12 Unethical Nonprofit Organizations Examples

Donating to nonprofits is a great way to make a difference and make the world a better place. However, not all nonprofits are created equal.

While most nonprofits are indeed doing incredible work, there are quite a lot of nonprofit organizations and charities that simply don’t live up to their promises. They may steal or divert funds for selfish purposes or otherwise engage in unethical practices.

Usually, people donating to these nonprofits are simply unaware of these unethical activities. If they were, they wouldn’t donate.

However, these charities get away with their bad behavior by hiding behind flashy marketing campaigns that make it look like donating to the nonprofit is the best thing you can do in the world.

Today, we will be exposing various unethical nonprofit organizations that you should avoid donating to.

While this is not a comprehensive list by any means, I hope it sheds some light on the various ways nonprofits abuse their good image and do more harm than good by diverting funds that could have been donated to better causes that actually help people.

The short version: Unethical nonprofits include those involved with sex and public health scandals, such as Oxfam and the Canadian Red Cross, and those that are merely fronts for political organizations and fundraisers, such as Kids Wish Network.

For the nitty-gritty details, read on.

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Unethical Nonprofit Organizations Examples

1. Kids Wish Network

You’ve probably seen ads for Kids Wish Network in some place or another. It’s a famous charitable organization that promises to help kids with life-threatening illnesses enjoy their final days by granting them their wishes.

Who wouldn’t want to help a kid dying from cancer achieve their lifelong dream of visiting Disney or whatever their dream happens to be?

What you might not have known was that Kids Wish Network was named the worst charity in America.

It’s quite shocking, but Kids Wish only spends three cents out of every dollar on actually fulfilling the wishes of dying children. That means that out of the millions of dollars it raises each year, it spends 97 percent on other causes!

Most of the money it spends is on paying companies (for-profits, of course) to solicit money for them. It’s a good deal for those companies, but would you donate if you knew that out of that $100 you just spent, only $3 is going to sick kids, and the rest is going to the pockets of large corporations?

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2. The Wounded Warrior Project

The Wounded Warrior Project is one of the most well-known charities in the US for assisting veterans. It appeals to the patriotism of many Americans and helps veterans adjust back into society, helping them get medical care, attend school, find work, and more.

However, it was embroiled in a gigantic scandal when it became apparent that it spent a large percentage of its donations on unnecessary expenditures, including lavish dinners, luxury hotel rooms (often $500 a night), and various extravagant expenses.

In fact, in 2014, around 40 percent of the donations made to the project were spent on overhead, according to the New York Times.

Eventually, the organization’s CEOs were fired, and Congress started investigating the organization. However, it has recovered and fixed its issues, and it has been quietly regaining the trust of many donors, according to Military.com.

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3. The Canadian Red Cross

The International Red Cross is one of the largest humanitarian organizations in the world, consisting of 192 Red Cross (and Red Crescent) organizations in different countries across the globe.

While the Red Cross is a reputable organization and does impressive work, the Canadian Red Cross was involved in the biggest public health scandal in Canada’s history.

This was a while back, but it was a massive scandal that created shockwaves in Canada and around the world. The Canadian Red Cross failed to properly screen blood donors for infectious diseases such as HIV and hepatitis C.

Around two thousand people were infected with HIV as a result, and up to 30,000 people were infected with hepatitis C.

HIV was new at the time. The first case had been reported in Canada several years prior. Therefore, the organization should have done its due diligence and started screening for it.

This isn’t a case of misuse of funds but rather of another type of unethical conduct: negligence. In this case, medical negligence led to thousands of people becoming ill with incurable diseases.

While nowadays, we do have a cure for hepatitis C that cures more than nine out of 10 people, back then, things weren’t so simple. The earliest treatments for hepatitis C came out in the 1980s but were largely ineffective, with high relapse rates, only effectively treating 6-16 percent of the population.

International Red Cross and Red Crescent Movement, Public domain, via Wikimedia Commons

Important note: The Canadian Red Cross currently does a lot of important, valuable work. What happened back in the 1980s shouldn’t prevent you from donating now – we’re merely listing examples of unethical conduct at nonprofits.

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4. Oxfam in Haiti

Oxfam is a British charity with branches around the world. Its mission is to alleviate global poverty and reduce inequality across the globe.

While it does a lot of good work, it was involved in a disgusting scandal in Haiti.

In 2010, Haiti suffered a terrible earthquake in which thousands of people died, and many others were injured or lost their homes. Oxfam’s staff in Haiti took advantage of the situation by hiring prostitutes for sex and orgies.

What’s even worse, there were allegations that minors were exploited – girls as young as 12 or 13. Later, allegations came out that Oxfam in Chad had done similar acts under the leadership of the same director who later moved to Haiti.

Makenson Charles and Matiado Vilme/VOA, Public domain, via Wikimedia Commons

Now, you might say that it was just one country director. However, Oxfam, as a whole, failed to handle the situation responsibly.

An investigation and report from the Charity Commission in the UK found that Oxfam had failed to investigate reports of sexual misconduct and exploitation properly. While Oxfam’s investigation did mention sexual misconduct, it failed to address the issue of sexual exploitation of minors and tried to cover it up.

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5. Cancer Fund of America

Photo by Klaus Nielsen, Pexels

Just the mention of the word “cancer” makes people shudder. Some of the things that make it so scary include there not being a cure for it (despite treatments being available), the horrendous side effects of the treatments that do exist, and the fact that it can go undetected for so long until it’s too late.

That’s why many people donate to charities that help cancer victims. Charities may help fund expensive treatments that insurance doesn’t cover or fund research into additional treatment options that might help current or future cancer patients recover.

A lot of the time, bad nonprofit organizations simply mishandle funds. Sometimes, however, they outright steal the donations given by hardworking people who just want to make a difference in the lives of those suffering.

According to the FTC, the Cancer Fund of America and a related nonprofit called Cancer Support Services stole more than $187 million from donors, spending the money on salaries, perks for families and friends, and fundraisers.

The FTC ordered that those charities be dissolved. The head of the nonprofit, James Reynolds, was also banned from ever profiting from nonprofits again.

According to CNN, the fake nonprofits paid more than 86 percent of their donations to their executives and fundraisers, only donating around 2.5 percent to charity.

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6. World Vision

Bluerasberry, Public domain, via Wikimedia Commons

World Vision is a famous charity founded in the US (its US headquarters are shown in the image above) A few years ago, it was revealed that the Australian branch of the organization was rife with corruption, nepotism, and mismanagement.

Donations were used to pay for contracts for a printing group, and that group then made secret payments to the father of an executive at World Vision as kickbacks for the printing contract.

Glenn Kuramoto was hired as a consultant for World Vision, as per the recommendation of his son Zane, who was an executive at World Vision, according to Pro Bono Australia.

Glenn helped Docklands, a printing company, secure a multimillion-dollar contract. As a reward, Docklands sent Glenn on a free trip to Bali and even paid him $3,000 a month for a few years!

It is unknown if Zane was aware of what his father and Docklands were doing, but Claire Rogers, CEO of World Vision, resigned. Allegedly, she failed to act on a report from a whistleblower who alleged these things were happening.

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7. The Clinton Foundation

The Clinton Foundation is a nonprofit organization founded by former President Bill Clinton with the goal of improving people’s lives both in the US and around the world. It focuses on things like improving access to healthcare and education, working to combat climate change, and a lot more.

However, it has been the subject of a lot of scrutiny and various investigations.

The biggest scandal of all was the alleged donations by various wealthy donors, including foreign countries, to the foundation while Hillary Clinton was Secretary of State.

These donations by individuals and foreign governments were made while those entities were pursuing interests from the State Department.

Not only were the feds investigating that, as per CNN, but there has been an overall lack of transparency from the Clintons and the foundation regarding donations and such.

For example, according to the New York Times, a lot of money came from Uranium One to the Clinton Foundation (totaling $2.35 million in donations).

Despite an agreement that these donations be disclosed, the Clintons failed to disclose them.

The investigations didn’t really find proof of wrongdoing and that favors were explicitly made for foreign donors in exchange for donations.

However, according to a New York Times editorial, the ethical thing for Hillary Clinton to do (at the time) was to distance herself from the foundation due to the entanglement and ethical questions raised by these allegations and donations.

Certainly, if a politician has a nonprofit, the most ethical thing to do is to maintain utmost transparency to ensure there are no questions as to what’s going on.

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8. The Trump Foundation

Photo by Carlos Herrero, Pexels

Corruption is present on both sides of the political aisle. The Trump Foundation was a tax-exempt nonprofit organization run by the Trumps.

The original purpose of the foundation was to distribute funds raised from the sales of Trump’s book to different charities. The foundation also received donations from various donors and Donald Trump himself.

A few years ago, the New York Attorney General ordered The Trump Foundation to pay more than $2 million to eight different charities after misusing donations for political gain, and the foundation was dissolved as per court order.

9. Colorado State Fire Fighters Foundation

When you get a telemarketing call or some other solicitation for a charity, and it catches your interest, you might gladly hand over your credit card information, happy that you’re making a difference in the world.

What you might not realize is that a lot of the time, fundraising and telemarketing are performed by a third-party fundraising company and that fundraising company be keeping the vast majority of the money raised.

A good example is the Colorado State Fire Fighters Association, or the CSFFF. According to Charity Watch, a company that CSFFF was using to fundraise, called PB Entertainment, was keeping a whopping 75 percent of the money its telemarketers raised.

Now, that doesn’t mean the CSFFF is a scam – it did disclose this information. However, that information might not be readily available to most people who are contacted over the phone by a telemarketer from PC Entertainment.

Not only that, but according to Charity Watch, CSFFF was being disingenuous by claiming that it didn’t have any other good options that would allow it to lower its fundraising expenses.

According to Charity Watch, there are many nonprofits that can keep their expenses below 25 percent of the money raised.

It’s important to realize that this is not an isolated case. There are many charities that have contracts with fundraisers that allow the fundraiser to keep sometimes even more than 75 percent of the donations (90 percent is not unheard of).

Sometimes, these fundraising contracts cause the charity to become bankrupt.

It can be quite an eye-opener to realize that when you donate money in response to a charity outreach campaign, the majority of that money might go to a professional, for-profit fundraising company. Only a tiny percentage might go to the cause you care about.

Therefore, it’s critical to do your research before handing over any money.

10. The Disabled Veterans National Foundation

Charity campaigns are often just a front for for-profit fundraising companies. One such example is the Disabled Veterans National Foundation (DVNF). This organization was the subject of multiple news articles in years past.

Sometimes, it’s not that the charity wants to scam you itself. Often, it gets entangled with a fundraiser without knowing what it is getting into, and once it gets locked into a scummy contract, it’s hard to get out of it.

That’s what happened to the Disabled Veterans National Foundation. The fundraisers it was working with, Quadriga Art and Convergence Direct Marketing, earned more than $100 million in profit.

More than 90 percent of the money fundraised went to line the pockets of the fundraising companies, and the charity itself ended up in more than $13 million in debt.

According to New York State Attorney General Eric Schneiderman, it was the “largest amount of financial relief ever obtained for deceptive charitable fundraising,” as per CNN.

The New York AG fined Quadriga around $10 million in restitution to DNVF and forced it to forgive the debt of almost $13.8 million that DNVF owed it.

Schneiderman also prohibited Quadriga from funding new charities as it did before. That’s how charities get into debt – they allow fundraisers to cover the startup costs and then get locked into these contracts. In the end, they deceive the public, either willingly or not, and run fundraising campaigns that primarily fund for-profit companies.

11. The American Breast Cancer Coalition

Sometimes, political organizations masquerade as charities and pretend to be nonprofits that make a difference while merely being a front for political groups. One such example is the American Breast Cancer Coalition, which was exposed by The Daily Beast.

According to telemarketing robocalls, the group claims to help people who have breast cancer by supporting legislators who fight for the approval of breast cancer drugs and treatment options.

It is a registered nonprofit. However, it is not a charity. The organization hands over almost all the donations it receives to fundraising companies. One of these companies has ties to a known scammer who was fined $56 million for stealing tens of millions of donations via fake charities.

Furthermore, the ABCC managed to escape scrutiny from the Federal Election Committee by registering not as a PAC (Political Action Committee) but as a 527 group.

The legalities surrounding this issue are complex. Essentially, this group’s actions are not monitored by the FEC. Instead, they fall under the jurisdiction of the IRS and are kept confidential.

Regular PACs, on the other hand, which are registered with the FEC, are required to make their expenditures and contributions publicly available and can be seen on the FEC site.

This is an excellent example of a scammy and unethical nonprofit. Remember, just because something is registered as a nonprofit, that doesn’t mean it’s a good organization.

On its website, it does disclose that it’s not a charity and that a large portion of its donations go to offset fundraising costs. However, that fine print might not be noticed by everyone.

There are a lot of loopholes in how organizations can be categorized and registered. As you have seen, sometimes, nonprofits are merely fronts for for-profit fundraising companies; at other times, they are fronts for political groups.

12. The American Cancer Society of Michigan

Photo by Anna Shvets, Pexels

Sometimes, unethical people set up nonprofits with names that sound similar to famous nonprofits that are ethical. They fool you because you’ve seen that kind of name mentioned somewhere, so you think it’s reputable.

The American Cancer Society is a reputable nonprofit, but the American Cancer Society of Michigan was not. In fact, it wasn’t even based in Michigan but registered in Staten Island.

This nonprofit was a complete scam. It was part of a whole network of scams set up by one person. All of them were registered at the same address in Staten Island.

Guess what – the IRS approved all 76 of this scammer’s nonprofits.

The nonprofits were set up by one Ian Hosang, according to a New York Times expose.

What’s even worse is that Hosan is a convicted scammer. He pleaded guilty to money laundering and fraud in 1999 and spent two years in prison. Even worse, the real American Cancer Society had already warned the IRS about him and his like-sounding charity.

Another charity he set up was called The American Cancer Society for Children, Inc. See a pattern there? It also had no connection to the real American Cancer Society.

This just shows how easy it is to get registered as a nonprofit. The IRS can be lenient about groups registering as nonprofits and claiming to be charities. I mean, how can a charity with “of Michigan” in its name be based in New York?

Apparently, the law does not prohibit nonprofits from having similar names to existing, well-known nonprofits. Neither does the IRS check thoroughly to see if the founder of a nonprofit has been convicted of fraud.

Hosang was eventually convicted in New York and charged with stealing over $150,000 in donations. He spent it on personal expenses such as paying off his mortgage and credit cards – and at liquor stores!

Imagine you donate money to help cancer victims only for the money to be spent on alcohol.

How to Avoid Unethical Nonprofits?

Before I wrap things up, I’d like to give you some advice on avoiding these types of scams and unethical nonprofits.

The first is to know who’s calling. Donating directly to a charity vs waiting for a telemarketer to call you makes a big difference. You should understand why after reading through this article and learning about how for-profit fundraisers scam people for donations.

Before donating to any charity, though, check their rating. Fortunately, there are websites that investigate charities. They assign them ratings based on what they do with the money they raise and how they operate.

Charity Navigator is a good site to use. It’s also useful for finding the best nonprofits to donate to, depending on which cause you want to support.

Here are some other sites that I recommend for researching nonprofits:

Unethical Nonprofit Organizations Examples – Conclusion

Unethical nonprofit organizations exist – don’t let the term “nonprofit” fool you. It’s just a technical term for categorizing organizations, but it doesn’t mean the organization is actually doing any good.

Do your due diligence before donating to any charity. Verify that the funds go directly to the cause, not to a fundraising middleman. Also, ensure the charity hasn’t been tangled in any scandals, like sexual abuse, that question its ethics.

About Author

Tom loves to write on technology, e-commerce & internet marketing. I started my first e-commerce company in college, designing and selling t-shirts for my campus bar crawl using print-on-demand. Having successfully established multiple 6 & 7-figure e-commerce businesses (in women’s fashion and hiking gear), I think I can share a tip or 2 to help you succeed.