Personal Finance

When disasters hit, charity scams follow

Natural disasters often inspire people to donate money to relief efforts. But where money flows, con artists routinely pop up and establish fraudulent charities to accept donations from unsuspecting donors. That's likely to be the case with the May 20 tornado that scraped parts of Moore, Okla., to the ground, killing at least 24 and destroying thousands of homes.

As a result, experts say the best advice for people wanting to help is to donate to established nonprofits after verifying their identitiers and track record. Be skeptical of pitches from groups you have never heard of or that refuse to provide you with documentation that proves who they are.

"When there is a disaster that is highly publicized, people want to help, but sometimes they let their emotion guide them rather than their brains," says Daniel Borochoff, president and founder of CharityWatch , which evaluates charities on behalf of donors.

There are plenty of government agencies and watchdog groups that help deter scammers. State attorneys general and the Federal Trade Commission typically send out lists of tips to avoid getting conned and set up hotlines to report suspicious requests for charitable giving. They also advise being wary of contractors who move in after a disaster to assist with home repairs.

Burden falls on you

But with so many ways to communicate nowadays -- such as with smartphones and social media -- much of the burden to avoid fake-charity scams falls on individuals. For instance, donating via text messaging is becoming more popular, because people perceive it as being easy and quick. But verifying who gets the money when you text is trickier than donating by credit card or check.

Social media could also be a charitable landmine, Borochoff says, because people might pass along information to friends without anybody vetting it.

"People make the false assumption that something is legitimate because they get it passed on from a friend, who was duped," he says.

Katherine Hurt, spokeswoman with the Council of Better Business Bureaus , a consumer organization, says scammers have evolved to incorporate new technologies.

"It's gotten more sophisticated," she says. "It's really easy to create a real-looking charity. You can have a sophisticated website, robocalls, all kinds of things that look like a real charity and sound like one."

For example, after a tornado hit Joplin, Mo., in May 2011, killing 158 people and destroying more than 7,000 homes, Missouri's attorney general sued a Puerto Rican organization called Alivio Foundation Inc., which he said fraudulently solicited donations on its website using PayPal. The foundation claimed the donations would be used to assist survivors and relatives of tornado victims in conjunction with St. Peter The Apostle Catholic Church and Catholic Charities of Southern Missouri, the attorney general's office said. But neither the church nor Catholic Charities had ever heard of the Alivio Foundation. The company had received nearly $10,000 in donations intended for tornado victims.

The Missouri attorney general also sued an Internet radio personality in Georgia, who raised nearly $5,000 selling "Storm-Aid" T-shirts and setting up benefit concerts aimed to help tornado victims. The money never went to tornado victims, the suit alleged.

Missouri won judgments in both cases.

Take the time to use your head

Lindsay Nichols, a spokeswoman for GuideStar , which compiles information about nonprofit organizations, says the critical step in donating to help after a natural disaster is not acting in haste. Resist any high-pressure tactics or requests for cash now.

"The process to make sure they're not giving to a scam is taking a few minutes to research," she says. GuideStar provides a wealth of information about charities, including estimates of their overhead and fundraising costs and links to federal tax filings.

But even using a search engine such as Google or Bing can go a long way toward answering key questions, such as: What charities are doing relief work in this area? Where is help needed most?

A charity's website might also include an annual report, which offers details about its programs and its mission. People can evaluate those to ensure their money is headed where they want it to go.

"They should say clearly what they do," she says. "If you don't understand it, don't give to it."

And in the end, she says, the decision on whether to give should come down to a gut feeling.

"Trust your instincts," Nichols says. "If it doesn't feel right, don't do it. If you don't feel good about it, there are too many nonprofits out there that would make you feel good about your donation."

See related:Giving charity gift cards? Mind the fine print

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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