March 10, 2013 | Read Time: 9 minutes
Like many people who are drawn to nonprofit work, Pearl Cohen wanted to make a difference in the world. As a single mother, she also wanted flexible hours. So in 1993, she answered a help-wanted ad and took a job at a telemarketing firm raising money for animal-protection, antipoverty, and environmental charities.
She liked the work at first. But by the time she left the job a few years ago, Ms. Cohen, of Bridgewater, Mass., had turned into a whistle-blower, dedicated to exposing practices that she says cheat charities and mislead donors.
“The industry needs to be totally overhauled because it’s riddled with deception,” she says.
Acquiring Donors
Ms. Cohen’s quest, which has prompted state legislators to sponsor a bill to tighten rules on telemarketing, highlights some of the legal and ethical questions surrounding a fundraising method that regularly raises the hackles of regulators and watchdogs but that some nonprofits defend as an essential tool for acquiring and keeping donors.
Her main concern: Telemarketing firms often keep the lion’s share of the money they raise but fail to make that clear to donors.
“Sometimes, unbelievably, the charity winds up owing the vendor money at the end of the telefundraising campaign,” according to the Web site for a nonprofit group that Ms. Cohen started to warn the public about telephone fundraising. “Plain and simple: This is wrong, wrong, wrong.”
Not So Simple
Studies by state regulators bear her out. A 2012 report by the New York attorney general’s office, called “Pennies for Charity,” says that in 78 percent of the telemarketing drives conducted by firms registered in the state, charities kept less than half of the money raised. And in 48 percent of campaigns, they kept less than 30 percent.
But defenders of telephone fundraising say things are not as simple as those numbers suggest. Some appeals may raise little money initially, but they allow the charities to cultivate donors who contribute regularly thereafter.
One group that Ms. Cohen used to raise money for, the United States Fund for UNICEF, gets a “very high percentage” of its monthly donors through telephone appeals, says Helene Vallone-Raffaele, vice president for direct response.
Turning Whistleblower
Ms. Cohen took her first step as a whistle-blower in 2006, when she reported her own employer, the Share Group, because it had failed to register and pay fees for all of its fundraisers in New York and South Carolina. South Carolina fined the company $115,000, and New York asked it to pay $25,000 in penalties and legal costs in an agreement under which the Share Group admitted no wrongdoing but paid $13,520 to register 169 solicitors.
In 2010, as Ms. Cohen’s concerns about the industry escalated, she helped start New Concepts Fund, a nonprofit that catalogs what it sees as wrong with telemarketing firms and chronicles her legal battles against them.
She stopped working as a fundraiser later that year, when the Share Group closed its call center in Newton, Mass., and laid off its employees.
Another company, PDR II, has taken over the company’s assets and still uses the name Share when raising money.
But Ms. Cohen, 56—a woman with an intense personality who volunteers that “my co-workers hated me”—has continued her crusade while working as a retail cashier.
She has devoted much of her time in the past couple of years to battling for a tougher state law on telephone fundraising. She first tried to put the issue before voters on a 2012 ballot but fell short. This year, she won a big victory when a state legislator introduced a bill to accomplish Ms. Cohen’s goals, which so far has eight cosponsors.
Disclosure Rules
The legislation would bring commercial fundraisers under the state’s do-not-call-list law, which allows consumers to register their phone numbers so they can limit telemarketing calls. Like the federal law, the current provisions exempt charitable solicitations.
The bill would also require professional fundraisers to disclose the firm they work for and reveal, if asked, the percentage of gross receipts guaranteed to be used for charitable purposes.
Such disclosure rules are critical, Ms. Cohen says, because vendors often fudge when people ask how their donations will be used.
“The donor is asking, How much money is going to charity?” she says. But the relevant question is: “How much will you give to charity after expenses?”
As an example, she points to a registration form that the Share Group filed with the Massachusetts attorney general to describe a campaign it was conducting in 2010 for the United States Fund for UNICEF.
When asked to name the approximate percentage of receipts the charity would retain, the firm wrote: “20 percent.”
When asked what it would tell people who inquired how much the charity would get, it wrote: “100 percent of funds raised go directly to the charity/nonprofit. Share Group Inc. has neither custody nor control of funds raised.”
That may be technically true, Ms. Cohen says, but it doesn’t account for the fees and expenses that the charity must pay the company. According to reports filed by both the Share Group and PDR II with state charity regulators, the UNICEF charity often nets a small percentage of donations from their appeals—for example, 21.1 percent during a 12-month period ending last June 30, according to Hawaii, and 11.45 percent during a five-month period in 2011, according to Massachusetts.
But Geoffrey Loree, PDR II’s managing director, rejects the accusation that the language about how much the charity gets is misleading.
“We do not get a percentage,” he says. “One hundred percent of the gift goes to charity. We get a standard fee.”
He says the state reports offer only a snapshot since they cover short time periods and do not reflect a charity’s entire fundraising effort.
“You have to look at an organization’s overall track record,” Mr. Loree says, noting that the Unicef group gets high marks from charity watchdogs for its low administration and fundraising costs.
Those kinds of arguments don’t sway Ms. Cohen, who says donors should get the full truth—and the bottom line is that “charities never get 100 percent of the money.”
(See an example of a registration document filed by PDRII in Massachusetts.)
A Passion for Law
Ms. Cohen earned a paralegal degree while she was a telemarketer and says she has a passion for law.
That came in handy when Copilevitz & Canter, a prominent law firm that regularly challenges efforts to restrict fundraising activities, tried to scuttle her petition to put a telemarketing measure on state election ballots.
In two documents that were thick with references to case law, the firm urged the attorney general not to certify the petition because Ms. Cohen’s efforts would unconstitutionally restrict “charitable speech” by freezing the ability of nonprofits to contact some people and compelling fundraisers to make certain disclosures.
Saying it was speaking on behalf of its clients, including almost 400 charities, it warned that even if voters approved the proposed law, it would be subject to a First Amendment legal challenge.
Ms. Cohen says she is aware that U.S. Supreme Court rulings limit what charities and their fundraisers can be required to tell potential donors but took those into account when crafting her law.
She rebutted the law firm’s arguments in a memorandum that also cited many previous court rulings—and won the battle when Attorney General Martha Coakley certified the petition.
Unwanted Phone Calls
After the petition failed to get the almost 70,000 signatures that were needed, Ms. Cohen turned her attention to the state legislature—and Gailanne Cariddi, a Democratic representative, agreed to introduce a bill after a constituent put the two in touch.
Ms. Cariddi says the telemarketing issue struck a chord because her district in western Massachusetts has a relatively high population of older people and unwanted phone calls are among their top concerns—second only to the fate of Medicare and Social Security. “They’re leery of people asking them for money,” she says.
Filed a Complaint
While waiting for the law to change, Ms. Cohen acts as a watchdog.
She filed a complaint with the Massachusetts attorney general after Public Interest Communications called her in 2011 to seek a donation for Greenpeace, the environmental group. Ms. Cohen said the caller broke Massachusetts law by failing to identify herself as a paid solicitor or provide Greenpeace’s address and by saying Greenpeace would keep 100 percent of her donation, even though the firm estimated in a state registration document that the charity would get only 20 percent of the gross receipts.
The attorney general’s office warned Public Interest Communications in a letter last March that it could be guilty of deceptive practices and would face legal action if other similar complaints were filed.
Joyce Brundage, senior vice president for operations, says the company was unaware that its solicitors were making those statements and adds, “We’ve taken extra precautions to make sure it doesn’t happen again.”
Molly Dorozenski, a Greenpeace spokeswoman, says that after learning of the complaint, the charity reminded the telemarketer that its contract calls for “full transparency of where the funds go.” Her group has not received further complaints, she says.
Quick Conversations
While Ms. Cohen gives top priority to protecting donors, she says charities also suffer from some common telemarketing practices.
She says clients paid the Share Group for each contact that it made, whether or not it resulted in a donation.
Fundraisers would get a bonus if they made a certain number of contacts, generally 12 an hour, so they were motivated to have quick conversations, sometimes even counting a response from an answering machine as a “contact,” she says.
Charities are mistaken if they think the fundraisers are having “well-articulated” conversations with donors, she says.
But Ms. Vallone-Raffaele of the United States Fund for UNICEF says her charity monitors phone calls for every telemarketing campaign, sometimes listening in and sometimes asking for recordings afterward. “For the most part, we’re very happy with the quality,” she says.
One-Woman Charity
Ms. Cohen started New Concepts Fund, which has applied for 501(c)(3) status, with two other telemarketing colleagues, but they have drifted away. She is mostly a one-woman operation now, although three other people serve on the nonprofit’s board.
Her cause is not popular with everyone, for example, among some former colleagues who believe her activities cost them their jobs by contributing to the Share Group’s decision to shut down.
One of them blasted her anonymously on 800 notes, a Web site where consumers post information about telemarketing calls.
“You should know that getting the word out is what the client pays for, not just for donations. God forbid some cholera-stricken family in Zimbabwe didn’t get their aqua tabs to clean their water because you decided to play morality police. Get therapy, Pearl.”
But Ms. Cohen says she just wants people to know where their donations are going. She says she would like to see charities and telemarketers “working as a partnership and to put the donor front and center.”
