Proposed Bill Targets Shady Fundraisers

Atty. Gen. Bill Lockyer proposed anti-fraud legislation Thursday that would give law enforcement authorities new tools to crack down on dishonest fundraisers.

The bill, to be introduced by Sen. Byron Sher (D-Stanford), would target fundraisers who scam donors and nonprofits by illegally diverting to themselves contributions intended for charitable causes.

In announcing the legislation, Lockyer cited the recent case of high-powered fundraiser Aaron Tonken, who pleaded guilty in Los Angeles in December to felony charges of defrauding contributors and underwriters of Hollywood charitable galas.

Some authorities believe Tonken illegally diverted at least $7 million, much of which went to associates and others.

Sher told a news conference Thursday that such a law not only would improve financial accountability and public disclosure, but also would assure donors that their money was “being received by the intended organization.”

Lockyer, who had sued Tonken, said the leadoff reform would require nonprofit organizations that collect at least $500,000 a year to be audited by an independent certified public accountant whose report would be sent to both the attorney general and the Internal Revenue Service for review.

The audit would attempt to uncover any illegal fundraising practices or other irregularities.

The bill also would require fundraisers to clearly spell out their fees in contracts with clients, and that they get the clients’ permission before lavishing expensive gifts on celebrities as inducements to participating in events.

Lockyer noted that 89,000 nonprofits in California are regulated by his office, but that the auditing requirement would apply to a relative handful of the biggest organizations.

He said the vast majority of nonprofits and charities “do a good job and an honest job serving community needs.”

The bill was applauded by representatives of senior citizen and law enforcement groups. But it raised concerns at the California Assn. of Nonprofits, a trade organization that said the threshold was too low and would subject many small nonprofits to expensive audits they could not afford.

Spokeswoman Kathryn Lynch said her group favored increasing to between $3 million and $5 million the point at which an audit is triggered. She said the association was willing to negotiate a compromise.

Other proposed changes would require large nonprofits to create oversight audit committees similar to those required of for-profit companies by the federal government.