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May 20, 2009

Attorney General Alleges Consumer Fraud by Professional Fundraiser

Iowa lawsuit alleges deception in charitable fundraising calls by “Public Safety Communications, Inc.” of Des Moines. Iowa is part of nationwide “Operation False Charity” enforcement effort.

Des Moines. Iowa Attorney General Tom Miller filed a lawsuit Wednesday alleging that telemarketing callers for a professional fundraising company are misleading Iowans about who the callers are, where donated funds are used, and how much of each dollar donated goes to the purported worthy cause touted by the phone solicitors. [Go to: lawsuit.]

Miller filed a consumer fraud lawsuit naming Public Safety Communications Inc. of Des Moines, a professional fundraising company that contracts to raise charitable donations for client organizations, such as Handicapped Children’s Services of America, American Veterans Network, the Association of Firefighters and Paramedics, and the State Police Officers Council.

Public Safety Communications operates a phone call center at 101 East Sheridan Avenue in Des Moines that makes thousands of calls. The lawsuit alleges that the calls collected about $1.5 million in a recent year.

“By their contracts, Public Safety Communications typically keeps 80% to 90% of the donations made, and sends the remaining 20% or 10% to the other organizations,” Miller said.
“That’s not illegal -- but it is illegal to deceive Iowans by concealing that fact, or telling them a much higher percentage of their donation is going to charity when that simply isn’t true, or telling Iowans their donation will be used in Iowa, if that is not true.”

The lawsuit, filed Wednesday in Polk County District Court, listed numerous examples of misrepresentations captured in tapes of phone calls directed to Iowa residents, such as:

  • According to a March 2009 call by Public Safety Communications on behalf of Handicapped Children’s Services of America, a Public Safety Communications phone solicitor said “80 percent” of contributions benefited Handicapped Children’s Services, when in fact only 20% goes to the purported charity. The caller also said, “we’re helping handicapped children here in Iowa” when in fact Handicapped Children’s Services has said it never has spent any money in Iowa for program services. [Go to undercover recording.]
  • In a February 2009 call by Public Safety Communications, the phone solicitor, who claimed to be a volunteer, said that all of a contribution would go to the State Police Officers Council to be used for a child identification program. The Attorney General’s lawsuit alleges that, in fact, only 25% of the money goes to the Council. [Go to undercover recording.]

Miller added: “Given that the purported charitable organizations only receive a small percentage of the funds donated, and given that those organizations report that they only commit three or four percent of their revenues to the charitable purpose, that means sometimes less than a penny on the dollar of Iowans’ donations ends up devoted to the charitable purposes touted by callers. And the chances are high that penny isn’t even spent in Iowa.”

The AG’s lawsuit asks the Court to prohibit Public Safety Communications “from engaging in the deceptive, misleading, omissive, and unfair practices” alleged in the suit; to order civil penalties up to $40,000 per violation of the Consumer Fraud Act; and to order civil penalties up to $5,000 per violation of the law against older Iowans.

“This lawsuit is about protecting the integrity of the charitable dollar,” Miller said. “We definitely want people to give and give generously, now more than ever. But generous Iowans shouldn’t have to contend with deceptive solicitations that squander their donations.”

Miller announced the lawsuit at a news conference Wednesday in Des Moines. He was joined by Sheri McMichael, Executive Director of Variety -- The Children’s Charity of Iowa. Variety supported 89 programs at several cities across Iowa and distributed $3.65 million in the year ending last Sept. 30. Variety of Iowa was recognized recently with Variety International’s highest award, the Gold Heart Award, commending its fundraising efforts and efficiency.

“We want Iowans to continue to give generously to reputable organizations,” Miller said. “We are working to combat fraudulent professional fundraisers because they mislead donors, divert funds from effective charities, and shortchange people in need.”

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“Operation False Charity”:

Miller’s announcement in Iowa came as the Federal Trade Commission and dozens of states announced “Operation False Charity” in Washington and around the country. States unveiled numerous legal actions, and the FTC announced actions against several defendants who allegedly tricked consumers into giving by claiming they were affiliated with law enforcement or veterans groups.

Miller said Iowa also was one of many states announcing lawsuits Wednesday naming Community Support, Inc., or CSI, a professional fundraiser with headquarters in Milwaukee, Wisconsin. Iowa’s suit alleged that CSI callers into Iowa misrepresented who was calling, where the charity was located, how much of the donation was going to the charitable cause, what was the charity’s connections to Iowa, and other facts. Iowans’ generosity was “unfairly and deceptively exploited,” the lawsuit said. CSI denies any wrongdoing.

Community Support Inc. typically retained 80% or more of funds that it solicited for various organizations, including The American Breast Cancer Foundation, Inc.; National Vietnam Veterans Foundation; Reserve Police Officers Association; Firefighters Charitable Foundation; United States Deputy Sheriff’s Association, Inc.; and others.

Iowa District Court Judge Don Nickerson entered a Consent Judgment Wednesday resolving the suit, in which the judge issued a detailed order prohibiting CSI from misrepresentations of all kinds, ordering hefty penalties if CSI violates the terms, and ordering CSI to pay $200,000 to the group of states settling with CSI. [Go to: CSI Consent Judgment.]

Donor Beware!
How to avoid charity fraud and make the most of your donations:

Miller said his office and the FTC are issuing new consumer education materials on how to avoid charity fraud. Some of the top tips include:

  • Don’t be fooled by a sympathetic name or “pitch” – some organizations exaggerate or fabricate their support for veterans or military families, law enforcement, fire fighters, victims of disease, and children’s causes.
  • Ask questions. Reputable charities welcome them. Ask how much of your donation will go for the charitable purpose, and exactly how and where your contribution will be used.
  • Ask phone solicitors to send written 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!
  • If you think you have been cheated by a fundraising scheme, contact the Attorney General's Consumer Protection Division, Hoover Building, Des Moines, Iowa 50319. Call 515-281-5926, or 888-777-4590 toll free. Web site:
  • FTC web site with much more information:

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