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March 4, 2021

Miller, FTC, other AGs shut down charity fraud telemarketers

Defendants placed more than 1.3 billion calls claiming to support veterans, children, firefighters 

DES MOINES — Iowa Attorney General Tom Miller has joined the Federal Trade Commission and 46 agencies from 38 states and the District of Columbia to stop a massive operation that bombarded 67 million consumers with 1.3 billion deceptive charitable fundraising calls. The defendants collected more than $110 million using their illegal robocalls and other deceptive solicitations.

Associated Community Services (ACS) and a number of related defendants have agreed to settle charges by the FTC and state agencies that they duped Americans into donating to charities that failed to provide the services they promised.

The complaint names ACS, a Michigan company, and its sister companies Central Processing Services and Community Services Appeal; their owners, Dick Cole, Bill Burland, Barbara Cole, and Amy Burland; and ACS senior managers Nikole Gilstorf, Tony Lia, John Lucidi, and Scot Stepek. In addition, the complaint names two fundraising companies allegedly operated by Gilstorf and Lia as spin-offs of ACS: Directele and The Dale Corp.

“This case is another example of why robocalls are more than an annoyance. Scam telemarketers harm legitimate charities as well as generous Americans who want to help those groups,” Attorney General Miller said.    

According to the complaint, the defendants knew that the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support — in some cases as little as one-tenth of 1 percent. The defendants kept as much 90 cents of every dollar they solicited from donors on behalf of the charities.

The complaint alleges that the defendants made their deceptive pitches since at least 2008 on behalf of numerous organizations that claimed to support homeless veterans, victims of house fires, breast cancer patients, children with autism, and other causes that well-meaning Americans were enticed to support through the defendants’ high-pressure tactics. ACS was also the major fundraiser for the sham Cancer Fund charities that were shut down by the FTC and states in 2015.

In many instances, the complaint alleges, ACS, and later Directele, knowingly violated the Telemarketing Sales Rule by using soundboard technology in telemarketing calls. With that technology, an operator plays pre-recorded messages to consumers instead of speaking with them naturally. Use of such pre-recorded messages in calls to first-time donors violates the rule. Use of the technology in calls to prior donors also violates the Telemarketing Sales Rule unless call recipients are affirmatively told about their ability to opt out of all future calls and provided a mechanism to do so; the defendants did not make that disclosure. Most of Directele’s soundboard calls originated from call centers in the Philippines and India.

The complaint also charges ACS with making harassing calls, noting that it called more than 1.3 million phone numbers more than 10 times in a single week and 7.8 million numbers more than twice in an hour. More than 500 phone numbers were even called 5,000 times or more.

The ACS defendants were the subject of actions by Attorney General Miller in 2011 and several other attorneys general throughout the last decade. An appendix filed with the complaint detailed ACS call volume per state from 2016 to 2019, which showed Iowa had received far fewer calls than many other states across the country.

“While some of the defendants are repeat offenders in Iowa, I believe my office’s actions in 2011 contributed to the lower call volumes Iowans received. We are glad to put an end to this operation so that Iowans can be more assured their charitable donations are being used for the intended purpose,” Miller added.

As a result of the settlement terms pending court approval, the defendants will be required to turn over several hundred thousand dollars, which will eventually be contributed to one or more legitimate charities that support causes like those for which the defendants solicited after court approval. The individuals and corporations will also be subject to permanent injunctive relief, including prohibitions on fundraising work, using robocalls in telemarketing, and using existing donor lists. Directele and The Dale Corp will cease operations and dissolve.

Other state agencies joining in the case with Iowa and the FTC include the attorneys general of Alabama, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia,  Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; the secretaries of state of Colorado, Georgia, Maryland, North Carolina, and Tennessee; and the Florida Department of Agriculture and Consumer Services and the Utah Division of Consumer Protection.

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