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Illinois is committing charity fraud according to . . . Illinois

The Nonprofit Quarterly reports that the State of Illinois has “borrowed” nearly $1.2 million in funds donated to charities through the state’s tax return check-off system. That was money designated by taxpayers to go to charities, and I am anxious to see whether the check-off option the state gives to taxpayers comes with a disclosure statement that the state reserves the option to use the money for itself.

Because if the state didn’t disclose that information, wouldn’t that constitute fraud? According to Illinois charity officials, it should.

You may recall that the most recent major U.S. Supreme Court case involving charity regulators was brought by the Illinois Attorney General. The case, Illinois ex rel. Madigan v. Telemarketing Associates, Inc., was brought because a telemarketing fundraiser did not disclose the costs of its fundraising to prospective donors. The Illinois AG claimed this nondisclosure induced donors to conclude that the money was going directly to the charities, ignoring the fact that the fundraiser was to be paid. The Illinois AG (joined by other state charity regulators as amici) lost on First Amendment grounds consistent with a line of precedent that high fundraising costs do not constitute fraud. Charity regulators still fume about this. They can’t seem to comprehend this First Amendment thing, and try to cheat around it.

Here, it seems, the State of Illinois is engaging in far worse conduct. They’re taking money intended for charities, and they don’t even have the costs of fundraising to pay for. If the State of Illinois didn’t disclose to taxpayers that their check-off contributions could be used by the state, isn’t that fraud under the theory advanced by Illinois itself? Unlike charities raising money on their own or through paid agents, Illinois doesn’t have the First Amendment on its side. It took money intended for charities. It’s a Bernie Madoff situation.

Lisa Madigan is still Illinois’ Attorney General. Let’s see how quickly she descends on her own state for this fraud.

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