles Social Service Department, which last year denied American Veterans Committee and its affiliates a permit to seek donations in the city. The Pates’ letter was submitted to Judge Huss.