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Robo-caller for Popular Charities Fined $1 Million for Multiple Violations

Published 11/18/2014

What do American Center for Law and Justice, Environmental Defense Fund, Foundation Fighting Blindness, Mothers Against Drunk Driving (MADD), NARAL Pro-Choice America (NARAL), Operation Smile, Special Olympics, Tea Party Patriots, and U.S. English have in common when it comes to fundraising? These nine charities each have used the services of a professional fundraising company named Strategic Fundraising, Inc. (SFI), "Where old-fashioned work ethic and values meld with creativity, analytics and advanced technology," according to its website. It appears, however, that SFI has a warped view of "old-fashioned work ethic and values" as the fundraiser has been fined $1,054,000 by the state of South Carolina (SC) for placing phone call solicitations that violated numerous laws under the SC Solicitation of Charitable Funds Act, according to an October 22, 2014 news release by the SC Secretary of State.

The Notice of Violation and Administrative Fine in the matter of Strategic Fundraising, Inc., dated October 21, 2014 (the Fine Notice), states that SFI was fined by the state of SC for:  failure to disclose its status as a "professional" or "paid" solicitor at the initial time of the call; failure to disclose its registered true name as a professional fundraising organization; failure to disclose the location of the charitable organization for which it was soliciting; failure to register or maintain the current registration of 97 individuals as professional solicitors prior to employing them to solicit in SC; and misrepresentation of the percentage of donations used for charitable programs. According to the SC Secretary of State in the October 22nd news release, "What makes this case so egregious is that these were robo-calls in which the individual solicitors were using prerecorded scripts. This wasn't a situation in which an individual caller made a mistake and went off script—these disclosure violations were a result of deliberate choices made by a professional fundraiser who was well-aware of the requirements of the Solicitation of Charitable Funds Act." Prior to assessing this $1 million fine, SC already had provided SFI with several notices of violation, and SFI even entered into an Assurance of Voluntary Compliance with the SC Secretary of State in 2009 in which it agreed to abide by all provisions of the SC Solicitation of Charitable Funds Act, according to the October 22nd news release.

The solicitation violations for which SC fined SFI occurred in connection with calls placed to SC citizens in June 2014 on behalf of each of the nine charities listed above, according to the Fine Notice. Operation Smile was the charity for which SFI was in violation for misrepresenting the percentage of donations used for charitable programs when a call recipient was told that 74% of donations to Operation Smile go directly to fund programs. This statement was a knowing and willful misrepresentation, according to the Fine Notice, as Operation Smile’s most recent financial report filed with SC in May 2014 states that only 54% of its expenditures were for program services, and SFI’s joint financial report filed with SC for SFI’s solicitation campaign on behalf of Operation Smile for the calendar year 2013 states that Operation Smile received only 18.9% of gross receipts from SFI's solicitation campaign. CharityWatch grades Operation Smile a "D" as our analysis, which often does not accept the self-reported numbers provided to the states, puts Operation Smile's program spending at 38% of its cash budget. (The primary difference between the 54% program ratio from Operation Smile’s SC financial report and the 38% calculated by CharityWatch is due to CharityWatch not allowing Operation Smile to boost its program expenses by claiming its solicitations include educational messages worth over $5.9 million. For more on how CharityWatch calculates the program services percentage, see "Getting the Most from Your Rating Guide" on page 5 or the Criteria & Methodology section of the website.) Regarding the other eight charities connected with SFI's fined solicitation violations in SC, CharityWatch also gives "D"grades to NARAL and U.S. English while MADD is rated a "C", American Center for Law and Justice a "C+", Foundation Fighting Blindness and Special Olympics each a "B", and Environmental Defense Fund an "A-" (Tea Party Patriots is not rated by CharityWatch).

Even though some of the charities for which SFI was soliciting in SC when it was fined receive satisfactory or better grades from CharityWatch, SFI made "deliberate choices" to violate charitable solicitation disclosure laws according to the SC Secretary of State, which should give pause to all potential donors who receive telemarketing calls. CharityWatch urges caution when it comes to giving in response to phone solicitations and reminds donors never to give to a charity you know nothing about or because of pressure from a fundraising solicitor.

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