U.S. Supreme Court rules that states may prosecute fraudulent fundraisers

From ANIMAL PEOPLE,  June 2003:

WASHINGTON D.C.,  LOS ANGELES,  SACRAMENTO–The U.S. Supreme
Court on May 5 ruled unanimously that states may prosecute charities
and hired fundraisers for fraud if they misrepresent how donations
will be used.
The case,  “Madigan v. Telemarket-ing Associates,”  concerned
the effort of Illinois attorney general Lisa Madigan to prosecute a
firm that solicted funds for VietNow,  a charity formed to aid
Vietnam veterans.
Summarized Associated Press,  “The state claimed would-be donors were
told their money would go for food baskets,  job training and other
services for needy veterans,  even though Telemarketing Associates
pocketed 85% of the take.  One woman said she was told,  ‘90% or more
goes to the vets.’  The ruling makes clear that while fundraisers may
keep quiet about the high costs of running a charity drive,  they may
not lie about it.”


The Supreme Court reaffirmed previous rulings that states may
not restrict how much money charities spend on fundraising.
However,  wrote Justice Ruth Bader Ginsburg,  “Like other
forms of public deception,  fraudulent charitable solicitation is
unprotected” by the First Amendment guarantee of freedom of speech
and press.  “Consistent with our precedent and the First Amendment,”
Ginsburg continued, “States may maintain fraud actions when
fundraisers make false or misleading representations designed to
deceive donors.”
Less than 48 hours after the verdict a former longtime
supporter of the Wildlife Waystation in Angeles National Forest,
California,  who had not previously criticized the Waysta-tion to
ANIMAL PEOPLE,  forwarded a postal solicitation from the Waystation
which may have stepped over the lines delineated by the Supreme
Court.  The solicitation   was apparently sent in April 2003.
A pie chart beside the facsimile signature of Waystation
founder Martine Colette,  headlined “”How your donations are
utilized,” showed expenditures of 83.2% for “Animal care services,”
against 16.8% for “general administrative,”  with no mention made of
fundraising.
The most recent Wildlife Waystation filing of IRS Form 990
available from the IRS service contractor <www.Guidestar.org>,
rec-eived by the IRS on October 15,  2002,  declared expenditures of
69% for program services,  including animal care;  24% for
“Management and general”;  and 7% for fundraising–but as on the
filing from the previous year,   Line 30,  requiring disclosure of
payments of “Professional fundraising fees,”  was left blank.
Virginia fundraiser Bruce Eberle (page one) has done direct mailings
for the Waystation in recent years,  but the Waystation also does
mailings of its own.
Waystation general manager Alfred “A.J.” Durtschi told ANIMAL
PEOPLE that the mailing in question was entirely produced by the
Waystation staff,  said the pie chart would be corrected in a future
mailing,  and sent a page of a new IRS Form 990 declaring that
program service had increased to 76%,  with “Management and general”
expense down to 16% and fundraising costs at 8%.
However,  the breakdown of expenses could not be verified as
meeting the Wise Giving Alliance and ANIMAL PEOPLE guidelines for
calculating program service vs. overhead expenditure because for the
third year in a row Line 30 was left blank.
Not clear to ANIMAL PEOPLE was if complaints about the appeal
had been sent to regulatory agencies or other news media.  Vague
hints that it might have been came on May 11 from an ex-volunteer who
has long been hostile toward Martine Colette.
The Waystation has made recent progress on other regulatory
fronts.  Los Angeles Daily News staff writer Troy Anderson reported
on June 9 that “Wildlife Waystation and Los Angeles County officials
expect to sign a memorandum of understanding this week that would
allow the facility to resume rescuing sick and homeless creatures.”
Since April 2000,  the Waystation has not been allowed to
take in additional raptors,  reptiles,  so-called game mammals,
exotic birds,  or exotic mammals.
In November 2002 the Waystation settled a five-year backlog
of 299 citations for alleged Animal Welfare Act violations by signing
a consent decree which allows the animals on site to remain,  but
prohibits accepting more,  and puts the facility–well-regarded by
fellow sanctuarians but long at odds with officialdom–under a
two-year probation.
In May 2003 the Waystation won a court order allowing it to
build new quarters for 24 chimpanzees,  ending a five-year impasse
due to conflicting state,  federal,  and county regulations.
The Waystation was closed to public visits from April  2000
to January 2001 by order of the California Department of Fish and
Game,  and was closed again by the Los Angeles County Fire Department
in September 2001 pending completion of fire and erosion control work
now underway.

California crackdown

Following the May 5 Supreme Court decision,  California
attorney general Bill Lockyer joined charities regulators in 33 other
states and the Federal Trade Commission in a joint effort called
“Operation Phoney Philanthropy,”  which according to Stephen G.
Greene of The Chronicle of Philanthropy “is aimed at people who gull
donors into contributing to charities supposedly set up to benefit
police or firefighters and their families,  veterans,  terminally ill
children,  or other sympathetic causes,  but who wind up keeping most
of the money they raise.”
Lockyer also released a report stating that “Only 38% of
donations raised by commercial solicitors in California fundraising
campaigns in 2001 went to charities,”  The Chronicle of Philanthropy
said.  This was a slight improvement over 2000,  however,  when
California charities got 34% of the money raised by commercial
solicitors.
Acting Wildlife Waystation chief executive officer Robert
Lorsch is among the alleged victims listed in a lawsuit Lockyer filed
on March 13 against Hollywood fundraiser Aaron Tonken.  According to
a press release from Lockyer’s office,  a Tonken-produced event “was
supposed to benefit the Joan English Fund for Women’s Cancer
Research,  the Robert H. Lorsch Foundation Trust,  and charities
designated by TV producer Loreen Arbus.  Tonken took in at least
$550,000 in donations,  loans,  and expense payments for the event
and has failed to account for any of the money.  The event never was
held.”

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