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Charity Fundraiser Settles Charges of Misleading Sweepstakes Promotions

January 25, 2006
Massachusetts-based Newport Creative Communications has reached a settlement with 18 states over deceptive sweepstakes claims the company made in charity solicitations.

"Commercial fundraising firms that solicit donations must employ tactics that do not deceive consumers or the charities they represent," California Attorney General Bill Lockyer said. "This agreement will ensure that Newport’s future solicitations are not misleading."

Lockyer, along with attorneys general from 18 states, conducted an investigation into allegations that Newport, on behalf of more than 30 charities, engaged in a pattern and practice of misleading and deceptive advertising and solicitation practices that violate laws governing deceptive trade practices and charitable trusts.

Newport disputes those claims, and admits no wrongdoing in the agreement.

Newport Creative Communications is a fundraising consultant for charities. Solicitations developed by Newport for some of these charities often contain sweepstakes promotions. The states alleged that those promotions were often illegal and misleading, guaranteeing prizes or claiming that recipients had already won a sweepstakes prize.

The states also alleged that, in most cases, no prizes were ever awarded despite these misleading claims. Examples of the language used include: "YOU ARE OUR $6,000 WINNER. It's as simple as that," and "Cash payment to be confirmed for Mr. John Q. Sample upon reply by deadline."

Under the terms of the agreement, Newport’s direct-mail solicitations will no longer claim that the recipient has already won a prize or will be guaranteed a prize by responding to the charitable solicitation. Newport will also cease creating mailings unless there is a prize ultimately awarded by the charity.

The company will also be required to include inserts in its mailings explicitly stating that the consumer has not already won a prize, and that donating to the charity does not improve their chances for winning.

In addition to changing their charity pitches, Newport will also pay $400,000 to the states, which will be dispersed among participating states to defray the costs of investigation.

The states involved in the agreement include: Arkansas, California, Kentucky, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and Wisconsin.

A comprehensive reform law sponsored by Lockyer, which took effect in 2005, includes provisions to protect charities that contract with for-profit solicitors.

The Nonprofit Integrity Act (Act) requires commercial fundraisers, within five days of receiving donations, to deposit the funds in a bank account controlled by the charity, or give the money directly to the charity. The Act also requires written contracts between charities and commercial fundraisers for each solicitation campaign, and mandates that the contracts include specific protections and rights for nonprofits.

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