United Homeless Organization Caught in Fraud Scandle

by Gordon Clark | November 24, 2009 at 03:49 pm

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The United Homeless Organization of New York City is dealing with fraud accusations from the Attorney General's office. The claim against them is that for a nonprofit organization they collect a lot of profit and that whether their business model is ethical or not the owners owe the government a lot of money in taxes.
The United Homeless Organization (UHO) has developed a very do-it-yourself business model. How it works:

The UHO owns hundreds of plastic jugs and folding tables that they loan out to homeless people.
The homeless renters take the tables and jugs along with a certificate recognizing that UHO is incorporated and panhandle on the streets of New York.
At the end of the day the renters return the tables, jugs, and certificate back to UHO along with the $15 rental fee.

Throughout the day if the panhandlers are given more than $15 they can keep how ever much the difference is. If they are given less than $15 then they loose money because they still owe the $15 to the UHO.
The UHO's fraud claims are based on what founder and president, Stephen Riley, and its director, Myra Walker do with the revenue from the rental sales. Because the UHO is registered as a nonprofit organization they do not have to pay tax on rental sales but because Riley and Walker have not kept sufficient financial records with suspicious amounts of money missing and donations made to themselves it is hard to understand how the two are not profiting.
Besides tax evasion and corporate fraud the UHO is also facing charges for misleading the public. The business model is designed to give legitimacy to begging for money. What gives it legitimacy is the photocopied certificate that the UHO is a not-for-profit organization. This model is misleading because the UHO is not providing services beyond rentals and donates would likely expect a homeless organization to do so.

While the fraud and tax evasion is clearly illegal I think the business model is unethical - maybe not illegal - but definitely unethical.

They are a familiar sight on street corners across the five boroughs: Men and women standing behind folding card tables, urging passers-by to throw a little change into the empty plastic water jug marked “U.H.O.”

But an investigation by Attorney General Andrew M. Cuomo appears to have confirmed what many New Yorkers secretly (if somewhat guiltily) suspected all along: The United Homeless Organization, supposedly a nonprofit group set up to help feed and house the homeless, was actually an elaborate fraud.

According to a complaint filed by Mr. Cuomo [pdf] on Tuesday morning, U.H.O. does not operate a single shelter, soup kitchen or food pantry. It does not provide food or clothing to the homeless. It does not even donate money to other charities that do.