How A Network of Nonprofits Enriches Fundraisers • Zero-Sum

Nonprofits

How a Network of Nonprofits Enriches Fundraisers While Spending Almost Nothing on Its Stated Causes

by Ellis Simani | Jun 18, 2024

In September 2020, the Federal Trade Commission joined regulators in four states to sue four men behind a notorious telemarketing company called Outreach Calling. The FTC alleged that the company, which it described as a “sprawling fundraising operation,” had raised millions on the promise of helping the needy — cancer patients, veterans, firefighters — but instead used the money to line its pockets.

The case was meant to put fundraisers on notice. The FTC would not only go after charities that improperly spent donor dollars, but it would “aggressively pursue their fundraisers who participate in the deception,” a news release said.

The executives and corporate entities behind the operation were fined more than $58 million. They were also banned from all charitable fundraising for life. But regulators kept one door open in most of the settlements: the ability to continue fundraising for political purposes.

For Thomas Berkenbush, who was a co-manager at Outreach, that provision would prove to be a windfall.

Before the deal with the FTC was even finalized, Berkenbush filed paperwork to establish a new company, Office Edge LLC. Since then, Office Edge has been paid about $866,000 for fundraising from organizations that similarly claim to be working on behalf of cancer patients, veterans and firefighters. The difference? These groups are not charities, they’re political nonprofits that claim to use donations to influence elections and support broad political causes.

The groups that are hiring Berkenbush are known as 527s, after a section of the tax code. They include federal political action committees — organizations that raise money to elect or defeat candidates and are regulated by the Federal Election Commission — but also a lesser-known group of nonprofits. These 527 groups limit their direct support to political candidates, removing them from the jurisdiction of the FEC or similar state agencies and leaving their regulation to the IRS. They do not have restrictions on how much donors can contribute, but the donations are not tax deductible.

A ProPublica investigation has connected Berkenbush to a network of at least 10 of these 527 groups that have raised more than $33 million on the promise of supporting admirable causes, but that have spent little on activities that could be construed as having a political purpose. Most of the money goes to fundraisers who have only been paid by 527s in the group ProPublica identified.

Experts say that it’s hard for the public to follow the business practices of 527 groups because of how difficult it is to access the records that the IRS publishes about their activity. Data about 527 organizations is published on an IRS website in a hard-to-use data file with a limited search interface. On top of that, experts said that there is lax oversight by the federal agencies in charge of regulating the groups.

“There is no enforcement whatsoever,” said William Josephson, the former head of the charities bureau within New York’s attorney general’s office. “It’s just not a big enough issue for the IRS.”

None of the organizations responded to ProPublica’s requests for comment. But during the process of our reporting, the eight groups that have websites added prominent “Transparency Statements” with essentially identical language.

“We advocate for the needs of veterans, by informing voters of these needs and asking them to take action. This is our only purpose,” the statement for the National Coalition for Disabled Veterans reads. It also says, “When you make a contribution, we want you to know that a minimum of 90 cents of every dollar will be dedicated to covering our fundraising costs and outreach efforts.”

The IRS did not respond to questions from ProPublica about our findings in any detail. The FTC declined to comment on why some of the settlement agreements in its case against Outreach Calling permitted political fundraising. The New York attorney general’s office, whose lawyers played a significant role in the case, told ProPublica that it can’t prohibit political fundraising because of First Amendment protections. But it maintained that the settlement agreements forbid the defendants from engaging in any fraudulent conduct while fundraising, regardless of the organization’s tax status or stated purpose.

Under the terms of the settlements, the defendants — who did not admit or deny any of the allegations in the FTC complaint — were required to submit yearly compliance reports to New York, disclosing all fundraising activity for five years after the agreement was reached. The office confirmed that some of the defendants have reported business activity with 527 groups but did not say whether this prompted any investigations. Berkenbush did not respond to requests for comment.

One of the organizations ProPublica identified, the American Breast Cancer Coalition, contacted retiree Laurence Eggers in April for a donation.

Eggers lives in Pasadena, California, has Parkinson’s disease and frequently volunteers his time and money for various causes. He made a pledge to give $100 to the group, later telling a reporter that he gives out of appreciation for the people they claim to be helping.

nonprofits “They really do need it,” he said in an interview. “They’ve worked hard enough to deserve it.”

Eggers has given at least $1,500 to the nonprofit in the past three years. He said his phone rings two to three times a day with different causes asking him for money. However, there is scant evidence the organizations calling Eggers do what they claim.

The American Breast Cancer Coalition, for example, has taken in nearly $9 million from donors since 2019 and has spent less than half of 1% of that on “voter advocacy and outreach.” The rest of the money — millions of dollars — goes to companies with names like Action Committee Marketing, Capital Vendor Management and Berkenbush’s Office Edge. Berkenbush’s company pulled in $222,000 just from this one organization.

The network has paid millions to a handful of other vendors, including one of Berkenbush’s former colleagues at Outreach Calling, whose company brought in more than $3.4 million in expenditures. He and his firm did not respond to requests for comment.

Another man, Alan Bohms, was paid more than $575,000 by the American Breast Cancer Coalition through a company he controlled named Campaign Marketing Inc., which also did business under the names Insight Data Management and Prestige Tax & Payroll. The company has taken in close to $1.5 million from the network of nonprofits ProPublica identified. Bohms was not a member of Outreach Calling or subject to the FTC order, but he has previously paid the company millions to fundraise for one of his nonprofits.

In an email, Bohms defended the money that the groups spend on fundraising, writing that the phone calls are central to “educating and engaging the community about the PAC’s mission and objectives.”

ProPublica reporters uncovered the web of connections between the groups by compiling the reports they file into a searchable database, offering a level of visibility similar to what’s available for records collected by the FEC. (Read more about our new database.)

Web of Connections

Even on their surface, the connections between these groups are obvious: Six of the organizations in this network have websites that were built using the same platform and share similar designs. All but one process donations using an obscure payment system also used by several political nonprofits that federal prosecutors began investigating after a New York Times story last year.

Nearly all used similar or identical language when describing the purpose of the organization in IRS filings. They share significant overlap in both donors and contractors, and they often reuse the same language when describing expenditures or donors, including multiple organizations listing an identical description for services from different companies: “Fundraising, Donor Management, Database Services, Direct Mail Services, Postage.”

At least half of the organizations ProPublica identified worked with the same Morristown, Tennessee-based accounting firm on their IRS filings, Purkey, Carter, Compton, Swann & Carter. Bohms also uses the firm for his own nonprofit, the Volunteer Firefighter Alliance, telling ProPublica that the firm maintained high standards of integrity. The firm did not respond to requests for comment.

Fire departments across the country warned people against donating to Bohms’ charity, and both he and the charity were written about in a 2020 Salon story that connected Bohms to a network of “scam PACs.”

“VOLUNTEER FIREFIGHTER ALLIANCE is a FRAUD!” exclaimed one 2021 post on Facebook from the Alpha Fire Company in Centre County, Pennsylvania. “Do not give money to this organization! They are not your local fire company.”

Records show that one of the charity’s main fundraisers was Outreach Calling, the company shut down by the FTC. The Volunteer Firefighters Alliance paid $4.8 million to the company for fundraising in total. Bohms defended Outreach’s work, telling ProPublica that he “found Outreach Calling to be very professional and had never experienced any problems with them.”

Bohms’ family members also appear to help run the nonprofits that pay his companies. His sister, Julie Forsythe, is listed as the treasurer of the National Cancer Alliance, which “works to establish the end of childhood cancer by making it a state and national priority.” Another organization, the National Coalition for Disabled Veterans PAC, reports its treasurer as Bohms’ aunt, Judith Gragert. In the last five years, these two organizations have raised over $7 million from more than 700 donors around the country.

Like all of these groups, neither used much of the money they raised in support of their stated efforts. Effectively all of the expenditures that both groups reported were for either fundraising or other administrative costs. Together, the organizations paid more than $300,000 to Campaign Marketing Inc., the company owned by Bohms.

Gragert and Forsythe did not respond to requests for comment. Bohms told ProPublica that he works with 527 groups “strictly in the capacity of a vendor,” and that the payments made to his companies were for legitimate services. He denied any involvement in decision-making at the groups that listed his aunt and sister as treasurer.

“It is important to understand that the payments made to fundraisers encompass more than just fundraising activities,” Bohms wrote in an emailed response. “These funds support a broad range of outreach efforts, including phone calls and direct mail campaigns that are designed to inform the public about the PAC’s goals and initiatives.”

At least one of the groups ProPublica identified has been sued over its fundraising practices. A pair of call recipients filed a lawsuit seeking class-action status in 2022 against the National Police & Sheriffs Coalition PAC. Lawyers for the plaintiffs alleged that the group used prerecorded voice calls to contact potential donors without their consent, in violation of FCC rules that are meant to protect consumers from telemarketers.

“Many of these PACs are illegitimate,” said Eric Weitz, whose law firm is on the team representing plaintiffs. “They prey on people’s political leanings.”

One of the defendants named in the lawsuit was Frank Pulciani, the organization’s treasurer. Pulciani maintained that prerecorded messages were not improperly used in calls to donors, and that the fundraising company the group hired was responsible for ensuring that calls complied with the law. Pulciani settled with the plaintiffs for undisclosed terms, and the organization was dissolved in February of last year.

Pulciani is also closely connected to Bohms. The two men, who both produce and act in low-budget films, recently worked on a project called “Murder by Association.” In its trailer, posted to YouTube, Bohms and Pulciani can be seen decked out in suits and dark sunglasses.

Pulciani did not respond to requests for comment. Robert Bernhoft, whose firm represented Pulciani in the lawsuit, declined to comment.

Used and Abused

For Eggers, the donor who gave to the American Breast Cancer Coalition, the revelation that some of the organizations he’s been supporting are using almost none of what they raise for their stated purpose was discouraging.

“I feel like I’m being used and they’re being abused,” he said, referring to those he aimed to help with his donation.

On the mantle above Eggers’ fireplace rests a selection of plaques, framed photographs and certificates that showcase his commitment to giving. One award from 2012, titled “Lending a Helping Hand,” recognizes his 31 years of volunteering for a local organization providing services to the homeless. Another, from a regional branch of the American Red Cross, celebrates his donations to a blood platelet program.

He showed ProPublica a letter he received from the American Breast Cancer Coalition this past April.

“Through your much-needed support, we hope to educate the public about our nation’s important Breast Cancer health bills,” reads the letter, thanking him for his donation. It noted that the group was not a charity — key to the FTC order against former Outreach Calling employees. And further down, it stated, “A large portion of proceeds from this campaign are used to defray the costs of fundraising.”

Eggers received a letter from the American Breast Cancer Coalition thanking him for his donation and saying that a “large portion of proceeds from this campaign are used to defray the costs of fundraising.” Credit: Ryan Young for ProPublica