Authorities Pose No Obstacle to Shady AIDS Charity

07/26/2009 05:12 am ET | Updated Sep 30, 2014

by Christopher Weaver, special to ProPublica

In late March, we published an investigation of the Center for AIDS Prevention, a Beverly Hills, Calif. charity that wages high-profile fundraising campaigns, spreads inaccurate health information and dodges questions about how it spends donations. Three months later, the group is still at it -- despite the fact that authorities are aware of its activities. The case is a window into the fractured and often ineffective oversight of nonprofits.

The center's 18-month advertising campaign has made it to the Web pages of the New York Times, Chicago Tribune (PDF), Los Angeles Times (PDF) and USA Today, and the print edition of the Wall Street Journal (PDF), urging viewers to "Donate Now." The most recent series of ads appeared on the Web site of the LA Times (PDF) between May 28 and June 9.

While the center invested heavily in soliciting the public's money, its services appear to include little more than a Web site that long featured inaccurate information, such as the suggestion that birth control pills prevent the spread of HIV (PDF), a claim that has since been revised. Until March, it promoted ineffective herbal remedies (PDF) marketed by a now-defunct for-profit company with ties to the center's director, Steve Neely.

The charity's sparse financial records (PDF) show no expenses or revenues from donations, even though the center was fundraising with advertisements in a national newspaper during one financial reporting period. The group has not registered with state officials, a minimum requirement for fundraising, despite the high visibility of its campaigns.

The center, and Neely's other activities, have sparked suspicions at city offices in Los Angeles, where the charity does business now, with the attorney general of Illinois, where it is incorporated, and with the federal Food and Drug Administration. The center and Neely have repeatedly dodged inquiries by these authorities and members of the public, who have complained to attorneys general in both states. But officials have often not followed up on their concerns, allowing the charity to continue raising money and revealing fault lines in the oversight of nonprofits.

The Internal Revenue Service keeps an eye on nonprofits' financial reports, but it falls to state agencies — usually attorneys general, as in California and Illinois — to address concerns about misrepresentations in fundraising appeals. A spokesman for California Attorney General Jerry Brown said the Charitable Trusts section investigates complaints, but “we also have 98,000 charities who file documents with our office, and that's a large number.”

Last year, Belinda Johns of the California Charitable Trusts section told the U.S House of Representatives (PDF) oversight committee that her 11 lawyers and seven auditors struggled to “effectively protect charitable assets given our limited staff and budget resources.”

California's oversight problems aren't unusual. “The challenges that most of these agencies have is the limitations of resources available to them,” said Bennett Weiner, an executive at the Better Business Bureau's Wise Giving Alliance, a national charity-monitoring organization. “This is not a field where state governments devote a lot of resources.”

The shortfalls leave would-be donors as the first line of defense against bogus charities. “The lesson of any charitable appeal for donors is that you can't assume what the charity is doing based on the name,” Weiner said. “You should look at not only what the charity says it's going to do, but also what it's achieved so far.”

Meanwhile, the California legislature's budget committee voted last week to cut about half—$33.5 million—of the state's funding for certain AIDS services. That funding stream helps support grants to nonprofits that provide preventive, educational and treatment services. (Gov. Arnold Schwarzenegger had proposed cutting nearly all funding for those programs.)

The cut threatens the existence of charities that depend both on government grants and private contributions, local advocates say, and make it more important than ever for would-be donors to keep Weiner's advice in mind as they consider charitable appeals.

Among the center's latest questionable appeals was a golf tournament that was scheduled to be held at the Desert Springs, Calif., JW Marriott last Saturday. The center first pitched the "Help Stop AIDS Golf Classic" to other AIDS organizations in April, asking them to collaborate by sharing the costs of the center's campaigns.

According to the fliers (PDF) distributed by a board member, the center planned to charge $250 per person, and for $15,000 or more, individuals could become “sponsors.” A spokeswoman for the Marriott resort confirmed the event earlier this month and said that the hotel had reserved rooms in Neely's name.

Promotional materials touted an appearance by Tiger Woods, but the golf division at Woods’ public relations firm, IMG World, said by e-mail, “[T]heir event is being held on the Saturday of the U.S. Open, on opposite sides of the country, so he obviously won't be participating.”

The hotel reservations were later canceled, the resort spokeswoman told us. Lomax Burnett, the center's board member who planned the tournament, said in an e-mail last week that he quit working on the project after Woods declined the invitation, and that the center's director, Neely, had taken over.

Burnett said in the e-mail, which was forwarded to ProPublica, that he "officially" ended his role as the center's top fundraiser as of June 1. He added that the center planned to hold a “Help Stop AIDS seminar” on June 27, but he would not attend. Burnett did not reply to an e-mail request for an interview with ProPublica.

The center first surfaced more than two decades ago, drawing scrutiny within months of its inception in Chicago. Illinois authorities quickly shuttered the organization, but that didn’t prevent its reincarnation, in 2007, on the West Coast.

The center incorporated in Illinois on June 8, 1987, to raise money for the burial of one of Neely's cousins who died of AIDS, Neely told us in a March interview. According to the center's original application (PDF) for tax-exempt status, Neely planned to provide referrals and information to people with AIDS, make research grants and pursue what still appears to be its main activity: fundraising.

“In the coming months, we will organized [sic] an national televised program with actors and actresses donating their time to raised [sic] funds," the application (PDF) explained.

The “coming months” were all the center had. The Illinois attorney general revoked the center's charitable status on Oct. 27, 1987, saying Neely had lied on charity registration forms (PDF) about whether an unnamed center official had ever been “charged or convicted of a misdemeanor involving the misapplication or misuse of money, or any felony.” (The center's three board members at the time are listed on the initial application (PDF).)

Harris Brown, another member of the center's board, said the official in question is dead, but did not identify the person. He added that Neely and other center staff were “neither available nor willing” to comment.

“Be advised that it would be illegal to conduct any further solicitations of funds or to conduct any fund raising activities in Illinois,” said the attorney general's letter explaining the revocation (PDF), addressed to Neely under his pseudonym, Morrell S. Neely.

Neely said in his earlier interview with ProPublica that the center was inactive for 20 years after its charitable status was stripped. He went on to run at least two telecom companies, including World Preferred, a cellular phone retailer, which dissolved before he filed for bankruptcy in the Central District of California in 2005, reporting hundreds of thousands of dollars of debt to the IRS.

Illinois’ action didn't stop Neely from reviving the center and qualifying it to do business in California in October 2007. The California Registry of Charitable Trusts' records show that the center's charitable status – which would allow it to legally solicit donations in California – is still pending. The center nevertheless launched an ambitious new fundraising campaign shortly after reopening.

The center placed a half-page, color advertisement (PDF) in the Dec. 1-2, 2007, edition (PDF) of the Wall Street Journal, asking potential donors on the occasion of World AIDS Day, “If you could stop 6,000 children from dying everyday, would you?”

The center's financial reports, signed by Neely “under penalty of perjury,” for the year ending Dec. 20, 2007 (PDF), weeks after the ad ran, did not show any incoming contributions. A Journal spokeswoman said the newspaper's standing policy is not to comment on advertisers.

Last month, the center ran an ad in the Chicago Tribune (PDF) that has also raised questions. The ad invites Chicagoans to "Donate Now,” despite the fact that the center is still barred from soliciting donations in Illinois after lying on its charity registration forms in 1987.

The ad “raises particular concerns regarding this organization's fundraising efforts,” said Natalie Bauer, a spokeswoman for the current attorney general, Lisa Madigan, whose office began an investigation into the center in “the last couple of months.” The Illinois secretary of state has stripped the center of its good-standing status since ProPublica's initial report in March.

Even if the Illinois investigation causes the center to lose its corporate status altogether, California authorities may not shut it down. “If a charity's corporate status is revoked in another state but the charity is still doing business in California, it is still required to comply with our charity registration and reporting requirements,” said the California attorney general's spokesman in an e-mail.

In February 2008, the FDA took issue with another Neely venture. Herbal Hope, the for-profit company operated by Neely and his now-deceased brother, Alexander, marketed an array of herbal remedies (PDF) for diseases ranging from asthma to AIDS on Herbal Hope’s Web site, which was registered to Steve Neely. A testimonial (PDF) for the AIDS remedy appeared earlier on the center's site, though it was removed in late March.

In a “warning letter” (PDF) dated Feb. 25 of last year, the FDA asked Neely to remove inaccurate claims about the effectiveness of those remedies, saying the Web site violated the Federal Food, Drug and Cosmetics Act. Herbal Hope's AIDS remedy, Immunity (PDF), had been advertised as a product “Created for HIV and AIDS patients” that “has been known to raise the T-Cell count and reduce the Viral-Load in sufferers.” (There’s no evidence that any herbal treatment is effective for HIV and AIDS.)

The FDA never received a reply, agency spokesman Sebastian Cianci said. More than a year later, in April 2009, the inaccurate claims still appeared on Herbal Hope's site. Brown, the center’s spokesman, said he didn’t know about the letter to Neely.

Cianci said the FDA was concerned because Herbal Hope's claims implied that the remedies were effective treatments, and because the prices -- $10,000 for a month’s supply of Immunity -- were so high. If the drugs had been labeled “something else, like ‘fruity afternoon supplements,’” the agency would never have warned Neely in the first place, he said.

After the initial letter, FDA officials do not appear to have pried deeper. “Enforcement against Web sites is tough,” said Jennifer Thomas, director of an FDA enforcement division. “We try to find a physical location for a Web site when possible,” she said.

But “if the firm doesn’t reply, then we really don’t have a process for documenting follow up,” she added. “Unfortunately, in this case, it appears we did not very well document any follow up we might have done.”

Herbal Hope’s Web site was taken down in March, and some incorrect information on the center's site was revised. Miguel Gomez, the director of, a federal organization that disseminates HIV information, said the center removed his agency’s logo from its site after he insisted in writing that it do so. However, people concerned about the center still await an accounting of how it spends its money.

LA’s AIDS coordinator, Stephen Simon, for instance, learned of the center in February, days before it hosted a Valentine's Day fundraising gala ostensibly set to feature a visit by Mayor Antonio Villaraigosa. Simon told ProPublica, “Our research makes us very concerned that this is not a legitimate organization.”

In a Feb. 12 e-mail to the mayor's office, he warned that an appearance by Villaraigosa “may seem to be a City endorsement of these organizations.” The mayor did not attend.

On April 9, the center's then-chief fundraiser, Lomax Burnett, attended an LA County Commission on HIV meeting to ask for cash. “We need all the support, volunteers, agencies to align themselves with what we're doing to try to get the word out more,” Burnett said, according to a recording of the meeting.

Whispers circled the room, people who were present recalled. Members of the local AIDS community had raised questions after the center began its advertising campaign and had read ProPublica's March report detailing the group's practices.

Near the meeting's end, LA County AIDS Commissioner Jeff Goodman put his concerns on the record, saying, “Mr. Lomax … I would love to see financials from your organization showing … where you are spending this money, and just how you specifically respond to the allegations … being made about you both by attorney generals [sic] and by the press.”

“Personally, I don't know if I could listen to anything else until I hear that information,” Goodman concluded. The commission followed up with a written request (PDF) for the documents, and Goodman said he had alerted the California attorney general's office by e-mail, though he hasn't heard back.

Brown, the center's spokesman, said that the charity would comply with the commission's request and that its accountants were on it. But Goodman said he hasn't yet received any response.

The California attorney general's office said its policy is not to “comment on whether or not an investigation has been initiated.”

Goodman said that he planned to pursue the attorney general on the matter and that he hoped either that agency or the Internal Revenue Service would look into the center. “If my suspicions turn out to be true, they need to be shut down,” he said. “It’s on my list.”

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