Each year, Fred Salanti receives a check in the mail for a few thousand dollars.
Salanti, a 72-year-old Vietnam veteran, uses the money to keep his small Redding-based charity afloat. It buys a few wheelchairs for veterans, covers student scholarships and sometimes funds a monument at the cemetery, he said.
“We’re down here scrabbling with shoestrings,” Salanti said of his charity, Victory Ensured Through Service, or V.E.T.S. Salanti said he tries to not question much in life.
V.E.T.S. is scrabbling because the money Salanti receives is a small fraction of the amount actually raised in the name of his charity. Most of the money that people donate to V.E.T.S. goes to a West Sacramento telemarketing firm 160 miles away. Veterans get little benefit from the money.
That telemarketing firm, Zagar and Associates, has consistently retained more than 90 percent of all the donations it collects on behalf of V.E.T.S., charging the charity millions of dollars over three decades, The Sacramento Bee found.
A web of tax filings, financial disclosures and legal documents show this relationship between the West Sacramento fundraiser and V.E.T.S. continued as the California Attorney General’s office, which regulates commercial fundraising outfits, did little to investigate it.
But now, investigators with Attorney General Xavier Becerra’s office have taken a step toward shutting down the charity and its telemarketer after The Bee asked about its tactics.
Becerra’s office late last week issued a cease-and-desist order to V.E.T.S. saying the charity’s registration had been delinquent for three years, even while Zagar and Associates continued soliciting donations. Prosecutors also said the charity knowingly filed false statements about its revenues for much of the past decade.
The Attorney General’s Office fined the charity $18,000 for the alleged violations and false statements. It also demanded V.E.T.S. turn over contracts with Zagar and Associates, solicitation materials, financial reports and detailed accounting documents for the past 10 years. And it suspended Zagar and Associates’ ability to fundraise in California for V.E.T.S.
“When it comes to charities moving operations from one state to another, it can feel like a game of whack-a-mole,” said Eleanor Blume, special assistant to the Attorney General. “This is not a unique strategy.”
Carl Zagar and his fundraising partner, Kurt Nielson, have operated in California since the charity’s inception in 1988, even after Oregon’s attorney general banned Zagar and Associates from soliciting in that state two decades ago. The V.E.T.S. charity and its fundraiser also have been the subject of a few stories in The Bee over the years, and each time the operation did little to change.
V.E.T.S. is one of the longest-running lopsided charity campaigns in California, state records show. While commercial fundraising operations are expected to keep less than 35 percent of donations to pay for telemarketing costs, Zagar and Associates is among a small group of commercial fundraising firms that take an outsize proportion of the money they raise.
State-wide, commercial fundraising firms handed over, on average, about 80 percent of the revenue they raised for charities in 2018. V.E.T.S. has never received more than 10 cents for every dollar raised on its behalf by Zagar and Associates, records show.
In 1999, when the operation was most profitable and about to be pushed out of Oregon, V.E.T.S. spent almost $991,000 on Zagar’s fundraising arrangement. Just 3 percent went to veterans’ programs, according to state records
That yearly fundraising for V.E.T.S. has declined substantially over the years. Although financial reports from its California fundraising are missing for several years, The Bee calculated that Zagar and Associates raised at least $2.1 million since 2002.
“They’re diverting resources away from needy veterans,” said Daniel Borochoff, president of CharityWatch, a national nonprofit watchdog in Chicago. “Donors are getting ripped off.”
Salanti said he doesn’t feel ripped off, but admitted he “didn’t want to look too close.”
‘That’s all you need to know’
Carl Zagar, a gruff, white-haired man who has headed the fundraising effort for V.E.T.S. since it opened, said he doesn’t think he’s ripping anyone off, either. His temper has flared when questioned over the years. He was confrontational when contacted for this story.
“I raise money for veterans!” he yelled at a reporter from the entry to his West Sacramento home before slamming the door. “That’s all you need to know.”
Fundraisers that worked in California solicited $810.4 million in 2018, according to the state’s most recent report, a 61 percent increase in revenues compared to five years earlier. The surge has been driven largely by reputable mega-campaigns for cancer research and treatment, civil liberties and human rights charities.
But the majority of fundraisers are more modest. Nearly a quarter of all fundraisers who reported to the Attorney General said they gave no money to the charity that hired them. One-in-five charities ended up actually owing money to the fundraiser, usually because of expensive contracts that didn’t pay for what can amount to costly campaigns.
“We’re small potatoes,” Zagar said defensively in a telephone interview.
But in reality, the amount Zagar and Associates now raises is typical when it comes to charity earnings in California, according to an analysis of state data. The group raised $73,000 from soliciting in 2018, making it the midpoint among Sacramento area fundraisers. Similarly, the median state-wide revenue was $62,566 for charity fundraising.
Zagar says in financial documents he spent nearly half the $73,000 on fees, commissions and salaries. He funneled more than $6,000 toward “accounting and automobile expense” — he would not explain how that was related to telemarketing. Zagar and Associates racked up $7,622 in “bank charges, interest and office expense.”
V.E.T.S., by comparison, received just $7,335 for veterans programs in 2018.
‘Exclusively for the benefit of war veterans’
According to its 1988 founding documents, the mission of the V.E.T.S. charity is to “sustain and patriotically promote the defense of the Constitution and laws of the State of California.”
Among its written goals was to bridge federal and local support systems for servicemen and women. The charity was to be “organized and operated exclusively for the benefit of war veterans,” its founders wrote.
Giving ear thermometers to veterans was an early priority because, they said, glass ones cracked in their mouths.
But V.E.T.S. quickly came to benefit Zagar and Nielson, his business partner, instead.
In 1992, Oregon’s attorney general charged Zagar and a group he was working with on behalf of V.E.T.S. for misrepresenting themselves to prospective donors. That subcontractor, Veterans Accredited Program, used canvassers who said they were “volunteers for the veterans’ department,” according to Oregon legal documents and previous reporting.
Oregon’s AG demanded Zagar and Associates to change their practices as part of the settlement. Zagar agreed to pay the state $1,000 and refund any donor who requested their money back.
The fundraising continued, though.
In 1999, Zagar told a reporter he was tired of telemarketers getting a black eye on the state’s annual charity report. He tried to run a quality operation, he said, and sometimes he even hired people experiencing homelessness or recovering from drug and alcohol addiction.
“It takes a special person to get on the phone and solicit,” he said. “You have to take a lot of rejection.”
Oregon’s attorney general in 2000 again rebuked the groups fundraising for V.E.T.S. Investigators said Zagar and Associates had been charging people $29.95 for “care packs” at the Veterans Administration Hospital — the packs actually had items like toothpaste and trash bags valued at less than $5.
“This organization generated more complaints to the Charitable Activities Section last year than any other, then-Attorney General Hardy Myers said in a February 2001 news release. “We are very pleased that they will no longer be soliciting in Oregon.”
Zagar and Associates already returned their focus to California and pulled in nearly $366,000 the following year.
V.E.T.S. got 9 percent of that.
‘They’re happy with us’
The relationship between Zagar and Salanti at V.E.T.S appears to have lasted because Salanti never asked many questions, interviews show.
In 2006, when The Bee highlighted the charity, Zagar was defensive when a reporter asked about the sky-high fundraising costs and pittance that went to V.E.T.S.
“Call ‘em up and ask ‘em,” Zagar shot back. “They’re very happy with us.” A 2009 Bee report spotlighted Zagar’s operation again, noting the Oregon connection. In that article, Zagar said he was just a middleman at the time and that the subcontractor, Veterans Accredited Program, did the soliciting for V.E.T.S.
In the past, the charity’s co-founder has said he was content with the 90 percent fundraiser charge. “I thought we did good having 10 percent,” Tom Pearson, a World War II veteran, told The Bee previously.
Candace Filek, another co-founder whose name is listed on the original documents, did not return calls seeking comment.
Salanti took the helm of V.E.T.S. about 10 years ago — he couldn’t remember exactly when in interviews, but documents indicate he was president by 2013. Salanti said he never questioned the sliver of money his charity got from Zagar and Associates. He said in an interview he didn’t know how they worked or what they did.
“It was free money to us, and it kept us running. So I never looked too deeply into it,” he said. “I don’t feel taken advantage of because I’ve gotten something for nothing forever.”
He added later: “Sometimes ignorance is bliss.”
Zagar would not agree to an in-depth interview. But in a brief conversation last month, Zagar said he barely did anything with V.E.T.S. anymore and that the exorbitant fees were because a subcontractor did all the work.
Asked who that was, Zagar replied: “Ain’t none of your business. I’m done talking to you.”
That subcontractor, Kurt Nielson, is the same business partner Zagar had two decades ago in Oregon. His name is not on any recent fundraising paperwork, and he does not appear to be registered as a commercial fundraiser in California, according to state records. But reached by phone, Nielson confirmed he works for Zagar.
Nielson filed for bankruptcy in 2012, court records show, after amassing some $180,000 in debt, mostly credit cards. Nielson said he has two part-time employees working for him, though he suggested they’re not actively making calls at the moment because the charity itself fell behind on financial paperwork.
Nielson repeatedly insisted — unprompted — that his operation is completely legal.
The high charges, he said, reflect the “cost of doing business.” He uses the money for “care packs” at a hospital, an arrangement now that mirrors what caught the eye of Oregon investigators decades ago.
Asked to provide documents or receipts showing where exactly that money went, Nielson demurred. He swore at a reporter and hung up the phone, called back and cursed some more.
Then he hung up a second time.
Silence and a ‘red flag’
Given the thousands of charities in California, consumer advocates say it’s difficult for the Attorney General to investigate all of them.
News media and consumer watchdogs frequently spotlighting exorbitant fundraising costs and other suspicious campaigns are often the only way state investigators learn about wrongdoing, said Doug White, a longtime nonprofit consultant and expert on solicitation scams. High fundraising costs could indicate more nefarious activity.
“Even though that’s not illegal, it’s still a red flag,” White said in an interview. “It makes sense for the attorney general to investigate that further.”
Charity registration requirements and fundraiser monitoring efforts vary widely among states, making consistent tracking and enforcement difficult, researchers with the nonprofit Urban Institute wrote in a 2016 report. Staffing for charity oversight has failed to keep pace with the increasing number of charities and fundraisers nationwide. “Resources devoted to charities oversight are minuscule compared with the oversight they are expected to provide,” they wrote.
Comprised of about 55 employees, including attorneys, California’s charitable trust section of the Attorney General’s Office routinely cites charities and commercial fundraisers for failing to file proper paperwork on time. Stricter enforcement, including criminal prosecution, is usually reserved for larger scams that can send the widest message, officials said.
“We hope Californians use the resources available when deciding what charities to donate to,” Blume, with the Attorney General’s office, said. “And we encourage all Californians to report bad actors or suspicious activity. When initiating investigations, we look for actions where we can have the greatest impact.”