‘The smell test’
Levite, a retired fundraising executive, joined the Circle of Friends for American Veterans’ board in 2006 at Hampton’s personal request.
Levite recalled that Hampton’s desire to help veterans appeared sincere, but Hampton’s board meetings were poorly attended. Members of the board didn’t spend much time reading his financial reports, either, Levite said. Hampton “played everything close to the vest,” Levite added.
Meanwhile, Hampton’s decision to engage telemarketers turned the organization’s financial books inside out.
The nonprofit’s fundraising budget rose from $3,106 during the 2006 fiscal year — less than 1.5 percent of its overall expenses — to $1.9 million in 2009, or 87 percent of its expenses, according to annual tax filings for those years.
Levite raised concerns. He reminded Hampton that the National Society of Fund Raising Executives, the organization that first brought the two friends together in the 1970s, cautioned against the use of telemarketers that kept a high percentage of the money they raised, Levite said during a phone interview from his home in Alabama.
Hampton told the Center for Public Integrity that he planned to let telemarketers keep no more than 20 percent of the proceeds they raised when he first turned to outside fundraisers.
But that didn’t happen. Telemarketing, Hampton said, proved to be more expensive than he thought:
- Outreach Calling, the telemarketer representing the Center for American Homeless Veterans, kept $3.7 million, or 90 percent, of the $4.1 million it raised for the nonprofit in the 2014 and 2015 tax years, according to the charity’s annual IRS tax filings. Records filed by Outreach Calling in Utah claim the telemarketer has kept $7.9 million out of $8.7 million it raised for the charity from 2011 to 2015.
- Since 2015, Outreach Calling has raked in $2 million from the Put Vets First! PAC, the political action committee Hampton runs out of the same Falls Church office as his nonprofits. That’s 89 percent of the $2.3 million in donations the PAC has received in the same time period, according to Federal Election Commission filings.
- Charitable Resource Foundation, the telemarketer working for Circle of Friends for American Veterans, kept $6.4 million, or 85 percent, of the $7.5 million it raised from donors between the 2011 and 2015 tax years, according to IRS filings.
Hampton’s veterans operation is a cog in an even bigger fundraising machine — one that’s funneled more than a hundred million dollars in charitable contributions out of donors’ pockets and into a private company, according to a Center for Public Integrity analysis of licensing records maintained by the Division of Consumer Protection in Utah’s Department of Commerce.
Outreach Calling, based in Reno, Nevada, raised more than $118 million on behalf of about two dozen charities from 2011 to 2015, according to Utah’s records. The company kept $106 million of that, leaving $12.2 million — or 10.3 percent — for its client charities, which include the Childhood Leukemia Foundation, the Disabled Police and Sheriffs Foundation and the Kids Wish Network.
That Outreach Calling keeps 90 percent of the donations it raises on behalf of the Center for American Homeless Veterans was shocking for Dave Silver, the president and founder of Operation Yellow Ribbon of South Jersey, a small nonprofit that sends care packages to active-duty American service members in the Middle East.
“Oh my goodness,” Silver said. “Ninety, as in 9-0? It’s disheartening to hear all this.”
Operation Yellow Ribbon of South Jersey doesn’t use professional fundraisers to generate income, and Silver doesn’t pay himself a salary. He said he spends 20 to 30 hours a week running the nonprofit in addition to his full-time banking job.
In his experience, it’s hard to raise money because potential donors are already stretched thin.
“The other nonprofits that are out there that are trying to do the right thing … it makes it harder for us,” Silver said.
The American Legion, which bills itself as the “nation’s largest wartime veterans service organization,” doesn’t monitor the fundraising practices of other organizations but is proud of its own financial record, spokesman John Raughter said in declining to comment on Hampton’s use of telemarketers. The American Legion, which is supported in part by membership dues, spent less than $7,000 — or .01 percent of total expenditures — on professional fundraisers last year, according to its 2016 tax return.
Randi Law, spokeswoman for the Veterans of Foreign Wars’ national headquarters, also declined to comment on Hampton’s practices.
Hampton said he doesn’t have a problem with the steep cost because fundraising is a risky enterprise. The telemarketers shoulder the liabilities and create awareness among potential donors while the charities, freed from the burden of dialing for dollars, focus on their mission.
But nonprofit watchdogs aren’t impressed with Hampton’s operations.
The Better Business Bureau of St. Louis issued an alert in June urging donors to “exercise caution” when deciding whether to give money to the Center for American Homeless Veterans.
According to the alert, a woman in Quincy, Illinois, told the Better Business Bureau a telemarketer led her to believe her contribution to the nonprofit would provide direct assistance to homeless veterans.
“Instead, it appears that more than 95 percent of the donations are used to pay the fundraising firms, salaries for Hampton and other employees and other expenses related to running the charity’s office,” according to the alert.
Both of Hampton’s nonprofits, the Circle of Friends for American Veterans and the Center for American Homeless Veterans, received “Fs” from CharityWatch, a nonprofit organization that uses an A+ to F scale to rate nonprofits based on their financial transparency and spending habits.
“It’s somewhat of a minefield for donors to locate a high-performing veterans charity,” said Daniel Borochoff, president of CharityWatch.
Nonprofits that get As and Bs on CharityWatch’s scale spend about 70 percent of their contributions on core programs and services, Borochoff said.
Charity Navigator, another watchdog that evaluates nonprofits, gives the highest ratings to charities that spend at least 75 percent on programs and no more than 25 percent on fundraising and administrative overhead. (Charity Navigator does not rate either of Hampton’s nonprofits.)
In the latest tax filing available for the Center for American Homeless Veterans, three telemarketers raised about $2.4 million — keeping a combined $2.2 million for themselves. This means the Center for American Homeless Veterans pocketed only about 10 percent of what was raised, or $244,529.
Yet the Center for American Homeless Veterans also states in the same tax form that it spent $681,178 on “programs” that year.
A closer look at the tax form indicates most of the Center for American Homeless Veterans’ “program” spending in late 2015 and early 2016 — $514,663 — ultimately paid for unspecified “consulting” services provided by a familiar source: telemarketers.
Hampton did not respond to a question about why so much of his nonprofit’s “program” expenses ultimately went to hired telemarketers.
As for Center for American Homeless Veterans programs that appear to directly benefit veterans, the nonprofit states in its most recent tax form that it distributed 20,000 copies of the 40-page “Veterans Vision” publication; conducted an “earned media” campaign; informed the public about veterans issues via radio interviews and news releases; and contacted more than 500 candidates for Congress, urging them to make veterans a high priority.
The Center for American Homeless Veterans’ tax filings contain “a lot of red flags,” said Marcus Owens, who for 10 years led the IRS’ exempt organizations division and today is a partner at law firm Loeb & Loeb LLP.
Both of Hampton’s nonprofits spend an “extraordinary” amount of money on fundraising — so much so that it might attract the attention of the IRS, state attorneys general and the Federal Trade Commission, Owens said. (The IRS did not respond to requests for comment about Hampton’s nonprofits.)
Borochoff of CharityWatch theorized that Hampton’s nonprofits are classifying some of the money spent on telemarketers as services to veterans. Hampton acknowledged in an email that certain expenses classified as “program” costs were payments to professional fundraisers.
”They may be able to do a few positive things, but you know, they are woefully inefficient,” Borochoff said. “Not much is going to happen with your donation to help veterans.”
Hampton dismissed as insignificant the “F” ratings his nonprofits received from CharityWatch.
“These charity sites contain no consideration of how a charity makes a difference in the lives of people,” Hampton said.
But a pair of U.S. congressmen said Hampton shouldn’t raise funds in the name of veterans if he’s not going to spend most of it helping them.
“Any person or organization who raises money under the pretense of helping veterans, but who then … profits from the exploitation of veterans and their families, should be ashamed of themselves and be held fully accountable,” said Rep. Tim Walz of Minnesota, the highest ranking enlisted service member ever to serve in Congress and the ranking Democrat on the House Veterans Affairs Committee.
Rep. John Sarbanes, D-Md., said Congress should look into ways to crack down on organizations that spend most of their money on fundraising. At the very least, it should be easier for donors to research how charities are using their money, he said.
As for Hampton’s operation?
“It doesn’t pass the smell test, and everybody knows that,” Sarbanes said.
The Center for Public Integrity contacted the offices of every Republican member of the House and Senate veterans affairs committees about Hampton’s operations. None responded to requests for comment.
President Donald Trump, for his part, declared November National Veterans and Military Families Month, proclaiming the importance of protecting the “heroes” that have “braved bitter winters, treacherous jungles, barren deserts and stormy waters to defend our nation.”
White House spokesman Hogan Gidley declined, however, to discuss Hampton’s veterans groups or whether federal laws governing the use of charitable contributions should be changed.