FTC Targets ‘Fundraising’ Telemarketer

The Federal Trade Commission is seeking civil penalties against a New Jersey-based telemarketer that allegedly made misrepresentations to consumers when fundraising for police, firefighter, and other nonprofit organizations, in violation of a 1998 stipulated order and the Commission’s Telemarketing Sales Rule (TSR).

The complaint names Civic Development Group, LLC (CDG), Edison, NJ, and its officers, Scott Pasch and David Keezer.

In addition to violating the Commission order, the complaint seeks unspecified civil penalties from defendants for violating the provisions of the TSR that prohibit them from misrepresenting the amount or percentage of donations going to the charity or from making false or misleading representations to induce consumers to make donations. The complaint also charges that defendants violated the TSR by failing to transmit Caller-ID information required by the TSR and by failing to honor consumers’ requests to discontinue calling, according to the FTC.

Calls to Pasch and Keezer were not returned by deadline.

Both individual defendants and CDG’s corporate predecessor were named in the Commission’s 1998 complaint and order. Additionally, as professional fundraisers for nonprofit organizations, defendants must also comply with the TSR, said the FTC.

Although the stipulated order and the TSR bar the defendants from making any misrepresentation that would be material to a consumers’ decision whether to make a charitable donation, the defendants misled consumers by telling them that their telemarketers work directly for the charities for which they are calling, that consumers’ donations would be paid to the charities, and that “100%” of the consumers’ donations would go to the charity, according to the FTC.

The FTC’s original complaint alleged that Keezer, Pasch and the corporate predecessor to CDG (along with other defendants) misrepresented to consumers nationwide that the contributions they were soliciting on behalf of a nonprofit organization — the American Deputy Sheriff’s Association (ADSA) — would buy bulletproof vests, provide death benefits for deceased officers’ surviving family members or otherwise benefit local law enforcement organizations in the donors’ own communities.

In fact, the FTC charged, virtually no money raised by CDG in the name of the ADSA ever benefited state law enforcement officers or organizations in the consumer’s locality.

The 1998 stipulated order settling these charges barred the defendants from misrepresenting the purpose for which the charitable contributions would be used or making any misrepresentation that would be material to a consumer’s decision to make a charitable donation. The order also prohibited the defendants from assisting any organization in making such misrepresentations to consumers, according to the FTC.

According to the FTC, CDG’s representations to consumers violated the order’s prohibitions against misrepresenting the purpose for which charitable contributions will be used or misrepresenting any facts material to a consumers’ decision to contribute. The complaint also alleges that CDG assisted the organizations in making material misrepresentations to consumers.

The complaint specifically alleged that, beginning in about 2004, the defendants began changing their contracts with the charities to identify CDG as the charities’ “professional management consultant”– instead of their professional fundraiser, in an attempt to evade the Commission order, according to the FTC.

Under these PMC contracts, although defendants continue to operate as professional fund-raisers for the charities, they misrepresent to consumers that: no professional fund-raising company or middleman is involved in the fundraising campaign that would reduce the value of a consumer’s donation to the charity; the telephone solicitor calling for the donation works for the charity; the donation goes directly to the charity; the charity receives 100% of the donation; the charity directs how the entire donation is spent; and a substantial portion of the donation goes to fund the charity’s programs. In fact, according to the complaint, on average no more than 15% of the consumer’s donation goes to the charity, according to the FTC.

The case is on file at U.S. District Court in New Jersey.