Charity for Dying Youths Accused of Fraud by State : Donations: Attorney general says that only 1% of money raised by Children’s Wish Foundation went to the intended youngsters. Group’s executive director calls allegations false.

The Children’s Wish Foundation, a charity formed to grant the last wishes of dying children, has been accused of fraud and false advertising because only 1% of the funds it raised went to the intended youngsters, Atty. Gen. Dan Lungren announced Monday.

“Thousands of well-intentioned donors were deceived by these people, who used the hope of dying children for their own financial gain,” said Lungren in a statement announcing the filing of civil charges against the charity. “A sad combination of financial greed and a lack of conscience resulted in those affiliated with Children’s Wish . . . openly engaging in a major fraud.”

Since it was created more than four years ago, the Carson-based nonprofit foundation raised $3.1 million but spent only $36,800 granting wishes, a Lungren spokesman said. It is not known how much raised by the group remains unspent.

Last year, the grants that Children’s Wish gave out totaled $10,431 spread among five children, although the group raised $1.3 million, said Dave Puglia, Lungren’s press secretary. Most of the money went for fund raising and consulting fees, he said.

The organization should not be confused with other charities that also grant the wishes of dying children, including the better known Make a Wish Foundation, said Deputy Atty. Gen. Peter Shack.

The executive director of Children’s Wish, Maurice Benkoil, said the charges against his group are false and were prompted in part by the way fund raising must be reported by charitable organizations in their tax statements.

“I’m appalled by the accusation. It’s untrue,” Benkoil said. “I can’t wait to get to court to show that.”

In a brief telephone interview, Benkoil said he took over the organization in June of last year when it was in serious financial trouble.

“I took an organization that was essentially destitute,” he said. “It took six months to grant the first wish. We’ve granted eight already this year and we are preparing for several more on top of that between now and the end of this fiscal year. More than four.”

But the attorney general’s office contends in a suit filed in Solano County Superior Court that the group misrepresented its activities to unwary contributors.

Named in the suit are Benkoil, former Executive Director Dennis M. Cunningham and seven past and present members of the charity’s board of directors.

The penalties--up to $2,500 for each false advertising violation--”could be enormous,” Shack said.

Shack said most of the money went to professional fund-raisers and telemarketing firms. He said he had no information that would indicate that the directors of the group profited personally from the alleged deception. Former Executive Director Cunningham has a $30,000 consulting contract.

Shack also said that the families of two of the five children who were aided last year were unhappy with the services and that it was unclear whether all the children were terminally ill.

“It took a long time to get the gift,” he said. “Parents would be told that the organization had no money to give now. There were a lot of problems.”

Shack said the case was particularly important because of a 1988 U.S. Supreme Court decision that prohibited states from forcing charities to reveal to their potential contributors the percentage of contributions that were used for their intended purpose. However, the justices said that their ruling should not interfere with the states’ vigorous enforcement of anti-fraud laws.