It’s estimated that more than $2 billion a year is given to charity by companies that match donations made by their employees – an example of corporate generosity designed to generate goodwill among their staffs and help for nonprofit organizations. Unfortunately a recent indictment in Silicon Valley revealed a little known vulnerability of these programs.
Most critiques of corporate employee matching gift programs focus on their clunkiness which can depress employee engagement.
I was shocked recently to learn of another potential problem: scammers who concoct elaborate schemes to trick such programs into contributing funds that go into the fraudsters’ pockets.
On December 3, for example, the Santa Clara County (California) District Attorney’s Office announced that it had charged six former employees of Apple Inc., “for a scheme in which they tricked the tech company into matching thousands of dollars in donations to children’s charities, when they were not in fact donating a thing.”
According to a release from the DA, five employees defrauded the State of California and Apple’s Matching Gifts Program by pretending to make donations to the American Chinese International Cultural Exchange (ACICE) or Hop4Kids. “In fact, they were given the donations back and (Siu Kei/Alex) Kwan – the CEO of Hop4Kids and accountant for ACICE – kept Apple’s matching funds. Meanwhile, all the donators wrote off their “charitable donations” on their tax returns.”
The DA alleges the conspirators defrauded Apple of $152,000 in matching donations and overreported about $100,000 in donations as income tax deductions.
I took a pretty deep dive into corporate matching gift programs a couple of years ago and had never heard of such shenanigans. After learning of the Apple case I discovered that, unfortunately, it was not unique. Examples of cases that have been prosecuted include:
— In 2021 a North Carolina man was sentenced to 57 months of imprisonment and required to make restitution for nearly $600,000 for defrauding the employee matching gift program of Connecticut-based United Technologies Corporation. A US District Court in Hartford, Connecticut found that between 2015 and 2019 the defendant submitted fraudulent records of donations purportedly made by him and other employees which resulted in UTC transferring about $585,000 to a sham charity the defendant had created.
— In 2018, an Atlanta federal court sentenced a Georgia man to 41 months in prison and ordered him make nearly $700,000 in restitution to companies he had duped into sending matching gift donations to a bogus charity he ran. According to the US Attorney’s Office for the Northern District of Georgia, the defendant operated a nonprofit called Our Genesis Project that supposedly provided healthcare to underprivileged people, but enriched himself with donations instead of engaging in charity.
— In 2011, a pair of Virginia men were sentenced to prison terms and required to make $276,000 in restitution for having defrauded the Bank of America employee matching gift program. According to the indictment and information presented in court, one defendant “fraudulently obtained matching funds from Bank of America’s charitable arm after he falsely certified that charitable contributions had been made to his nonprofit organization, “Hoops for Africa,” by Bank of America employees.” His co-conspirator, a former Bank of America employee, admitted that “he falsely certified donations made in his name and that he recruited additional bank employees to participate in Bekale’s fraud scheme.”
There are more examples of convictions out there and it’s fair to assume that reported convictions are only the tip of the iceberg of the number of people who have constructed these types of fraudulent schemes.
It’s amazing – and frankly heartbreaking – that the philanthropic nature of employee matching gift programs don’t shield them from criminals and that the people who run these programs must increase their vigilance to thwart scammers.
Stay tuned in 2025 for advice on how to balance the need to harden corporate employee matching donation programs against fraud with the goal of encouraging employees to utilize them.