Whistleblower on bankrupt charity: 'I think it's kind of shameful'
EVERETT, Wash. -- A local charity is bankrupt, the IRS has stripped its tax-exempt status and now the state is trying to recover $20 million in what it calls "falsely obtained donations."
The Problem Solvers exposed this charity's questionable ties to a telemarketer in 2011. Now we uncover how that telemarketer is still trying to get money out of the charity.
Legacy Telemarketing is a ghost town these days. Locked doors. Abandoned work stations. Discarded phone accessories. No sign of the busy telephone boiler room that, up until last year, brought in millions. Most of those millions were raised while Legacy solicited donations for the Breast Cancer Prevention Fund.
Jill Ballinger was a top producer when she worked the phones at Legacy Telemarketing. She believed the written spiel she was given to read: that 88 percent of the money raised would go to help women get mammograms.
"We had faith," said Ballinger, "like we're doing the right thing, this is going to where it's supposed to."
But Ballinger, like other telephone solicitors with Legacy Telemarketing, became suspicious when she learned Legacy's owner, Jim Paton, was also the founder of the Breast Cancer Prevention Fund.
Federal law requires disclosure of that type of financial relationship. Ballinger put it this way: "I want to work for a charity where the money is going to the charity."
A KOMO 4 Problem Solvers investigation in 2011 uncovered the cozy connection between BCPF and Legacy Telemarketing and revealed that, while BCPF did pay for some mammograms, the lion's share of the millions of donations for cancer prevention went to Legacy.
At that time, would-be donor and whistleblower Carl Hu was outraged.
"When you learn the truth about it, oh my gosh - you just feel so betrayed," he said.
After our 2011 report, the IRS investigated. The Problem Solvers obtained a copy of the completed investigative report which found, in part, that "Mr.Paton is a savvy and experienced professional fundraiser." And that BCPF, the charity Paton founded, "was operated primarily to benefit the private interests of the founder's telemarketing business."
Also, the IRS investigation found that Paton used an unacceptable accounting method, "to trick the public and government," about how much money was paying for mammograms, "and to hide the amounts going to LTC," or Legacy Telemarketing Corporation.
The IRS has now stripped BCPF of its non-profit status. Ballinger, who thought her job would help people with early detection of cancer says, "the people on the phone, the people who donated the money - it's really sad, I feel really bad."
Now Legacy has shut its doors and last summer BCPF filed for bankruptcy. The charity's only real asset, according to court filings, is $427,000 in two bank accounts, the vast majority from donors who thought they were paying for life-saving mammograms.
Washington State's Attorney General has filed a claim with the bankruptcy court for $20.2 million. In that claim, the state says that's the amount consumers gave BCPF, "through false, deceptive and misleading statements and representations," through Legacy.
Legacy Telemarketing also filed a claim with the bankruptcy court, claiming that the breast cancer charity owes it $480,063.76 for unpaid telemarketing fees.
Carl Hu said he's not surprised that Legacy filed a claim for what's left of BCPF's assets.
"It's clear that they were not operating with the public's interest in mind from the very beginning, just looking out for their own," he said. "I think it's kind of shameful."
Neighbors say Paton has not been to his Everett storefront in weeks. His other address is a waterfront home on the south end of Lopez Island. We reached him there by phone but he hung up on us.
None of the former directors of the charity were willing to talk with us. We've asked both the state and the IRS what, if anything, will happen to either Legacy Telemarketing or its owner, Jim Paton. Neither will comment on any potential investigation involving a private citizen.