New Fundraising Rules Sought

State Atty. Gen. Bill Lockyer is proposing new laws regulating charitable fundraising, including one requiring that charities disclose how much they pay celebrities who agree to appear at fundraising events.

The reform plan comes in reaction to the scandal involving celebrity fundraiser Aaron Tonken, who was expected to plead guilty today in Los Angeles to two federal fraud charges. Some investigators have suggested that at least $7 million raised in events organized by Tonken went astray, though the federal charges are based on a smaller amount.

A story in The Times on Monday detailed how wealthy celebrities often use the charity circuit to enrich themselves, in some cases demanding jewelry or cash in exchange for headlining an event. Critics say those gifts often translate into less money for nonprofit causes.

Lockyer said in an interview that he wanted to see tighter control over those who make a business of seeking contributions.

“We need a nonprofit analog of Sarbanes-Oxley,” Lockyer said, referring to the federal act last year that stiffened regulation of corporate accounting.

The push for tougher oversight comes as state and federal investigators continue to examine the disappearance of funds that flowed through glittery galas organized by Tonken, a professional fundraiser.

Much of the money raised at these events wound up in the pockets of famous figures who often agreed to be honored in return for gifts or hidden fees. Former President Ford and his wife, Betty, for example, received $200,000 for an appearance at a star-studded event; other celebrities have received gifts of Rolex watches and Cartier jewelry.

Lockyer’s office filed a civil complaint against Tonken in March and succeeded in shutting his business. Federal authorities later filed the criminal charges Tonken now faces.

Asked whether the state ultimately might press charges against celebrities or add them to its civil complaint pending against Tonken, Lockyer said, “We haven’t ruled it out.”

Legal action, he said, would depend on whether the recipients of gifts or payments had knowingly aided Tonken in allegedly siphoning money from charities. No celebrity has been charged in connection with the case.

The attorney general is responsible for regulating about 87,000 charities and trusts in the state. Lockyer said his office had just 12 attorneys and 11 auditors to monitor those nonprofit groups.

Proposed laws that are likely to be introduced in the Legislature in January would require charities to work only with registered commercial fundraisers, Lockyer said.

Fundraisers are required by law to register, but charities do not have to ensure that the fundraisers they hire abide by the law. Thus, Tonken and many of his associates were able to raise money -- and often channel it to others -- without meeting state registration and reporting requirements.

“We’re going to prosecute as many of them as we can,” Lockyer said of those who are found to have solicited funds without registering.

In another major change, Lockyer’s proposal would require written contracts between fundraisers and charities, with disclosure of fees and expenses, including payments to celebrities.

State investigators and charity professionals alike have been frustrated to learn of backdoor deals that have rewarded stars with expensive jewelry, trips abroad or even cash, without violating current law.

“I do know there are celebrities who will not do an event, ones you wouldn’t think need the money, without being paid,” said Paulette Maehara, president and chief executive of the Assn. of Fundraising Professionals, based in Alexandria, Va.

“There’s nothing illegal about it,” she said, “but it detracts from money that could go toward the organization’s mission.”

In addition to publicly disclosing such payoffs -- charity reporting in California is posted on an Internet site -- the proposed laws would require fundraisers to deposit money in bank accounts controlled by the charities. They also would require larger nonprofits to have financial statements audited by certified public accountants and establish independent audit committees.

State Sen. Sheila Kuehl (D-Santa Monica) said any legislation should be designed so that it does not overburden small charities.

“Nonprofits are so beleaguered in terms of their requirements that many of the small ones can’t even afford an auditor,” she said.

Kuehl added that there should be safeguards to ensure that charity money reaches the intended beneficiary.

Joe Haggerty, president and chief executive of United Way of Greater Los Angeles, said Lockyer’s proposals were reasonable and included steps, such as the audits, already taken by many larger charities.

“I can’t see how you can be against any of it,” Haggerty said. “It safeguards the organization and makes sure the money goes where it’s supposed to go.”

Judy Levy, a professional fundraiser whose Levy, Pazanti & Associates specializes in Hollywood galas, said she would applaud the proposed changes.

“It might be harder for the charity, but so be it,” she said. “I’d rather give money where I know it’s going to a good purpose.”

Lockyer acknowledged that California’s existing charity- related laws, with their registration and reporting requirements, already were among the nation’s toughest.

But he said the current regulations were “obviously inadequate” in view of the problems exposed by the Tonken case.

The attorney general also acknowledged being surprised himself by the gifts some- times demanded by stars in return for agreeing to appear at events.

“As a candidate, I’m always honored to have a star show up,” he said. “Now I realize why it’s so hard to get them.”