November 13, 2003 | Read Time: 2 minutes
A Boston direct-marketing company and its subsidiaries have agreed to pay $4.5-million to settle federal postal-fraud charges over the company’s fund-raising mailings for dozens of charities.
The government accused the Vantage Group of illegally using cheaper nonprofit bulk mailing rates while it was conducting fund-raising campaigns in behalf of the charities. According to the government’s complaint, Vantage signed agreements with its nonprofit clients stating that if the amount of money raised in a campaign was not enough to cover its costs, Vantage would be permitted to continue soliciting funds until it took in enough to eliminate its losses — even though none of the money it raised subsequently from donors would actually go to the charity.
However, postal regulations say that marketing firms using that sort of arrangement are not eligible to use the nonprofit bulk rate, which is about half as expensive as standard third-class bulk mailings.
In agreeing to the settlement, Vantage denied any wrongdoing. In a written statement, Harry S. Melikian, executive vice president of the company, said, “Vantage believes now, as it always has, that we were in compliance with all U.S. Postal Service regulations.”
Revised postal regulations set to take effect this week allow charities and marketing companies using the kind of arrangement Vantage did to pay the lower nonprofit bulk-mailing rate.
Neal Denton, executive director of the Alliance of Nonprofit Mailers, a Washington coalition of nonprofit groups that raise funds using mail solicitations, criticized the new rules.
“I fear there will be widespread abuse of these sorts of arrangements, with commercial entities collecting all the funds and the nonprofits seeing five cents of every dollar raised.”
But Robert S. Tigner, general counsel for the Association of Direct Response Fund-Raising Counsels, said the new regulations will not cause many problems for charities. “Nonprofits that know what they’re doing will be better able to make advantageous arrangements with fund raisers,” Mr. Tigner said.
