Attorney General: Company Raising Funds for Local Police Unions Operating Unlawfully

A for-profit fundraising company that sent out letters on behalf of the Sierra Madre Police Officers Association last month has been operating unlawfully and has failed to register as required by state law, the California Attorney General's office confirmed to Sierra Madre Patch.

The company, New Equity Productions of Newport Beach, also handles fundraising efforts for police unions in neighboring cities, including Arcadia, Monrovia and South Pasadena. The Attorney General's office confirmed that New Equity has allowed its registration to lapse and was therefore operating illegally.

In response to Patch's inquiry, Candy Hetherington, an analyst from the Registry of Charitable Trusts department of the Attorney General's office, sent a strongly worded letter to New Equity president Andrew J. Howitt stating that his company was in violation of the Supervision of Trustees and Fundraisers for Charitable Purposes Act, which requires fundraising professionals to register and file annual reports with the Registry. A copy of the letter is attached to this article.

"We've sent them a letter notifying them that they are out of compliance," said Kate Gibbs of the Attorney General's office. "We hope that they comply. If they don't, and we have evidence that [they] are in fact soliciting in California, then we will send a cease and desist letter." The letter further states that solicitation of donations by an unregistered commercial fundraiser is "in violation of California law [and] is grounds for civil action, including injunctive relief and civil penalties."

New Equity's lawyer, Grant Reader, said in a telephone interview that the lapsed license was "a clerical oversight" and that the firm would be moving to regularize its legal status.

Patch's inquiry was prompted by letters sent by New Equity to Sierra Madre residents last month soliciting donations on behalf of the Sierra Madre Police Officers Association. The letter was signed by the association's president, police Sgt. Ken Berry.

One concerned resident sent a letter of their own to the Sierra Madre Tattler blog, calling the solicitation "a shakedown" and questioning the solicitation's claim that any funds raised would help the police union "provide outreach and strengthen relations by and between the SMPA and several local worthy groups and charities."

For its part, the Sierra Madre Police Officers Association has been unable to cite specific examples of what charitable activities will be funded by Sierra Madre residents' donations.

New Equity's registration expired and has been delinquent since Jan. 15, 2008, according to documentation from the Attorney General's office. Though the paperwork shows their license to have expired on Jan. 31, 2008, spokesperson for the office Kate Gibbs said that "New Equity's registration expired on Jan. 15, 2008 and it has not registered since."

Nevertheless, the New Equity Productions website, which advertises the company as "The Good Guys" and says they "specialize in POAs" and work exclusively with police associations, deputy Sheriff associations and firefighter associations, still displays prominently an assurance that the company is "registered with the state Attorney General."

Berry, president of the Sierra Madre Police Officers Association and sole signatory to the solicitation letter, told Patch that he had inherited the relationship with New Equity when he was selected as president of the officer's union and that the relationship had been set up by a previous SMPOA president.

How much money does New Equity take in?

Asked what percentage of donations would be returned to the union, Berry said he did not know, adding that the relationship between New Equity and the SMPOA preceded his presidency of the union.

Phone calls to the New Equity headquarters were handled by a man who refused to give his name but identified himself as the company's owner. He told Patch that while he would not reveal just how much of every donated dollar the organization returns to the communities in which it's raised, it is "the lion's share."

In general, reports filed by for-profit companies who solicit donations on behalf of unions and nonprofit organizations reveal that "only about one-third of the total dollars collected by the commercial fundraisers in California actually go to charities, with about 30 percent of the campaigns netting nonprofits 15 percent or less of the total revenue," according to the state.

In fact, a section of the DOJ website dealing with what it terms "commercial fundraising" companies maintains that historical data show these companies return, on average, less than 50 percent of the contributions to the charity. Perhaps for this reason, the DOJ says that most of the more than 80,000 charities registered with the Attorney General do not use commercial fundraisers to solicit donations.

Though no reports dealing with commercial fundraising and the Sierra Madre Police union were available, a report filed with the Attorney General detailing a New Equity fundraiser for the San Jose Police Officers' Association Charitable Foundation showed that New Equity returned only 34 percent of the total funds raised back to that organization.

The fundraising drive held between 2007 and 2008 collected a total of $160,794.57, of which $54,973.24 went to the San Jose Police union, according to a 2008 report filed with the Attorney General. The report lists only two items to account for the $105,821.33 difference: $29,473.85 for "fees or commissions" and $76,347.48 handwritten into the "other" category as "mail production." The report was signed by Andrew J. Howitt, President and CEO of New Equity, and dated Jan. 29, 2009.

The state Department of Justice calls the use of so-called commercial fundraisers an  "individual choice," but warns that, historically, "use of a commercial fundraiser has meant higher costs for a charity."

What charities will local contributions support?

Again, Berry was unable to provide specifics. In a telephone interview, he maintained that whatever cash is returned to the association would go to local charities. What specific charities would be supported, however, are still yet to be decided, he added.

Correction: An earlier version of this story incorrectly spelled the first name of Candy Hetherington, an analyst from the Registry of Charitable Trusts department of the Attorney General's office. Patch regrets the error.