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MADISON - Attorney General J.B. Van Hollen announced today that his office has joined a nationwide, federal-state crackdown on fraudulent charitable solicitations. Wisconsin is one of 48 states, together with the Federal Trade Commission, participating in Operation False Charity, the goal of which is to bring actions against fundraising companies, nonprofits and individuals for violations of charity fundraising laws, as well as to educate consumers as to how to recognize and avoid charitable solicitation fraud.
Charity fraud most commonly occurs when donors are misled into believing that their donations will help a particular group or cause, or assist persons in their own community, when that is not the case. At its most extreme, none or very little of the funds donated are actually used for the charitable purposes claimed by the fundraisers or the charity.
"Preying on the generosity of good-hearted people by deceptively obtaining donations, very little of which actually go to help those in need, is truly reprehensible," said Attorney General Van Hollen. "Solicitation fraud harms not only the donors who are misled, but the many legitimate charities that do outstanding and vital work, both in Wisconsin and elsewhere. I will continue working to rid Wisconsin of this type of illegal activity."
As part of Operation False Charity, Wisconsin has joined with approximately 35 other states in reaching a settlement with a Milwaukee-based professional fundraising company, Community Support, Inc ("CSI"). CSI employs telemarketers to solicit funds from consumers across the country on behalf of over 35 charitable clients. For some of its fundraising campaigns, CSI keeps up to 90% of all money donated, at times leaving just 10% for the charity.
Based upon the multi-state investigation, the states allege that CSI has engaged in a pattern of violating state laws over a substantial period of time. Among other things, CSI telephone solicitors are alleged to have: 1) misrepresented how much of the donated funds actually go to the charity; 2) misrepresented what would be spent in the donor's local community; 3) harassed call recipients; 4) falsely claimed to be law enforcement officers or veterans, and 5) falsely claimed a person had made a pledge when they had not. In addition, CSI used local post office boxes in the communities in which it was fundraising to make it appear that the charity was local.
Under the settlement, a consent judgment will be entered against CSI enjoining it from engaging in specific deceptive fundraising practices. In addition, CSI will have to regularly report information to the states and be more responsible for its employees' training and conduct and representations made to consumers. Violations of the settlement may result in penalties of $10,000 per violation. CSI also must reimburse the states $200,000 for the costs of the investigation.
The Community Support settlement follows the successful prosecution of Wisconsin fundraiser Duane Kolve by the Eau Claire County District Attorney's office, with assistance from the Wisconsin Department of Justice and the Wisconsin Department of Agriculture, Trade and Consumer Protection. In March, 2008, Duane J. Kolve pled guilty to one count of racketeering in connection with his charitable fundraising business in Eau Claire, and was sentenced to 10 months in jail.
Attorney General Van Hollen noted that in addition to enforcement actions, the best cure for fraudulent fundraising is consumer education. Here are some tips for deciding whether a requested donation will be effectively used by a claimed charity:
To promote awareness of charity solicitation fraud, Attorney General Van Hollen has authored this op-ed column. Further, the Federal Trade Commission has substantial consumer information about charitable solicitations, which can be found on its website: http://www.ftc.gov/charityfraud/. Also, there are a number of sources of information about charities, such as the percentage of donations spent on fundraising and administration. These include:
www.bbb.us/charity (Better Business Bureau Wise Giving Alliance)
www.charitynavigator.org (Charity Navigator)
www.charitywatch.org (American Institute of Philanthropy)
Information about whether charities or fundraisers are registered in Wisconsin, as required by law, is also available on the website of the Wisconsin Department of Financial Institutions (DFI):