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Associated Press
John Michelotti’s Flag of Honor/Flag of Heroes Project collected more than $100,000 in donations, but it has donated only $15,000 to 9/11 charities.

Some 9/11 charities not so charitable

– Americans eager to give after the 9/11 terrorist attacks poured $1.5 billion into hundreds of charities established to serve victims, their families and their memories. But a decade later, an Associated Press investigation shows many of the non-profits have failed miserably.

There are those that spent huge sums on themselves, those that cannot account for money they received, those that have few results to show for their spending and those that have yet to file required income tax returns. Yet many continue to raise money in the name of Sept. 11.

One charity raised more than $700,000 for a giant memorial quilt, but there is no quilt. Another raised more than $4 million to help victims, but didn’t account publicly for how it spent all of the money. A third helps support a 9/11 flag sold by the founder’s for-profit company.

There are other charities that can account for practically every penny raised – except that all the money went to pay for fundraising, and not the intended mission.

Most of the 325 charities identified by the AP followed the rules.

But in virtually every category of 9/11 non-profit, an AP analysis of tax documents and other records uncovered schemes beset with shady dealings, questionable expenses and dubious intentions.

The AP examined charities that received tax-exempt status from the Internal Revenue Service by promising to serve victims of the 9/11 tragedy, build memorials or do other charitable works in honor of the dead. The charities were identified using data maintained by Guidestar, a private database of non-profits.

The $1.5 billion donated to these charities was in addition to the billions spent by Congress and states and established non-profits like the Red Cross.

Most of the 9/11 charities fulfilled their missions, but the AP analysis found dozens that struggled, fell short of their promises or did more to help their founders than those affected by the attacks.

The quilt that isnít

Kevin Held was a self-employed handyman in Peoria, Ariz., when he formed Stage 1 Productions in 2003 to promote the American Quilt Memorial honoring lives lost on Sept. 11. He said thousands of individual pieces would be crafted together on white, king-sized sheets that, when sewn together, would stretch 1 1/2 miles across an eight-lane highway.

That never happened.

The $713,000 that Held raised from students, school fundraising campaigns, T-shirt sales and other donations is gone. More than $270,000 of that went to Held and family members, records show.

Since 2004, Held paid himself $175,000 in salary, health insurance, other benefits and a car allowance. He’s owed $63,820 in deferred salary, according to the charity’s most recent tax filing.

Held also charged the charity more than $37,000 for office rent, utilities and other expenses, according to the group’s tax forms. But the addresses reported by the charity for most years were Held’s home and private mail boxes.

Held spent more than $170,000 on travel since 2004 to promote the quilt. He also listed $36,691 in credit card and bank charges since 2005 and $10,460 for an expense listed as “petty” in 2009.

Held acknowledges he struggled managing the charity’s finances, but he said he didn’t live off the non-profit.

Still, he’s come a long way since serving a few days in a Tampa jail in 1993 for misdemeanor theft and battery. With his wife, he’s moving into a $660,000 house in Chandler, Ariz.

Held insists he has accounted for every dime spent by the quilt charity, even if he can’t justify all the expenses.

“It doesn’t mean I’m a bad person,” Held said. “It just means I made a mistake.”

Ministerís millions

Urban Life Ministries, based in a church not far from the World Trade Center site, is one of many 9/11 charities that have caught the attention of the IRS because it failed to file annual tax returns.

The charity’s creator, the Rev. Carl Keyes, said that in the initial months after the 9/11 attacks the group raised more than $4 million with the help of a Christian television station telethon. All of that money, he said, went to cover the costs of counseling, feeding and caring for 9/11 victims, first responders and workers at ground zero.

The only tax return available from Guidestar – for 2001 – lists just $670,000 raised for relief work. The IRS withdrew the charity’s tax-exempt status in June for failing to file annual returns.

Keyes has not responded to AP’s requests to explain how the money raised was spent; some of the information he did provide conflicted with the 2001 return.

For example, Keyes said in the initial interview that he never received a salary from his charity. But the 2001 tax filing reported $89,500 on compensation to charity directors, including $31,600 paid to himself and his wife.

Keyes and his wife also received salaries from Glad Tidings Tabernacle, their New York City church. A large amount of the charity’s money went to Keyes’ church.

Keyes said he knows his charity has not filed all the required disclosures. “We’re not very good at that,” he said.

But he said he hoped the non-profit’s efforts wouldn’t be tainted by his lack of accounting.

For-profit flag

At first glance, the Flag of Honor/Flag of Heroes Project looks like any other charity doing philanthropy in the name of 9/11. But people who bought flags might be surprised to learn nearly all the proceeds have gone to the founder’s for-profit flag company, not 9/11 victims.

IRS rules generally prohibit the resources of a non-profit from being used to promote a for-profit product.

John Michelotti of Greenwich, Conn., the charity’s founder, said one of his goals was to give a framed copy of his flag, which bears the names of all the dead emblazoned on the Stars and Stripes to every family that lost someone in the attacks. He also designed a “Flag of Heroes” with only the names of fallen firefighters and law enforcement personnel.

In an AP interview, Michelotti acknowledged that his for-profit business, BIE LLC, has donated no more than $15,000 to 9/11 charities.

Most of the charities listed as beneficiaries were actually BIE customers that bought flags to resell during their own fundraising efforts.

Michelotti’s charity collected $139,332 in donations and other revenue from 2003 to 2009, but it only gave away framed copies of the flag to the families of between 200 and 350 victims of the terror attacks.

In interviews, Michelotti said he has never tried to mislead anyone about the nature of his business. “I never tell people, ‘Your money is going into a non-profit,’ ” he said.