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Katrina Charity Scams

September 13, 2005 at 12:00 AM EST
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JEFFREY BROWN: Americans have responded to the devastation of Katrina with a huge outpouring of charitable giving, currently at a record pace.

Donations are nearing $800 million. That compares with about $550 million given in the first two weeks after 9/11, and $400 million raised by American groups in the first weeks after last year’s tsunami. The largest chunk of money by far has gone to the American Red Cross: some $584 million. And more than half of that was given over the Internet.

But the government is also warning of a rise in illegal scams designed to grab some of those dollars. Today Justice Department officials announced a new task force to take on fraud.

ALICE S. FISHER, Asst. Attorney General for Criminal Division: The types of fraud that the task force will address will be wide ranging but share a common denominator. We will work to bring to justice those who would seek to re-victimize the people of Louisiana, Alabama, Mississippi, and other affected areas by fraudulently diverting or siphoning the flow of relief dollars.

This is a time to focus on the needs of the many, many victims. Those who detract from that critical effort for opportunistic reasons will answer to the Department of Justice and our law enforcement partners. The work of the task force will include by way of example four areas of fraud: Charity fraud, identity theft, procurement fraud and insurance fraud.

JEFFREY BROWN: And for more on all of this, we’re joined by Trent Stamp, executive director of Charity Navigator, an independent charity evaluator; and Stacy Palmer, editor of the Chronicle of Philanthropy, a biweekly newspaper covering the nonprofit world.

Mr. Stamp, let’s start with today’s news about these scams. How much of it are you seeing and what forms does it take?

TRENT STAMP: We’re seeing way too much of it, Jeff. This disaster has shown us the power of the Internet in the fact that over half of the donations that have come in so far have come in over the Internet which is wonderful. It’s remarkable. People can act quicker and people can give money who may not have given before because they were embarrassed to call up and give $5, $10.

We’ve also seen the worst of humanity in that we’re seeing tons of online Internet scams. We’re seeing people who are sending e-mails, the spamming, the phishing, who are trying to steal if not your cash, your identity. And we’re also seeing tons of these phony Web sites that look professional but on the back end are simply scams.

The FBI, which is not a particularly liberal organization, is estimating that right now there are around 2,500 bogus Web sites designed to fleece people who want to help the victims of this particular disaster.

JEFFREY BROWN: So, Stacey Palmer, what are you telling people? How do they protect themselves?

STACY PALMER: They have to be very careful and be sure they know where they’re giving and watch out. I think people should still give online but it’s very important that you check and be sure that you’re giving to the right organization. There are a lot of organizations that look like the Red Cross but aren’t the Red Cross, for example. So you have to watch what you’re doing. If you’re uncomfortable at all, if anything looks weird, you should make a phone call and not give online if you’re not comfortable.

JEFFREY BROWN: Does the government, Miss Palmer, have experience with shutting down some of these Web sites? How hard would that be to do?

STACY PALMER: It’s very hard to do it very well because they keep cropping up again in part because some of them are in other parts of the world. They’re not in the United States. So the government doesn’t always have jurisdiction; that’s why this is such a very difficult thing to stop.

JEFFREY BROWN: Now, Mr. Stamp, moving to all the money that is flowing to more traditional charitable organizations, $800 million is a lot of money. Is there a way to know how much of it is getting to the places it should go? Can people track where their money goes?

TRENT STAMP: Well, self-servingly, Jeff, yes. They can check it at our Web site at charitynavigator.org. But we’re just a private watchdog. The nonprofit accounting standards in this country are woefully behind what they are for the for profit industry. The best thing that you can do is find a charity that you trust on the front end.

Find a charity with good leadership. Find a charity that has good finances, good auditors, good accountants, good board who is corporate and is going to keep them in line. And then make a gift because chasing the money after the fact is, you know, it’s almost impossible to do. That’s why we’re telling people to stick with the name brand charities, the reputable groups, be proactive in your giving; don’t give to anybody who calls you on the telephone.

Don’t give to anybody who sends you an e-mail. Don’t give to the bucket at your local convenience store. Go proactive in your gift, seek out a reputable charity; research them. The stakes are way too high this time to screw around.

JEFFREY BROWN: Ms. Palmer, if someone sees something on television, sees a particular person or a particular town and they really want to target their money to a specific person or place, how doable is that nowadays?

STACY PALMER: That’s a very challenging thing to do. But if you call your local United Way or Community Foundation, the Red Cross, other organizations and explain that that’s what you want to do, they can help you figure out how you get the closest to doing that.

A lot of religious groups are also doing work so there are ways to get to local congregations so you can often work through the religious organization in your own town and find a way to get to wherever you want to help.

But it’s easier if you give to some very generalizable thing rather than that one person because there are so many people who are in need and not all of them appear on television. So I think it would be best to give to a more general kind of cause.

JEFFREY BROWN: And, Ms. Palmer, when a person — for example, in the newspapers I read there are lists of organizations that are accepting money. What criteria do you suggest that people use for deciding who to give the money to?

STACY PALMER: Trent has outlined a lot of the things about financial accountability but one of the other important things is what is it that you as a donor care about? Do you want to make sure that people get housing or get food or that the animals are taken care of?

There are lots of charities that specialize in doing those kinds of things if you care about housing, Habitat for Humanity. Food banks are working to get food to the needy. So think about what it is that you are most worried about and what kind of help you would most like to give and look at it that way.

And then analyze and ask some hard questions before you make a gift. Just because there are names in the newspaper doesn’t mean that they’re legitimate. The newspapers haven’t checked that out either.

JEFFREY BROWN: Mr. Stamp, we have heard a lot over the last few years about people asking for more accountability in these charitable organizations. What have they done to address that and are we seeing that in the instance of the Katrina effort?

TRENT STAMP: We’re seeing a decent movement from some of your more larger charities. The Red Cross has gone to what they’re calling, you know, for lack of a better word kind of a pay-as-you-go disaster relief system where they only raise funds for that particular disaster. We’re seeing charities that are going ahead and telling people to designate their gift to ensure that it doesn’t get spent on anything else in the future.

Good charities once again are welcoming these questions. They have lists of what they need your money for. They have lists of how they’re going to spend your money. And they have some verifiable data on the back end. We’re well past the day when good charities are relying on a benevolent sounding name and some tragic photographs.

Good charities will tell you about accountability, transparency, results. And bad charities, those that don’t deserve your dollars will try trot out sad-looking pictures and a sad name and tell you that they’re going to help and not offer anything more than that.

There really is a strong dynamic, a strong dichotomy between those charities that deserve your dollars and those charities that are trying to fleece you.

JEFFREY BROWN: And, Ms. Palmer, we’re still in early days here but what happens over the longer term, in terms of the needs that will continue, in terms of the need to raise more money?

STACY PALMER: That’s the very big question. While Americans have been very generous so far, are they really going to be able to provide enough money to take care of all of these victims that are sprinkled throughout the country?

And they’re going to need help for a long time. They need jobs. They need housing. They need to readjust. They’re going to need mental health counseling for many years to come after the kinds of traumas they’ve all seen.

And so we’ll need to continue to give to them through many local charities. We’ll make sure that people are being taken care of. But I think this is something that Americans are going to be called on for quite a long time.

JEFFREY BROWN: All right. Stacy Palmer and Trent Stamp, thank you both very much.

STACY PALMER: Thank you.

TRENT STAMP: A pleasure. Thank you.