Charities deceive donors; money actually going to telemarketer

By David Evans, Bloomberg News
Posted Sept. 13, 2012, at 6:10 a.m.

Carol Patterson was waiting for a call from her doctor. When the phone rang on that afternoon in August 2011 at her home in Cortland, Ohio, it wasn’t a physician on the other end. A woman named Robin said she was representing the American Diabetes Association.

Robin didn’t ask for money. She asked Patterson to stamp and mail pre-printed fundraising letters to 15 neighbors. Both of Patterson’s parents and one grandmother had been diabetic, so she agreed to do it.

“I thought since it does run in the family, it wouldn’t hurt for me to help,” says Patterson, 64, a retired elementary school teacher. She guessed, based on what she knew about charity fundraising, that about 70 to 80 percent of the money she brought in would be used for diabetes research.

The truth was almost the exact opposite. The vast majority of funds Patterson, her neighbors and people like them throughout the country would raise — almost 80 percent — would never be made available to the Diabetes Association. Instead, that money collected from letters sent to neighbors would go to the company that employed Robin and an army of other paid telephone solicitors: InfoCision Management Corp.

Just 22 percent of the funds the association raised in 2011 from the nationwide neighbor-to-neighbor program went to the charity, according to a report on its national fundraising that InfoCision filed with North Carolina regulators.

“It’s like a betrayal,” Patterson says, sitting in her kitchen in June, after being shown copies of the North Carolina report and the contract the association signed with InfoCision. “I know I won’t donate again. It’s like they stabbed you in the back. It’s terribly wrong.”

And it gets worse. Many of the biggest-name charities in the United States have signed similarly one-sided contracts with telemarketers during the past decade. The American Cancer Society, the largest health charity in the United States, enlisted InfoCision from 1999 to 2011 to raise money.

In fiscal 2010, InfoCision gathered $5.3 million for the society. Hundreds of thousands of volunteers took part, but none of that money — not one penny — went to fund cancer research or help patients, according to the society’s filing with the Internal Revenue Service and the state of Maine.

Every bit of it went to InfoCision, the filings say. The society actually lost money on the program that year, according to its filings. InfoCision got to keep 100 percent of the funds it raised, plus $113,006 in fees from the society, government filings show.

Major charities compound the deception by encouraging telephone solicitors to lie. InfoCision scripts approved by both the Diabetes Association and the Cancer Society for what the telemarketer calls neighbor-to-neighbor campaigns in 2010 instruct solicitors to say, when asked, that at least 70 percent of the money raised will be used for charitable purposes.

Yet in contracts with InfoCision in that very same year, the association and society said they expected that the telemarketing firm would keep more than 50 percent of all the funds it collected.

Altogether, more than 5 million Americans volunteered to raise money for these two groups — and other charities that hired InfoCision — from their neighbors since 2005 after being pitched by solicitors using charity-approved scripts, according to state regulatory filings.

Charities should be held accountable for deceptive fundraising done in their name, says James Cox, a professor at the Duke University School of Law in Durham, N.C.

“If that’s what they do systematically, then they’re obtaining money under false pretenses,” he says. “I don’t just think it’s incredible. I’d be surprised if it isn’t criminal.” Naomi Levine, chair and executive director of the George H. Heyman Jr. Center for Philanthropy and Fundraising at New York University, says charities are knowingly being dishonest.

“I’m amazed at that,” she says. “I didn’t know about it. It’s deceitful.” Levine, 89, was a nonprofit fundraiser for three decades, bringing in more than $2 billion for NYU.

“Even for them to engage in a program like that is shocking to me,” she says. “And I’m in the field. So how can you expect donors to know that?”

Richard Erb, vice president of membership and direct marketing at the Alexandria, Va.-based Diabetes Association, defends his group’s practices.

“If we came into it and said, ‘Geez, I’m not going to make a dime on this,’ do you think we would have anyone who would give us money?”

InfoCision, which is based in Bath Township, Ohio, near Akron, says on its website that it raises more money for nonprofits than any other telemarketer in the world. The privately held company was founded by Gary Taylor, who got his start raising money for evangelical preachers.

InfoCision, which isn’t required to and doesn’t disclose revenue or profit, also does marketing for corporate clients such as Time Warner Cable Inc. and Verizon Communications Inc. The company has a political operation as well.

It did fundraising for Citizens United, the conservative group best known as the plaintiff in the Supreme Court case that allowed unlimited independent spending by corporations and unions on behalf of political candidates. From 2009 to 2011, InfoCision raised $14.7 million for Citizens United.

The telemarketer was as stingy with Citizens United as it was with some of the charities: It kept $12.4 million, or 84 percent, of the money it raised for Citizens United, according to InfoCision filings with North Carolina. InfoCision has also worked for the National Republican Congressional Committee.

The group paid InfoCision more than $115 million to raise money from 2003 to 2012, according to company filings with the Federal Election Commission. The filings don’t say how much InfoCision raised for the committee.

InfoCision has barely been touched by legal trouble over its fundraising for charities. The Ohio Attorney General’s Office, after listening to recordings of phone calls by InfoCision solicitors, negotiated a settlement with the company, filed in civil court in April.

Ohio said InfoCision’s employees had misled people by giving them false information about how much of their contributions would actually go to charities. While denying that it had done anything wrong, InfoCision promised not to mislead potential future donors.

The company agreed to pay $75,000 to settle the case — an amount equal to less than one-10th of 1 percent of its revenue from charity fundraising from 2007 to 2010.

Greg Donaldson, a senior vice president at the Atlanta- based Cancer Society, likens telemarketing campaigns that net the charity low percentages of donations to retailers pricing a product below cost to lure shoppers.

“It’s certainly not inconsistent for organizations like ours to invest in some loss-leader strategies, to engage people in long-term meaningful relationships,” he says.

In the past decade, many of the nation’s biggest health charities have hired InfoCision, including the American Heart Association, American Lung Association, American Society for the Prevention of Cruelty to Animals, March of Dimes Foundation and National Multiple Sclerosis Society.

Overall, InfoCision brought in a total of $424.5 million for more than 30 nonprofits from 2007 to 2010, keeping $220.6 million, or 52 percent, according to state-filed records.

Adapted from Bloomberg Markets magazine.

http://bangordailynews.com/2012/09/13/business/charities-deceive-donors-money-actually-going-to-telemarketer/ printed on September 18, 2014