Fundraisers Ordered to Pay $18.8 Million and Banned from Soliciting Forever Forced to Relinquish Luxury Assets
Donors who have been misled or harassed by charity telemarketers know how insidious some telephone fundraisers can be. In a signal that the regulators know it, too, the Federal Trade Commission (FTC) has ordered the operators of the telemarketing company Civic Development Group (CDG) to pay $18.8 million, the largest penalty ever handed down in a consumer protection case.
CDG has a long history of betraying donors and flouting regulation. In 1998, the FTC filed a complaint against CDG for misleading donors while soliciting on behalf of the American Deputy Sheriff's Association (ADSA), a group that was F rated by AIP until 2008, a year before it was closed down by a court appointed receiver. While the telemarketers told donors that their contributions would benefit local police and their families, the FTC charged that "virtually no money raised by CDG in the name of the ADSA ever benefited state law enforcement officers or organizations in the consumer's locality." The FTC issued an order barring CDG owners Scott Pasch and David Keezer from making such misrepresentations while soliciting charitable donations.
Instead of cleaning up their acts, the FTC alleges that Pasch and Keezer tried to evade the 1998 order by mischaracterizing themselves as "professional management consultants," not professional fundraisers. Despite this new title, they were essentially operating the same telemarketing scheme in which they misled donors. According to the complaint, CDG's telemarketers lied to potential donors by saying that they worked directly for the charity and that 100 percent of the funds raised would go to charity. In truth, the charities received only a tiny fraction of the donations collected.
Contributions raised by CDG telemarketers went to Financial Processing Services, a company headed by David Keezer's mother, Dolores, according to the complaint. Her company deposited these contributions into bank accounts to which charities had no access. The FTC complaint alleges that Dolores Keezer, acting through FPS, used those funds to cover fundraising costs and to pay CDG a hefty profit. The remaining funds, which according to the FTC were typically no more than 15%, went to charity.
In 2007, the FTC again filed a complaint against CDG. In March 2010, Pasch and Keezer agreed to settlements in which the two are permanently banned from telemarketing and soliciting charitable donations. To cover their portions of the $18.8 million fine, Pasch and Keezer also agreed to turn over many of their assets to a court-appointed liquidator.
These luxury assets, a sign of just how much money the two made by ripping off donors, include two $2 million homes, paintings by Picasso and Van Gogh, a collection of vintage guitars valued at $800,000, a $117,000 jewelry collection (which includes a 1 carat diamond engagement ring), $270,000 in proceeds from a recently sold wine collection, 2 Bentleys, 3 Mercedes, a Range Rover, and a Cadillac Escalade.
CDG fundraised for numerous local firefighter, police and veterans charities. They also had contracts with several groups that received F ratings from AIP, including Cancer Fund of America, Children's Charity Fund/A Child's Wish Foundation, Disabled Veterans Association, Firefighters Charitable Foundation/Fire Victims, and the Childhood Leukemia Foundation. The Virginia Mid-Atlantic Chapter of the AIP F rated charity, Paralyzed Veterans Association, was also a client of CDG.