BBB warns that boat donation charity may be navigating in trouble waters

3:12 PM, Jan 21, 2009   |    comments
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KSDK --  A charity that raises money by selling donated boats across the country,  including Missouri and Illinois,  has spent thousands of dollars of that money to make payments to businesses operated by its top two officials.

According to the Better Business Bureau, the arrangements appear to violate its conflict-of-interest standard for charities and may be at odds with Internal Revenue Service recommendations on non profit governance. They also may violate an IRS prohibition against private inurement for charity officials.

A consultant and spokesperson for the charity, Larry C. Howlett, told the BBB he disputes any violation of IRS rules. He said any funds the charity paid to the officials is less than the fair market value of property rights and services.

The charity currently operates under the name Boat Angel Outreach Center of Mesa, Ariz. Its chief executive officer is Brian Stewart, who is listed in Arizona state records as one of two members of the charity's board of directors. Stewart also is described as the founder and director of operations for Reignbow Media on Reignbow Media's Web site. Both Boat Angel Outreach Center and Reignbow Media list addresses in Mesa.

Boat Angel says on its web sites that it raises money for a variety of charitable programs by taking ownership of donated boats, cars, trucks and recreational vehicles and then selling them, many on the internet auction site eBay.

One potential conflict involves Stewart's dual roles with Boat Angel and Reignbow and their ties to a series of animated Christian-based movies featuring a white donkey called "Donkey Ollie."

In an interview, Stewart said Boat Angel paid Reignbow about $60,000 for "production rights" for the children's videos. Stewart said the $60,000 is less than 2 percent of the charity's $3.8 million cost of distributing nearly 4 million videos.

The payment came to light after the BBB asked Stewart about an agreement, found on the internet, between Stewart's Car Angel New Millennium Scholarship Fund and DQ Entertainment, Ltd., an animation company based in India. The agreement appears to show that Car Angel had paid Reignbow $175,000 for "sound track preparation" and $450,000 for "script licensing/licensing fees" over a three-year period between July 2004 and July 2007.

Stewart said that agreement was never signed and was put together simply to protect his rights as the program's creator and the rights of Reignbow as his representative. He said neither he nor Reignbow ever received any of the $625,000 referred to in the agreement. Stewart acknowledged the $60,000 payment when asked by the BBB whether the charity had ever paid Reignbow any money for rights to the videos.

In the past, the charity has operated under the names Boat Angel, Car Angel Ministries and Car Angel New Millennium Scholarship Fund. The groups recently were combined under the name Boat Angel Outreach Center, according to Stewart and records in Arizona. Documents filed with the Arizona Corporation Commission show Stewart as the chief executive officer and board member. David Crawford of Queen Creek, Ariz. is listed as secretary and the only other board member.

 

The BBB said a second potential conflict involves payments from the charity to Crawford. Stewart said Crawford receives about $3,000 a month for work related to the charity's Web site. Stewart would not produce documentation of the payments to Crawford and would not say how long Boat Angel/Car Angel had been making the payments.

In addition, Reignbow publishes Christian books that are distributed free by the Car Angel/Boat Angel charity to prisons throughout the U. S. Hundreds of thousands of the books are distributed, Stewart said. He would not say how much he or Reignbow have received from the charity for rights to those books.

Boat Angel advertises on billboards in the St. Louis area, as well as outstate Missouri. Stewart said recently that the charity has 3,000 billboards across the U. S.

Recent sales by Boat Angel include several boats donated in Missouri and Illinois. They include a bass boat in Troy, Mo., a 36-foot houseboat in St. Charles, Mo., a 22-foot Sea Ray in Kimberling City, Mo. and a 21-foot Bayliner Ciera cabin cruiser in Carlyle, Ill. Donors receive federal tax deductions for their gifts.

"Groups that are not transparent and are found to have conflicts of interest make it more difficult for good, responsible charities in our area to raise funds," said Jim Judge, BBB Director of Charity Information Services. "We all know and understand the challenges which charities face in the current economy--challenges both with fundraising and meeting growing demand for services--and every dollar which goes to a group of questionable trustworthiness is a dollar which does not go to accountable charities in our area."

The BBB's Wise Giving Alliance, recommends, "no transaction(s) in which any board or staff members have material conflicting interests with the charity resulting from any relationship or business affiliation."

The IRS rules for charitable organizations mandate that a charity such as Boat Angel Outreach Center "must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests."

In a 2008 report to the IRS, the charity said that Stewart received a salary from Boat Angel Research Center of $43,655 in 2007. That total is in addition to payments made to Reignbow.

KSDK/BBB

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