Vet groups guide members after ID thefts.

Veterans' organizations around the country are scrambling to educate their members about fraud alerts after possibly millions of vets' personal information, as well as that of active duty personnel, was reported stolen.

The Department of Veterans Affairs (VA) announced on May 22 that the home of a data analyst employee was burglarized three weeks earlier. Among the items stolen was electronic data the employee had taken home, in violation of policies, that included names, Social Security numbers and dates of birth for as many as 26.5 million veterans and some spouses, as well as some disability ratings.

The VA plans to send individual notification letters to veterans. Vets also can go to www.firstgov.gov, as well as www.va.gov/opa, to get more information. The firstgov Web site is being set up to handle increased Web traffic. Working with other government agencies, the VA has set up a staffed call center (1-800-FED-INFO) that veterans can call to get information about this situation and learn more about consumer identity protections. The call center will operate from 8 a.m. to 9 p.m. EDT, Monday through Saturday as long as it is needed, and will be able to handle up to 20,000 calls per hour, or 260,000 calls per day.

Members of the President's Identity Theft Task Force met May 22 to coordinate the comprehensive federal response, recommend further ways to protect affected veterans, and increase safeguards to prevent the reoccurrence of such incidents. Details of that meeting were not available at press time.

In the meantime, veterans' organizations are stressing to their members that they place a fraud alert on their credit cards--regardless of whether they suspect fraudulent activity.

National service officers with Lanham, Md.-based AMVETS have been reaching out to the 180,000 members of that national organization to let members know about the situation and what they should do.

AMVETS offered five "key maneuvers" on its Web site which veterans should consider making, including placing a fraud alert on credit reports and monitoring credit reports and other financial statements.

"The big thing at first was education for our membership," said Joseph Chenelly, director of communications for AMVETS, starting with their monthly newsletter, Membership Matters. Most of the queries the organization has received have come after initial contact by service officers, after members have digested the information, he said.

AMVETS also is partnering with Identity Safeguard to provide members with a reduced rate for services like credit monitoring and personalized risk assessment, as well as insurance in the case of identity theft. "If there's a problem, they'll act as their advocate with credit agencies," Chenelly said.

Within weeks of the public announcement of the theft, AMVETS had discovered a scam that asked vets to confirm personal information such as Social Security numbers and dates of birth. Though the organization learned of the scam in Nashville, Tenn., Chenelly warned that it's not limited to one geographic area, nor is it limited to phone calls or e-mail.

"It could be reached any way, anywhere," he said, including regular postal service mail.

David Autry, deputy national director of communications for Disabled American Veterans (DAV), said it's impossible to know specifically which of the 1.3 million DAV members, if any, had their information stolen. The organization almost immediately sent a notice to field chapters, departments and national service offices alerting them to what happened, along with how people can contact the major credit bureaus and flag their accounts with a fraud alert. DAV also plans a story in the upcoming July edition of its magazine.

Like other veterans' groups, DAV is working with the VA and news media to alert members about preventive steps they can take to protect themselves.

Joe Davis, a spokesman for Veterans of Foreign Wars, said it's critical to keep members informed because more information comes to light every day, and sometimes it contradicts earlier announcements. At first, VA told organizations that only those who retired or separated from service since 1975 (when records began being kept electronically) were affected. Later, it was revealed that maybe those who Filed a VA claim (such as a home loan guarantee, medical claim or GI bill), but separated earlier, could be affected, he said.

Since the initial announcement, published reports have indicated that the format in which the data--which were not encrypted--were stored required specialized training and application software to access.

Initially, the VA employee who took the data home had been placed on administrative leave pending the outcome of an investigation. Veterans' groups didn't think that was punishment enough and also were upset that they were not informed of the incident until May 16, still ahead of the national announcement.

"For Secretary Nicholson to have to admit that he had been kept out of the loop on such a serious matter reflects a serious lack of leadership, management and accountability within his department," said Jim Mueller, commander-in-chief of VFW. Headquartered in Kansas City, Mo., VFW is the largest organization of combat veterans, with 2.4 million members, including auxiliaries.

Some members of Congress have called for VA Secretary Jim Nicholson to resign, but Mueller said that's a decision for the president. The VFW does, however, believe that after Congressional hearings on May 25, that a certain number of senior executives, as well as mid-level managers involved in the incident, should be immediately terminated.

"To not inform your boss of what can only be described as the worst crisis in the VA's history is unconscionable, inexcusable, and does tremendous injury to America's veterans and to the VA's workforce of 235,000 dedicated employees," he said. "These individuals cannot be trusted to fix what they allowed to happen."

The leadership at Paralyzed Veterans of America (PVA) called for all individuals involved to be held accountable. "Simply placing this individual on administrative leave for jeopardizing the lives of so many veterans is wholly unacceptable," PVA President Randy L. Pleva, Sr. said in a statement.

The VA announced May 30 that the employee would be fired, Acting Assistant Secretary for Policy and Planning Dennis Duffy was placed on administrative leave, and Deputy Assistant Secretary for Policy Michael McLendon resigned, effective June 2. McLendon did not immediately make officials aware of the burglary, although he knew about it hours after it occurred. The employee who took the data home worked in McLendon's office and Duffy was in charge of that division.

"The keys to the kingdom of one-tenth of the country's population were released," said Davis, the VFW spokesman. "They are the lead organization to take care of America's veterans and they failed us."

Davis suggested there were other ways to alert veterans' groups sooner than two weeks after the burglary occurred.

"I find it deeply troubling that the VA has allowed the personal information of so many millions of veterans to be compromised. Even more troubling is the fact that the VA did not notify the public about this incident until nearly three weeks after the information was stolen," Pleva said.

"This could literally impact all 24.8 million living veterans," Davis said. "To err on the side of safety, every veteran should put a fraud alert on their credit because we don't know who truly is impacted because VA has yet to tell us."

RELATED ARTICLE: Study: fund nonprofits with sales tax.

BY MARK HRYWNA

Nonprofit cultural institutions in the Chicago metropolitan area should be funded through an increase in the sales tax rather than property taxes, according to a new study. A new legal entity for Cook County would be funded by a sales tax increase of 0.25 percent to replace property tax support for the 12 institutions supported by the Chicago Park District and the Cook County Forest Preserve District, as well as other emerging groups.

Revenue from the sales tax hike, proposed on general merchandise and food and drugs, could generate $125 million while allowing the Park and Preserve districts to cut in half their reliance on property taxes for operating expenses. A 0.25 percent increase in the sales tax would add 2.5 cents to a $10 purchase.

Annual operating expenses are approximately $53 million, with another $28 million in capital expenses, all supported through property taxes. The tax levy for operating expenses could be cut in half, with $26 million in property tax relief in the first year, and the remaining $26 million for ongoing programs.

The Civic Federation, a nonpartisan, independent government research organization, released its four-year study in May and the response has been fairly positive, President Lawrence Msall said, adding that institutions not funded by property taxes also have expressed interest in how they would benefit from a countywide cultural district. Not only is the property tax highly regressive and politically unpopular, but Msall estimated the new tax would reduce property taxes by about $40 to $80 in the city, depending on how it's applied.

A sales tax is a more reasonable funding mechanism, Msall said, and a more rational way to support cultural institutions. He reported little opposition to the task force's recommendation, except for some merchants who are afraid the sales tax already is too high, though he added that some might say the property tax is too high as well.

In Chicago, the combined sales tax is 9 percent, with 5 percent going to the state, 2.25 percent to the city, 1 percent to Cook County and 0.75 percent to the Regional Transit Authority. Two years ago, Msall said, the city increased its take by 0.25 percent to meet a budget shortfall. The 0.25 tax hike for cultural institutions would be added to the 1 percent for Cook County.

Now that the federation has released its report, Msall said it's time for discussion among Chicago's cultural institutions and public officials to decide whether to create a new district. The proposal would need approval by commissioners but not by a ballot measure, and the property tax relief plan is "inextricably linked" to the new, more stable funding for the cultural institutions, Msall said.

The 128-report, available on the federation's Web site (www.civicfed.org), compared a number of different routes taken by other major metropolitan areas to secure arts funding in recent years. Five different models for financial support of cultural institutions were examined: special taxing districts established by local voters to collect and distribute money; quasi-governmental agencies that award grants supported by earmarked tax revenues; appropriations and/or rent waivers provided to privately owned and operated institutions, and full public ownership.

Since the Denver Scientific and Cultural Facilities District was created in 1988, Pittsburgh, Pa., Kansas City, Mo., and Salt Lake City, Utah, "have each created cultural taxing districts tailored to the needs and resources of their metropolitan areas," according to the report.

Commissioners in Cleveland, Ohio's Cuyahoga County are considering a proposed 30-cent increase in the cigarette tax, according to the Cleveland Plain Dealer, that would generate $20 million for matching funds for county-based nonprofit arts organizations' operating expenses. Two years ago, voters in Cuyahoga County, Ohio, rejected Issue 31, a ballot measure to dedicate a $0.7 million property increase to arts funding.

A dedicated revenue source for the arts "usually grows up around what's politically and economically feasible at a particular time at a particular location," said Edward Able, chief executive officer of the American Association of Museums. "What will fly and what won't within a political boundary.

"The bottom line is most government funding comes from the very practical realizations of the contributions museums make to their communities in a wide variety of areas," he said. Some cities and states set aside their hotel and bed tax for museum funding, recognizing that in many cases, museums are the "primary drivers of enormous amounts of cultural tourism that in fact generate those tax dollars."

While popular and a significant source of arts funding, the hotel tax also can be volatile, said Randy Cohen, vice president of research and information for Americans for the Arts. During the economic boom of the late '90s, San Jose, Calif., was generating more than $15 million a year in arts funding, he said, but when the economy cooled, hotel occupancy dropped and the funding pot shrank to about $10 million or $12 million a year.

"It's sort of a live by it, die by it, but it does ensure that the arts community remains very engaged in local economy," Cohen said.

In Tempe, Ariz., voters approved an increase in the sales tax to build a cultural center, but also create an endowment for programs at the facility, Cohen said. "It's forward thinking, and it's refreshing to see." There's a growing understanding of the importance of museums and other cultural institutions in creating an environment that attracts what is commonly referred to as the "creative class," which Able said is essential to the commercial growth of any community today. "There are many who view we're moving from an information society and age into a creative industry age where the main industry in the U.S. will be the creative industries. Studies by a number of cities have found clear evidence that rich cultural assets are essential to attracting the workforce necessary for those creative industries," he said.

The Civic Federation's study found that total attendance at the 12 cultural institutions in Cook County was 13.35 million in 2004, more than 1 1/2 times the population of the metropolitan area and double the combined paid attendance of Chicago's six professional sports teams.

The task force made three primary findings:

* Cultural institutions provide substantial quantifiable benefits to the region;

* Government financial support for the cultural institutions is steadily shrinking;

* A stable new funding structure is needed for the cultural institutions to replace current property tax subsidies and to offset declines in those public subsidies.

The study, funded by The Chicago Community Trust with research by the University of Illinois, also detailed the economic impact of cultural institutions on the greater Chicago metropolitan area, which is more than $1 billion, with 6,500 jobs and $273 million in salary and wages during 2002. The study estimated that the 12 institutions employ 4,710 employees and generate $1.35 in additional economic activity for $1 spent.

But the pressure to keep taxes in check has meant reduced funding for subsidies to cultural institutions. The report found that the Chicago Park District reduced funding to Museums in the Park by $4.8 million, more than 13 percent, between Fiscal Year 2001 and 2004, while the State of Illinois cut grants to museums by 9 percent, or $717,000, between Fiscal Year 1999 and 2002.