CNN 2012-06-20

 "Keeping Them Honest" now. With yet another troubling case of a charity that is asking you to open your wallet for a good cause but where the money actually,  where it actually goes is a completely different story. Now over the past couple of weeks, if you've been watching, we've been taking a very hard look at some veterans' charities. Charities for disabled veterans, in particular, that have taken in tens of millions of dollars in donations but used almost none of it to directly help those veterans. CNN's Drew Griffin has been investigating one of those charities, the Disabled Veterans National Foundation, the DVNF, for years now. They've raised nearly $56 million in the past three years. $56 million. And not one dime 1 that we've found has actually gone directly to help disabled veterans. Now you may remember Drew's attempts to talk to the president of that group? It's been met with resistance to say the least. There, she just shut a door in his face. Drew's reporting on the DVNF has gotten a lot of attention. Many of you have been outraged 2, you've twitted us about it. You've e-mailed us about the story. It's also gotten the attention of the Senate Finance Committee which has launched an investigation 3 into the DVNF. Drew is going to join us shortly in just a couple of minutes with an update on that investigation. The million-dollar question is, if the DVNF isn't spending your donations on directly helping 4 veterans, where is all that money going? 

 
As far as we can tell, up to the 10th floor of this Manhattan office building through a company called Quadriga Arts. A company that specializes in fundraising. And as far as we can tell, Quadriga Arts knows a lot about fundraising for itself. 
 
So Quadriga Art. That's the name you need to remember. Quadriga Art is this company that essentially 5 gets paid to build mailing lists for groups like the DVNF. And that's where the money trail took, Drew. Now following the trail was one thing. Actually getting answers at the end of it, that was another thing entirely 6. 
 
Yes, it's Drew Griffin. G-R-I-F-F-I-N. 
 
Yes. He is not here. … ? 
 
I'm trying to reach Mr. Schulhof. 
 
He's not in. 
 
Oh, he's not in.
 
In the course of investigating the DVNF, Drew uncovered yet another veterans' charity called the National Veterans Foundation that takes donations but uses only a very small percentage to actually help veterans. The connection you ask? Well, both veterans' charities use that same fundraising company, Quadriga Art. And now, tonight, Drew has uncovered yet another charity. This time a group that's supposed to help animals that has a similar money-losing connection to: you guess it - that same direct mail organization, Quadriga Art. Here's Drew. 
 
In Montreal, like every big city, the needs of the local SPCA was great. Abandoned dogs and cats needed help and the money to help them was running out. So in 2005, what seemed like a great opportunity came knocking. A private fundraising company called Quadriga Art proposed a major expansion. Montreal's SPCA would become the Canadian SPCA, Quadriga Art would send fundraising mailers across all of Canada. The deal was done and the money started rolling in. But there was a big problem. Practically every dollar that came in, according to Montreal's SPCA's new executive director, was going directly into the coffers of Quadriga Art. The fundraising bill is so large that after three years the Montreal SPCA, despite receiving about $13 million in donations, was in the hole more than $4.5 million.
 
How do you get in debt to a fundraiser? 
 
By incurring 7 expenses and not having a plan for getting out of it. It was not a smart decision on the SPCA's part. And we let Quadriga create strategy for us. 
 
The strategy was simple. Quadriga Art would send out pleas for money on behalf of this shelter, include tote bags and other gifts made by Quadriga Art's Chinese factory. But the cost far exceeded the donations and the SPCA was locked into this contract for seven years. 
 
The fundraising operation was so upside down for the Montreal SPCA that they actually still owe Quadriga Art nearly $2 million. And Quadriga has even taken out a lean (?) on this animal shelter. 
 
It's a lot of money. It's a lot of money but it's a lot less than the $4 million we owed them seven years ago. 
 
Quadriga Art and its president, Mark Schulhof, pictured here in an ad for an unrelated charity, have repeated refused interview requests to explain its unique process of raising money. A public relations firm explained that the cost at the beginning and raising funds by Quadriga involved long-term strategies to develop donor 8 list, creating databases that would eventually pay off. 
 
A spokesman told us, quote, "This has been a proven model for 50 years, despite being criticized by some charity watch groups." But at the Montreal SPCA, when the Quadriga Art contract has been running for nearly seven years now, the results have been a disaster. 
 
Will you sign with them again? 
 
Probably not. 
 
And that is hardly the end of this story. 
 
Mr. Barnoti? 
 
Speaking. 
 
My name is Drew Griffin. I'm with CNN. 
 
Yes. 
 
Meet Pierre Barnoti, fired by the Montreal SPCA board only to emerge as the founder 9 of a new U.S.-based charity - SPCA International. From his home in Montreal in a rarely staffed office in New York, Barnoti and Quadriga Art have designed a new charity, to tug 10 on the heartstrings with its signature program called Baghdad Pups. The stated goal, reuniting vets 11 and their war pets. But you're going to be stunned 12 to find out just how this operation works.