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Attorney General Nessel Aims to Dissolve Fraudulent Organizations Posing as Charitable Nonprofits
September 04, 2020
LANSING – The Michigan Department of Attorney General is seeking to dissolve 10 fraudulent entities for failing to comply with state nonprofit and charity laws. The entities have names similar to those of legitimate nonprofits, like the American Cancer Society, American Cancer Foundation, United Way and the American Red Cross, but appear to serve no charitable or commercial purpose.
Attorney General Dana Nessel announced today that a complaint to dissolve the illegitimate entities was filed Aug. 11 in Ingham County Circuit Court and assigned to Judge Clinton Canady III.
Subjects and entities identified in the complaint are Ian Richard Hosang, Claudia Stephen, Lincoln Palsey, American Cancer Foundation (ACF) of Detroit, and ACF of Grand Rapids, ACF of Lansing and ACF of Michigan; American Cancer Society (ACS) of Detroit and ACS of Michigan; American Red Cross (ARC) of Detroit and ARC of Michigan; United Way of Detroit and United Way of Michigan.
The entities were all incorporated in Michigan in 2018 by Hosang, who is identified as the resident agent. Stephen and Palsey are identified as officers and directors for some of the entities. However, neither Hosang nor the other defendants reside in Michigan, but all have New York addresses. The entities themselves also appear to have fraudulent information connected to them and none are registered with the Attorney General’s Charitable Trust Division, a legal requirement for nonprofit entities.
“Michigan philanthropists and charitable donors do a great deal of good with their contributions to nonprofits here in the Great Lakes State and elsewhere throughout the world to create and support positive change for worthy causes,” Nessel said. “However, anyone who chooses to donate – no matter how large or small the contribution – should not have to sift through fraudulent entities before finding a reputable one to support. My office has a responsibility to protect charitable interests in this state, and I take that responsibility seriously to ensure donors are not deceived or misled by dishonest individuals or organizations.”
On Jan. 2, 2020, the Michigan Department of Licensing and Regulatory Affairs referred the ACS of Michigan and ACS of Detroit to the Attorney General’s office for potential dissolution proceedings after discovering the organizations were not part of the national entity.
Hosang, a former stockbroker from New York who has a history of alleged fraudulent activity across multiple states, is listed as the incorporator and resident agent for the entities. He has registered nonprofits in California, Wisconsin, Ohio, Georgia, New York, Florida and Maryland all using similar variations on the names United Way, American Red Cross and American Cancer Society.
The Attorney General’s office alleges that Hosang uses names similar to those of well-known nonprofit charities to confuse the public by appearing to be legitimate entities. For example, a resident who wants to contribute to the American Cancer Society may conduct an internet search and believe American Cancer Society of Lansing is the local affiliated chapter. However, it may actually be a fraudulent entity.
The Attorney General’s office alleges that Hosang’s phony organizations serve no legitimate charitable or commercial purpose, as they do not actively solicit charitable contributions, distribute charity or provide any educational services. They also are not registered as charitable organizations with the state, and they have no physical office locations, no web presence and no phone numbers. Moreover, none of the board members reside in Michigan.
Hosang and his allies may be committing multiple violations of the Michigan Nonprofit Corporations Act (NCA), which led the Attorney General’s office to seek from the Court a permanent injunction against the defendants and involuntary dissolution of the entities. The states of California, North Dakota and Washington took similar action in 2018 and 2019 against entities Hosang established.
The NCA allows the Circuit Court to involuntarily dissolve a nonprofit corporation when the entity has:
- Procured its organization through fraud;
- Repeatedly, willfully and materially exceeded the authority conferred on it by law; and
- Repeatedly, willfully and materially conducted its affairs in an unlawful manner.