"That is Definitely Mail Fraud"

The La Habra Heights Improvement Association has been a positive force in the community for over 70 years, especially in the years prior to Incorporation, when it served as a watchdog and defender of the rural lifestyle and large, minimum one acre lots.

In recent years, the La Habra Heights Improvement Association has advertised and publicized itself as a 501(c)3 non-profit, and that contributions to it are tax deductible.

According to IRS Charity Specialist John Miller, the La Habra Heights Improvement Association is a 501(c)4, and has been since October 1966. Filings by the Improvement Association for the past 3 years also say it is a 501(c)4.

Contributions to a 501(c)3 are, with limited exceptions, tax deductible.

Contributions to a 501(c)4 are, with limited exceptions, NOT tax deductible.

The Improvement Association is listed on the California Attorney General's Charitable Trust website. However, in response to an inquiry regarding the status of the LHHIA as being shown as "current" on their website, the Attorney General's Office said, " If an organization is listed as "current" on our website, it doesn't necessarily mean it is a 501(c)(3) or 501(c)(4) organization. It just means an organization has filed their annual filing reports with this office."

A review of sampled Heights Life magazines, going back to the 1970s, indicates that tax deductibility was first mentioned in 2007, and said "may be tax deductible".

2007 Heights Life Excerpt


The statements became more definitive in the ensuing years as seen below.

Improvement Association Solicitation Samples - Red underlines added for clarity
June 2008 Heights Life President's Column
June 2008 Heights Life Page 12
2009 Dues Solicitation
May 2009 Heights Life Solicitation


Jeffrey Heintz, currently a candidate for the Water District Board, has been Treasurer of the Improvement Association during this time.

He recently said in response to an inquiry regarding contributions, "Yes, the Improvement Association is 501(c)3, tax deductible non-profit."

For the past three years, he signed the Improvement Association's Annual 990 Filings which stated it is a 501(c)4.

Excerpts from 3 Page 2007 990 Form (2006 & 2005 Similar). Red Outlining Added for Visibility

Page 1 contains Identifying info. Page 3 contains Signature

Suspicions were raised in June 2009 when Treasurer Jeffrey Heintz did not provide the Annual Income statement to members at the La Habra Heights Improvement Association's Annual Public Meeting at City Hall as had been done in the past, and the Board subsequently ignored a written (email) request.

At the June meeting it was also disclosed that members' voting rights had been taken away in a secret by-law change. The Improvement Association Board refused to let members see the revised by-laws, stating the By-Laws could only be seen by the Board.

These refusals to provide members with requested information appear to violate several sections of the Corporation Code requiring disclosure of finances and by-laws upon request.

California Corporation Code 6333 states:

"6333. The accounting books and records and minutes of proceedings
of the members and the board and committees of the board shall be
open to inspection upon the written demand on the corporation of any
member at any reasonable time, for a purpose reasonably related to
such person's interests as a member."

California Corporation Code 5610 applies to By-Laws:

"5160. Every corporation shall keep at its principal office in this
state the original or a copy of its articles and bylaws as amended to
date, which shall be open to inspection by the members at all
reasonable times during office hours. If the corporation has no
office in this state, it shall upon the written request of any member
furnish to such member a copy of the articles or bylaws as amended
to date."

In addition, the last extant Association By-Laws (2001), the Corporation Code, and an internal Improvement Association document, require that an annual financial statement be mailed to all members. This has not occured during at least the term of the current Treasurer, going back to 2003.

Corporations Code 6321 states:

"6321. (a) Except as provided in subdivision (c), (d), or (f), the
board shall cause an annual report to be sent to the members not
later than 120 days after the close of the corporation's fiscal year.
... (c) Subdivision (a) does not apply to any corporation which
receives less than twenty-five thousand dollars ($25,000) in gross
revenues or receipts during the fiscal year."

The Improvement Association 2001 By-Laws, page 12, states:



A schedule of Treasurer's duties from another Improvement Association Document, of unspecified date, states that the Annual Report is to be provided to members, and cites the applicable Corporation Code section.



The Public 990 Filings, show that the gross receipts of the Improvement Association were as follows:

La Habra Heights Improvement Association Gross Receipts
FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08
$41,546 $51,703 $40,880 $37,572


According to the Corporation Code and Association By-Laws, members should have been provided a financial report for at least those years.

In some earlier years, the Annual Report was included in the Heights Life.

Was labeling the Improvement Association a "501(c)3" to attract more contributions a "scheme" to offset losses?

The first apparent mention of tax deductibility of contributions was late in Fiscal Year 2006-07.

The table below shows the net income from Special Events and Activities, and the Excess or Deficit for the years available.

Figures from LHHIA Public 990 Annual Filings (See complete filings below)
FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08
Net Income, Special Events & Activities -$1,043 $2,811 -$28, 204 -$20,859
Excess or Deficit $1,013 $25,720 -$5,944 -$1,678


The figures indicate losses for FY2007 and FY2008.

The 501(c)3 representation and Bronze, Silver, Gold, Platinum designations for contributors started in this period.

The Improvement Association mailed it's magazines and Dues Statements advertising their 501(c)3 status, the tax deductibility of contributions, and solicited contributions.

When questioned about the status of mailing solicitations for tax deductible contributions as a 501(c)3, when the organization is actually a 501(c)4, Kevin at the United States Postal Service Postal Inspectors Division, stated, "That is definitely Mail Fraud."

One description of Mail Fraud is:

"MAIL FRAUD - 18 U.S.C. 1341, makes it a Federal crime or offense for anyone to use the United States mails in carrying out a scheme to defraud.

A person can be found guilty of that offense only if all of the following facts are proved: First: That the person knowingly and willfully devised a scheme to defraud, or for obtaining money or property by means of false pretenses, representations or promises; and Second: That the person used the United States Postal Service by mailing, or by causing to be mailed, some matter or thing for the purpose of executing the scheme to defraud. Punishment for a conviction under the mail fraud statute is a fine or imprisonment for not more than five years, or both."

The use of the internet for misrepresentation and solicitation is "Internet Fraud", and if the mails are used in transmission of funds from that solicitation, that is another type of "Mail Fraud."

The Improvement Association's Accountant's office of Joe Mericle referred questions regarding the Association's 501(c)4 or (c)3 status to Treasurer Jeffrey Heintz.

Treasurer Jeffrey Heintz hung up on a caller seeking to ask questions, and upon a re-call directed that questions be asked through the Improvement Association website.

Repeated attempts to obtain any documentation from the Improvement Association, that shows that they are a 501(c)3, and that donations are tax deductible, have received no response as of press time.


Resources

If you are a victim of Mail Fraud or a mailed fraudulent solicitation, a complaint can filed at the US Postal Inspector:
https://postalinspectors.uspis.gov/forms/MailFraudComplaint.aspx

The L.A. County District Attorney's Office, Fraud Division can be contacted at:
Los Angeles County District Attorney's Office
201 North Figueroa St., Suite 1600
Los Angeles, CA 90012
(213) 580-3273

The California Attorney General's Office has a complaint form here, or contact them at:
California Attorney General
(916) 322-3360 or 1-800-952-5225
http://ag.ca.gov/charities/


Source Documents and Contacts

IRS Charities Division Phone number to confirm 501(c)4 status 877-829-5500, LHHIA id# is 95 2455456

See the Improvement Association 990 Filings for 2008, 2007, and 2006

Improvement Association 2001 By-Laws see here

Improvement Association Treasurer Duties Sheet, unknown date - see here


Comments and Question