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Are Charity Regulator Investigations of 9/11 Charities Illegal?

The Chronicle of Philanthropy covers the Associated Press report that New York and Arizona are investigating 9/11 charities that may have failed to “keep promises to create memorials or contribute to 9/11 causes.”

AP reports that “New York Attorney General Eric Schneiderman’s office said state lawyers are conducting their own ‘broad review’ of 9/11 charities to make certain that all documentation [for the charities] is in order and that all rules on fundraising and public disclosure are being followed.”

There are, of course, many charities that have noble ambitions, but fail to meet them.  Failure is not unlawful.

Fraudulent fundraising would be unlawful.  Charity regulators justify their jobs by claiming they are needed to prevent fraud.

Through charitable solicitation registration laws, states and their regulators have created a maze of prior restraints on fundraising communications that are protected by the First Amendment.  Instead of being used to prevent fraud, charity regulator enforcement is mainly targeted at those who fail to comply with the registration laws themselves.

So what are the purported unlawful acts that form the bases of these New York and Arizona charity regulator investigations of the 9/11 charities?

Conversely, are these charity regulators violating the law?  State investigations of charities that do not meet the requirements of Fourth Amendment protections against unreasonable searches and seizures may be unlawful.

The Fourth Amendment has procedural requirements that must be met before government officials may search charities.  These include probable cause supported by oath or affirmation, “and particularly describing the place to be searched, and the person or things to be seized.”

The New York statute authorizing charity regulators to conduct searches, Estate Powers and Trust Law 8-1.4(i), appears on its face to violate the Fourth Amendment:

(i)   The   attorney   general   may   investigate   transactions  and  relationships of trustees for the purpose of determining whether or  not  property  held  for  charitable  purposes has been and is being properly  administered. The attorney general, his or her assistants, deputies  or  such other officers as may be designated by him or her, are empowered   to subpoena  any  trustee,  agent,  fiduciary,  beneficiary,  institution, association or corporation or other witness, examine  any  such  witness  under  oath  and,  for this purpose, administer the necessary oaths, and  require the production of any books or papers which they  deem  relevant  to the inquiry.

The New York statute has no requirement of cause supported by oath or affirmation, nor does it require particularity of what is to be searched.

Searches conducted pursuant to that statute should be considered unlawful.

The statements by the New York and Arizona AGs’ offices described in the AP story are troubling from a number of perspectives.  Charity regulators typically claim — at least when they are asked for information — that investigations are confidential.

Here, the charity regulators have gone public.  They have placed a pall on fundraising by 9/11 charities.

Secondly, the Fourth Amendment requires narrowly tailored searches, but the New York charity regulators admit they are engaging in a “broad review.”  Are their subpoenas and demands for documents too “broad?”

I just renewed our New York registration and paid the $800 annual registration fee.  Registration is expensive enough for entities that are solvent.  Charity regulators help suck the life out of charities through burdensome, expensive registration requirements.

If this is simply a matter that the 9/11 charities did not raise enough money to accomplish their intended big dreams, then these charity regulator investigations are a farce.  It is unlikely these 9/11 charities will have enough money to hire lawyers to sue charity regulators in the event the regulators break laws and violate rights.  But that’s what charity regulators rely on.

1 comment to Are Charity Regulator Investigations of 9/11 Charities Illegal?

  • I agree with your take here- AG in Arizona does not have general policing authority over charities. They can only investigate where there is fraud or violation of some other law under their jurisdiction. The Arizona charity cited in the AP article raised its funds from sales of t-shirts. Everyone who paid for a t-shirt got it. Thus, no fraud and no jurisdiction. I’m also disturbed that nonprofits are encouraged to thing big and set “big hairy audacious goals” and then the media accuse them of fraud when the fail to reach them. The AP purportedly reviewed over 300 911 charities for the article and the entire focus of their article was three that didn’t accomplish what they set out to rather than the 297 that apparently passed their scrutiny. The story should have been about the amazing work accomplished by the 297 not the 3 that fell short.

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