Senate Select Committee - XXXVIII

Reward Offers

Commencing as early as the 1960's the U.S. Government provided its servicemen in Vietnam with "blood chits" which were documents promising a reward for the safe return of the serviceman to U.S. authorities. The "blood chits", which were written in local languages, were to be used by American servicemen to secure their release in the event they were captured. In addition, in the 1970's the National League of Families endorsed the use of rewards to encourage the release of POWs.

Since the mid-1980's several highly-publicized reward initiatives have been undertaken. Some believed that the most effective way to return a live POW would be to offer a financial incentive to those who might be able to help an American escape. To date, nobody has collected publicized rewards by producing a live POW. DIA and others have suggested that these reward offers have fostered the dissemination of false POW information by those who believe they will eventually be rewarded.

In 1987, out of frustration, 21 members of Congress, including Sen. Bob Smith, the Committee's Vice Chairman, and Committee member Sen. Hank Brown joined with McDaniel's American Defense Institute (ADI) in pledging a reward totalling $2.4 million for the release of an American POW from Southeast Asia. The reward was to be for the release of a POW to U.S. authorities, and not for information about POWs, or for rescue/reconnaissance missions. Under its terms, the reward could only be paid to persons indigenous to Southeast Asia.

On January 23, 1988, the ADI launched "HOME FREE!/The Committee of 40 Million," a campaign to raise $1 billion, that would be enough rewards for more than 400 POWs, through pledges of $25 each from 40 million Americans to serve as a reward for the release of American POWs from Southeast Asia.

Also in 1987, Hendon, who worked for ADI, signed a solicitation letter which sought to raise $500,000 in order to publicize a $1 million reward (in gold) in Southeast Asia. The fundraising letter stated in part:

I can clearly picture some impoverished prison guard in tattered fatigues, enticed by the offer of a huge reward, escaping with his family and one of our men. Can't you just picture that too?

We're ready to buy time on Vietnamese language radio stations in the Philippines and elsewhere in Southeast Asia to broadcast news of the reward. We'll be placing full-page ads in every Vietnamese language paper and magazine we can get our hands on.

We plan to purchase 10,000 copies--in the Vietnamese language--of hit movies like Rocky, Indiana Jones, and Kung Fu, and intersperse our reward offer into the videotapes. . .

In August 1988, Hendon announced that the ADI would open an office in Thailand to spread the news of the reward, due to the difficulty they had encountered in securing advertising time. "You just can't buy any news ads in the Hanoi daily. . . ,"Hendon explained.

In 1989, Hendon, through the POW Publicity Fund, sought to publicize the $2.4 million reward by launching helium balloons from a boat in the South China Sea. Each balloon was to carry a message in Lao and Vietnamese, sealed in a Zip-Loc bag. The POW Publicity Fund ran a series of advertisements to raise money for this endeavor.

Hendon also planned to launch balloons into Laos and Thailand, across the Mekong River. When Thai officials refused to permit this on the grounds that it might damage Thai-Lao relations, Hendon and his group obtained permission to float the rewards offers down the Mekong River instead. Several POW/MIA family members travelled to Southeast Asia to assist in the distribution of the reward offer. DIA, however, opposed the reward offer, claiming that it fostered bad information.

Others also have criticized the ineffectiveness and negative impact of reward offers. Gritz testified that:

Very frankly, the Lao people would not know what to do with a million dollars. They're living in a land of communism. They can't have it. They wouldn't even conceive what a million dollars would be. That's 26 million baht. They're happy to have 20 baht [approximately one dollar]. So those kind of figures don't translate over there. . . .

. . . high rewards are not the name of the game. It doesn't work. It doesn't compute to real terms. And so that one, and then Hendon's $2 million where the Congressmen all got together -- it could be $2 billion. It wouldn't -- well, as a matter of fact, maybe $2 billion, the Vietnamese Government might decide or the Lao may decide hey, now we're talking turkey here, and they would be willing to exchange prisoners for that amount of money. But those kind of things, as far as I'm concerned, never helped over there. They only hurt the operation there.

The Committee notes, however, that Gritz' is not the only opinion on the issue. Family members who travelled to Southeast Asia with Hendon to assist in the distribution of the reward offer hold different views.

Fundraising

In stark contrast to the vast majority of volunteer POW/MIA organizations, stand a few private organizations who solicit money from millions of American households. In response, the American public has contributed tens of millions of dollars to the POW/MIA cause since Operation Homecoming. In many instances, however, well over half of the money raised was spent on fundraising. This exorbitant rate, while not illegal, would certainly come as a surprise to those who contribute and is inconsistent with standards set by nationally recognized organizations which monitor the fundraising activities of public charities.

Congress, Government officials, POW/MIA families and members of the public and others have raised questions about the propriety of fundraising activities conducted by the handful of POW/MIA organizations which raise millions of dollars with the help of professional fundraisers who have a financial stake in campaign's success.

The Committee found that professional fundraisers created solicitation materials designed to maximize the emotional impact of the POW/MIA issue by stating that POWs remain alive in Southeast Asia and by stating that for a few dollars more, a private organization can rescue them. In virtually every case, materials relating to the existence, identity and location of POW/MIAs and attempts to rescue them were held out as factual but were based on circumstantial and hearsay evidence far weaker than claimed. Solicitations to millions of potential donors consistently omitted critical facts about the failure to actually locate and/or repatriate any POW after Operation Homecoming such as, in one case, the fact that the boat used in the operation had not left port for three years.

These materials were misleading -- not because they asserted that POWs remain alive in Southeast Asia, but because they failed to disclose critical information including that the reported information was usually second and third-hand rumors.

The Committee's investigation was hampered by the refusal of the most active fundraising organizations to cooperate, in particular when it tried to verify statements made in the fundraising appeals of Account for POW/MIA, Inc. (Skyhook II), Operation Rescue, Inc., American Defense Institute, Inc., Homecoming II, Inc., and Veterans of the Vietnam War, Inc. The Committee did not seek court orders requiring these witnesses' testimony because most fundraising information was available from their professional fundraisers and tax forms that non-profit groups are required to file.

Amounts Raised

Operation Rescue, Inc. reported on federal tax forms that during the period 1985 through 1990 it received $2,283,472 in contributions; spent $2,028,440 on fundraising expenses and $312,125 on program expenses. According to Operation Rescue's own figures, its fundraising expenses constituted 88.8 percent of contributions.

Veterans of the Vietnam War, Inc, reported on federal tax forms that from 1983 through 1990, it raised $11,366,557 in contributions. For years in which it filed relevant information regarding its fundraising expenses, they ranged from 28.1 percent to 42.8 percent of its contributions.

Skyhook II (Account for POW/MIAs, Inc.) reported to the IRS that from 1988 through 1991 it raised $1,528,223 in contributions and had fundraising expenses of $395,327. However, information contained in these tax forms can be misleading. For example, information obtained from Skyhook II's fundraiser revealed that from 1987 through late 1992 the fundraiser collected $1,897,730 in contributions on behalf of Skyhook II and retained $1,678,890 of that amount. Thus, Skyhook II actually received only $218,839 of the $1.9 million raised. The fundraiser's figures show that the organization actually received only 25.8 percent of the money raised.

Homecoming II reported to the IRS that it paid Ted Sampley, its founder and the publisher of U.S. Veteran News and Report, more than $300,000, ostensibly for t-shirts sold at Homecoming II's stand at the Vietnam Veterans Memorial in Washington, D.C. Sampley has fought all efforts by the National Park Service to stop merchandising the t-shirts and other merchandising on national park property, and at publication time was involved in a lawsuit over his right to use the picture of the memorial statue without paying the artist. Another lawsuit, against the National League of Families, also is pending. Despite promises of cooperation, Sampley refused to provide financial records to the Committee for his tax-exempt organization.

The Committee notes with concern that its survey of amounts raised by various POW/MIA organizations was hampered by the unwillingness of some POW/MIA organizations to disclose their financial information to the Committee.

Professional Fundraising Techniques

In their depositions before the Committee staff, professional fundraisers consistently stated that for a fundraising appeal to be successful, it must be based on a current event and it must have a strong emotional appeal.

The POW/MIA issue clearly meets both of these criteria. Indeed, the POW/MIA issue was exploited by fundraisers who, recognizing its income potential, actively sought out, and sometimes even created POW/MIA groups. For these fundraisers, this activity offered an opportunity to expand their client base. The business of raising money typically involves the creation and use of mailing lists (for direct mail campaigns), and phone lists (for telemarketing campaigns) which identify potential donors who statistically can be determined to be susceptible to the particular charitable appeal. For example, in the case of raising funds for POW/MIA organizations, professional fundraisers have determined that females over the age of 50 are the most likely demographic group to donate.

Contracts between professional fundraisers and their clients typically give the fundraiser sole responsibility for designing solicitation materials or scripts; the client's role is to review and approve these materials or scripts.

Solicitation materials used by professional fundraisers on behalf of POW/MIA organizations frequently include petitions which the prospective donor is asked to sign and return; a representation is generally made that the petition will be presented to the Congress, the President or some other government official. These petitions are called "engagement devices" because they seek to actively engage the prospective donor in the cause associated with the solicitation. Frequently, these engagement devises were not delivered as promised but rather were used to expand the client's potential donor list. In at least one case, these engagement devices were routinely discarded or warehoused.

Operation Rescue, Skyhook II and Vietnam Veterans of the War all used such engagement devices, but paid little attention to the petitions, concerning themselves only with the money which often accompanied the petitions.

Once solicitations are prepared and approved by the client, they are routinely mailed to hundreds of thousands of persons, at bulk rates available to charitable organizations. In the case of telemarketing campaigns, thousands of telephone calls are placed. Contributions from as few as 2 percent of those solicited by mail can be deemed successful. For telephone solicitations the figure is somewhat higher.

In some instances, fundraisers and charities will engage in "prospecting" appeals, at a financial loss to the charity (but not to the fundraiser), in order to generate a list of known contributors. Donations are expected to exceed expenses as the known contributors are subjected to repeated, urgent solicitations for money. Because the professional fundraiser's profits are considered expenses of the prospecting appeals, it is possible for the professional fundraiser to earn a profit even when donations from a particular campaign do not exceed expenses. The fundraising materials and scripts used by various POW/MIA organizations typically contain themes designed to have maximum emotional appeal. One common theme is that the group is on the verge of rescuing a POW and if the recipient does not send money promptly, boys who have survived against all odds for 20-plus years will die. For example, the following are sample statements contained in direct mail solicitations of the American Defense Institute:

It is important to get American People to support action to rescue our POW hostages.

Too many years have passed now for us to let our men languish in torture cages any longer. Our national honor hangs in the balance.

I promise to tell all of our hostages, when they are finally freed, of the vital role you played in their release. I wish you would write a brief note on the enclosed donation card, which I will personally hand to the first man to regain his freedom.

Samples of statements contained in direct mail solicitations sent out on behalf of Operation Rescue, Inc.:

If I can't raise $13,671.77 by October 31, vital intelligence gathering cannot continue.

You may wake up tomorrow morning and hear that the first American POW has been rescued. We are that close.

Those of us here have only until December [1987] to get them out. After that, no telling what the savage communists might do.

We are very, very close to freeing one of our valiant Americans.[December, 1988]

Samples of statements contained in direct mail solicitations sent out on behalf of Skyhook II:

We're close to making contact with an American POW who has been alone since his fellow prisoner died of natural causes less than a year ago. That effort could fail for lack of funds. [This quotation is part of a letter that Skyhook II mailed one time to its donors in March, 1987.] They relocated the 17 we were trying to contact. [This quotation is part of a letter that Skyhook II mailed to its donors one time in March, 1987.]

If enough concerned citizens respond . . . we should gain the $64,300 we need to launch a carefully planned mission . . . built around a small elite force. . . . [This quotation is part of a letter that Skyhook II mailed to non-donors in March and September, 1988.]

We must move quickly before they get word of us and force-march the POWs . . . Timing is critical to make sure Papa has the financial backing to rescue the first POW. [This quotation is part of a letter that Skyhook II mailed one time to its donors in April, 1988.]

Operation Rescue, Inc.

Operation Rescue employed Eberle and Associates as its professional fundraisers from 1983 through 1986. Bruce Eberle is the chairman of the board and a majority owner of Eberle & Associates, a Vienna, Virginia based direct marketing company which provides fundraising services to nonprofit and for profit organizations. Linda Canada, an employee of Eberle & Associates, and handled Jack Bailey's Operation Rescue, Inc. account.

In approximately three years Eberle prepared more than 40 solicitations on behalf of Operation Rescue and mailed them to hundreds of thousands of potential donors at bulk rates. They brought in contributions of approximately $2 million.

According to Eberle, the basis for the representations in the solicitation letters came from Jack Bailey. Eberle believed Bailey, although he had no more than Bailey's word that POWs were alive and suffering from malnutrition.

Canada designed most of Operation Rescue's solicitations from 1984 to 1986, sending solicitation letters along standard emotional appeals to Bailey for his approval before disseminating them to the public. She never questioned the reliability of Bailey's statements and told investigators that she could not provide the Committee with any facts to back up her statement in a 1985 solicitation that "men are in terrible shape. Their time is running out."

In a 1986 letter, Operation Rescue told potential donors that unless it received $13,671.77, vital intelligence-gathering missions might have to be stopped. If those missions did not continue, there was no hope for the return of POW/MIA's held captive in Vietnam, the letter stated.

In April, 1985 solicitations stated that Bailey had just returned from an intelligence-gathering mission and confirmed the location of live American POW's. The solicitation stated that the men were in terrible shape and their time was running out. The solicitation was designed as a "Post Gram" stating that Operation Rescue had more evidence of live Americans. This Post Gram and another solicitation purporting to be a copy of a letter written by Bailey while aboard his rescue ship, the Akuna II in the South China Sea, were not what they appeared to be.

These scenarios were concocted by Bailey's fundraisers. A memorandum dated April 2, 1985 from Eberle to Canada laid it out:

In addition to the two fundraising appeals which I drafted today, I have an idea for three more packages on behalf of Operation Rescue. Here they are:

1. Some sort of an international cable gram sent from Thailand to the donor describing the "evidence" that Americans are still being held captive and the urgent need for tax-deductible contributions in support of the rescue efforts.

2. A handwritten or hand printed letter on lined note paper written by firelight during an intelligence gathering mission either inside of Cambodia or Vietnam, or at least on the banks of the river which divides Thailand and Cambodia. Same message.

3. A letter originated in Thailand, either on hotel stationery or on Akuna II stationery stating that the Akuna is in port and can't leave again unless a certain amount of money is received. Letter could even be drafted on the deck of the Akuna. Once again, this letter should either be handwritten, hand printed or typed on a portable typewriter. Same message.

Linda, obviously these are take-offs on your current package. They could be used as "challenger" packages to test against your current control package. They should be tested head to head with the control package and any other challenger packages which you mail.

During the relevant period, the Akuna never left Songkhla Harbor according to a telegram from the Department of State dated September, 1986, which quotes a letter from the Harbor Master:

. . . [the Akuna] has been anchored in Songkhla for roughly two years (Actually three), never leaving its mooring . . . The Akuna has not performed any useful service, and that it has not received maintenance for a long time. In this regard, it notes that the skeleton crew of two watching over the ship has absolutely no knowledge of how to maintain it.

The Post Gram and the handwritten letter are clear examples of misleading solicitations.

Skyhook II

Skyhook II's modus operandi is similar to Operation Rescue's. One 1985 letter claimed that POW's are starved and clad in filthy rags and airmen are kept chained in tiny bamboo cages and made to work like animals. Another 1986 letter stated that brave fighting men are treated worse than animals cooped in jungle cages. Skyhook II's materials state that these recent reports all come from refugees whose claims have been verified by lie- detector tests. In 1986, Skyhook II represented that "we are close to making contact with an American POW who has been alone since his fellow prisoner died."

Fundraising techniques used by Skyhook II included a script used by Akron, Ohio telemarketer, Infocision Management, Inc. on October 13, 1992 which claimed that:

. . . our effort to have the government admit to live POW/MIA's in Southeast Asia has been so relentless that last week the Senate Subcommittee subpoenaed our records. . . .We are now closer than ever to bringing these war heros home. . .

Additional scripts were drafted to prepare telemarketers to overcome objections by people who were on fixed income, unemployed or ill, or the widows or widowers of prior donors.

From July, 1985 through August, 1992, Skyhook II used the services of Response Development Corporation, a professional fundraising organization which has been in the direct mail business since 1945.

RDC prepared and sent solicitation letters using POW/MIA information provided by former LeBoutillier, and Skyhook II's agent in Thailand, Al Shinkle. RDC's writers never independently checked the veracity of this information, which included purported live sighting reports and photographs determined to be unreliable by DIA. However, RDC routinely collected information and media reports concerning the POW/MIA issue in order to corroborate, to the extent possible, the information provided to them by LeBoutillier and Shinkle. RDC's highly emotional, urgent appeals for money, often promised that the money raised would be used to rescue live POW/MIAs; in some cases, however, 100 percent of the money raised was used to pay debts LeBoutillier owed to RDC.

In August, 1992, RDC terminated its efforts for LeBoutillier and Skyhook II, citing a dearth of "good conservative donor files" and media attention which discounted the evidence used in the fundraising appeals before the donors had a chance to respond to them.

Of the nearly $1.9 million raised by RDC for Skyhook II, RDC kept nearly $1.7 million. Despite the fact that RDC kept 88.5 percent of the money it raised, accounting regulations allow charities to include portions of the fundraising packages into program expenses (as opposed to fundraising expense) if the package contains certain informational/educational content. This is accomplished by counting the lines of text in the letter that actually ask for money, and then calculating a percentage of the letter that is "education" as opposed to "solicitation." In this way, Skyhook II's fundraising expenses are reported as closer to 50 percent of revenue than 88.5 percent. In some solicitation packages, however, as much as 75 percent of the content was considered "program" rather than "solicitation." This technique is a standard industry practice, but unknown to the donating public.

Veterans of the Vietnam War, Inc.

Veterans of the Vietnam War, Inc. (VVnW) engaged The Creative Advantage, Inc., a professional fundraiser to prepare its mail solicitations. Marilyn Price of Fairfax, Virginia is the President and majority stockholder of The Creative Advantage, Inc., a company which provides fundraising services to national and international nonprofit organizations. She is also owner and president of Creative Management Services, Vvnw's management consultant.

Price's testimony explained how a professional fundraiser can virtually create a client. According to her testimony, Price first learned of Vvnw in the summer of 1982 by reading an article in Life magazine about veterans and their children injured by Agent Orange exposure. The article contained a photograph of Michael Milne, executive director of VVnW. Price found the Life magazine article compelling and sought to contact Milne because another client also was interested in Agent Orange.

At that time, Price was working for another fundraiser, Response Dynamics. Shortly thereafter, she left Response Dynamics and formed her own company, The Creative Advantage, Inc. Milne's organization, VVnW, was Price's client, first at Response Dynamics and then at The Creative Advantage, from 1982 until September, 1991. From 1985 through 1991, more than 2.5 million highly emotional, urgent solicitations were mailed on behalf of VVnW claiming that live U.S. servicemen were being held captive and that rescue could be achieved through VVnW. One, sent in 1991, stated:

Thanks to your support, Veterans of the Vietnam War, Inc. has sent a delegation to Vietnam to negotiate for the release of our POW's. During these meetings in Vietnam, the Vietnamese leaders told our representatives that American POW's are still alive in Southeast Asia! THEY ADMITTED IT -- FINALLY! This confirms live sighting reports collected by the other "core" groups. We're making some important progress as negotiations continue.

Marilyn Price drafted and signed a solicitation letter in January, 1991 on behalf of VVnW which stated in part:

Our representatives have been to Southeast Asia to meet with government leaders to break the deadlock. The Vietnamese have admitted that some of our men are still alive!

Another solicitation from VVnW claimed that Norwegian workers in Vietnam had seen POW's who had called out to them. In all, solicitation materials prepared by Price were sent to hundreds of thousands of Americans netting more than $11,000,000 since 1984.

In one fundraising campaign, Price of The Creative Advantage, Inc., arranged for the production and broadcast of a television commercial asking viewers to call a toll-free telephone number to get a petition to the President of the United States. They would sign and return it to VVnW for delivery to the U.S. Government to show the wide-spread desire to bring missing servicemen home. The petitions urged the Administration to "do everything humanly possible to secure the immediate release of our brave American Vietnam War heroes, held hostage in Southeast Asia, under sub-human condition."

The commercial contained footage of prisoners (taken during the war, prior to Operation Homecoming), government officials, a family member and an appeal by actor Cliff Robertson. Broadcast over the Christian Broadcasting Network and numerous cable television channels, the advertisement was extremely successful, resulting in more than 125,000 requests for petitions. Those who signed the petitions were requested to provide their addresses and phone numbers. When these petitions were signed and mailed to a post office box controlled by the fundraiser, the petitioners' identifying information was transferred to mailing lists and telephone directories for future fundraising use.

Rather than delivering these petitions to the President of the United States, as promised, VVnW simply collected and stored the petitions, adding the names on those petitions to its mailing and phone lists to be used in additional fundraising solicitations. This petition drive was little more than a way to build a list of potential donors to be subject to repeated solicitations, both to fund additional television commercials and to contribute to VVnW's "rescue" efforts.

According to an affidavit provided by Michael Milne, National Executive Director of VVnW:

1. Between 1987 and 1992 we collected 126,812 signatures on petitions.

2. These petitions were delivered to Veterans of the Vietnam War, Inc.

3. We continued to receive the petitions. We changed the name on the new petitions from "President Reagan" to "Mr. President."

4. All of the petitions we collected are stored in a Wilkes-Barre, Pennsylvania warehouse. Veterans of the Vietnam War, Inc. provided photographs of these petitions to the Senate Select Committee on POW/MIA Affairs.

In response to the Committee's request to substantiate the information in its solicitation materials, VVnW provided field reports from overseas agents, including Al Shinkle who apparently worked for VVnW after he ceased working for Skyhook II. The field reports document the thrust of some, but not all, of the statements contained in VVnW's solicitation materials.

One report, in the form of a letter dated December 10, 1989 from Shinkle to Milne, warned Milne about an agent whom Shinkle had learned was being sponsored by VVnW:

I found [the agent] to be of average or slightly below average intelligence but with a vast amount of energy and a deep-set conviction that he could collect intelligence information from inside Laos and recover living POWs better than anyone else.

During that short time frame he distinguished himself by being bilked out of a respectable sum of money by con artists (not his money, but that of another), being arrested for violating Thai Internal Security Operations command and placed on a watch-list for actions not in keeping with then current Thai foreign policy, wenching and drinking so frequently that he still has a reputation for so doing in Nakhon Phanom, Thailand.

. . . In my opinion, he is a rank amateur with some kind of personal mental problem which makes him unreliable and controllable. In short, and in words that are easily understood, he is an accident looking for a place to happen.

In July, 1989, the agent wrote a letter to Milne discussing what he had learned:

During my stay I learned more in a short time than the Government has learned in 15 yrs. I learned where many of our people are, and actually negotiated for the release of several of them. I worked with many of the agents who have been scamming Americans for yrs. but in my case we were working under a different set of rules. I worked with former Pathet Lao military personnel, and some still in the service. I worked with refugees from Laos, and Thai nationals also.

I learned that there are 253 Americans still being held in Laos, with a total of approx. 500 in all of S.E. Asia. A great number of the men being held in Laos are constantly being observed by friendly agents working for other Americans in the area, to maintain a knowledge of their presence at all times.

Another thing I learned is this, no one in S.E. Asia thinks the Government is interested in live Americans. [E]veryone, Everyone that I talked to especially from Laos is under the impression that remains are the only thing of value. This is because live Americans are not, nor ever have been mentioned in any talks or negotiations with the government of Laos.

An example of this particular case in point is this -- In 1988 a Pathet Lao soldier brought a fresh set of remains and Dog-tags to an American in Bangkok, to sell. The soldier, believing that the only value to this American POW was his remains, Killed him and cooked the flesh from the bones, bleached them, and then tried to sell them. If he had been successful and gotten a good price for them, he actually intended to kill the remaining 2 POWs in his care.

This soldier was shocked, and disappointed to learn that we wanted LIVE Americans. Negotiation are presently under away to try to gain the release of the 2 survivors. Our governments policy of remains only "caused this man's death." There is no telling how many more have lost their lives in a similar fashion.

Price also arranged for VVnW to utilize the telemarketing services of Infocision Management Corp. During its campaigns approximately 300,000 telephone calls were placed to prospective donors, using urgent, emotional appeals seeking money to rescue POWs. As part of this arrangement, Price elicited from Infocision a three- percent kickback.

In addition, Price entered into a management consultant agreement with VVnW that was to net her $5,000 a month plus 10 percent of the net income of VVnW. At her insistence, the agreement stated in part:

Expenses related to the performance of this agreement will be categorized as program expenditures [not fundraising expenses] on the client's financial statements and tax returns. Neither the existence nor the details of this agreement will be discussed by either party with any member(s) of the press.

VVnW has balked at paying some of Prices fees and was in litigation with her at publication time.

DIA's Analysis of Fundraising Solicitations

In 1987, DIA analyzed representations such as those set forth above and found that unwary potential donors might easily conclude that the organizations making those representations possessed substantial intelligence from reliable sources who were in direct contact with American prisoners of war. The little noticed report concluded in part that:

. . . nothing could be further from the truth. Some of the claims are undoubtedly the invention of the authors. . . . [F]or all their proof and untold millions of dollars raised, none of these groups or individuals have yet to furnish even the slightest shred of evidence of POW's, much less secure the return of a living American captive.

In reviewing the materials, we find they include little or no substantive data but instead are rambling discourses filled with inflammatory rhetoric.

Use of Proceeds: Fundraising vs. Program Expenses

In many cases fundraising expenses top 50 percent of the total amount donated by the public. The issue of how much money a charity should spend to raise money and whether and how the public should be informed of the high cost of fundraising has been the subject of much debate.

In 1989, the Subcommittee on Antitrust, Monopolies and Business Rights of the Senate Judiciary Committee held hearings on abuses in charitable gift giving that showed how professional fundraisers sometimes dupe well-meaning charities into contracts that result in huge consulting fees with little or nothing left over for the charitable purpose. Of concern to the Select Committee is that while professional fundraisers often raise enormous sums, very little goes to the cause. The Committee's investigation revealed that many POW/MIA organizations receive as little as 13 percent of the money generated by their professional fundraisers. Creative accounting often boosts that figure closer to 50 percent, as in the case of Skyhook II.

In at least one instance, state regulators have attempted to challenge excessive fundraising expenses. A pending civil suit in Illinois seeks injunctive and other relief against the fundraiser for VietNow, a Rockford, Illinois based POW/MIA organization. The State alleges that:

Since July 1, 1987 to the present, Defendants . . . have acted as professional fundraisers and solicited charitable donations from the public for VietNow's charitable purposes through their own acts and in concert with others in an amount of at least $1.524 million, with VietNow receiving only $224,000 (14.6 percent) in that period. . . . By taking possession and control of said charitable funds upon the Defendants' representation to the public that the funds would be used for charitable purposes, the Defendants had a fiduciary duty to fairly and reasonably deliver said funds for VietNow's purposes, but in charging the fee amounts they charged they breached their duty and defrauded the donating public.

Disclosure of Fundraising Expenses

Another concern of the Committee and others, including the National Association of Attorneys General, is what donors are told about where money donated to the cause actually goes. According to a recent law review article:

Legislatures and courts have engaged in a tug-of-war over the regulation of charitable fundraising. Legislatures have tried to control overall fundraising costs by limiting the amount a charity can spend on fundraising if it wants to continue to solicit funds. Fundraising cost limits, however, sacrifice the rights of individual charities that have high costs for good reasons. They also restrict the donating public's choice of which charities to support. The judiciary, beginning with the United States Supreme Court's 1980 decision in Village of Schaumburg v. Citizens for a Better Environment, [444 U.S. 620 (1980)] moved to protect both the rights of charities with inherently high fundraising costs to solicit funds and the public's right to choose to give to these charities. Unfortunately, following Schaumburg, the Court moved too far in protecting the rights of charities and ignored the contributors' interest in ensuring that charitable contributions be used for charitable purposes. In 1987, in Riley v. National Federation of the Blind, [487 U.S. 781 (1988)] the Court extended the striking of fundraising cost limits to include a statute that required charities to disclose fundraising costs at the time of solicitation. . .

Given the current state of the law, the public's ability to inform itself of a charity's fundraising expenses depends largely on the accuracy and clarity of information filed with the IRS. The Committee has reviewed several Forms 990 filed by various POW/MIA organizations and found that in some instances these forms are incomplete and inaccurate on their face, even when prepared by major accounting firms.

Since these charitable organizations are exempt from taxation, there is little incentive for state and federal regulators to audit them closely. This, combined with the complexities of accounting standards governing the allocation of expenses forces the public to rely on private watchdogs such as the National Charities Information Bureau.

Canada, the account executive for Operation Rescue, testified that it would undercut the success of a fundraising campaign to disclose the involvement of a professional fundraiser. A typical donor wants to believe that one person is writing to them as a donor: if the fundraiser disclosed his or her role it would "completely destroy the success of the mailing." The issue of public disclosure is an issue that states have tried to address but recent Supreme Court decision have restricted states' ability to regulate raising costs.

Price, the fundraiser and management consultant to VVnW, drafted a contract with VVnW specifying that the charity record her management fee as a program cost not a fundraising cost in their financial statements and tax returns. Such accounting measures have been a concern to not only this Committee but to the states which attempted to regulate accounting practices of the charities. In 1989, Connecticut's Attorney General testified that new accounting rules permit a charity to shift a generous portion of the cost of raising money into program services in its expense statements. This exaggerates the amount of money spent on the cause.