The warning was prophetic.
Maurice Levite sat in a modest office in Falls Church, Virginia, about a decade ago, and cautioned his longtime friend, Brian Arthur Hampton, against continuing to use telemarketers to fund his small veterans charity.
But there was a catch — a costly one. The fundraisers were keeping most of the contributions donors were giving to the charity. Almost all of the money left over paid for overhead costs, such as Hampton’s salary. Veterans themselves received scraps.
Levite says he protested, but Hampton ignored him. He hired another telemarketer, Outreach Calling, to assist a related veterans nonprofit he runs out of the same office. This telemarketer — which the New York attorney general’s office says is run by a man they banned for life from fundraising in New York and remains under investigation — kept $9 out of every $10 raised.
Meanwhile, Hampton’s reported compensation quadrupled — to $340,126 between his two nonprofits in 2015 — in less than a decade.
“I’m flabbergasted,” said Levite, who served with Hampton on the board of Circle of Friends for American Veterans from 2006 to 2009. “Those figures blow me away.”
With help from Outreach Calling, Hampton is now expanding his operation into the largely unregulated world of political fundraising, sponsoring a veterans-focused political action committee that’s using the same money-generating tactics as his nonprofit groups, according to a Center for Public Integrity analysis of Federal Election Commission and Internal Revenue Service documents.
Hampton has already cashed in: During the first nine months of 2017, he paid himself $75,000 from his PAC. Out of $1.5 million the PAC has raised from donors, telemarketers have kept $1.3 million. Politicians and political committees that support veterans issues hadn’t received a cent through September.
Hampton said he hires telemarketers because it is too expensive and time-consuming to try to raise money on his own.
“Over the course of 24 years, I have tried every other fundraising technique known to me in over four decades with fundraising experience, most of them over and over again, with different variations,” Hampton said in an email to the Center for Public Integrity (he declined to answer questions in person). “None of those efforts produced revenue remotely close to the revenue generated by telemarketing.”
He also defended his compensation: “I am the head of three organizations. I am always working.”
But Elaine Del Vecchio, a semi-retired New Jersey resident, said she felt duped after learning almost all of her donation to Hampton’s nonprofit went to a fundraising company instead of programs directly benefiting veterans.
“They served in the military — even foreign wars — and risked their lives, and now they’re homeless. That touched a soft spot in my heart, and so I just made the donation,” said Del Vecchio, who recently gave Hampton’s nonprofit $25. “We know that 100 percent of the donations can’t go directly to the cause, because the CEOs have to be paid and all that, but it should be reasonable.”
Charity watchdogs say the most effective nonprofits spend at least 75 percent of their expenses on program services and no more than 25 percent on fundraising and overhead. Hampton’s tax returns claim his nonprofits are spending just under a third on programs — but that’s only because telemarketers’ consulting fees are counted as “program” services. CharityWatch, a nonprofit that analyzes financial statements of charitable organizations, says Hampton’s nonprofits spend 7 to 11 percent on programs.
Hampton’s veterans operation is hardly alone. Telemarketer Outreach Callinghas contracted with at least a dozen other charities — two of which have been shut down by New York regulators — and keeps an average of 90 percent of the money it raises for them, according to state government records. And other veterans groups, such as the Wounded Warrior Project, have recently endured scandals surrounding their spending.
The U.S. Supreme Court has ruled that it’s not against the law for telemarketers to keep most of the donations they raise, as long as they don’t lie about how the money is going to be used, said Jim Sheehan, head of the charities bureau for the office of New York Attorney General Eric T. Schneiderman.
“From the charitable entrepreneurs’ perspective, there’s no downside. Whatever money they get is gravy,” Sheehan said. But at some point, “the gifts to the charitable activity are so low, it’s a fraud.”