Schneiderman reaches $24.6M settlement with charity, fundraisers

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a $24.6 million settlement on Tuesday with one of the country's largest charities and its direct mail fundraisers to resolve allegations of using misleading solicitations.

The Disabled Veterans National Foundation's (DVNF) outside, for-profit direct mail vendors, Quadriga Art and Convergence Direct Marketing, allegedly misled potential donors and failed to disclose conflicts of interest. Quadriga and Convergence allegedly used mailings that highlighted a wounded veteran who was never helped by DVNF, falsely claimed DVNF had a robust network of veterans' advocate and benefit corporations, and claimed that for each dollar donated, the DVNF would be able to deliver $10 in services and goods to disabled veterans.

Schneiderman alleged that more than 90 cents of every dollar donated went to cover DVNF's direct mail costs.

DVNF also allegedly failed to maintain adequate independence from Quadriga. Quadriga allegedly drafted DVNF's fundraising council agreement with Brick Mill Studios, a Quadriga affiliate; selected DVNF's auditor; served as a highly influential financial consultant; and managed DVNF's public relations response to probing questions about DVNF's relationship with Quadriga.

"This investigation sheds light on some of the most troublesome features of direct mail charitable fundraising as it is practiced in the United States today," Schneiderman said. "Taking advantage of a popular cause and what was an unsophisticated start-up charity, these direct mail companies used cleverly designed but misleading mailers to raise tens of millions of dollars in donations from generous Americans, nearly all of which went to the fundraisers and their agents, and left the charity nearly $14 million in debt. Charities and their fundraisers that rely on direct mail campaigns can and must do better -- and this settlement is an important milestone on the path forward."

Under the terms of the settlement, Quadriga will pay $9.7 million in damages and Convergence will pay $300,000 in damages. The $10 million will go to supporting and improving the lives of disabled veterans. Quadriga also agreed to forgive $13.8 million in debt that DVNF owes to Quadriga and pay an additional $800,000 to the state of New York for costs and fees.

As part of the agreement, DVNF will also reorganize its board, appoint a committee to reexamine its business model, terminate Quadriga and Convergence as fundraising advisers and discontinue certain messaging in its fundraising appeals.