From Patch.com: Prosecutors Allege State and county prosecutors filed papers to close down a car donation charity that allegedly pockets proceeds and misleads donors.
The state attorney general and county prosecutors today filed a $3 million consumer protection lawsuit against a North Hollywood- based car donation charity that allegedly misled donors about how much money goes to charitable causes. The lawsuit against People’s Choice Charities, filed in Los Angeles County Superior Court, alleged breach of fiduciary duty, untrue and misleading advertisement, unfair competition and negligence. It seeks a permanent injunction as well as more than $3 million in damages.
“People’s Choice Charities used its tax-exempt status to dupe donors into believing it was a legitimate charity,” District Attorney Jackie Lacey said. “Instead, it preyed upon the generosity of donors. It spent hundreds of thousands of dollars for its own purposes rather than sending that money to charities designated by the donors.” The lawsuit aims “to ensure consumers can donate to charities with confidence,” Lacey said. The lawsuit contends that People’s Choice Charities promised 100 percent of the proceeds from the sale of cars donated to the organization would be given to charities chosen by the donors. However, an estimated 97 percent of the funds allegedly were used toward administrative costs, including advertising and towing and car repairs, according to the complaint.
Audits performed by the Attorney General’s Office between 2007 and 2012 revealed that the tax-exempt organization reported it had donated more than $700,000 to other nonprofit agencies, but actually only gave about $185,000, prosecutors said. Additionally, People’s Choice Charities maintained that its towing services were free and its employees could repair and sell the vehicles at minimal cost, according to the lawsuit. But the charity did charge for towing expenses and did not have a repair staff, the lawsuit states. The organization also allegedly created a program in which donors could receive money in exchange for their donation, giving it the ability to boost its inventory, the lawsuit said.
By offering cash for the donated vehicles, People’s Choice Charities was essentially running an unlicensed used car business in violation of California law, the lawsuit alleges.