Senate committee to investigate charity it suspects may be exploiting veterans

Oct. 26, 2011: Members of the deficit Super Committee meet on Capitol Hill. From left are Sen. Jon Kyl, Sen. Max Baucus, Sen. Rob Portman, and Sen. John Kerry. (AP)

HELENA, Mont. – U.S. Sen. Max Baucus of Montana said Wednesday that the legislative finance committee that he chairs is launching an investigation into a charity it suspects may be exploiting veterans.

The Democrat said that the Disabled Veterans National Foundation has raised millions of dollars but apparently spent very little on disabled veterans. Large sums instead went to a marketing firm.

The organization said it welcomes the inquiry and sees it "as our opportunity to set the record straight," according to a statement from the board of directors. Foundation officials say they provide a variety of help to veterans, such as giving gift cards to hospitalized vets.

The Baucus-led Senate Finance Committee sent the foundation a letter on Wednesday notifying the group that its tax-exempt status would be investigated. Baucus and U.S. Sen. Richard Burr, R-N.C, wrote that "an organization which purports to help disabled veterans and operates as a tax-exempt organization deserves special scrutiny."

The senators said their interest was sparked by reports that DVNF raised nearly $56 million in donations since it was founded in 2007, yet paid marketing firm Quadriga Art and its subsidiaries nearly $61 million. The senators also cited an "F" grade given the group by CharityWatch.

The veterans' charity was told that only spending a small fraction of funding on the charitable purpose can results in losing a 501(c) (3) tax-exempt status.

The Senate panel is asking the group for documentation, including detailed description of assistance provided to veterans and verification whether the same people have interests in both DVNF and the marketing firm.

The Washington, D.C.,-based organization says the high fundraising and marketing costs are part of building a donor database and support network.

"We realize that our fundraising and marketing costs seem high, however these fees are necessary to create the awareness of the causes we support and the programs we offer," the group said. "We are completely dedicated to serving our disabled veterans and we remain focused on this important goal.