States Crack Down On ‘Deceptive’ Charities

Increasingly, consumers have to worry about being ripped off by so-called charities, not just shady businesses. States have begun stepping up their actions to warn and protect their citizens.

The State of Iowa has taken action against a Minnesota fundraiser it says was calling consumers in the state seeking donations for several law enforcement associations.

Iowa Attorney General Tom Miller says the firm used deceptive tactics to solicit the money, and has now agreed to make changes in how it deals with consumers.

Public Safety Council, LLP, and Community Safety, LLC, both headquartered in Minneapolis, their subcontractor, Safety Services, LLC, of St. Paul, and their principals, J. Michael Callan and Robert T. Callan, have entered into an agreement with the Attorney General, called an Assurance of Voluntary Compliance.

Miller says telephone solicitors, working from a call center in St. Paul, called Iowa consumers on behalf of at least three Iowa law enforcement associations.  Several calls, which were recorded by the Consumer Protection Division, reveal unfair and deceptive conduct, Miller alleges. 

The respondents deny wrongdoing or liability of any kind.  The respondents solicited Iowans on behalf of the following organizations:

Iowa State Police Association (ISPA)

It sound like a worthy cause, right? But Miller says of the total amount solicited from Iowans in donations to the Iowa State Police Association (ISPA), fundraisers retain 84 perent, and only 16 percent actually goes to ISPA. 

Based on recorded calls, the Attorney General alleges that telephone fundraisers failed to identify themselves as paid professional fundraisers; insinuated that they were directly associated with ISPA or a law enforcement agency; falsely inflated the amount of donations benefiting ISPA, by implying that as much as 100 percent of a donation goes to ISPA; and misrepresented how often they call potential donors.

Iowa State Reserve Law Officers Association (ISRLOA)

Of the total amount solicited from Iowans in donations to the Iowa State Reserve Law Officers Association (ISRLOA), fundraisers retain 85 percent, and only 15 percent actually goes to ISRLOA, Miller says.  Based on recorded calls, the Attorney General alleges that telephone fundraisers failed to identify themselves as paid professional fundraisers; insinuated that they were directly associated with ISRLOA or a law enforcement agency; falsely inflated the amount of donations benefiting ISRLOA, by claiming that as much as 100 percent of a donation goes to ISRLOA; and misrepresented the solicitors' location.

Iowa Peace Officers Association (IAPO)

Again, Miller says this group - formerly known as the Iowa Association of Chiefs of Police and Peace Officers - got only 16 percent of the collected funds. Based on recorded calls, the Attorney General alleges that telephone fundraisers failed to identify themselves as paid professional fundraisers; insinuated that they were directly associated with IAPO or a law enforcement agency; falsely inflated the amount of donations benefiting IAPO, by claiming that as much as 60 percent of a donation goes to IAPO; misrepresented when the donor would receive another call; and misrepresented the solicitor's location.

'Oregon names 20 worst charities'

In Oregon, Attorney General John Kroger has assembled a list of what he calls the state's "20 worst charities" and is urging consumers to avoid them. 

"It is important that generous Oregonians make charitable contributions to legitimate organizations," Kroger said. "Many charities do great work, but some are little more than scams that do little to help the people they claim to support."

In addition to increasing consumer awareness, Kroger will ask the 2011 Legislature to pass a law making Oregon the first state in the country to use the tax code to fight charities that spend most of the money they raise on telemarketers and administration.

The proposal will eliminate the Oregon tax deduction for donations to charities that spend less than 30 percent of the money they raise on the people they claim to support.

"This proposal will help kick sham charities out of Oregon," Kroger said. "If the rest of the country follows Oregon's lead, we could end the rampant abuse of non-profit laws."

State law requires charities to file periodic financial reports with the Oregon Department of Justice disclosing how much money the organization raised and how the funds were spent. The Department's Charitable Activities Section has identified 20 organizations that spent more than 75 percent of the donations they collected on administrative costs and professional fundraising.

While guidelines issued by the Better Business Bureau (BBB) suggest that charitable organizations should spend at least 65 percent of their funds on charitable programs, every charity on the Department of Justice's list devoted less than 25 percent of their expenditures on charitable program activities.

At the top of the list is Shiloh International Ministries, which claims to solicit money to provide medical necessities and moral support to needy children and to provide assistance to the homeless. According to the most recent financial filings, the California-based non-profit spent an average of $937,315 per year, 96.37 percent of which went to management and fundraising.

No. 2 on the list is Law Enforcement Education Program, which supposedly raises money to educate teenagers on the effects of alcohol. The Michigan-based non-profit spent just 6.26 percent of the annual average $1,893,929 it raised on charitable purposes.

The Korean War Veterans National Museum and Library was one of many groups on the list that says it raises money to help veterans. The Illinois-based group spent 96.97 percent of the annual average $2,265,809 it raised on telemarketing and administration.

Just hang up

How do you avoid being deceived by a charity fundraiser? One way is to simply hang up when you get these calls. It's much better to choose your own charity projects to support from within your local community, supporting organizations you know something about.

However, if you are someone who wants to consider all appeals, Miller offers these tips:

• Ask questions.  Be wary of claims that the caller is a charity worker or volunteer, that most of your donation goes to the cause, or that your donation will be used locally. 

• Don't let a sympathetic charity name fool you - some fundraisers exaggerate or fabricate their support for veterans or military families, law enforcement, fire fighters, victims of disease, and children's causes.

• Ask phone solicitors to send written information.  Be suspicious if they insist on a pledge before they'll send you information. 

• Don't give your credit card or checking account numbers over the phone to someone you don't know.

• Give directly to a known charity of your choice.

Bottom line: Keep giving generously, but give wisely!  Giving to a known charity you're confident about is often the best option.