A new legislative proposal would raise the punishment stakes for fraudsters who use charity crowdfunding sites, but the sites' operators should get some scrutiny, too.
If you Google “gofundme,” the first thing on the search engine’s list is a paid ad for the official GoFundMe platform, whose headline describes it as “Free & Trusted Fundraising.”
After the Johnny Bobbitt Jr. debacle, we know that neither claim is entirely true. GoFundMe might be “free” and “trusted” for those who set up web pages for donations, but they can be false for anyone who contributes.
The apparent scam perpetuated by Bobbitt, a homeless veteran, and a South Jersey couple who purported to “help” him, turned out to be the kind of fraud that fake cancer sufferers used to perpetuate with donation cans and beef-and-beer benefits. Crowdfunding sites — GoFundMe is not the only one — are a higher-tech solution for those with genuine financial need, but they’re just as susceptible to would-be embezzlers.
Prosecutors allege that Bobbitt and cohorts Kate McClure and Mark D’Amico concocted the story that Bobbitt gave his last $20 to aid McClure as a stranded motorist, and that the parties had misspent some of the $400,000 that poured into the GoFundMe page they’d set up.
The Bobbitt case also made clear that while GoFundMe.com doesn’t charge to set up a donation page, it extracts a “processing fee,” usually 2.9 percent, plus 30 cents, for each personal/charity donation. Crowdfunding sites are entitled to defray processing costs for credit-and debit-cards transactions, but it’s not readily apparent that GoFundMe is a for-profit company.
Enter state Assemblyman Ron Dancer, R-Ocean, with proposed state legislation as charges in the Bobbitt case move forward. All three defendants are charged with theft by deception of more than $75,000 and conspiracy, second-degree crimes carrying prison five-to-10-year prison sentences.
Text of Dancer’s proposal was not on the Legislature’s website Monday, but a press release explained it would kick the penalties up a notch when the theft by deception involves crowdfunding, presumably making future Bobbitts, McClures and D’Amicos eligible for more serious first-degree penalties. The legislation would also add fines of up to $500 for each fraudulent donation collected — money that would go into a fund for the homeless.
There’s nothing wrong with Dancer’s bill, because, as he states in the release, “Taking advantage of someone’s good nature is appalling.”
At the same time, why should profit-making crowdfunding aggregators be let off the hook when they can’t vouch for the veracity of campaigns they promote? In the wake of the Bobbitt case, GoFundMe says it has refunded the $400,000 that donors gave unsuspectingly. We applaud the company for stating that it now offers crowdfunding’s first “guarantee” of refunds of donations that later are exposed as non-kosher.
It’s likely beyond the New Jersey Legislature’s grasp to regulate crowdfunding platforms whose appeals reach national and international audiences. But what about the federal government?
It would ruin the crowdfunding concept if host sites, for-profit or nonprofit, had to hire detectives to find out every teacher who asks for funds for classroom supplies is legitimate. These sites have done tons of good that should not be needlessly disrupted.
Again, we propose some kind of circuit breaker. When a single appeal reaches, say, $100,000, regulations should compel the host sites to perform some vetting. Maybe a cursory criminal background check or a requirement to provide references would be sufficient.
Verification procedures won’t catch every determined fraudster, but might trip up some of them before they can abscond with hundreds of thousands of dollars.
Get tough on the scammers, as Dancer’s legislation proposes. But don’t forget that crowdfunding hosts whose revenue grows as donations climb have obligations, too.
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