UHO Duped the Public into Making Donations for Homeless Services while Principals and Workers Pocketed Donations for Personal Expenses

NEW YORK, NY (November 24, 2009) - Attorney General Andrew M. Cuomo today announced that his office has filed a lawsuit against the not-for-profit group United Homeless Organization, Inc. (“UHO”), its founder and president Stephen Riley, and its director Myra Walker, alleging that Riley and Walker used the organization to dupe the public into donating cash to fund services for the homeless, when the money was instead used for personal expenses.

According to the lawsuit filed in New York Supreme Court, New York County, Riley and Walker had UHO workers set up tables across the city with plastic jugs to collect cash donations, telling sympathetic passersby that donated funds would be used for services for the homeless. However, Cuomo’s investigation revealed that all the money collected went directly to Riley and Walker, or was kept by the people working for UHO, instead of funding charitable programs or services. The lawsuit charges Riley, Walker, and UHO with engaging in a scheme to defraud and violating New York State’s not-for-profit and charitable solicitation laws.

“UHO exploits the good intentions of people who thought that their charitable donations were helping to fund services for the homeless,” said Attorney General Cuomo. “Instead, their donations go directly to UHO’s principals and workers, who abused the organization’s tax-exempt status to line their own pockets. The greater tragedy in this is that bad actors like UHO undermine the public’s willingness to give to legitimate charities across the state. My office will continue to uncover these unscrupulous organizations and ensure that they don’t threaten the generosity of hard-working New Yorkers.”

Attorney General Cuomo’s lawsuit charges that UHO:

- Uses donations for personal expenses
According to Cuomo’s lawsuit, UHO employees (also called “table workers” or “members”) pay Riley and Walker a fixed daily fee for the right to use the UHO tables, jugs, aprons, and other paraphernalia. After paying the fee, the workers then pocket any daily cash donations they receive. In turn, Riley and Walker use the fees collected from workers for their own living and travel expenses, while claiming in annual reports to the Attorney General’s office that they received no income from UHO. In addition, Riley has misappropriated UHO assets, including four UHO vehicles that he transferred to his own name.

- Solicits donations with false and misleading solicitations
UHO workers encourage donations with false and misleading statements that the funds will “help the homeless,” “feed the homeless,” and otherwise go to “charities and different churches” or to support pantries, shelters, and detox centers. In fact, Cuomo’s investigation revealed that UHO does not operate any shelters, soup kitchens, or food pantries. Nor does it purchase food, clothing, or other essential items for distribution to the homeless, or provide social workers or any social services to assist the homeless or fund other charities’ efforts on behalf of the homeless. The Attorney General’s investigation also found that Riley and Walker failed to secure a public solicitation license for UHO. Despite this, workers are given UHO’s incorporation receipt to display at their tables to mislead the public into believing it is a permit.

- Fails to maintain records of money collected and paid out
UHO fails to maintain any records of the hundreds of thousands of dollars of funds collected and pocketed by UHO workers at the tables. In addition, more than fifty percent of the cash withdrawn from UHO’s bank account in 2007 and 2008 lacked any documentation explaining the purpose for which the funds were spent. Since UHO failed to properly book its revenues and expenses, it filed false and misleading financial reports with the Attorney General’s office.

- Has no governance or financial oversight
UHO is operated by Riley and Walker without any board or financial oversight, which New York State law requires of all charities. Riley and Walker are the only directors on UHO’s board, despite legal requirements that New York State not-for-profits have three directors. UHO has not held an election for directors since its incorporation in 1993.

The lawsuit also charges UHO, Riley, and Walker with engaging in a scheme to defraud in connection with charitable solicitations and making false filings with the Attorney General. The lawsuit further charges Riley and Walker with violations of New York’s Not-For-Profit Corporation Law for breaches of fiduciary duty in connection with UHO’s governance, and for wasting and misappropriating UHO’s assets. In addition, the lawsuit charges Walker and Riley with failing to properly administer charitable assets.

Attorney General Cuomo’s lawsuit requests that the Court remove Riley and Walker as directors and officers of UHO and dissolve UHO as a charitable enterprise. It also seeks to bar UHO, Riley, and Walker from soliciting charitable contributions from the public and prohibit Riley and Walker from serving on the board of directors of any not-for-profit group. In addition, the lawsuit seeks that Riley and Walker be held financially accountable for their waste and misappropriation of UHO assets and pay restitution.

Steven Banks, Attorney-in-Chief of the Legal Aid Society, said, “With record homelessness now in New York City, it is essential that every dime raised to alleviate this crisis actually goes to help homeless New Yorkers and Attorney General Cuomo’s action in this case is aimed at making sure that happens.”

Mary Brosnahan, Executive Director of Coalition for the Homeless, said, “New Yorkers are generous people and have shown their willingness to step up and help families in need time and again. With this case, Attorney General Cuomo and his office are protecting this generosity and ensuring that contributions meant to help our homeless neighbors actually go towards their intended purpose.”

The case is being handled by Assistant Attorneys General Patricia Northrop and Carolyn Ellis, Chief of the Charities Bureau Jason Lilien, and Senior Trial Counsel for Social Justice Kathryn Diaz.