Where Your Pledge Money Really Goes

NJBIZ, Dec 3, 2007 by Daks, Martin C

EDISON

Fundraising expenses eat most contributions to a police group

When a holiday season caller with a gravelly voice says he's collecting money for the Newlersey State Fraternal Order of Police (FOP), it's a tough plea to refuse. The Trenton-based union, which says it provides death benefits and other services for more than 14,000 Newlersey police officers, to ok in nearly $4.3 million in contributions from the public last year, plus about $400,000 in membership dues and event revenue.

But according to the FOP's federal tax return, only $82,934-or less than 2 percent-was actually paid out for the "good and welfare" of the officers. Instead, the return for fiscal 2006 shows that a total of $3.7 million-or 87.2 percent of the public donations-was spent on fundraising expenses, including fees to an Edison-based consulting company, Civic Development Group LLC (CDG), that has a long history of disputes with federal and state regulators.

The rest of the money went to support events such as Special Olympics and for administrative purposes.

Charities should cap their fundraising expenses at no more than 35 percent of total contributions, according to give.org, an Arlington, Va.-based charity watchdog associated with the Better Business Bureau.

Issues surrounding outside fundraising have driven one group, the New Jersey State Policemen's Benevolent Association Inc., to ban telephone solicitation, according to Anthony Wieners, president of the state PBA."We ended the practice about 10 years ago," says Wieners. "It was expensive, and there were too many complaints from donors."

CDG solicits donations for organizations that benefit police officers and firefighters across the country. It is currently facing lawsuits by the U.S. Department of Justice and the state of Ohio, alleging that the company misled donors about a variety of issues.

The company's telemarketers routinely tell potential donors that 100 percent of their money will go directly to a charity, even though most of it actually goes to the fundraising company, according to the Department of Justice complaint, which was filed in Newark's U.S. District Court in September.

The suit, which names Civic Development Group and directors Scott Pasch and David Keezer, says the defendants violated federal telemarketing regulations and a 1998 settlement with the Federal Trade Commission-in a case involving the American Deputy Sheriff's Association (ADSA) of Monroe, La.-that prohibited "false or misleading representations."

In an e-mail to NJBIZ, a representative of CDG's public relations department stated that, "We operate in full compliance with all applicable state and federal laws and we do not believe that there is any basis for a suit. Civic looks forward to a favorable resolution of this [Department of Justice] matter in court."

Last month, the Ohio attorney general's office filed a lawsuit in that state charging that CDG engages in misleading practices. The complaint alleges that CDG's solicitations made since 2004 on behalf of at least two Ohio-based charities-Disabled American Veterans Associations Inc. and the Ohio Troopers Coalition Inc.-misled donors by indicating that the charity would receive the majority of the donated funds. In fact, "CDG withholds a substantial portion of these proceeds as its expenses and fees," according to the complaint.

Other states have also sparred with Civic Development Group over allegations of making misleading statements to donors.

In New Jersey, CDG and three affiliates-Civic Development Group Inc., Public Awareness Group Inc. and New Jersey Fundraising Consultants Inc.-paid $125,000 to the State of New Jersey in 1999 to settle a 15-count complaint alleging that the fundraisers "deceived the public while soliciting money on behalf of police and fire associations," according to a 1999 statement from the state attorney general's office.

CDG previously settled a 1998 dispute with the attorney general's office in Washington state that charged the New Jersey consulting group with making phone calls on behalf of the Washington Fraternal Order of Police and the Washington State Patrol Troopers Association that said the telemarketers were "from" or "with" the Troopers Association. The complaint said the callers failed to disclose that they were really paid solicitors working for a fundraising company.

CDG settled the charges by paying a $109,290 fine to Washington state.

"Civic Development Group continues to use smoke and mirrors to deceive the public about their operations," says Joel Brewer, an attorney with the Federal Trade Commission, which asked the Justice Department to file the September complaint against CDG.

"There's no law against charging steep fees for fundraising," says Brewer, "but it's misleading, and a violation of the Federal Trade Commission Act, to induce donors to contribute by saying all of their contribution will go to a charity, when in fact only a small portion will actually make it there."

This year, a letter under the signature of New Jersey FOP President Edward Brannigan confirmed a New Jersey resident's May telephone pledge and stated, "You will be glad to know that 100 percent of the donations go directly to the FOP..."