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Nonprofit under investigation wins registration exemption in Virginia

Virginia Sen. Patsy Ticer, a 75-year-old, five-term state senator, told the lobbyist for the U.S. Navy Veterans Association that she would be happy to sponsor a bill that would exempt the nonprofit from state registration requirements.

"It seemed like a nothing little bill,'' Ticer said. "I thought it was about groups who do bake sales and hold Fourth of July parties."

The bill sailed through the General Assembly, with 140 ayes and not one nay.

Then Ticer received an alarming e-mail from someone writing under the pseudonym John Jones Smith. The correspondent warned Ticer that the Navy Veterans group, founded in Tampa, might not be what it seemed.

"I thought you might be interested in seeing the news articles about the veterans group you introduced a bill on behalf of,'' the e-mail said. "It seems this group doesn't want to have to tell anyone what it does, how it does it, or even if it does it — and under your bill, it won't have to tell Virginia either."

Ticer's aide read the articles, St. Petersburg Times stories headlined "Under the Radar," and figured this was not anything the senator wanted to be associated with. Ticer asked the governor to veto her own bill.

But he had already signed it. Come July 1, the Navy Veterans and groups like it can solicit donations in Virginia without having to file an audited financial statement or tax return.

Last week, with news that the Navy Veterans had been shut down in two states and was being investigated in others, Virginia officials scrambled to distance themselves from the campaign contributions they accepted from Bobby Thompson, the man behind the Navy Veterans group.

Ticer said she would give Thompson's $1,000 to another nonprofit. Gov. Bob McDonnell said he would donate Thompson's $5,000 to another veterans group.

But Attorney General Ken Cuccinelli said that unless Thompson were convicted of a crime, he would keep the $55,500 Thompson sent his campaign last year.

"I am really shocked and dismayed about what has happened,'' said Ticer. "This bill was not as benign as it seemed, I guess."

The invisible nonprofit

Virginia is home to the world's largest naval facility, the Norfolk Naval Station. It has as high a concentration of military personnel and service retirees as anywhere in America. For a charity serving veterans, Virginia might be a fundraising gold mine.

The Navy Veterans, which Thompson founded in 2002, came to Virginia in 2004. Certified tax-exempt by the IRS, the group filed registration papers in Richmond so it could begin soliciting donations under the banner of helping veterans, America's troops at war and their families.

The registration form was signed by Allan Rosellini, commander of the Navy Veterans Virginia state chapter. The listed address was a rented mailbox on Waters Avenue in Tampa. The listed phone number was a cell phone that belonged to Bobby Thompson.

Rosellini is among the 84 Navy Veterans officers the Times could not find any trace of in six months of looking. Only Thompson could be located. The nonprofit says it is 66,000 members strong and brings in more than $22 million a year, but the group is all but invisible, its office addresses are rented mailboxes, its charitable gifts mostly undisclosed and unverifiable.

On Sept. 22, 2004, Virginia officials wrote Rosellini that the Navy Veterans' registration was incomplete; he had neglected to send in a tax return or audited financial statement.

The Navy Veterans satisfied the requirement with a one-page financial statement that said the fledgling charity collected $400 in contributions from its members outside Virginia in 2003 and spent $205 on office equipment and supplies. The statement was signed by Bob Thompson, treasurer of the Virginia chapter.

In an October 2004 letter with Rosellini's signature, the chapter applied for an exemption from financial reporting requirements. Initially, it was approved. Over the next five years, with the group exempt from disclosing its finances, its reported revenue rose to more than $2 million a year.

On Feb. 23, 2009, the Virginia Division of Consumer Protection notified Rosellini that the Navy Veterans did not qualify for the exemption.

The response was handled not by Rosellini but by Samuel F. Wright, a retired U.S. Navy captain acting as counsel for the Navy Veterans. His letter, dated March 27, was under the letterhead of a Washington law firm, Tully Rinckey.

Wright wrote that the Navy Veterans had a national board that donates to groups like the USO, but it also has more than 40 state chapters, including the one in Virginia that should qualify it for the state's registration exemption for local charities.

Wright said regulators were wrong in denying the exemption, and he said IRS regulations backed him up: "As the late Casey Stengel (Major League baseball icon and World War I Navy veteran) said, 'You can look it up.' "

In the meantime, the Navy Veterans began sending cash gifts to veterans service agencies in Virginia. On May 15, 2009, Thompson's group wrote three checks, $2,500 each, to three agencies, all in Richmond, the state capital.

None of the groups solicited the gifts.

"We don't get many letters like this,'' said Dr. Joseph Wallace, whose group got a check. "It said they had reviewed our website and liked what we were doing.''

All three recipients wrote thank-you letters to "Commander Rosellini." All three notes were posted on the Navy Veterans Web site.

Wright met with then-Attorney General Bill Mims in May to discuss the exemption, but he did not get the result he wanted.

In a letter dated Aug. 18, the Consumer Protection manager informed Wright that the attorney general had determined the Navy Veterans was not exempt from state registration requirements. To solicit money in Virginia, the Navy Veterans would have to register.

More money started going to Virginia. Thompson wrote personal checks to the campaigns of six key Virginia politicians. He would give $67,500 in all.

On Aug. 19, Thompson contributed $500 to Cuccinelli, a lawyer and conservative-minded state senator running for attorney general, whose office might be asked to interpret or enforce the new law. Thompson already had given Cuccinelli $5,000.

On Aug. 27, the Navy Veterans general counsel, Ohio lawyer Helen Mac Murray, wrote to the Consumer Protection office. "While we disagree with the conclusion," she wrote, the group's Virginia chapter would not be filing any registration forms. The group "has suspended all solicitation in Virginia."

On Aug. 31, Cuccinelli got another check from Thompson, this one for $50,000, for a total of $55,500. Thompson, who was living in a $600-a-month duplex in Tampa, was the second highest individual contributor to Cuccinelli's campaign for Virginia attorney general.

Asked why the chapter stopped soliciting funds in Virginia, Mac Murray said via e-mail that her client stopped fundraising there because it believed the attorney general's opinion "was not legally correct."

Mac Murray also was asked about Thompson's contributions to Virginia politicians.

She replied that Thompson's "support of political candidates is personal to him and frankly, is none of anyone's business why he supports who he does.'' She added that "not a single dollar" of Navy Veterans funds "has ever been used to support a political candidate."

The political solution

The Navy Veterans opened another front in its efforts to avoid Virginia's charity registration requirements.

The nonprofit group hired three lobbyists to see that Virginia passed a law that would exempt the charity and others like it from having to register. Their rationale was that the veterans group deserved the exemption it had enjoyed for so long and shouldn't be hamstrung by the usual reporting requirements.

The lobbyists were Wright, special counsel to the Navy Veterans; J. Kenneth Klinge, a consultant of JKK Associates who once served as executive director of the Virginia Republican Party; and Edward E. Cain, whose Minnesota company, Legislative Associates, is a consultant for the Navy Veterans group.

On Nov. 30, Wright wrote Sen. Ticer, saying he represented Commander Bobby Thompson, and mentioning Thompson had supported Ticer's campaign. Wright said Virginia regulators had treated Thompson's group unfairly.

Later, Wright met with Ticer and asked her to sponsor a bill that would exempt the Navy Veterans and other veterans groups from registration requirements.

"Wright came to me and asked me to do it,'' Ticer said. "I thought it was a benign little bill for veterans. In my mind, it was like the American Legion or something."

Lobbyist registration records list Rosellini as the contact person for the Navy Veterans in Virginia. The Times could not find any trace of him. The phone number listed for Rosellini is Wright's cell phone number.

Wright, now an attorney for the nonprofit Reserve Officers Association, declined to comment. Cain did not return phone messages.

Klinge said Wright recruited him to help shepherd the bill through the General Assembly. He said he forwarded to the governor the Times articles that questioned the legitimacy of the Navy Veterans group. And he said it was "none of your damn business'' how much the nonprofit paid him to lobby.

The governor signed Ticer's bill April 12.

The Roanoke Times published a story connecting the dots between Thompson's political contributions and the push to change the Virginia law for veterans group registrations. Reporter Dan Casey said it began with a routine review of contributions to Cuccinelli, who has made national news for asking the EPA to review its ruling that greenhouse gases endanger the public health and for telling Virginia colleges they could not include sexual orientation in nondiscrimination policies.

The Roanoke paper's review took off after learning that officials in states from Hawaii to Florida are investigating the Navy Veterans group, run by Thompson, Cuccinelli's mysterious Florida benefactor.

On May 10, a letter from Rosellini was sent to Virginia officials saying "it is now even clearer" that the group's Virginia chapter is entitled to a registration exemption.

The Rosellini letter included a tax return for 2009, listing Thompson as chief financial officer and showing the Navy Veterans took in $2.6 million in Virginia in just the six months before fundraising was suspended.

The tax papers say the charity provided $7,500 in cash grants to three agencies in Richmond last year and $1.6 million in "direct assistance" to unspecified veterans, military personnel or their families.

The tax return said the Navy Veterans volunteers provided services and counseling to 2,204,405 Virginia residents last year, which averages out to providing free services to more than 6,000 Virginians a day, all 365 days of 2009.

In the letter, Rosellini asked state regulators what his group needed to do to begin fundraising again, adding, "The Virginia chapter would like to make a 'fresh start' with you.''

Jeff Testerman can be reached at (813) 226-3422 or testerman@sptimes.com. Researcher John Martin can be reached at (813) 226-3372 or jmartin@sptimes.com.

The players

Bobby Thompson

Calling himself a former U.S. Navy lieutenant commander, Thompson founded the U.S. Navy Veterans Association in Tampa in 2002. After the Times began looking into his group last year, he cleared out of the Ybor City duplex he had rented for a decade and left his landlord no forwarding address.

Patsy Ticer

A five-term Democratic state senator from Alexandria, Ticer sponsored a bill granting an exemption to the Virginia law requiring charities to register and file financial reports. She asked the governor to veto her own bill after an anonymous e-mailer sent her the stories questioning the legitimacy of the Navy Veterans group.

Ken Cuccinelli

Elected attorney general of Virginia in November, the conservative Republican made headlines with actions on gay rights, the environment and health care. Cuccinelli, whose office would rule on the constitutionality of new bills, received $55,500 in contributions from Thompson last year.

Samuel F. Wright

A retired U.S. Navy captain, Wright has devoted much of his career to veterans rights. He is special counsel to the Navy Veterans and lobbied for a bill that exempts the group from filing registration papers. He is an attorney at the nonprofit Reserve Officers Association.

Helen Mac Murray

Former chief of the Consumer Protection Section of the Ohio Attorney General's Office, Mac Murray is general counsel for the Navy Veterans association. All questions to the group and answers are routed through her law office in New Albany, Ohio.

The story so far

In March, the St. Petersburg Times published "Under the Radar," stories that questioned the legitimacy of the U.S. Navy Veterans Association and examined more than $180,000 in political contributions from the nonprofit's mysterious founder, Bobby Thompson.

The group claims 41 state chapters, 66,939 members, and annual income in excess of $22 million. But its officers, members and auditors were nowhere to be found. Its charitable gifts are mostly undisclosed and unverifiable.

Some state regulators have since opened investigations. The New Mexico attorney general determined the charity's officers were "fictional'' and ordered the group to cease operations there. Hawaii told the group to stop fundraising. Florida opened two investigations, by the attorney general and by the consumer services division.

This week, U.S. Sen. Jim Webb, a Virginia Democrat who was secretary of the Navy under President Ronald Reagan, asked the Department of Veterans Affairs why the Navy Veterans was on the VA website list of recommended veterans service organizations. The VA removed the name and promised to review its procedures for screening the service organizations it lists.

Why it matters

A nonprofit certified tax-exempt by the IRS, the U.S. Navy Veterans Association pays no taxes on the millions of dollars of donations it receives, and it's required to disclose how it spends its money. The group doesn't do that. It lists a few cash grants but refuses to document where the other 99 percent of its money goes.

Most states and most philanthropic groups believe trust in charities is built upon openness and transparency. The Navy Veterans has endeavored to keep its records secret, leaving the public unable to make informed decisions on giving.

Nonprofit under investigation wins registration exemption in Virginia 05/21/10 [Last modified: Wednesday, May 26, 2010 12:26pm]

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