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ANDERSON COOPER 360 DEGREES
Veterans Charity under Scrutiny
Aired July 6, 2012 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: Hey, welcome, everyone. Tonight, a "Keeping Them Honest" special. An investigation into charity cheats. Now when you open your heart and you open your wallet to help a charity, how do you know your money is going to be put to good use?
Well, in the next hour, we're going to bring you Drew Griffin's investigation into charities accused of collecting millions of dollars in donations and not spending it where donors expect it. One of the charities under scrutiny is called the Disabled Veterans National Foundation. That's their logo. It looks very official. DVNF. Remember those initials. DVNF.
Now there's no sign any of the cash donations of more than $56 million they're raised over three years went directly to the men and women who sacrificed so much in war zones. Not one dime of that money.
Because of Drew's reporting, the Senate Finance Committee is now demanding answers from the DVNF. They've launched an investigation into its practices. More on that tonight.
Drew also uncovered yet another veterans charity called the National Veterans Foundation, which is taking donations but using only a very small percentage to actually help vets.
There are also charities that claim to help abandoned animals but the money trail lead somewhere else entirely. Baghdad Pups has raised millions to reunite military dogs to the personnel they serve with overseas, but as far as we can tell, they don't do that at all.
In -- in the Montreal SPCA, a Canadian charity that helps abandoned cats and dogs, received about $13 million in donations over three years but despite all that money, they've ended up in the hole more than $4.5 million.
Now all of these charities have one thing in common. They all have connections to a fundraising company called Quadriga Art. The company essentially gets paid to build mailing list for all these charity groups, and that's where the money trail took Drew. Following the trail was one thing, getting answers along the way was another.
(BEGIN VIDEO CLIP)
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Hi, how are you.
UNIDENTIFIED MALE: We're not going to be doing the interview on camera.
GRIFFIN: OK. So the bottom line is you're not going to give me an interview? Where is the money going? I'm trying to reach Mr. Scholoff.
UNIDENTIFIED FEMALE: He's not in?
GRIFFIN: He's not in? So here's the question.
UNIDENTIFIED FEMALE: Only in writing. Thank you so much.
GRIFFIN: You raised over three years and none of the money has gone to any veterans. Ma'am?
(END VIDEO CLIP)
COOPER: Now you'd think that these charities, if the money was going where they said it was going and everything was on the up and up, they'd think they want to be completely transparent, right? We've been investigating, Drew has been investigating this for years in some cases, and they are refusing to answer. Literally getting doors slammed in his face.
Well, tonight, you'll see what he and his producer David Fitzpatrick have uncovered during their continuing investigation. And later on we'll also tell you what you need to look for in order to make sure that a charity that you want to donate money to, to make sure that they're doing the right thing with your donations.
We begin with the veterans charity that has a lot of explaining to do. Now a lot of Americans feel duped after learning the money that they donated in the name of helping disabled veterans never made it to those in need. Here is Drew's report.
GRIFFIN (voice-over): Mary Alice Dick, a retired English professor, is pretty charitable, especially to groups supporting disabled veterans. So it didn't surprise her when she opened her mailbox one day and found this.
(On camera): With your husband's name on them?
(Voice-over): In the fundraising industry, they're called guilt packages. And when this one arrived, a big calculator and a calendar book with her husband's name on them, Mary Alice felt the guilty tug to make that donation.
MARY ALICE DICK, RETIRED ENGLISH PROFESSOR: And, see, it's disabled American Americans. How many people are going to look at it and think that they are the same organization.
GRIFFIN (on camera): And they are not.
DICK: No. GRIFFIN (voice-over): In fact the gifts were not from the well-known and respected Disabled American Veterans but from a newer, much smaller charity, the Disabled Veterans National Foundation. Something didn't smell right so this retired English teacher did some research and found that the DVNF gets an F from a charity watchdog group.
According to its tax filings, raising nearly $56 million in donations for veterans in the past three years. But according to the records CNN found, none of that $56 million has gone to direct services for veterans.
DICK: Making lots of money off of it. I mean, when you're talking about millions of dollars that people are doing by grabbing money from people who don't have it.
GRIFFIN (on camera): Who believe out of the goodness of their own heart that they are giving money to the troops.
DICK: A worthy cause.
GRIFFIN: The purpose is to try to explain to me why these numbers don't add up.
(Voice-over): CNN has been trying to reach the Disabled Veterans National Foundation off and on for nearly two years. The Public Relations man did return our phone call outside the group's Washington, D.C. headquarters in 2010, but the manager refused to talk. Despite e-mails and more phone calls, our repeated requests for interviews were all denied.
DANIEL BOROCHOFF, CHARITYWATCH.ORG: Up to $2 billion is raised in the name of veterans in this country and it's so sad that a great deal -- hundreds of millions of dollars of our charitable dollars intended to help veterans, is being squandered and wasted by opportunists and individuals and companies that seek it -- see it as a profit-making opportunity.
GRIFFIN: Daniel Borochoff runs a charity watchdog group out of this office in Chicago. He grades charities and just how much good and bad they do with your donations. Veterans and military charities are some of the worst, he says. And that includes the Disabled Veterans National Foundation, which he gives an F because hardly any of the donations make it to the people the group is fundraising for.
So back to that $56 million the group has raised, if it hasn't gone to direct contributions to veterans, where exactly did it go?
(On camera): But as far as we can tell, up to the 10th floor of this Manhattan office building to a company called Quadriga Arts, a company that specializes in fundraising. And as far as we can tell, Quadriga Arts knows a lot about fundraising, for itself.
(Voice-over): Quadriga is a private company, which according to its Web site, raises money for more than 500 charities and nonprofits worldwide. In an e-mail to CNN, a company spokesman said, it, quote, "does not discuss specific client relationships," but that spokesman did say Quadriga at times chooses to invest money in partnerships with nonprofit organizations.
To date, Quadriga told CNN it's actually lost $7 million investing in veteran nonprofit organizations. That may be true but in the case of the Disabled Veterans National Foundation, according to tax documents, not only did all the nearly $56 million in cash donations go to fundraising costs, but the DVNF still owes its fundraiser another $5 million.
It sounds like backward math. DVNF is reporting on its tax returns that it's costing more than a dollar to raise a dollar, despite the fact that its fundraising contract to Quadriga says it wins its fair share of business because it is a low-cost provider in the nonprofit marketplace."
BOROCHOFF: It's like printing money. I mean they just -- they print these solicitations, they send them out to millions of people. They don't care -- they don't care about the -- you know, the percentage of returns. All they care is about is how much money they get from it.
PRECILLA WILKEWITZ, PRESIDENT, DISABLED VETERANS NATIONAL FOUNDATION: You're the one from CNN that's we've been talking --
GRIFFIN (on camera): That's right.
(Voice-over): Meet Precilla Wilkewitz, president of the Disabled Veterans National Foundation, who we found at a small VFW office in Baton Rouge, Louisiana.
WILKEWITZ: Well, this is the Veterans of Foreign Wars. And I really didn't think you'd do something like this and we've agreed to talk to you answer your questions.
GRIFFIN: Nobody has agreed. So here's the question.
WILKEWITZ: Only in writing. Thank you so much.
GRIFFIN: You've raised over three years, and none of the money has gone to any veterans. Ma'am?
GRIFFIN (voice-over): While Wilkewitz is the former national legislative liaison for the Veterans of Foreign Wars, it's another veterans group she's president of that we wanted to discuss.
(On camera): OK. So the bottom line is, you're not going to give me an interview?
(Voice-over): CNN has been trying for two years to get an interview with the Disabled Veterans National Foundation. Since we began tracking its fundraising. We've gotten angry phone calls, angry e- mails, promises of written responses, and now a slammed door.
(On camera): Ma'am?
((voice-over): But no answer. And when you see just how this charity operates, you'll understand why.
WILKEWITZ: We're paying down our start-up costs.
GRIFFIN (voice-over): Wilkewitz on the organization's Web site likes to boast about the charitable gifts that her group gives away and DVNF does give away stuff, stuff actual veterans groups say they really don't need. It's called gifts in kind on tax forms. Instead of giving away some of the $56 million in cash raised over the past three years, DVNF gives away stuff it got for free.
In 2010 the group filed this tax form claiming it provided more than $838,000 in gifts in kind to U.S. vets. A charity in Arizona. U.S. vets showed us what actually was sent. Twenty pairs of men's football pants, more than 100 chefs coats, 125 chef's aprons. A needle point design pillow case. Two pages worth of stuff the director told us we don't need.
And take a look at what showed up at the Saint Benedicts Veterans Center in Birmingham, Alabama. Where JD Simpson takes homeless vets off the streets. Simpson says the modest shipment included some useful items. Twenty-three hundred disaster blankets good for a couple of day's use and some cleaning supplies. But it also included this.
J.D. SIMPSON, SAINT BENEDICT'S VETERANS CENTER: They sent us 2600 bags of cough drops and 2200 little bottles of sanitizer, and the great thing they sent us 11,520 bags of coconut M&Ms and didn't have a lot of use for 11,500 coconut M&Ms.
GRIFFIN: Here's what the DVNF posted on its Web site about the work they were doing in Alabama.
UNIDENTIFIED MALE: We send by the truckload items that these centers and shelters say they need desperately.
GRIFFIN (on camera): For our veterans who have given so much to our country and now need our help.
SIMPSON: Great sound bite.
GRIFFIN: Did they ever ask you what you wanted?
SIMPSON: No. No. They always call and say, hey, we've got a truckload coming.
UNIDENTIFIED MALE: Everything up here on the top is a lot of the stuff that came in on the last truck, the bandages, the lotion, some hand sanitizer.
GRIFFIN: It's unpacked.
UNIDENTIFIED MALE: It's unpacked.
GRIFFIN: Because you don't --
UNIDENTIFIED MALE: We really have no use for it. These shelves should be filled with this.
UNIDENTIFIED MALE: Not that.
GRIFFIN: Do you ask yourself, well, where's the money?
SIMPSON: I ask myself that after I ask myself what the heck are these people doing stealing from our veterans? Because that's what they're doing. I don't care how you look at it. These people have sacrificed for our country and there's some people out there that are raising money to abuse it and that just makes me mad.
GRIFFIN (voice-over): Executive director J.D. Simpson became even more angry when these showed up. More than 700 pairs of surplus Navy dress shoes.
SIMPSON: Not a lot of use for these unless you're going to send a personnel inspection.
GRIFFIN (on camera): Those shoes are now part of the yard sale that this group uses to raise real funds for the things they really need. Not shoes like these.
Here is the question.
(Voice-over): Precilla Wilkewitz wouldn't tell us why she sent homeless vets in Alabama shiny new Navy surplus shoes.
WILKEWITZ: Hello. I'm Precilla Wilkewitz, president of the Disabled Veterans National Foundation.
GRIFFIN: The DVNF wouldn't really tell us anything. What the group and its president continue tell you, the American public, is to keep sending in those donations.
COOPER: Drew, this is really just unbelievable. I mean how does this charity get away with this? How can they take in this money and not give it any of it directly to the people they say they're collecting it for?
GRIFFIN: You know, Anderson, I think part of our mission here is that people who donated actually saw where their money was going or not going, all going to a private company, in fact, that this fundraising service business operates, I don't think they would get away with it.
Legally, though, there doesn't seem to be much policing of these groups. But for the nonprofit watchdog groups who rate this charity specifically as an F.
COOPER: And all of the money seems to be going directly to the company which is raising the funds. Is that their business model? Simply raise money for themselves? GRIFFIN: You know, that seems to be the bottom line. But we've been told in e-mails from this company is that the goal is maybe not to collect money but to go to veterans but to build a sustainable database of names to be used for future pleas. Quadriga is telling us that they've been successful in taking this start-up charity and to now have a huge mailing list to work with. But, again, no real money for the actual disabled vets. Just a big mailing list.
COOPER: It's unbelievable. We'll continue on this. Let us know what you think. We're on Facebook, follow me on Twitter, @andersoncooper.
Up next, Drew tries to get answers from the Disabled Veterans National Foundation. What happened to that $56 million that they raised. He tracked down the vice president of that group. We'll hear what she told him, next.
COOPER: More now on the group that claims to be raising money for disables veterans. Now when you hear someone say they're helping disabled veterans, it sounds like a great cause, a great organization. What Drew Griffin has uncovered it is going to make you very, very angry.
The group he's investigating is called the Disabled Veterans National Foundation, DVNF. They've got an official looking seal. That's it right there. And they've raised an awful lot of money. Maybe you've gotten a mailer from them.
As Drew reported before the break, according to their own tax filings, DVNF has raised more than or nearly $56 million in the past three years. $56 million. Now with that kind of money you'd think there'd be a lot of disabled veterans who they'd help directly, and you'd think they'd want to show off exactly where that money has gone, right? But that is not the case.
Drew Griffin joins us again. Also with us is CNN senior legal analyst Jeffrey Toobin.
So, Drew, you tracked down the vice president of this group. Did you get any idea of where all the money is going?
GRIFFIN: No. The answers are very vague. And let me set this up for you. We went to Sacramento because Precilla Wilkewitz, the woman who slammed the door in my face, was going to be a presenter at the conference. She abruptly did now show for the conference so we found the vice president. She did answer our questions but really without answering anything specific.
(BEGIN VIDEO CLIP)
GRIFFIN: I'm here asking actual questions from your donors and our viewers who want to know what happened to that $56 million that they thought they were giving to actual deserved veterans.
VALERIE CONLEY, VICE PRESIDENT, DISABLED VETERANS NATIONAL FOUNDATION: Well, the cost of fundraising is high and as you know, and it has been many veteran service organizations who use this kind of direct paying approach.
GRIFFIN: What is the point of a fundraiser when all of the funds go to your private fundraising company?
CONLEY: Well not all of the funds do.
GRIFFIN: Well, according to the documents we've seen filed by your organization, they all do and more. $56 million, plus your other --
CONLEY: Well, I think you need to talk to our Washington, D.C. office.
GRIFFIN: Quite frankly, I've been trying for two years to talk to them and I haven't got any answers, which is why I have to resort to this kind of nonsense.
CONLEY: Well, I am a volunteer on the board.
GRIFFIN: Are you concerned about how this fundraising drive has gone with your private fundraiser?
CONLEY: No, we have done nothing illegal.
GRIFFIN: I know you have done nothing illegal. But have you done --
CONLEY: Would you like to --
GRIFFIN: Would you like to have more money going to the veterans or some money going to the veterans?
CONLEY: Absolutely. There is money going to the veterans. We approve grants to individual veterans and veterans organizations on a monthly basis.
GRIFFIN: I've seen no evidence of that other than some gifts-in-kind programs.
(END VIDEO CLIP)
COOPER: It's really infuriating, you know, that she's -- first of all, she falls back on the well, I'm just a volunteer on the board. I mean if she's serving on the board, she should know everything that's going on with this organization and, I mean, they are not being transparent. They're not being upfront here. They're saying they've done nothing illegal but that's -- that's not the issue here. She claims money is going to veterans and veterans groups. Have you been able to find any evidence of that?
GRIFFIN: No. We've been looking, Anderson, at this group's paperwork that they file with the IRS, the lists of what they have to show the IRS, to find any evidence that any actual dollars are going to veterans groups. We've also been begging them to open up other books to show us any proof that it's happening. We simply cannot find it. It's just plain and simple. They have not been able to come up with one documented piece of evidence that shows us, yes, here's money that was donated and here it goes to the veterans who need it the most.
COOPER: You know what's so sleazy about this is -- I mean, after that interview you would assume well, if they actually did have money that they were giving every month to veterans groups, after you confronted that woman on the board, that you would have gotten a call the next day and they would have said, look, here's all of the documentation, here's exactly where the money is going.
But they haven't done that. We've been on them now for months. You've been on this for years, and they've yet to really give a sit- down interview. I just find that -- if they're doing nothing wrong, if they're being transparent, and they're asking people for money, they should sit down and do an interview and explain if they can. And apparently they're completely unwilling to do that.
GRIFFIN: Yes, and what --
GRIFFIN: What you'll hear from the watchdog groups is good fundraisers do just what you say, Anderson. They have nothing to hide.
COOPER: And Drew, she's saying, well, you know, as you know, fundraising is expensive. It's expensive when you sign up with Quadriga Art apparently because what you found is this $56 million that they've raised has gone back into Quadriga Art and the only thing they've gotten for it, it seems like, is a bigger mailing list so that they can raise more money down the road.
GRIFFIN: A bigger mailing list and a bigger debt to Quadriga Art. This group is in debt now to their fundraiser. Expensive is one thing but to go in debt to fundraiser, they're actually taking more than a dollar to raise a dollar.
(BEGIN VIDEO CLIP)
GRIFFIN: As a board member did you have any idea that the costs would be this high? $56 million would be paid for just to get a list of people?
CONLEY: We did not know how fast this would take off and how well it would do.
GRIFFIN: How can you say how well it would do when the money is going to Quadriga?
CONLEY: When we first started this, we didn't know how fast it would take off.
GRIFFIN: You're basically taking money that people want to go into veterans' pockets and giving it to a private company.
CONLEY: It's worth it for every veteran that we can help.
GRIFFIN: No matter what the cost?
UNIDENTIFIED FEMALE: Hi, excuse me.
CONLEY: Well, I put on women's veterans conferences in my home state and we spend several thousands of dollars and they're donated dollars, and philosophy, my personal philosophy has always been that if we can help one veteran, then every dollar we spent is worth it.
GRIFFIN: Even if it's $56 million?
CONLEY: Well, I'm not going to answer that question.
(END VIDEO CLIP)
COOPER: You know what? I'm sorry. If you can only help one veteran and you've raised $56 million, shame on you. I mean that is the biggest cliche -- if I can just help one person. You know it sounds good if you have -- if it's like a result of a bake sale.
But, Jeff, if you raised $56 million and you only helped one person, is this legal?
JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, you know, this is an amazing area of the law frankly that I didn't know much about. But, you know, unfortunately, charity scams are not new and states have tried to regulate them over the years. North Carolina certainly made an effort in this area. And what the Supreme Court has said is that charitable requests are protected by the First Amendment.
That it is very hard to make scam charities illegal as long as they fill out their paperwork correctly. As long as they report honestly to the IRS, that you know what, we raised $56 million and it cost us $56 million. As long as that's true, as it appears to be true here, there doesn't appear to be any criminal offense involved.
COOPER: It's infuriating because, I mean, maybe it's legal but it just seems incredibly deceptive and also I don't know if that woman is just naive or stupid or deceitful. I'm not sure which of those things, or just embarrassed to admit that she's in over her head. But for her to be backing up raising $56 million, that has all gone to this company and they are now in the hole to this company.
TOOBIN: Right. Well, I mean, I think all those adjectives might apply to her. But let's concentrate on where the money goes and who is making money here. Quadriga doesn't even pretend to be a nonprofit or a charity. Quadriga is making an enormous amount of money by churning these charities, these charities lists. That's where the money goes. They're the people making money.
I mean this woman, she strikes me as she's probably well-intentioned but she's obviously in way over her head here. The problem is Quadriga, not these charities. COOPER: Well, and how these people sleep at night, it just -- I --
TOOBIN: It is grotesque but they are going to be sleeping in their own beds, not in prison because the law really does protect them.
COOPER: On very high-thread count sheets, no doubt.
TOOBIN: I think so.
COOPER: It's infuriating. We're going to have more on Quadriga later in the program.
Jeff, appreciate it. Drew, stick around.
Up next, a look at another charity that Drew has investigated. Millions of dollars donated to a program called Baghdad Pups, supposedly helping military dogs abandoned in Iraq and Afghanistan. So why just pennies on the dollar actually going to help any animals? And the group admits it hasn't rescued a single military dog yet. You will not believe what Drew has uncovered.
COOPER: Hey, welcome back. We're spending the hour tonight looking at charities that are taking your money and as far as we can tell not delivering on their promises. Now in some cases, not even close.
We think it's important information but the last thing we want to do is give the impression that all charities are bad or you shouldn't give it all. That would be terrible. So in a moment we'll talk with the leaders of two groups that actually track nonprofits. They are going to share with you what you should do to make sure your donations go to good use, how you can checkup on a charity. After all, when you're generous and you want to do good, you want to help people, you want to make sure you're actually helping someone in need.
Before we do that, though, we want to take a look at one of the charities that you saw in Drew's earlier report. A charity doing really heroic work helping veterans.
Here again is Drew Griffin.
GRIFFIN (voice-over): He's gotten candy, cough drops, and hundreds of pairs of shoes he didn't need or ask for. Now J.D. Simpson has a message for those who want to help him support the small veterans shelter he helped founded three years ago in Birmingham, Alabama.
SIMPSON: Everybody out there saying, hey, let's go help the vets. It's like a flavor of the day. Don't say you're going to do it. Do it.
GRIFFIN: Simpson and his buddy Rich Cislak founded the Saint Benedict's Veterans shelter with almost no money. They struggle every day to keep it open. The mission, simple, helpless vets get help, hungry vets get food, homeless vets get shelter. Three Hots and a Cot is what they call it. And for three years the only real struggle to keep the mission going is money.
SIMPSON: My budget was at $200,000 this year and that's just to pay liability, (INAUDIBLE) pay for the insurance and buy food. That's not a salary for anybody that works here. We're all just volunteers.
GRIFFIN: On the shelter's front porch, Simpson recalls the day a veteran in a wheelchair showed up.
TOOBIN: And a veteran here one day in a rainstorm with no way to get up into the house. We picked him up and carried him in here. And the DAD came by, we're going to (INAUDIBLE) and have this ramp. And that gets quite a bit of use.
GRIFFIN: Since that day, the charity, the Disabled American Veterans, has sent Simpson $400 a month for gas, not coconut M and Ms.
J.D. SIMPSON, ST. BENEDICT'S VETERANS SHELTER: We don't need no astronomically silver bullet. We need people pulling together saying, let's do something about this. Let's get off the sound bites and get in the streets.
GRIFFIN: St. Benedict's is tiny. Both Simpson and his friend, Rich, say it does the job, taking homeless vets off the street.
(on camera): Do it all again?
UNIDENTIFIED MALE: In a heartbeat. We really would.
UNIDENTIFIED MALE: There's enough success stories out there, you know -- we're not going to go Tahiti in our retirement, but it feels good knowing when a daughter calls you and says you've given her daddy back.
GRIFFIN: Drew Griffin, CNN, Birmingham, Alabama.
(END VIDEO CLIP)
ANDERSON COOPER, CNN ANCHOR: In all these reporting on bad charities, it's nice to see someone doing some good work and there are many others out there.
We'll have more information coming up on how you can identify, which charity is actually using the money that they raised wisely. We'll have more of what that Drew's investigation uncovered as well, but, first, a "360 News and Business Bulletin."
TOM FOREMAN, CNN CORRESPONDENT: Hi, Anderson, police have raided the home and office of ex-French President Nicholas Sarkozy. They are investigating whether he received illegal campaign contributions.
The pilot on JetBlue who had an apparent meltdown on a March flight was found not guilty by reason of insanity. Clayton Frederick Osbon was restrained by the passengers and the flight was diverted.
Scorching heat continues to bake much of the U.S and still no power for at 1.2 million customers across 11 states from Indiana to Delaware. That's after storms hit last Friday and Saturday.
And actor Andy Griffith has died. He was best known as the small town sheriff with a big heart on the '60s hit TV show "The Andy Griffith Show." Decades later, Griffith also starred in "Matlock" and leaving that Grammy award winning gospel singer, Andy Griffith, something of a national treasure, 86 years old. Anderson.
COOPER: Up next, Drew Griffin on the money trail. Looking at charities claiming to do good things with your donations helping those in need, but that is not the case.
COOPER: Welcome back. We're continuing our investigation on charities that collect millions of dollars in donations from well meaning people around the country, but end up spending very little or any of that money helping anyone, except for themselves.
So far we've told you about the $56 million raised by the Disabled Veterans National Foundation for over three years, none of that money, none of it that we can find has gone directly to help veterans. The million dollar question is, where is all of the money going?
(BEGIN VIDEO CLIP)
GRIFFIN: As far as we can tell, up to the 10th floor of this Manhattan office building to a company called Quadriga Arts, a company that specializes in fundraising. And as far as we can tell, Quadriga Arts knows a lot about fundraising for itself.
(END VIDEO CLIP)
COOPER: The company again is called Quadriga Arts. Now they provide mailing lists to groups like DVNF. But Drew has had getting answers to what it's been doing with all the money. Watch.
(BEGIN VIDEO CLIP)
GRIFFIN: It's Drew Griffin. G-r-i-f-f-i-n.
UNIDENTIFIED FEMALE (via telephone): He is not here. What is this regarding?
GRIFFIN: I'm trying to reach Mr. Shoelaugh.
UNIDENTIFIED FEMALE: He's not in.
(END VIDEO CLIP)
COOPER: Drew's reporting on Disabled Veterans National Foundation caught the attention of the Senate Finance Committee. It launched an investigation in a possible abuse of the foundation's tax non-profit status.
The committee is requesting records relating to their fundraising and marketing activities. I spoke with Senator Max Baucus, the chairman of the committee.
(BEGIN VIDEO CLIP)
COOPER: What concerns you most about this Disabled Veterans National Foundation?
SENATOR MAX BAUCUS (D), MONTANA: It sounds like it's a front. I don't it's legit. They've taken about $56 million from ordinary good Americans who want to help Americans, but then don't give any money to veterans. And in this case don't give any money to disabled veterans. It's an outrage, frankly.
COOPER: Have you heard of the DVNF before?
BAUCUS: I have not, frankly. You highlighted it in one of your reports.
(END VIDEO CLIP)
COOPER: Senator Max Baucus giving a nod to Drew Griffin's reporting. DVNF, they are not the only charity that Drew has been highlighting.
He is also uncovered a group that supposedly helps animals. It called SPCA International and it has a similar losing connection to Quadriga Art.
It's signature program is called "Baghdad Pups." They've raised millions of dollars to reunite military dogs with U.S. troops and others they served with overseas. That's the idea, right?
As far as we can tell, they don't really do that at all. Once again, here's Drew Griffin.
GRIFFIN (voice-over): In Montreal like every big city, the needs of the local SPCA were great. Abandoned dogs and cats needed help and the money to help them is running out.
So in 2005, what seemed like a great opportunity came knocking. A private fundraising company called Quadriga Art proposed a major expansion.
Montreal's SPCA would become the Canadian SPCA and Quadriga Art would send fundraising mailers across all of Canada. The deal was done and the money started rolling, but there was a big problem.
Practically every dollar that came in, according to Montreal SPCA's new executive director was going directly into the coffers of Quadriga Art.
The fundraising bill is so large that after three years, the Montreal SPCA, despite receiving about $13 million in donations, was in the hole more than $4.5 million.
(on camera): How do you get in debt to a fundraiser?
NICHOLS GILMAN, MONTREAL SPCA: By incurring expenses and not having a plan for getting out of it. It was not a smart decision on the SPCA's part and we let Quadriga create strategy for us.
GRIFFIN (voice-over): The strategy was simple. Quadriga Art would send out pleas for money on behalf of this shelter, include tote bags and other gifts made by Quadriga Art's Chinese factory.
But the costs far exceeded the donations and the SPCA was locked into this contract for seven years.
(on camera): The fundraising operation was so upside down for the Montreal SPCA that they actually still owe Quadriga Art nearly $2 million and Quadriga has even taken out a lien on this animal shelter.
It's a lot of money.
GILMAN: It's a lot of money, but it's a lot less than the $4 million we owed them seven years ago.
GRIFFIN (voice-over): Quadriga Art and its president, Mark Shoelaugh, pictured here in an ad for an unrelated charity have repeatedly refused interview request to explain its unique process of raising money.
A public relations firm explained that cost at the beginning of raising funds by Quadriga involved long term strategies to develop donor list creating databases that would eventually pay off.
The spokesman told us, quote, "this has been a proven model for 50 years despite being criticized by some charity watch groups." But at the Montreal SPCA where the Quatriga Art contract has been running for nearly seven years now, the results have been a disaster.
(on camera): Will you sign with them again?
GILMAN: Probably not.
GRIFFIN (voice-over): That is hardly the end of this story.
(on camera): My name is drew griffin and I'm with CNN.
UNIDENTIFIED MALE: Yes.
GRIFFIN (voice-over): Meet Pierre Bernardi fired by the Montreal SPCA board only to emerge as the founder of a new US based charity, SPCA International.
From his home in Montreal and a rarely staffed office in New York, Bernardi and Quadriga Art have designed a new charity to tag on the heart strings with its signature program called "Baghdad Pups," the stated goal, reunited vets and their war pets.
The televised appeal with an unwitting former military dog handler on CNN's sister network, HLN in 2011, was heart warming.
UNIDENTIFIED FEMALE: Our salute to the troops today is live in the studio with Retired Army Sergeant Jerry Barns who has Nugget with him and sitting right beside Nugget is Terry with the SPCA and Ivy is down at my feet.
GRIFFIN: Terry Crisp with SPCA International was telling our viewers Ivy and Nugget were two bomb sniffing dogs that had worked for a U.S. contractor in Iraq and had been essentially abandoned by the company. She rescued them and was trying to find them homes. An HLN anchor Robin Meade, understandably, couldn't believe it.
UNIDENTIFIED FEMALE: How is it that they fall through the cracks and get stranded there? That's unthinkable to me.
UNIDENTIFIED FEMALE: It is unthinkable. That's why SPCA International is making sure that these dogs don't get forgotten and that they get brought home.
GRIFFIN: It turns out, Ivy and Nugget weren't abandoned at all. It also turns out that the person telling us so, Terry Crisp, has been accused in similar situations before begging for money to save animals that weren't being saved.
The military contractor in Iraq actually says Ivy and Nugget had been retired and the company had found them good families who were going to adopt them in Kurdistan. Good homes the contractor told CNN.
That's when Terry Crisp came along and asked if the dogs could, instead, be donated so SPCA International. The contractor agreed, but Terry Crisp didn't tell the viewers there.
What she did tell us is that if we just gave her money, SPCA International would be doing something few Americans could resist, saving the pets of our Iraq and Afghan vets and that's where Peggy Scholley comes in.
(on camera): When this showed up, what did you think?
PEGGY SCHOLLEY, WILLIAMSBURG, VIRGINIA: Well, to be honest, when this showed up, I opened this up and this is what I saw. I thought this was fantastic. I was on board because I thought saving animals and supporting the troops, you know, what two things could be better.
GRIFFIN (voice-over): What Peggy got in the mail was a plea from the SPCA International and operation "Baghdad Pups," a direct mail package from the fundraising powerhouse, Quadriga Art, the guilt package, as they are called in the business, included this t-shirt a tote bag, and letters to banks. Peggy decided to do a little research.
SCHOLLEY: Six cents out of a dollar, approximately, would have gone to actually saving soldier's pets.
GRIFFIN (on camera): That's what you figured out?
SCHOLLEY: Yes. Based on what they spent in 2010 on the operation "Baghdad Pups."
GRIFFIN (voice-over): In fact, according to these IRS tax filings, SPCA International has taken in more than $26 million in donations over the past three years.
The $23 million of that money has gone right into the coffers of the direct mail company, Quadriga Art and SPCA International is still in debt to Quadriga Art another $8.4 million.
What is worse, the SPCA International admits it hasn't rescued any military dogs, just 26 contractors' dogs, including Ivy and Nugget. The bulk of the animals the group claims to have saved, a total 477, have been strays befriended by the troops.
A $26 million to rescue less than 500 pets, how is that possible? That's what we wanted to ask the group's founder, Pierre Bernardi who lives in Montreal.
(on camera): I'm wondering what you can tell us about the value of the donor's money. Where is the money going?
UNIDENTIFIED MALE: Well, we have different programs and site covers it all. Again, I'm not -- I'm not trying to hide or avoid any questions, but we have a spokesman. She has all the answers ready for you. She has agreed to give you an interview.
GRIFFIN: Can you just tell us how?
UNIDENTIFIED MALE: Absolutely. All you have to do is go on spcai.org.
GRIFFIN (voice-over): We did that and asked Bob Ottenhoff, the president of the charity watchdog group, "GuideStar" about the documents we found.
BOB OTTENHOFF, GUIDESTAR USA, INC.: What worries me about this one is that the numbers don't compute. I can't understand how to connect the dots between how much money is spent on fundraising to how much money is spent on programming.
And what the sources of those revenues are and I also can't really measure the impact of this organization. What difference are they really making?
GRIFFIN: A spokesman for SPCA International told CNN by e-mail that, yes, although our investment is not being returned in the time frame we had projected, the investments will pay for themselves within just a few more years.
Peggy Scholley admits it is successful for Quadriga Art and perhaps even the SPCA International, but the pets and their pets and anyone who gave money, she says, were doomed.
SCHOLLEY: What is frustrating is that it's millions and millions of dollars that just go to a business, a for-profit business. It's not going to a charity at all. (END VIDEOTAPE)
COOPER: Drew Griffin joins us again. Drew, you weren't able to track down this woman, Terri Crisp who brought those dogs into the HLN studios. Where is she?
GRIFFIN: Anderson, we're told she's in Thailand and supposedly that makes her unavailable. But there's something else we learned after digging into Terri Crisp and her background. She's done this before.
After Hurricane Katrina, she staged media campaigns asking for donations to save pets stranded by that storm and she actually collected $8 million for this charity called "Noah's Wish."
Guess what, the state of California where that "Noah's Wish" was registered, they began investigating to see if any of the $8 million actually saved any Katrina pets.
The investigation ended with a settlement. The agreement was "Noah's Wish" return half the money, $4 million, and made a promise that Terri Crisp would not be a director, officer, or trustee of any charity for five years.
So we called up the state of California and they are now investigating to see if Terri Crisp violated that agreement.
COOPER: I remember this woman after Katrina. We did a profile of her on our program. She told us she was saving thousands of dogs. Is there any evidence that she saved any?
GRIFFIN: According to the state of California Attorney General's Office, that agreement only finds that sum money went to program services and specifically, Anderson, overhead.
There's nothing that says even a single pet was saved from Hurricane Katrina and now this woman's going around again telling us we need to give her money to save stray animals in Iraq and Afghanistan.
COOPER: Again, if these people were on the up and up, they would want to clear their names and come from or interview. They are claiming she's in Thailand and unavailable.
I told you this before, I've lived in Thailand. They have plenty of phones, good internet connections, quite good ones. It's absurd. Drew, appreciate you being on it. Amazing reporting.
Up next, after seeing what Drew has uncovered, chances are you're wondering how can you be sure a charity is doing the right thing with your donations? That's an important question. We're going to get tips from the leaders of groups who track charities.
COOPER: All this hour, we've been looking at charities promising one thing with your money doing something else entirely veterans to animal charities, promises are not being kept. The bad deeds of a few should not stop you from donating money to those that do a good job with their charities. Want to get tips on how to make sure you're working with a good charity.
Art Taylor is the president is the president and CEO of the Better Business Bureau's Wise Giving Alliance and Bob Ottenhoff has the same title at GuideStar USA, an organization that provides information on nearly two million nonprofits.
Are there quick and easy ways to kind of check up on a charity?
ART TAYLOR, BBB WISE GIVING ALLIANCE: Sure. The first way is to go to a good information source. You know, we have one at the Better Business Bureau at our web site give.org that evaluates about 10,000 charities in relation to 20 best practices that we believe charities should adhere to.
Things like how they are governed, how they manage their finances, you know, how many board members are actually attending meetings, how truthful are they in their public information materials.
COOPER: And, Bob, you say that you should be able to pick up a phone and call any charity out there that is soliciting money. What basic questions should someone be asking before deciding to donate?
OTTENHOFF: Three simple questions. What does your organization do? Tell us in very simple and easy to understand language, what do you do? How do you do it is a second question.
In other words, what are your programs, what are your activities? And then, three, how are you doing? Give us some measurable way to impact your organization?
COOPER: Art, you heard about charities that use these fundraising companies in that seems like all of the charities that we've been profiling that seems to have the common link. They are in some cases stuck in a contract.
Maybe they didn't realize what the terms of it were, but they are giving all the millions they've raised to this company and they're still in the hole.
TAYLOR: Yes, you know, fundraising companies can be a good asset for some charities. But it's really important that management and the board take control of the situation, as Bob said.
They should really make sure they know what they are getting into. There are fees, of course, associated with using those firms, and that's fine. But the vast majority of the money should go to the charity, not to those firms.
You know, some charities that don't have household names will get a pitch from a fundraising company, which will say to them, you don't have to do anything. We're going to bring you money.
Well, they will bring you a little bit of money, but you're really going to upset your donors because in the end most of that money is going to stay with the fundraising company under an arrangement like that.
COOPER: Bob, the other thing to me that raises red flags is that you would think that after all these reports we've been doing, naming specific people and specific charities.
That if they were on the up and up and they wanted to clarify things, they know where we are. We have an open invitation to any of these folks to come on the program and talk to Drew Griffin.
And yet there is not -- they are not. It's like they are all running for cover and stuff. Transparency is incredibly important, isn't it?
OTTENHOFF: Transparency is the first rule of a successful donation to a charity. You want to know how are you using my hard-earned dollars. Can you prove to me, charity, that you're being effective, that you're being efficient.
That you're really making a difference? And I think it's something we expect today in today's charity world that every organization needs to be transparent and they need to be accountable.
COOPER: Art, are there any ways for somebody to go back and see if their money is having a direct impact?
TAYLOR: Well, you can ask the charity for a report on how they are doing and we require that charities that meet our standards do that. They should have an annual report that discloses how funds were spent.
That talks about how they performed in relation to their admission. That talks about what their plans are for the future.
These are things that every donor should be able to get from every charity. And so we think that, yes, every organization ought to provide that if a donor asks.
COOPER: Art, thank you very much. Appreciate all that you do. Bob as well. We'll be right back.
COOPER: That does it for this special investigation. We're going to continue to watch these charities that Drew's been reporting on and bring you any updates and investigate other charities as well.
Remember, there are a lot of good charities out there. Don't let the questionable actions of a few stop you from helping others. Thanks for watching. Good night.