The state filed a civil lawsuit Friday against a Sacramento group whose executive director and telemarketers were accused of conspiring and using deceptive practices to defraud donors as they raised more than $9.3 million.
The action was one of eight civil lawsuits targeting 53 people, 17 telemarketers and 12 charities in a statewide crackdown.
State Attorney General Jerry Brown said the groups "shamelessly exploited the goodwill of decent citizens trying to help police, firefighters and veterans."
In Los Angeles, for example, Brown said the same directors operated the Junior Police Academy, the American Association of Police Officers and Police Protective Fund Inc.
The protective fund reported raising $6.8 million in 2007 and said it spent $1.7 million on charity efforts. But Brown's investigators allege that expenses improperly included a $350,000 judgment the charity paid to the state of Missouri.
The civil fraud case against California Police Youth Charities Inc. of Sacramento was filed in Los Angeles Superior Court.
The CPYC operation, its executive director, Christopher Eaton, and its Texas-based for-profit phone fundraisers were accused of defrauding and misleading donors about how much of their money would really go to charitable activities.
Eaton and his charity also knowingly filed false reports with both state and federal charity and tax regulators and hid details of commercial fundraising deals from thousands of donors, the state alleged in court records.
The attorney general is seeking a permanent injunction to force CPYC to stop using those "deceptive practices."
It also wants to recover what state officials called "misappropriated charitable funds" and wants the charity to pay civil penalties topping $100,000.
Eaton denied all the allegations when reached by The Bee, saying he was surprised by the state's lawsuit.
State charities officials are auditing his group, Eaton acknowledged, but he said CPYC has cooperated and provided all information requested.
Eaton said his group may have improperly filled out some state and IRS forms – it's trying to amend and correct them – but said he is shocked that it was lumped in with charities whose officials were accused of misusing money to buy a sailboat.
"It's frustrating and disheartening," added Eaton, a retired police officer from Brawley, in Southern California, who formed CPYC in 2002.
The attorney general alleges that Eaton and telemarketers from National Consultants Inc. and Public Appeals Inc., run by three Texas businessmen, falsely told donors that 100 percent of their donations would support programs to help "at risk-youth."
The group raised $5 million in 2006 and $4.3 million in 2007, the state's lawsuit claims.
But CPYC spent less than 20 percent of that on charity programs, the court filing says, with most of that money going to the telemarketers under consulting and donation-sharing formulas hidden from donors.
The state also accused the charity of falsely reporting that it handed out almost $1 million in grants in 2006; it gave out only $110,000, the state alleges.
In court documents, the attorney general also alleged that Eaton failed to use donations for the purposes for which they were requested; CPYC also falsely said its financial statements were audited when they weren't audited.
CPYC's Web site includes an excerpt of a purported "testimonial letter" from Sacramento County Sheriff John McGinness. McGinness said he never endorsed the charity nor sent it a testimonial letter.
Rather, he sent CPYC a thank-you letter after it paid for a Disneyland trip for the family of the late Jeffrey Mitchell, a Sacramento County sheriff's deputy killed in 2006. The group also arranged for Mitchell's son, Jake, to get a tour of pit row at a NASCAR race, McGinness said.
The sheriff declined further comment on the lawsuit.