From the Fall 1999 Watchdog
Report
Wishful
Giving Goes Down the Well
Whoops! The professional telemarketing solicitor had
it reversed. The solicitor told potential donors that 80% or more
of their donation would be used for granting the wishes of terminally
ill children when in actuality the solicitors–not the children–got
the 80%.
This was no honest mistake, according to the Attorney
General of Minnesota, who has charged Wishing Well Foundation
USA, Inc. of Metairie, Louisiana and its hired fundraiser, Gecko
Communications, Inc. of Iowa and Missouri with charities fraud in
a lawsuit that seeks to stop such practices. Wishing Well, whose
purpose is to grant wishes to children with life threatening illnesses,
took in $3.5 million in 1996 and 1997 yet only spent $45,214, or
1% of these contributions, on granting wishes, according to the
Minnesota A.G.
The Minnesota A.G. alleged that donors were given
the false impression that Wishing Well, which started in 1995 and
began fundraising in Minnesota in October 1998, was a well-known
local charity. Donors were told to send checks to “St. Cloud
Donor Response Center,” which was nothing more than a private
mailbox. Solicitors did not inform potential donors that Wishing
Well Foundation USA did not have an office in St. Cloud or in Minnesota
at all, and was actually located in Metairie, Louisiana. The A.G.
also alleged that telephone solicitors neglected to tell potential
donors their company’s name and disclose that they worked for
a professional fundraising company, a direct violation of Minnesota
law.
Wishing Well’s lawyer, Matthew Brown, told AIP
that the organization no longer relies on professional fundraisers
and that they are pursuing grants and looking to their local community
for support. In the meantime, the lawsuit has asked “the court
to stop the defendants from engaging in fraud, order them to comply
with Minnesota law and award civil penalties, investigative costs
and attorney’s fees.”
From
the Winter 1998/1999 Watchdog Report
Donors
Grant Wish of Telemarketer
When someone calls on the phone and asks you to donate
to an organization with a name like Children’s Wish Foundation
International, wouldn’t you like to think that most of
your money would help grant the wishes of terminally ill children?
When AIP President Daniel Borochoff got this call at his home in
Maryland, he did what any informed donor would do – he asked
how much of his contribution would go to the telemarketing company.
The caller, who had identified herself as a telephone solicitor
for Reese Brothers Company, asked her supervisor and came back with
a figure of “a set amount, no more no less.” When Mr.
Borochoff asked her to clarify, she asked another superior and then
stated, “Almost 100% goes to charity.”
This statement seems curious since the Children’s
Wish Foundation’s 1997 federal return showed a budget of $21.3
million, with $12.9 million, or about 60% being paid to Reese Brothers.
The actual amount spent on granting dying children’s wishes
was reported as $1.9 million, about 9% of the organization’s
total expenses, to complete 207 wishes, and another $0.4 million
was spent on related services. $11.6 million, or about 84% of this
charity’s program service expenditures, were used to “distribute
educational material about wish children to the general public.”
The group’s tax-return indicates that nearly all such materials
were distributed in conjunction with a fundraising solicitation.
How can a telemarketer that is paid nearly $13 million
tell donors that almost all of the money will go to charity? According
to state law in Maryland and other states, all money collected by
an outside professional fundraiser must go directly into an account
controlled by the charity. The fundraisers may receive a large chunk
of that money later on, but to say that it all goes to charity is
not technically a lie. It is however, very misleading. In a 1988
ruling, the Supreme Court deemed it unconstitutional for any regulator
to require charitable fundraisers to say something they do not want
to say when speaking to potential donors. At the same time, professional
fundraisers have a financial incentive not to volunteer the percentage
of each contribution that ends up in their hands.
Giving in response to a slick telemarketing appeal
is tricky business. A wise donor finds out what the professional
solicitor’s cut is before making a donation.
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