Nonprofit leaders face many challenges, from managing resources to meeting regulatory requirements. Unfortunately, scammers routinely target nonprofits by sending fraudulent letters disguised as official government forms. We regularly receive inquiries from concerned nonprofit clients who have received Statement of Information and “Minutes” scam letters, which demand fees for compliance-related services that are not required by law. This post will guide you through identifying these scams, understanding your legal protections, and ensuring your nonprofit doesn’t fall victim to deceptive solicitations.
What Are Statement of Information Scam Letters?
Statement of Informationscam letters are fraudulent documents that resemble official state forms. These letters are designed to trick nonprofits into paying fees for unnecessary or nonexistent services, often by suggesting urgent deadlines or severe penalties for non-compliance.
For instance, many nonprofit leaders have reported receiving notices requesting that they pay an exorbitant fee to process an apparently official state filing that resembles the required Statement of Information but is in fact the non-existent “Declaration of Directors and Officers.” A sample of a scam Statement of Information letter, provided by the California Secretary of State, can be viewed here.
How to Identify the Scam:
- Read the document carefully to see if it explicitly states that it is not actually from a government agency and is a solicitation not a bill. Even letters deceptively designed to look like official government forms will often include such statements in an attempt to appear compliant with the law regulating such solicitations.
- Look for unusual language, such as exaggerated consequences for inaction or overly aggressive demands for immediate payment.
- Always verify such letters by contacting your state’s Secretary of State or legal counsel before making any payments or providing sensitive information.
What Are “Minutes” Scam Letters?
Similarly, “Minutes” scam letters target nonprofits by falsely claiming that board meeting minutes need to be submitted to the state, along with a fee. Under California law, for instance, there is no such requirement to submit minutes of board meetings to the state.
These letters often create a false sense of urgency by threatening fines or legal action if the minutes are not submitted. Nonprofit boards and officers should be cautious of any letter that pressures them into taking actions relating to compliance requirements they have not heard of before.
Legal Protections for Nonprofits
Both types of scam letters described above violate California’s Business and Professions Code, which prohibits deceptive solicitations that mimic government forms. These laws protect organizations from being tricked into paying unnecessary fees for services they are not legally required to complete.
In the case of these scam letters, your nonprofit can and should report the solicitation to the appropriate authorities. The California Secretary of State has an alert page with detailed resources for reporting these scams and preventing future issues here. Many other state regulators have similar alert pages.
Safeguarding Your Nonprofit from Scams
As a nonprofit leader, you have a duty to safeguard your organization’s financial resources and ensure compliance with state regulations. Here are some practical tips for avoiding these scams:
- Verify Notices: If you receive any unexpected solicitation or form, contact your Secretary of State or legal team to confirm its legitimacy before responding.
- Know Your Requirements: Familiarize yourself with your nonprofit’s actual filing obligations, so you can easily recognize when a solicitation is unnecessary or fraudulent.
- Stay Informed: Keep your team up-to-date on common scams targeting nonprofits. If you’re unsure, consult legal advisors with experience in nonprofit law.
Conclusion
Scams targeting nonprofits are an unfortunate reality, but with the right knowledge, you can protect your organization from falling victim. Always verify any requests for information or payment, educate your staff, and stay up-to-date with regulatory requirements. By doing so, you can safeguard your nonprofit from misleading solicitations and continue focusing on your mission. Lawyers specializing in nonprofit law are essential in helping organizations navigate emerging risks and challenges, ensuring they remain resilient and successful. For expert advice and assistance with your nonprofit’s governance and compliance matters, contact The Law Firm for Non-Profits to schedule a consultation.