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Financial Fraud Law

Three ‘Sham Charities’ – for Victims of Domestic Violence, the Hungry, and Breast Cancer Research – Are Shut Down in NY

 New York prosecutors have reached a $500,000 settlement that includes permanently shuttering three Long Island-based charities: the Bi-County Helpline for Abuse Against Women and Children; Long Island Responds; and Breast Cancer Funds for Research. The settlement also mandates the closure of professional fundraiser Mure Associates and bars accounting firm Portfolio Planners from providing services to New York-registered nonprofits.

According to New York State Attorney General Eric T. Schneiderman, the settlement followed an investigation by his Charities Bureau that showed that the charities were shell organizations run primarily for the benefit of the fundraiser and the charities’ officers, and that less than four percent of the money raised went to any charitable purpose. 

According to prosecutors, the settlement will be paid by the heads of the charities, the owner of Mure Associates, Harriet Waldbaum, and the accounting firm. In addition, Waldbaum and charity heads Lynne Speciale, Yvonne Caraftis, and Maryann Hanovic are permanently barred against any future service as an officer, director, or fiduciary of any charitable organization registered in New York.

“Operators of sham charities like these prey on the generosity of New Yorkers and must be held accountable,” Schneiderman said. “Our Charities Bureau will continue to pursue organizations that violate New York’s not-for-profit laws and the fundraisers and advisors who assist them. This protects donors as well as the good name and reputation of the legitimate organizations in this vitally important sector.” 

The settlement is subject to approval of the New York State Supreme Court for New York County, where the state’s lawsuit and the parties’ settlement stipulation were filed.

As set forth in the complaint, the Charities Bureau’s investigation found that the fundraiser, Mure Associates, was run by Harriet Waldbaum and the late Lillian Kleppe, who had close personal ties to the women who ran the three charities. Lynne Speciale, of Bi-County Helpline, was Ms. Kleppe’s sister; Yvonne Caraftis, of Long Island Responds, was Ms. Kleppe’s sister-in-law, and Maryann Hanovic, of Breast Cancer Funds for Research, was a former employee of Mure Associates, according to prosecutors. 

The government asserted that Bi-County was operated out of Lynne Speciale’s Farmingville, N.Y., home and that the other groups did not have offices and used only post office boxes. In addition, the investigation found that the charities had no functioning boards, failed to maintain accurate books and records, and allowed Mure Associates near-complete control over their finances, according to prosecutors.

Prosecutors said that of the approximately $2.2 million that the three entities have received in charitable donations since 2006, more than 80 percent went to Mure Associates. Prosecutors said that most of the remaining funds went to cover administrative costs generated by the phony charities to maintain the appearance of legitimacy. Funds also went to the principals of the charities, and some were used to cover personal expenses improperly charged by Ms. Speciale, according to prosecutors, who said that she used donated funds to pay her cable and telephone bills, Macy's credit card bills, and to make payments to family members. 

The government said that its investigation was initiated after the Charities Bureau issued its December 2012 "Pennies for Charities" report, which showed that a tiny fraction of donations raised by these groups went to charitable causes. The Charities Bureau revoked the registration of all three charities last spring as the investigation developed.

Additionally, the government said, the charities and their fundraiser falsely described the charities’ mission in their fundraising appeals. Bi-County Helpline, for example, promoted itself as a crisis helpline for victims of domestic violence, when in fact the organization had nothing more than a phone number that rang into Ms. Speciale’s home, according to the government. Moreover, the government said, no one at the home had any training or experience in assisting domestic violence victims, and the organization had no records of having provided assistance to any victims of domestic violence. 

The government also said that Long Island Responds claimed it provided information and education regarding Long Island’s hungry and the food shelters that help them, and that it maintained an information hotline and provided financial support, and that Breast Cancer Funds for Research claimed to work to increase awareness of the high incidence of breast cancer on Long Island and fund research facilities on Long Island to find a cure for cancer.

Included in the Attorney General’s lawsuit and the settlement was Portfolio Planners, LLC, a Long Island accounting firm that provided services to the charities and to Mure. As set forth in the complaint, Portfolio Planners caused financial audits and reviews to be filed with the Charities Bureau that contained material misstatements and were prepared by its sole principal, Richard Thomas, who was not a licensed CPA and therefore not authorized to conduct audits and reviews. Under the terms of the settlement, Portfolio Planners will pay $10,000 and is prohibited from providing accounting services to any New York-registered not-for-profit corporation.

Under the settlement, the defendants have not admitted the allegations against them. A copy of the complaint is available here, and the settlement papers are available here

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