Finances With Wolves
A few months ago, a telemarketer working out of a west Phoenix office made her pitch to an elderly Pennsylvania woman.
"I'm calling from the American Indian Relief Council," Sharon A. began, her accent straight out of New York City. "Currently, we are working on our food-baskets program. For $35, you will be able to fill a full basket of food for the children . . ."
"You can always send me the information and I'll think about it," the potential mark replied politely.
The gentle rejection left Sharon undaunted.
"Thank you very much," she continued. "The reason we do need a small contribution is that we are a nonprofit organization and, of course, our postage and printing are very expensive. We do get back 85 to 90 percent of your donated dollars back into the program. We're only asking for a contribution of even $15 to defray some of the information we do send you."
That did the trick. The woman promised to send Sharon a $15 check to a post office box in Apache Junction, a town whose name resonates for the uninitiated with images of tepees and smoke signals.
If things went according to plan, the woman received a "gift-reply envelope" with a personalized form letter from the charity's president, Brian J. Brown.
"For a lot of Indian families on the reservation," his note says, "the basic nutritious food we supply is often the first well-balanced meal they've had in weeks or even months. Without the gift you consider, I don't know how we would be able to meet the needs of these people--especially the old folks and children. They're the ones who are hurt the worst by such grinding poverty. Please take a minute now to write your check and send it to the address above. God Bless You."
Most of those contacted don't fall for the pitch, delivered weekdays by 40 or so solicitors (depending on the season) from a nondescript office at 23rd Avenue and Mescal.
But many, many people do make a donation--more than 500,000 in 1995, according to former American Indian Relief Council officials. Federal tax records indicate its parent firm, the nonprofit National Relief Charities, collected $5.47 million last year from citizens convinced they were helping poverty-stricken Native Americans.
The pitches do sound sincere and convincing--the only thing missing is violin music. But the causes they claim to benefit appear to be selected more for their sales potential than legitimate need.
If the charity has accomplished what its salespeople claim, the Virginia-based firm's presence in Phoenix since March 1995 would be cause for pride, not concern. Unfortunately, allege attorneys general in three states and national watchdog groups, National Relief Charities is a scam.
A lawsuit filed in December 1993 by Pennsylvania's attorney general accused American Indian Relief Council and Brian Brown of "exploiting Native Americans in South Dakota and caring Americans nationwide by collecting millions of dollars on the pretext of feeding starving tribes, while pocketing all but about 4 percent of the proceeds."
To be fair, National Relief Charities doesn't strictly serve itself. New Times confirmed that the charity in 1995 sporadically dispensed money, clothing and food to Native Americans on several Arizona reservations.
A spokesman for the Gila River Indian Community says the charity donated about $6,000 for food this year during the federal government shutdown. It also delivered some food and supplies to several remote Navajo communities, an official of that tribe says.
But federal tax documents filed by the charity belie Sharon A.'s promise that "85 to 90 percent" of a donation reaches the needy.
Instead--by National Relief Charities' own filing with the IRS--only about a nickel of every dollar donated to National Relief Charities in 1995 ended up where promised. That's far less than the 60 percent minimum recommended by national watchdog organizations.
An auditor hired by the charity listed its net assets of $1.42 million at the end of 1995. In early 1996, however, National Relief Charities' telemarketers and direct-mail solicitations referred to "our empty warehouses" and to "a major food crisis with the winter that has been so severe."
(New Times obtained tapes of dialogue between telemarketers and potential donors from a former employee of the charity.)
Courts and the accounting industry allow nonprofits great leeway--"a license to steal," says Karon Krause of the Phoenix Better Business Bureau. An example: The U.S. Supreme Court since 1987 has forbidden states from setting limits on what percentage of contributions a charity must spend on programs.
On top of that, savvy nonprofits routinely shift and mask their costs in reports--called Form 990s--they must file annually with the Internal Revenue Service.
"Something's way out of whack," says Ken LaDeaux, business manager for the 18,000-member Rosebud Sioux tribe of South Dakota, which suffers from the nation's highest Indian infant mortality rate, among other woes. "Some fund raising is very ethical. But I tried to get answers from [National Relief Charities] just before Thanksgiving about where their money goes. All I got was an answering machine, man. It's impossible to tell what they're doing."
Difficult, but not impossible.
National Relief Charities' Form 990s and other public filings are replete with damning data. In its 1995 filing, the charity told the IRS that it paid its attorneys almost twice as much--$171,866--as the $96,390 it granted to the needy and those who serve the needy.
National Relief Charities' fund-raising expenses accounted for two thirds of its 1995 budget, far more than the 25 percent recommended by NCIB guidelines. The charity also said it spent 16 percent on "program services," a figure that appears exaggerated.
Brian Brown claimed in his charity's 1995 tax filings to have a salary of $96,000, though a former top lieutenant says Brown told him he pocketed $300,000 last year.
In March 1995, the South Dakota newspaper Indian Country Today reported that the charity was headed to Arizona, with a new focus on Southwest Indians.
That month, Brian Brown abruptly dismantled his telemarketing operation in Rapid City, South Dakota, after public protests and a spate of critical news stories.
He registered with the Arizona secretary of state in June 1995 under a new name, National Relief Charities (American Indian Relief Council now is a subsidiary), set up shop in Phoenix and hired veteran telemarketer Tom Hennessey as his general manager.
"I thought, 'Great, I've got a job where I can make a decent living and feel good about helping people for once,'" says Hennessey, a Phoenix resident fired by Brown last May. It took several months, Hennessey adds, before he became convinced Brown was a scam artist.
Brown, a certified public accountant who now resides in Beaverton, Oregon, did not respond to phone calls and two faxed letters seeking comment. In court documents, however, he has denied any wrongdoing.
For now, most Phoenix residents need not worry about National Relief Charities and its noble-sounding subsidiaries--the American Indian Relief Council, the Council of Indian Nations and the newest additions to the fold, the Organ Transplant Support Network and the Children's Critical Care Alliance.
Like many other unsavory telemarketing operations, National Relief Charities avoids shaking down residents of the state from which it operates.
"A classic approach to keep the spotlight off yourself," says Denise Valenzuela, an assistant state attorney general and a member of Arizona's multiagency Telemarketing Fraud Task Force.
So far, the out-of-sight approach has worked. Karon Krause, who tracks charities for the Phoenix office of the Better Business Bureau, says her agency has received no local complaints about National Relief Charities or its related operations.
"That's not surprising, because they keep such a low profile here," Krause says. "But we've put an alert out about National Relief Charities because of information we've gotten from around the country. They have quite the bad track record."
The State of New York cited that track record in a still-unresolved 1993 lawsuit. It called Brian Brown's charity "a fraudulent fund-raising machine designed to generate millions of dollars for their directors."
Pete Hickok, a U.S. Postal Service inspector and member of the Arizona Telemarketing Fraud Task Force, won't say if Brown and National Relief Charities are under investigation.
"If we get continuing calls of complaint about a given operation," he says, "then we may feel the telemarketing room is attempting to mislead the public. That's when we step in. But I don't have anything to say about [National Relief Charities] at this time."
We'd like to provide some food to these small children and elderly who are going without, and I was wondering if we could possibly send you a gift-reply envelope for a small tax-deductible pledge to help feed these children that are going without food.
--a National Relief Charities telemarketer, in a successful call to a Brooklyn, New York, woman
The 1988 feature story in the Washington Post was warm and fuzzy. It told of a woman named Bernice Myers who operated a small Sioux craft shop in the unlikely outpost of Warrenton, Virginia--an hour from Washington, D.C.
Myers spoke movingly of how she'd travel regularly to South Dakota's reservations and buy handcrafted items from impoverished Indians for resale at her little shop.
Myers' husband, Dave, chimed in.
"The idea is to create jobs. You have these fine artists, and they have no marketing outlet," said Dave Myers, described in the piece as a man who worked in data processing for years before founding the Famine Relief Fund in 1985.
The Post failed to report that a year earlier, Dave Myers had agreed to stop soliciting charitable contributions in West Virginia. Authorities there had alleged that less than 9 percent of Famine Relief's contributions had gone toward programs described in its fund-raising letters.
But West Virginia is just one of 50 states. Myers continued to pitch nationally in the late 1980s and early 1990s, using Famine Relief and its successor charity, the American Indian Relief Council, as his lucrative vehicle.
In 1991 and 1992, he mailed fliers that told of Indian mothers "pleading for milk for their babies or diapers or any hope we can share," and of scores of homeless Indians roaming around Rapid City.
"Teenage and younger suicide is near an epidemic on Rosebud," Myers wrote in another letter. "Children have hung themselves in mass [sic], have put guns to their heads and literally blown themselves into eternity to escape life on Rosebud Reservation."
South Dakota's reservations have dismal health statistics and poor economies. But, says Rosebud business manager Ken LaDeaux, there have been no mass suicides.
Myers' accountant was Brian J. Brown, now the president of National Relief Charities. In filing after filing, Myers' charities claimed credit for giving needy groups millions of dollars' worth of surplus goods--vegetable seeds, used clothing, baby formula, books.
From 1987 to 1992, Myers' charities claimed to have given a whopping $21.5 million in goods to needy people, mostly Native Americans in South Dakota. However, a batch of the surplus seeds made up almost three fourths of that amount--and that, too, is deceiving.
A 1993 lawsuit filed by the State of New York's attorney general alleged that Myers' charity increased its claimed value of many seeds from a penny a pack to $1, even though many of the seeds were outdated and useless.
The New York suit noted that one American Indian Relief Council operation, dubbed the "Little Soldier Wood Project," was supposed to be stockpiling wood for sick and elderly Indians. "In reality," the state claimed, "the project consisted of one chain saw and a pickup truck in the director's [Myers'] backyard."
A Rosebud tribal employee wrote to Dave Myers in early 1992: "Where is all the money? Thousands of American citizens throughout the nation have sent you money, and continue to send you money, on behalf of the Rosebud Sioux for various reasons. . . . What services do you provide to our needy people with the millions of dollars you receive on our behalf?"
It isn't known if Myers responded. (He could not be reached for comment for this story.)
As the attorneys general of several East Coast states investigated Myers' charities in the early 1990s, he and Brian Brown made a series of brazen moves.
On June 20, 1992, court documents indicate, Myers and his wife resigned from the charities he had founded. That day, Brian Brown became American Indian Relief Council's president.
Also that day, the charity's new board of directors issued a call for anyone interested to apply for "monetary awards" to develop programs to assist Native Americans. Proposals were to be submitted by July 1993, more than a year off.
Less than a month later, however, the board met by telephone and granted $650,000 to the Great Plains Economic Development Corporation.
The board also sanctioned an immediate $300,000 payment to Great Plains, with the remaining $350,000 to be paid by July 1994. (American Indian Relief Council paid Great Plains $564,786 by April 1993, far exceeding its payment schedule.)
Of that sum, $250,000 of the initial $300,000 payment was to pay Great Plains for managing American Indian Relief Council's "jobs and training program"--actually a telephone boiler room then manned by about 20 Native Americans.
Great Plains' sole directors, officers, shareholders, employees and benefactors? Bernice and David Myers.
Myers introduced Brown to AIRC's established donor base with a glowing letter. In part, he said Brown had accepted "a huge cut in salary compared to the very prosperous living he was earning as a CPA."
But records show Brown's accounting practice had been closed since U.S. Postal Service inspectors raided his office in late 1991. Brown never was charged in connection with the raid.
(The relationship between Brown and Myers soured by late 1993. American Indian Relief Council sued Bernice and Dave Myers, Great Plains and the Native American Heritage Association--the Myerses' latest nonprofit incarnation--for misappropriating trade secrets and, ironically, for "unjust enrichment.")
Apparently, few South Dakotans knew any of this when Brown took over American Indian Relief Council. Within weeks, he instructed dozens of Sioux in the arts of telemarketing, then put them on the phones, paying them about $5 an hour.
Brown's upbeat letter inside American Indian Relief Council's glossy 1993 annual report heralded the charity's growth:
"AIRC has grown from having a few programs to over a dozen. We've gone from feeding a few dozen hungry people each month to feeding thousands. Best of all, we are starting to focus on some of the long-term problems that face the Native American community."
That's not how Pennsylvania Attorney General Ernie Preate Jr. saw it. His office sued American Indian Relief Council and Brown in December 1993, alleging the charity had made "phony claims about natural disasters and chronic food shortages among Native Americans to pull at the heartstrings of potential contributors."
Despite the bad publicity in states such as Pennsylvania, New York, Connecticut and Minnesota, American Indian Relief Council continued to rake in donations. The charity's Form 990 for 1993 said it collected $4.6 million in contributions that year, almost all from individual donors.
At that time, Brown had about 120 Native Americans working for him, most of them from a telemarketing room in Rapid City.
He, too, dubbed it his "jobs service" program.
As 1994 dawned, Brown and his family were living in a sprawling home in an elite neighborhood of Rapid City. The charity business had been very good to him.
But a little more than a year later, Brown would abandon South Dakota and its all-Indian telemarketing force for the promised land of Phoenix.
He made the move shortly after an episode in which he successfully evaded a reporter from a local newspaper who literally chased him down an alley seeking a comment.
Our food banks are depleted again. It's the Lakota Sioux, honey, way out in the middle of nowhere, 200 miles even from a pay phone, and they really have a tough time. They really need it the most on the reservations we checked on. And this winter was really, really tough.
--a National Relief Charities telemarketer, in a successful 1996 call to a Richmond, Virginia, woman
By early 1994, Indian Country Today reporter Pamela Skillman had started to sift through the tawdry history of American Indian Relief Council and Brian Brown.
Her stories spurred debate and consternation in Rapid City and on the reservations. Many Native Americans expressed happiness for whatever help they were getting. Others--whose numbers seemed to grow by the week--said they considered Brown and his charity a rip-off.
Skillman interviewed American Indian Relief Council malcontents, some of whom still were working as telemarketers at the Rapid City office. Brown fired the whistle-blowers, which led to protests--Russell Means, famed American Indian Movement activist turned actor, joined the picket line--and more news stories.
In May 1994, Rosebud tribal president William Kindle wrote to Brown, asking him to quit soliciting donations in his tribe's name. Kindle told Brown his brethren were "not receiving any benefits or very little from [American Indian Relief Council] fund-raising activities."
Some of Brown's former employees traversed South Dakota, asking that tribal councils compel the charity to become more accountable.
The disenchanted workers penned a manifesto, demanding that Brian Brown stop lying "about Lakota people to sympathetic donors, to supply accurate financial information, and to treat employees with fairness and dignity."
The negative momentum forced Brown in October 1994 to grant a long-avoided interview with reporter Skillman. He spent most of the session trying to explain away his troubles as misunderstandings, glitches and the doings of the disgruntled.
"I think you have to surround yourself with ethical people," Brown told the reporter. "I think we spend our money wisely and we have a lot of nice programs. . . . I think things have improved a lot and will improve a lot more in the future to change this organization for the better. If you look at us six months from where we are today, I think you'll see a lot of better results."
But Brian Brown would be long gone before the six months were up.
In early 1995, he signed a three-year lease with a Phoenix office complex, found the Apache Junction post office box and incorporated in North Carolina under a new name--National Relief Charities.
The charity registered with the Better Business Bureau, naming a "Ted Firethunder" as its Arizona contact person. Firethunder's local phone number is listed as 602-811-6955, though Arizona doesn't have an 811 prefix.
In March 1995, Brian Brown hired veteran Phoenix telemarketing manager Tom Hennessey to head the new local office. Hennessey says Firethunder is a South Dakotan who had nothing to do with the Phoenix operation.
Hennessey did no homework on his new employer before he took the job.
"Brian flew me up to South Dakota to see things," recalls Hennessey, a soft-spoken man in his late 40s. "He told me, 'Don't tell anyone we're moving, okay?' I knew I was in some kind of charade, but I let it ride. That was a mistake."
Former American Indian Relief Council supervisor Jacque St. Claire analyzed Brian Brown for Indian Country Today shortly after he closed shop in Rapid City: "He came here and took us on a dirty ride, caused us a great expense, and left us high and dry."
Who basically are you?
My name is David.
And you're a fund-raiser, a telemarketer?
Well, I don't know. We're a nonprofit charity that raises funds for hungry Native Americans.
--dialogue between potential donor and National Relief Charities telemarketer, summer 1996
Tom Hennessey took the witness stand in October at an Arizona unemployment hearing for one of his former top assistants.
At issue was whether the employee merited benefits, or if he'd been fired justifiably. Clifford Johnson, Hennessey's successor as National Relief Charities' telemarketing general manager, questioned him at the hearing.
"Did you believe in National Relief Charities' mission and purpose?" Johnson asked.
"As far as I understood, yes," Hennessey replied. "The original mission and cause were very worthwhile, but I found out that certain claims made by the charity were not true. The amount of money that was raised and what was dispensed to the Indians was very disproportionate and considerably different than what we were led to believe."
After the hearing--which the ex-employee lost--Hennessey relived his year-plus as Brian Brown's employee.
At first, he says, things went great guns. The classified ad he wrote to attract workers he now sees as ironic--"A REAL JOB, NOT A SNOW JOB," its headline promised. He hired about 50 telemarketers for starters, only a handful of them Indians.
"Brian told me he didn't care if he saw another Indian," Hennessey says. "But I made a concerted effort to hire Native Americans because they could personalize the pitch so well."
The few Indians who did come on board in Phoenix prove his point.
"I can fill a food basket that will feed six children for one week," a Native American telemarketer named Charlie H. told a Johnstown, New York, woman earlier this year, his tone mournful, sincere and dignified.
"You're still having a hard time?" the woman replied. "I don't understand why the government don't help you people more."
"I don't either. They put us on reservations and forgot us."
"That was a shame. We're helping everybody else in the world."
"There you go. It's people like you who feel the same way and help us. If it wasn't for you people, we wouldn't have nothing."
The woman promised to send a check for $25.
Charlie was soliciting for a new Brian Brown enterprise--the Council of Indian Nations, formed in April 1995 "to provide emergency services and self-help programs to Native Americans in the Southwest."
A Council of Indian Nations brochure printed this year noted its many alleged accomplishments for 1995. A pie chart detailed the charity's "program services" for the year, claiming about half of its income--an amount is never noted--went to "food programs," 18 percent to "medical programs" and 13 percent to "children and educational programs."
That sounded fine. But the parent firm's 1995 tax return indicates that National Relief Charities granted and/or allocated only $96,390 for the entire year to its target Native American population, after collecting donations totaling $5.47 million.
That adds up to a paltry 2 percent--not the 85 or 90 percent its telemarketers claim.
In September 1995, Brian Brown sent newsletters to thousands of donors, applauding his charity's continued work with South Dakota's tribes.
"AIRC forms partnerships with those working on the [South Dakota] reservations," he wrote. "We seek out individuals and community leaders who share our ideals of seeing life improve on reservation communities. . . . AIRC is sensitive to the needs of the Sioux people."
Most readers hadn't a clue that Brown had fled South Dakota months earlier, leaving behind a trail of broken promises.
Last January 26, National Relief Charities amended its articles of incorporation, adding new "purposes" beyond helping Native Americans. Among the new goals:
"To focus public attention upon the problems, needs, concerns and conditions of animals and the environment," and "to provide goods, equipment, services and funds to relieve the problems and meet the needs of those that need help."
Could it be any less specific? Probably not. But under current laws, in Arizona and nationally, the charity doesn't have to spell anything out.
A Phoenix telemarketer provided clues as to the new direction during a call this summer to a Virginia woman:
"We're calling from the Organ Transplant Support Network. We're a nonprofit charity involved in helping families with young children who are awaiting transplants. What we do is help with the expenses that their insurance doesn't cover, like their relocation. That alone runs into thousands of dollars without help of caring individuals. It can spell financial ruin for many of these families. We were hoping you could find it in your heart to help these children and their families with a tax-deductible contribution."
The potential donor asked for written information. The telemarketer responded that she couldn't do that, "because of the costs" of such mailings.
The new direction required a new director. By last spring, Tom Hennessey says, he and Brian Brown were at loggerheads.
"The more I found out about Brian and his programs, the more questions I asked," he recalls. "He was evasive about where the money was going, but he told me how sick he was of Native Americans. I finally came to the conclusion that I was part of a rip-off."
Hennessey says he was looking for a new job when Brown fired him last May. In the months after that, the telemarketing staff shrunk nearly in half, says another ex-employee. Brown also cut the hourly wage for his telemarketers from an average of $7.50 an hour to about $6.50.
Rumors ran rampant that National Relief Charities would close its Phoenix office and relocate, this time to Brown's latest home base of Oregon. Staff morale plummeted.
But things apparently have turned around. In recent weeks, National Relief Charities has advertised in local papers for new telemarketers.
Until the charity files its next Form 990--next April 15 at the earliest--it will be impossible to say how profitable 1996 has been. But it won't surprise anyone familiar with Brian Brown and his charities if this year has been another rousing success.
Says Pennsylvania deputy attorney general Mark Pacella, who has been battling Brown in court since late 1993: "That gentleman and his charities seem to have nine lives.
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