It's Far Too Easy for 'Charities' to Cheat You

This month, the man behind a $100 million "charity" scam was finally convicted on 23 felony counts. But "the most outrageous aspect of the case is that much of what [John Donald] Cody did was probably legal, or at least not specifically illegal," writes Ken Stern in the New York Times. Cody's US Navy Veterans Association purported to help needy Navy vets, but much of the millions raised over eight years stayed with the for-profit telemarketers who brought it in from unsuspecting donors. The rest went to Cody and various lawmakers, and the whole thing unraveled only because two reporters started investigating.

Yet, outrageous though it may seem, "the alleged fraud was not that very, very little money ever went to Navy veterans," Stern writes. Rather, it stemmed from things like Cody filing registration documents with false information. "The irony is that he could have accomplished virtually his entire enrichment scheme without ever violating the law—and others have figured that out." The IRS simply doesn't have enough staff to adequately regulate the charitable sector, and neither do state and local authorities. (Indeed, the IRS actually audited the Navy Veterans charity in 2008 and found nothing amiss.) That's why donors need to do their homework before giving, by first checking sources like GiveWell to find worthy organizations. Click for Stern's full column. (More charity stories.)