Los Angeles, California - Attorney General Kamala D. Harris, along with two local District Attorneys, today filed civil lawsuits against two car donation charities for violating state law by misrepresenting their charitable programs and improperly profiting from ostensibly charitable activities.
In partnership with the Los Angeles County District Attorney’s Office, Attorney General Harris filed suit against People’s Choice Charities; and in partnership with the Ventura County District Attorney’s Office, the Attorney General filed suit against Cars 4 Causes.
Car donation organizations are 501(c)(3) tax-exempt organizations that solicit car donations (often through extensive advertising), sell the vehicles, deduct all their costs, and then use what is left to fund a charitable program, which they choose or allow the donor to choose.
“These charities exploited the goodwill of generous donors by misrepresenting their charitable programs, misappropriating donations and accruing excessive administrative costs,” said Attorney General Kamala D. Harris. “These lawsuits hold People’s Choice Charities and Cars 4 Causes accountable for breaking the law and give California consumers greater confidence that their donations go toward the intended charitable cause.”
Los Angeles-based People’s Choice Charities (PCC) claimed that 100% of the net proceeds from the sale of donated cars would go to the donors’ chosen charities. As the lawsuit filed today alleges, 97% of the donations were spent on administrative costs, such as towing and car repairs, and advertising. PCC claimed that towing was free and that PCC employs experienced staff to repair and sell the cars at minimal cost. In reality, PCC charges the charities for towing expenses and has no repair staff; instead they pay outside vendors hundreds of thousands of dollars to do this work. After PCC deducts its numerous and undisclosed expenses, only a tiny fraction of the vehicle’s sale price is forwarded to the donor’s chosen nonprofit.
According to audits conducted by the Attorney General’s office, from 2007 to 2012, PCC reported that it had donated over $700,000 to other nonprofits, while actually only donating $174,000. To increase their inventory, PCC also developed a “cash back” program whereby vehicle donors could receive money in return for their “donation,” effectively transforming a charitable organization into an unlicensed used car dealership in violation of state law.
Ventura-based Cars 4 Causes claimed it “worked smarter” to “get the most money for charity.” In reality, as the lawsuit filed today alleges, C4C used 87% of its donations to pay for items such as advertising and administrative costs, including staff salaries, while only 13% was directed to actual charities. From 2009-2014, C4C reported that $15.9 million was donated to charity. In reality, C4C only gave $5.4 million to charity—and many of the charities designated by donors received nothing at all. During this time, C4C denied many requests from individuals in need seeking a car, including single mothers, college students, and seniors, all while paying thousands towards staff salaries and millions to advertisers.
C4C took money from the very charities it promised donors that it would support. According to C4C’s own accountings, it misappropriated about $2 million from thousands of charities, including over $600,000 that should have been given to charities serving the sick and providing medical research, $250,000 to children’s and education charities, $100,000 to veterans’ organizations, $230,000 to religious organizations, and $200,000 to charities serving the poor, among others.
In order to ensure that charitable donations are spent as intended, Attorney General Harris urges donors to donate directly to the organization they want to benefit. If a car donation organization is used, call the beneficiary organization you designated to confirm that they received your donation. If they did not, call the car donation organization and demand that they forward your donation.
Attorney General Harris has made it a priority to focus on enforcement of charitable misconduct. For example, in May of 2015, the California Attorney General jointly filed with state law enforcement partners in every other state in the nation, the District of Columbia, and the Federal Trade Commission, a federal lawsuit against four cancer charities Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services and The Breast Cancer Society and their operators, who allegedly scammed more than $187 million from consumers throughout the country. In the eight-count complaint, the FTC and all the plaintiff states charged the defendants with misrepresenting that contributions would be used for charitable purposes, misrepresenting specific program benefits, misrepresenting revenue and program expenses related to international Gift in Kind, and misrepresenting that the primary focus of their reported programs was to provide direct assistance to individuals in the United States.
The Attorney General's office today released a report summarizing the results of solicitation campaigns conducted in 2014 by commercial fundraisers in California. The report is prepared from information contained in the annual financial disclosure reports filed by commercial fundraisers for 2014 and includes statistics for donations of both cash and used personal property (such as clothing and vehicles) for the benefit of charity. The report shows that thrift stores and car donations provided significantly less donations to charities than other solicitation campaigns. View the report here: https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/publications/2014cfr/cfr2014.pdf?
Consumers can file a complaint with the Department of Justice by using the following form: http://oag.ca.gov/contact/consumer-complaint-against-business-or-company.