OFFICE OF THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK

 

Assurance No. 16-171
In the Matter of the

Investigation by Eric T. Schneiderman, Attorney General
of the State of New York, of

JOHN THOMAS BURCH, JR.

 

ASSURANCE OF DISCONTINUAN CE

The Of?ce of the Attorney General of the State of New York, Eric T. Schneiderrnan,
pursuant to the Not-for?Pro?t Corporation Law 112, the Estates, Powers,
and Trusts Law 8-1.4, and the Executive Law (?Exec Law?) Article 7-A 172 and
175, has reviewed whether a proceeding or action should be instituted against John Thomas
Burch, Jr., (?Burch?), the former founder, Chairman of the Board and President of the National
Vietnam Veterans Foundation, Inc., aka the American Veteran Support Foundation (Burch and
the OAG shall be collectively referred to herein as the ?Parties?). This Assurance of
Discontinuance (?Assurance?) summarizes certain ?ndings of investigation and sets forth
relief to which OAG and Burch have agreed.

I. FINDINGS
OAG has made the following ?ndings:

A. National Vietnam Veterans Foundation, Inc., aka American Veteran Support
Foundation

1. On January 30, 1992, the National Vietnam Veterans Foundation, Inc., was formed
as a nonpro?t corporation in the District of Columbia. The Foundation registered with the New
York Of?ce of the Attorney General Charities Bureau in September 2007 in order to solicit

charitable donations in the State of New York and was assigned N.Y. Registration Number 40-

51-40. In 2011, the Foundation also began soliciting under an alternative trade name, the
American Veterans Support Foundation.

2. One of the Foundation?s founding members, Burch, served as the Chairman of the
Board of the Foundation and its President from the Foundation?s inception until August 12,
2016. Burch primarily operated out of his home in Alexandria, Virginia, which served as the
Foundation?s corporate headquarters.

3. During his Presidency Burch also maintained full time employment and is himself a
Vietnam War Veteran.

4. Since 2010 the Foundation doubled the yearly donations it received from
nationwide fundraising efforts from approximately $3.6 million to $8.6 million. In its 990
tax returns which are also ?led with the State of New York the Foundation reported that
nearly all of the money raised through its direct mail campaigns was used to pay its fundraisers:
2010- $4,296,871 raised, $3,745,904 paid to fundraisers; (ii) 2011 - $3,630,957 raised,
$3,176,848 paid to fundraisers; 2012 - $4,489,637 raised, $3,968,538 paid to fundraisers;
(iv) 2013- $6,835,659 raised, $6,087,330 paid to ?mdraisers; and 2014- $8,643,900 raised,
$7,736,172 paid to fundraisers.

5. From 2010 through 2016 the Foundation raised $1,255,263.24 in donations from
New Yorkers.

B. Burch?s Fiduciary Duties To the Foundation

6. As a paid of?cer and director of the Foundation, Burch undertook speci?c duties to
the Foundation, its intended bene?ciaries, and donors. Directors and of?cers are required to
?discharge the duties of their respective positions in good faith and with the care an ordinarily

prudent person in a like position would exercise under similar circumstances.? N-PCL 717(a).

Proper discharge of these duties ensures that a not-for?pro?t board?s ?nancial

decisions are made soundly and legally, that an individual director, when faced

with an opportunity that could bene?t both the organization and him/herself, acts

in the organization?s interest ?rst, and that the board prudently manages its assets

in furtherance of its organization?s stated charitable purpose, among other things.

Put another way, these ?duciary duties are the high standards by which not-for-

pro?t boards and individual directors are held accountable for the decisions they

make and transactions they engage in.

Consumers Union of US, Inc. v. State of N. K, et al., 5 327 (N .Y. 2005); see also S.H. 
Helen R. Scheuer Family Foundation, Inc. v. 61 Assoc.?s, 582 662 Dep?t 1992)
(N .Y. ?duciary duty standard codi?ed at 717(a)).

7. First, Burch owed duties of care in the management of the Foundation and its
assets. These duties included acting prudently in the use of the Foundation?s assets by
purchasing only necessary goods and services at reasonable prices, making prudent selections of
vendors and regularly evaluating their cost and performance, making prudent decisions in grant-
making and distribution in the best interest of the Foundation?s charitable bene?ciaries, and
making prudent decisions in the selection and retention of other directors.

8. Burch also owed duties of due care to protect the reputation of the Foundation and
its ability to continue its mission by putting reasonable systems in place to ensure appropriate
reporting and monitoring of the conduct of the organization, its of?cers, directors, and
contractors, and to detect potential violations of law.

9. Second, Burch had duties of loyalty to the Foundation to act solely in its best
interest, to avoid potential or actual con?icts of interest, and to avoid using the Foundation for
his private bene?t in violation of governing documents and the representations it made to obtain
501(c)(3) tax exemption status ?'om the Internal Revenue Service. These duties included
avoidance of actions for his private bene?t which could place the Foundation?s tax exempt status

and deductibility of donors? gifts in jeopardy, or expose it to excise taxes.

3

10. Third, Burch had duties of obedience to the mission of the Foundation in its
advocacy for Vietnam Veterans, both to support and advocate for their legitimate interests, and
to avoid conduct that could bring the Foundation, and the causes it advocates, into doubt or
disrepute. As set forth in more detail in the ?ndings section below, Burch violated each of these
duties.

Burch?s conduct as set forth herein also violated speci?c provisions of the 
N-PCL 719(a)(1) provides that the OAG, on behalf of the corporation, may hold a director of a
corporation liable for an injury resulting to the corporation as a result of the distribution of the
corporation?s cash or property to directors or of?cers. N-PCL 720 provides that the OAG may,
on behalf of the corporation, hold an of?cer or director liable for his negligence or intentional
conduct. See also Vacco v. Aramony, N.Y.L.J., Aug. 7, 1998, at 21 (Sup. Ct. NY Cty. 1998)
(Attorney General had standing to sue of?cers of the United Way pursuant to N-PCL 720 for
losses suffered by the not-for-pro?t entity as a result of of?cers? breaches of ?duciary duty,
including the misappropriation of United Way funds for personal use).

12. The Foundation was incorporated in the District of Columbia and is also governed
by its nonpro?t law, including its Nonpro?t Corporation Act of 2010. The District of Columbia
Nonpro?t Corporation Act codi?es the duties of good faith, care, and loyalty referenced above
for o?icers and directors. See 29-406?30, 29?406?42. The Foundation is a foreign
corporation that is conducting activities in New York, that is registered in New York and that
conducts regular fundraising solicitations on New York residents. The Foundation?s directors
and officers are therefore subject to the same extent as directors and of?cers of a domestic New
York corporation to certain provisions of the New York Not-For?Pro?t Corporation law,

including but not limited to N-PCL 719 and 720, as made applicable by 1318. N-

PCL 719 and 720 may be enforced against the Foundation and its of?cers and directors in,
and such relief granted by, the courts in this State, in the same manner as in the case of a
domestic corporation.

C. Misuse of Foundation Funds and Emergency Assistance Program

13. As set forth above, the great majority of the donations collected on behalf of
Foundation went to compensate its ?mdraisers. Accordingly, after ?mdraising fees and
expenses, the Foundation received a comparatively small amount of the donations made to the
organization. The Foundation?s auditor concluded in his assessment of the organization?s
internal controls that ?due to its large expense in telemarketing [the Foundation] appears to have
limited resources to which funds could be depleted or diverted to unintended uses that would be
inconsistent with the Foundations [sic] Bylaws, including ?'au 

14. As set forth below, the fraction that actually made it to the Foundation to help
veterans was further reduced by a pattern of abuse, mismanagement and misspending of the
Foundation?s revenue. Some of the worst conduct was committed by the Foundation?s own
President, Burch a Vietnam Veteran.

15. Even though Burch maintained full time employment, Burch represented to the
board in 2012 that he ?expend[ed] over 400 hours a year in managing the affairs of the
[Foundation].? For this service, Burch received a number of bene?ts, including a salary.
However, the bulk of the Burch?s compensation came from the Foundation paying for or
reimbursing Burch for nearly every expense he incurred. This included Burch?s life and medical
insurance, pharmaceutical and medical expenses, parking for his two private automobiles in
downtown Washington, D.C., where Burch worked, telephone, fax, intemet and building security

services for Burch?s home, memberships, conference fees, and subscriptions.

16. Burch justi?ed some of these expenses to the board as an exchange for the
Foundation?s use of an of?ce, bathroom and basement storage space in Burch?s home. Burch
was not issued 1099s by the Foundation re?ecting these bene?ts and they were not included as
part of the amounts on his W-ZS. Moreover, this home of?ce was used infrequently given
Burch?s extensive travel schedule, full-time employment, and the existence of another purported
of?ce in Fort Lauderdale.

17. Burch could not justify the hundreds of thousands of dollars of Foundation money
that he spent since at least 2010 to support his expensive lifestyle and tastes. This included using
Foundation funds to pay for foreign and domestic travel, frequenting night clubs in the Baltimore
area on a nearly weekly basis, ordering excessive and expensive food and drink at meals at the
country?s top restaurants and lavishing gi?s (both monetary and otherwise), on women that had
either no or only a tangential relationship to a veteran.

18. Burch ran these expenses through the Foundation in a number of ways. 0n
numerous occasions Burch would pay for supposed Foundation business, including dinners,
travel, and entertainment, with his own credit cards, and then submit receipts for reimbursement.
Burch then directed the Foundation?s bookkeeper to pay off one of Burch?s several credit cards
using those reimbursements. However, the expenses that were being paid off were not related to
the Foundation or, in numerous occasions were for ?ctitious meetings involving individuals that
were not present. For example, in 2012 Burch spent approximately $800 in one night
frequenting night clubs and hotels in the Baltimore area. Burch described the nature of these
expenditures on the Foundation?s expense reimbursement form as ?work on homelessness? and

?veteran issue.?

19. From at least 2010 to 2016, Burch was also unilaterally in charge of the
Foundation?s ?Emergency Assistance Program.? The board budgeted tens of thousands of
dollars for Burch?s discretionary emergency assistance reaching $21,000 for 2013 and 2014, and
$40,000 in 2015 for these purposes. Burch described the program to the board in 2013 as
follows:

The individual grants generally run from $100 to $250 on a case by case basis.

The requests come to [Burch] informally, usually by text mail or by telephone and

sometimes in person. The recipients are usually Veteran family members with

small children who are in chronic destitute circumstances. In certain exceptional

cases, small grants are given to destitute individuals without close Veteran ties.

The grants are often given for several months until the requester is stabilized with

a new job or given time to save a home or get over a medical problem. While the

Board of Directors has approved an overall budget for the program, the Board

does not become involved in individual requests.

20. The Emergency Assistance Fund, to whom the Foundation? 5 board had entrusted
the President with sole and unfettered discretion, was also misused by Burch. Instead of being
distributed to Veterans in need, these funds were paid to the Burch?s relatives, friends and
personal acquaintances while legitimate claims for Emergency Assistance were denied or limited
in dollar amount. Indeed, nearly all of Burch?s ?discretionary ?md? was awarded to a handful of
women that had, at best, tenuous relationships with veterans; let alone Vietnam Veterans.
Between 2010 and 2015, Burch awarded signi?cant amounts of cash to only a handful of
women, all of whom were born after the Vietnam War ended. Six of those women received over
$10,000 and one over $20,000.

21. During this same time, several veterans that applied for Emergency Assistance with
the Foundation were either turned away or given only a nominal amount of assistance. For

example, in May 2015, a Vietnam Veteran with a family, including a ?ve year old daughter, who

was unable to secure employment and was unable to pay the rent was furnished with $250.00 by

the organization and was told that, ?with the current capacity of our organization and the number
of requests we receive, the most we are able to give at this time is $250.00 toward your ren 

22. Burch also awarded thousands of dollars in consultancies including to his wife and
retired board members and their wives. The most expensive of these consultancies were for
studies and reports which work product was never released to the public and had no immediate
benefit to Vietnam Veterans in need.

D. Burch?s Severance Payment

23. On August 14, 2016, the board of the Foundation met at the Army Navy Club in
Washington, DC. At that meeting, Burch was removed from his position as President and
Director and from all other roles at the Foundation, effective upon the close of the meeting. At
that meeting the two remaining board members awarded a severance to Burch consisting of two
month?s salary totaling $5,231.24 Burch wrote himself a check for that amount the next day.
While only three people, including Burch, attended that meeting a meeting at which Burch was
terminated -- Burch submitted an expense reimbursement for $100.00 cash tip to the server and
cut himself a check for that amount.

II. PROSPECTIVE RELIEF

WHEREAS, John Thomas Burch, Jr., agrees with the above Findings of the 

WHEREAS, OAG, ?nding the relief and agreements in this Assurance to be in the public
interest, accepts the terms of this Assurance in lieu of commencing an action or proceeding;

WHEREAS, the OAG and Burch, each believe that the obligations imposed by this
Assurance are prudent and appropriate;

IT IS HEREBY UNDERSTOOD AND AGREED, by and between the Burch and OAG

that, in consideration of the making and execution of this Assurance, the following terms apply:

MONETARY RELIEF

1. Burch has represented to OAG that he has very limited funds with which to pay
any judgment or other relief, apart ?om funds which are exempt from execution, and has
submitted a signed and sworn ?nancial statement to that effect. The OAG has relied on the
accuracy of this representation in agreeing to the payments provided for in Paragraphs 2 and 3
below.

2. Burch shall pay the sum of ONE HUNDRED THOUSAND DOLLARS
($100,000) to the New York Department of Law on or before the Effective Date of this
Agreement. This payment shall be made by cashiers or attorney?s check or money order payable
to the New York Department of Law. OAG may apply ten thousand dollars of the monies paid
pursuant to this Paragraph to defray the cost of investigation in this matter. OAG shall
distribute the balance of the funds it receives to a charity or charities providing substantially
similar services to the Foundation?s stated purpose.

3. Burch shall also repay the sum of $5,331.24 to the Foundation on or before the
Effective Date of this Agreement representing his ?severance? payment and cash tip at the
meeting where he was terminated. Proof of such payment shall be simultaneously forwarded to
the OAG.

4. Burch agrees that he has no claims against the Foundation and waives all right to
raise any claims against the Foundation in the future.

COOPERATION WITH ONGOING INVESTIGATION

5. The investigation into the current and former of?cers, directors,
employees and agents of the Foundation continues. The Foundation and Burch agree that, until
the date when the investigation is concluded, the Foundation and Burch agree to provide

9

full, complete and prompt cooperation with the investigation and related proceedings and
actions, against any other person, corporation or entity. This includes appearing for an on-the-
record examination at the convenience of Burch and the OAG.

BARS AND SUSPENSIONS

6. Burch agrees that he is permanently barred from serving as an of?cer, director,
trustee or ?duciary, of any not-for-pro?t or religious corporation or other charitable organization
or trust incorporated, formed, registered, operating or soliciting contributions in any of the ?fty
United States or in any United States Territory or Commonwealth.

APOLOGY

7. Burch shall execute the letter of apology to the People of the New York and, in

particular, the Veterans of the Vietnam War, in the form attached hereto as Exhibit A.
ADDITIONAL PROVISIONS

1. OAG has agreed to the terms of this Assurance based on, among other things, the
representations made to OAG by Burch and own factual investigation as set forth in the
?ndings above. To the extent that any material representation by Burch is later found to be
inaccurate or misleading, this Assurance is voidable by OAG in its sole discretion.

2. If the Assurance is voided or breached, Burch agrees that any statute of limitations
or other time?related defenses applicable to the subject of the Assurance and any claims arising
from or relating thereto are tolled from and after the date of this Assurance. In the event the
Assurance is voided or breached, Burch expressly agrees and acknowledges that this Assurance
shall in no way bar or otherwise preclude OAG from commencing, conducting or prosecuting

any investigation, action or proceeding, however denominated, related to the Assurance, against

10

Burch, or from using in any way any statements, documents or other materials produced or
provided by Burch prior to or after the date of this Assurance.

3. No representation, inducement, promise, understanding, condition, or warranty not
set forth in this Assurance has been made to or relied upon by Burch in agreeing to this
Assurance.

4. Burch represents and warrants, through his signature below, that the terms and
conditions of this Assurance are duly approved, and execution of this Assurance is duly
authorized.

5. This Assurance may not be amended except by an instrument in writing signed on
behalf of OAG and Burch. This Assurance may be executed in one or more counterparts, and
shall become effective when such counterparts have been signed by Burch and the OAG. The
Effective Date of this Assurance is the last date on which Burch and the OAG have signed this
Assurance.

6. This Assurance shall be binding on and inure to the bene?t of the parties to this
Assurance and their respective successors and assigns, provided that no party, other than OAG,
may assign, delegate, or otherwise transfer any of their rights or obligations under this Assurance
without the prior written consent of GAG.

7. In the event that any one or more of the provisions contained in this Assurance shall
for any reason he held to be invalid, illegal, or unenforceable in any respect, in the sole discretion
of GAG such invalidity, illegality, or unenforceability shall not affect any other provision of this

Assurance.

ll

8. To the extent not already provided under this Assurance, Burch shall, upon request
by OAG, provide all documentation and information necessary for OAG to verify compliance
with this Assurance.

9. All notices, reports, requests, and other communications to any party pursuant to this
Assurance shall be in writing, reference Assurance No. 16-171, and shall be directed as follows:

If to OAG, to:

Elizabeth Ann Fitzwater, Esq.

Assistant Attorney General, Charities Bureau

120 Broadway, 3rd Floor

New York, NY 10271

If to Burch to:

Paul R. Kramer, Esq.

Paul R. Kramer, LLC

1 North Charles Street, Suite 1104

Baltimore, Maryland 21201

10. Acceptance of this Assurance by OAG shall not be deemed approval by OAG of any
of the practices or procedures referenced herein, and Burch shall make no representation to the

contrary.

11. Evidence of a violation of this Assurance by Burch shall constitute prima facie proof
of violation of the applicable law as to that party in any action or proceeding thereafter
commenced by the OAG.

12. If a court of competent jurisdiction determines that Burch has breached this
Assurance, Burch shall pay to OAG the cost, if any, of such determination and of enforcing this
Assurance, including without limitation legal fees, expenses, and court costs.

13. OAG ?nds the relief and agreements contained in this Assurance appropriate and in

the public interest. OAG is willing to accept this Assurance in lieu of commencing a statutory

12

proceeding. This Assurance shall be governed by the laws of the State of New York without
regard to any con?ict of law principles.

14. Except as otherwise set forth herein, nothing contained herein shall be construed as
to deprive any person of any private right under the law.

IN WITNESS WHEREOF, this Assurance is executed by the Parties as follows:

 

Dated: November 2 2016 John Thomas Burch, Jr.
?2
Dated: ,2016 ERIC T. SCHNEIDERMAN
Attorney General of the State of New York
120 Broadway
New (york, NY 
es Sheehan

ureau Chief, Charities Bureau

13

OFFICE OF THE ATTORNEY GENERAL
OF THE STATE OF NEW YORK

 

Assurance No. 16-171
In the Matter of the

Investigation by Eric T. Schneiderman, Attorney General
of the State of New York, of

JOHN THOMAS BURCH, JR.

 

EXHIBIT A

I was founder, President and Chairman of the Board of the National Vietnam Veterans
Foundation. This letter is my apology to the millions of individuals that donated to the National
Vietnam Veterans Foundation, which also solicited money using the name the American
Veterans Support Foundation. As donors, you put your trust in me to make sure that your
donations helped veterans, not to pay professional fundraisers and ?nance my personal
entertainment pursuits. You sent in millions of checks - $10.00, $15.00 and $25.00 at a time.
That is real money from real people who sacri?ced those amounts so that a veteran would have a
meal, be able to call home or have a place to sleep for at least one night. Those checks added up,
and in 2014 we had a record year for donations reaching nearly $9 million. About 90% of your
money went to our ?mdraisers; that is unacceptable. Much of the rest was not spent in the
manner that we described when we solicited money from you.

This letter is also my apology to the people that we used as a prop in order for our ?mdraisers to
collect money - the veterans of the Vietnam War. These veterans are one of the most
overlooked and underappreciated group of veterans in United States? history. My actions as
President only added another insult to these heroes. As a Vietnam Veteran, I should have known

better.

As a Vietnam Veteran and as a human being I am ashamed of my actions. The National
Vietnam Veterans Foundation has shut down, I have agreed never again to handle charitable
funds, and I am repaying what I can to the New York Attorney General. I know that I can never
repair the damage my organization has inflicted on donor con?dence, but I urge you to continue
supporting our veterans, and the worthy charities out there who are assisting them. Mine,
however, was not one of them.

Dated: Alexandria, Virginia
November i 2016