Fundraisers' tales: Fraud or free speech?

Community Action, Feb 17, 2003

WASHINGTON -- The U.S. Supreme Court must decide if the constitutional right to free speech prohibits a state from bringing fraud charges against a professional, charity fundraiser for telling potential donors that monies raised are used for charitable practices when in fact, over 90% of funds are kept by the fundraising company.

The case, Ryan vs. Telemarketing Associates, was initially brought to the court by the Illinois attorney general and could possibly challenge three other court rulings regarding what charities must disclose to potential donors. They also hinge on the First Amendment to the American Constitution guaranteeing freedom of speech.

(The Canadian Customs and Revenue Agency recently lifted the charitable status for an organization whose fired-raising costs were about 90% of the money donated. The organization, Canadian Association for the Blind, withdrew its court challenge to the CCRA.)

The U.S. case has split charitable organizations. The Independent Sector, which represents about 700 non profit agencies along with a trade organization, the Direct Marketing Fundraisers Association plus a separate group of 176 charities and some free speech advocates, have filed briefs to the court on behalf of Telemarketing Associates. On the other side is the Better Business Bureau's Wise Giving Alliance, a charity watchdog organization, which has filed a brief supporting the Illnois attorney general.

The conflict among the organizations' viewpoints rests in different perspectives of the case. On the one hand, the Independent Sector et al, represents organizations that receive a great amount of their annual income from campaigns run by professional fundraisers while on the other hand, the Giving Alliance represents people who make donations to charities.

Telemarketing Associates, a fund raising company which is based in Illinois, solicits funds for VietNow, an organization that supports Vietnam veterans. Although donors were told in written materials that a "substantial portion of the proceeds will be spent on the cost of the public awareness campaign and our program service", as much as 91 cents on every dollar went directly to Telemarketing Associates.

The Illinois attorney general's office claims that in one instance, a donor was told that more than 90 per cent of her donation would go to veterans when she asked what percentage of her donation would be used to cover fundraising costs.

Saying that the Independent Sector is not "taking up the cause of any particular organization", Peter Shiras, interim president and chief executive officer of the Independent Sector, said his organization became involved in the case because it believes consumers are adequately protected by existing laws and that constricting solicitors' ability to raise money violates their free speech rights.

However, Art Taylor, president and chief executive of the Wise Giving Alliance says his organization is viewing the case from a "donor's perspective, and it's our view that no donor would make a contribution to this particular organization if they had information that told them what was really going on here."

Shiras also noted that his organization firmly believes that in addition to governments' "having laws on the books to prosecute illegal and fraudulent activities, both the IRS and the state attorneys general offices need additional resources so they can provide guardianship and oversee the sector effectively."