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Navy Veterans loses its attorneys and its fundraisers

TAMPA — The lawyers who have run interference for the U.S. Navy Veterans Association for months now say they can no longer represent the charity because all its directors have quit or disappeared.

In court papers filed Wednesday in Ohio, attorney Shaun K. Petersen said his firm must withdraw as counsel for the Navy Veterans because the charity's board has dwindled to a single member — founder Bobby Thompson — and he has been impossible to find for more than three weeks.

Petersen, of Mac Murray, Petersen & Shuster, was defending the Navy Veterans group as Ohio Attorney General Richard Cordray sought restraining orders to seal mailboxes used by the charity and to freeze its bank accounts as part of a multistate crackdown on the charity, originally set up and run from Tampa.

But recent attempts to advise the Navy Veterans "of significant recent legal matters have been regularly ignored,'' Petersen's motion said, leaving counsel no choice but to "withdraw from representation immediately."

The lawyers are not the only ones deserting the Navy Veterans. The telemarketers who raised millions of dollars for the charity also have cut all ties.

Associated Community Services of Southfield, Mich., and Community Support Inc. of Milwaukee ended all agreements to solicit donations for the Navy Veterans and its state chapters, according to letters the two companies sent to Florida regulators.

The two telemarketing companies helped the Navy Veterans' reported income grow from a few thousand dollars in 2002 to $27.3 million last year. But now CSI says too many questions remain unanswered about the charity, which is under investigation by several states, the IRS and the Department of Veterans Affairs.

In a July 7 letter to the Florida Department of Consumer Services, CSI attorney Greg B. Lam said "adverse media and the inability of the organization's principals to address concerns CSI had led it to terminating all services and ultimately led to the termination of the agreement between CSI and all USNVA entities.''

In a separate letter, Lam notified Florida officials that another client, Associated Community Services, also was severing all ties with the Navy Veterans.

Samuel Wright, a retired U.S. Navy captain who was special counsel to the Navy Veterans, quit six weeks ago, after writing a letter to Veterans Affairs Secretary Eric K. Shinseki saying the Navy Veterans had been unfairly maligned because of "untruthful reports in one newspaper, the St. Petersburg Times."

Wright said he resigned because of the "bad publicity."

The Navy Veterans has billed itself as a nationwide group with thousands of members, a dozen key officers and a five-person board of directors. But Petersen's court filing Wednesday said that two weeks ago, the board was down to two, Thompson and Tom O'Daniel, who runs a charity auto salvage business in Port Orange.

Then O'Daniel quit and Thompson disappeared. Not even his attorneys could contact him.

The telemarketers

With color literature showing troops at war in Iraq and Afghanistan, and with boiler rooms with hundreds of callers, telemarketers hired by the Navy Veterans used an appeal that says: "The troops don't wait to do their part — please do not wait any longer to do yours."

In the last six years, the Navy Veterans reported income of more than $99 million, much of it raised by telemarketers.

Last year, according to tax papers, the firms collected more than $7 million on behalf of the Navy Veterans and kept between 60 and 90 cents of every dollar.

But after a Times series in March sparked multiple investigations of the Navy Veterans, the telemarketing companies decided to end their lucrative association.

The Navy Veterans claimed membership rolls topping 66,000, offices in 41 states and millions of dollars of annual assistance to veterans, military personnel and their families.

The Times could confirm none of it: 84 of 85 officers listed on the group's tax forms were nowhere to be found, its state offices turned out to be rented mailboxes and 99 percent of the charity's reported assistance could not be verified.

The only officer who could be found was Thompson, who cleared out of his duplex in Ybor City and left his landlord no forwarding address after the newspaper started asking questions.

State investigators had no better luck finding Navy Veterans officers listed on registration papers. Addresses were found to be "fictional" and registrations were deemed false.

The attorneys general in New Mexico, Florida, Ohio and Hawaii ordered fundraising stopped. U.S. Sen. Jim Webb of Virginia asked the IRS and the Department of Veterans Affairs to investigate.

After backing away from the Navy Veterans state by state, both telemarketers have completely abandoned the group.

Both companies are smarting from regulatory crackdowns last year. Several attorneys general alleged that Associated Community Services broke the law, called consumers on "do not call" lists and used harassing calls to collect pledges. The company paid fines and agreed to reforms. Some three dozen states alleged that CSI used solicitors who masqueraded as veterans and told residents they were responsible for pledges they never made. The firm promised to cease deceptive practices and reimburse the states $200,000 for investigative costs.

Neither telemarketer would comment on the moves to cancel contracts with the Navy Veterans.

The lawyers

As income for the Navy Veterans rose, so did the fees the charity paid its lawyers. In 2007, the group reported legal fees of nearly $62,000. Last year, it was more than $753,000.

The Navy Veterans said its general counsel, Helen Mac Murray, did more than $36,099 of work by Dec. 1 just to handle questions from the Times. That was before any news story was published and before any state took regulatory or court action against the Navy Veterans.

Mac Murray's firm, composed of former officials of the Ohio Attorney General's Office, appeared suited to provide legal guidance to charities like the Navy Veterans. Mac Murray was formerly the chief of consumer protection for Ohio Attorney General Betty Montgomery, who is now a member of the Mac Murray firm.

The firm's website advertises its expertise, offering the "Charitable Fundraising Regulatory Guide" for $899 ($1,099 for non-clients), touted as "a must-have for any company that engages in charitable fundraising."

Now Ohio Attorney General Cordray says the group Mac Murray represented was "an elaborate hoax" that fleeced consumers.

His office has ordered the Navy Veterans to cease fundraising and continues to seek court orders to prevent the Navy Veterans from taking Ohioans' money.

But he can't account for every situation, including the final wishes of U.S. Navy Petty Officer Robert A. Benninger of Cleveland.

A veteran of five South Pacific combat campaigns in World War II, Benninger died July 4 at age 86. His obituary asked that donations in lieu of flowers be sent to the U.S. Navy Veterans.

The address listed: Annapolis, Md., where the U.S. Naval Academy is located — and where the Navy Veterans Association maintains a mail drop for contributions.

Researcher Caryn Baird contributed to this story. Jeff Testerman can be reached at (813) 226-3422 or testerman@sptimes.com. John Martin can be reached at (813) 226-3372 or jmartin@sptimes.com

Navy Veterans loses its attorneys and its fundraisers 07/14/10 [Last modified: Thursday, July 15, 2010 11:06am]
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