Questions raised about official IRS non-profit status of ADA serial lawsuit filers

Valley attorneys and business owners are raising questions about the non-profit status of a controversial group that’s become the nation’s most prolific filer of disability lawsuits.

Advocates for Individuals with Disabilities (AID) has filed more than 1,700 lawsuits in the Phoenix area since February.

INTERACTIVE MAP: See AID’s 1700 lawsuits

Almost all of the lawsuits are filed over signage issues in parking lots and allege violations under the Americans with Disabilities Act (ADA). In those lawsuits, AID prominently touted its status as an official 501c3 charitable foundation.  

But in its application for non-profit tax-exempt status, an ABC15 investigation found that AID didn’t tell the IRS that it would be filing lawsuits or funding itself through litigation. 

“The fact they never told the IRS that they would be filing lawsuits as a primary activity and funding themselves through lawsuit settlements, that’s a really big problem," said attorney Kory Langhofer, a former federal prosecutor whose firm now practices political and non-profit law.

FULL COVERAGE: “Cash for Compliance?”

APPLIED AND APPROVED

AID applied for non-profit status in April and was approved in July.

In its application, the organization said it would have four activities: (1) ADA education and awareness program; (2) individuals with disabilities grant program; (3) administrative activities; (4) public relations.

Under a section describing how AID would be funded, it said, “The organization is dependent on the voluntary donations and contributions from individuals, corporations and foundations.”

Read the application below. 

AID's IRS Application by Dave Biscobing on Scribd

“It seems clear there were misstatements in here,” Langhofer said. “When they were telling the IRS what they were planning to do with their organization, they didn’t tell the IRS everything they should have.”

It’s not the only issue Langhofer found with AID’s non-profit status.

“It looked to me that what they were doing was suspicious,” he said. “So I wrote them and asked for copies of their tax records. I wanted to see if they are really complying with tax law.”

AID never responded. So Langhofer said he sent a courier to go to multiple addresses for AID to physically inspect their records.

The courier was turned away.

By law, non-profit organizations are required to provide copies of certain tax records and their IRS application to anyone who asks.

“They completely ignored us and that’s illegal,” said Langhofer, who provided emails to ABC15 documenting his efforts to contact AID.

AID did respond to ABC15’s request and provided its IRS application.

“NOT MY EXPERIENCE”

Business owners sued by AID also question why information about lawsuits was omitted from the IRS application.

“I’m sure I’m not the only person who would find this not to be like a non-profit organization,” said Steven Fisher, whose business was sued in June. “They are coming at us for one thing, and that’s the money.”

Fisher said defending his business, Doug’s Bugs, against a lawsuit and negotiating with AID has been difficult.

Fisher’s business was hit for signage issues. One marked assessable space was missing a sign. Another spot had a parody sign that read “Not handicapped? Move your @*$%&* car.”

He said that is the unofficial spot for his mother-in-law, who’s disabled and confined to a wheelchair.

After Fisher said he corrected the issues, he had his attorney offer $1,500 to settle. AID didn’t accept, he said.

“They shrugged it off. They were insulted,” Fisher said.

AID RESPONDS

Court records show that AID has collected at least $1.2 million in legal settlements from it's lawsuits. AID officials claim, however, that they are operating at a loss. 

AID has said it's also provided assistance and charitable gifts to the community.

It's not clear how much in charity the group has given out. Annual tax records with yearly totals won't be available until next year. 

Regarding this story, ABC15 sent detailed questions to AID officials regarding its non-profit status and application. 

In response, AID’s “de facto representative” Alex Callan emailed a statement.

The statement said AID actually has two sides: a private business side, Advocates for Individuals with Disabilities, LLC; and a charitable side, Advocates for Individuals with Disabilities Foundation, Inc.

RELATED: Who’s who in AID?

Read the full statement and ABC15’s questions below.

AID Responses by Dave Biscobing on Scribd

However, the timeline and information in Callan’s statement are inconsistent with previous statements made by AID’s lead attorney, Peter Strojnik, and the group’s own press releases.

AID started using the charitable side to file lawsuits without specific individuals on June 9, 2016, records show.  In an interview conducted with ABC15 the previous day, Strojnik said AID had already made the decision to use the charitable side so that all of the money would go into the non-profit.

“Now the foundation is filing lawsuits in its own name. All of it goes to the foundation,” Strojnik said on June 8.

ABC15 also didn’t broadcast or publish any reports about AID until early August. Also, in several AID press releases and court filings, the goal is to “self-fund” the foundation through the recovery of litigation expenses.

RELATED: AID’s answers don’t add up

In response to this report, AID’s lead attorney Peter Strojnik refused to answer questions and only sent the following email.

Dear Mr. Biscobing:

I previously requested that you not communicate with me or my clients regarding your mendacious reporting. Please make a note of this in your files.

Cordially Yours,

Peter Strojnik

But the use of a business side and charitable side still raises questions, Langhofer said. There are rules and restrictions regarding how non-profits can move money between entities.

“When you send records like this into the IRS, you sign them under the penalty of perjury,” he said. “It’s very important to be telling the truth in these applications.”

IRS RESOURCES

ABC15 reached out to the IRS for comment. A spokesman sent the following response.

“IRS Code Section 6103 does not allow me to discuss specific taxpayer or entity issues. Period. However, I can provide public information that is available on IRS.gov that you can use as reference material. The following information may be helpful for your viewers.”

IRS Complaint Process - Tax-Exempt Organizations
https://www.irs.gov/charities-non-profits/irs-complaint-process-tax-exempt-organizations

Fact Sheet 2008-13 explains the process for communicating alleged exempt organization tax law violations to the IRS and describes how the IRS handles such information. Members of the public may send information that raises questions about an exempt organization's compliance with the Internal Revenue Code to IRS - EO Referrals, 1100 Commerce Street, MC 4910 DAL, Dallas, TX  75242.  They may use Form 13909, Tax-Exempt Organization Complaint (Referral) Form, for this purpose.

In addition to oversight by the IRS, tax-exempt organizations are subject to oversight by state charity regulators and State tax agencies.  You may also want to send a copy of the referral you send to us to your state charity regulator and/or state tax agency.

Contact ABC15 Investigator Dave Biscobing at dbiscobing@abc15.com

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