The Oregon attorney general says a nonprofit that awards honorary medals to military veterans has been deceiving donors by keeping most of the money.

PORTLAND — The Oregon attorney general says a nonprofit that awards honorary medals to military veterans has been deceiving donors by keeping most of the money.

John Kroger wants to shut down Veterans of Oregon telemarketers who tell donors the money will feed, house and provide medical care for homeless vets.

The state Department of Justice has sued the nonprofit veterans group and its for-profit fundraiser, Associated Community Services, claiming 80 percent of about $500,000 raised over the past two years has gone to the Michigan telemarketing firm.

The state says much of the rest goes to the group's founder John Neuman, meaning that Veterans of Oregon "spent nothing or only token amounts on the programs described" in solicitations.

Neuman defended the practice of using telemarketers and told The Oregonian he plans to fight charges in court. He says his organization has been caught up in a political campaign against telemarketers.

The newspaper featured Neuman in a 2009 Veterans Day story for his work awarding more than 9,600 vets the medal since 2006, including Gov. Ted Kulongoski and President George W. Bush.

Neuman's organization sells $6 medals and also produces the Field of Honor, a traveling memorial of 1,000 flags planted in dramatic locales, including the Portland Rose Festival.

Neuman, 62, an Air Force veteran who served in Vietnam, says he has worked for nearly 20 years to honor veterans with memorial highways, monuments and now medals.

"I've never been in it for profit, helping veterans is what I do, it's my own therapy and we're going to win this thing," Neuman told The Oregonian.

The complaint is part of a larger Kroger campaign to stop charities that keep most of the money they raise.

Veterans are among the "hero" charities, like firefighters and police, that enjoy wide support and are thus easily exploited, charity watchdogs say. There are 187 active nonprofits registered in Oregon with names indicating they serve veterans or soldiers.

Since the wars in Iraq and Afghanistan, there has been "a proliferation of new veterans' groups being formed," says Daniel Borochoff, president of the American Institute of Philanthropy, a prominent independent watchdog group.

"Unscrupulous fundraisers are taking advantage of America's concern for veterans. It's a national scandal," Borochoff said. "And there is a broad concern that over $1 billion (annually) is raised in the name of veterans in this country, and that so little of that is going to help the people in need."

Kroger, a Marine Corps veteran, said that in the midst of two wars, a nonprofit can easily exploit the desire to support and honor military service.

"People would not donate if you were honest and said, 'By the way, 80 percent of your donation will go to the telemarketing firm,' " Kroger said. "Every dime that goes to all that overhead is a dime that doesn't go to a worthwhile group."

Kroger asked his staff to investigate after he noticed that three of the 20 charities considered the worst in Oregon in 2009 raised money for veterans. The Department of Justice lists charities that spend 80 percent to 98 percent of donations on overhead.

The American Institute of Philanthropy rates charities "satisfactory" if at least 60 percent of donations go to the program and "highly efficient" those that send 75 percent or more to direct services.

In May, the Justice Department also sued a Central Point nonprofit, No Veterans Left Behind Association. Its founders sold embroidered vet hats and raffle tickets outside large retail stores in Marion and Klamath counties.

The state also sued and settled with The Veterans Fund and its Florida telemarketing firm for making false statements. The two agreed to pay a combined $180,000 in fines and to never solicit money in Oregon again.