This $300 Million Charity Fraud Has Almost Everything. No Sex Yet!

by Gary Snyder

The head of the local Fraternal Order of Police union and the commander of a St. Augustine-based veterans organization were among those caught up in a national racketeering investigation.

Allegations against Allied Veterans include money laundering, using money from a nonprofit for personal gain and misrepresenting the amount donated to charities. 

Investigators applied to search 51 locations in Florida, from Yulee to Naples, according to the warrant application filed in U.S. District Court in the Western District of Oklahoma. Most of the locations were current or former sites of sweepstakes centers operated by Allied Veterans.

Allied Veterans operates dozens of First Coast sweepstakes centers, which have long been at the center of controversy about their legality, both locally and in Tallahassee.

The warrant application said Allied Veterans claimed it was a member of the Veterans Administration and that 70 percent to 100 percent of the profits were used for charitable purposes. However, authorities said, the centers are actually gambling operations, with charitable purposes getting just 2 percent of the $290 million earned from 2007 to January 2012. Charities are considered to be operating effectively when they spend at least 60 percent on programs.

Instead of raising funds to benefit charities, investigators said, the primary purpose of the sweepstakes centers was to make a profit of at least $250 million for Allied, International Internet Technologies and other for-profit companies and their owners.

Investigators said the centers transferred money to Allied Management, a wholly owned subsidiary of Allied Veterans. The subsidiary then moved the money through other entities and used it for improper purchases, including buying property for former president Johnny Duncan.

Although federal law prohibits individuals from unreasonably benefiting from charities, the warrant application says Duncan received more than $1.5 million and Bass more than $250,000 from the organization. Both men also used money to purchase condos, commercial buildings and homes, including two parcels in St. Augustine. One of those properties houses Allied’s headquarters.

Update: The national probe of a Florida-based non-profit that operates a chain of internet cafes has led to the arrest of several of the organization's leaders and the heads of Jacksonville's police union. Lt. Gov. Jennifer Carroll owned a firm that once handled public relations for the company, Allied Veterans of the World. Now, Lt. Gov. Jennifer Carroll abruptly resigned Tuesday after law enforcement officials questioned her about ties to a purported veterans charity at the center of a $300 million illegal gambling investigation.

Florida law enforcement officials would not say whether Carroll is facing possible criminal charges in connection with the case. 

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)