September 10, 1998 | Read Time: 4 minutes
In a case that has drawn national attention, a federal court has upheld a Utah law that requires out-of-state fund-raising consultants to register with state authorities.
Meanwhile, the California Legislature has passed a bill that would, for the first time, specifically require “fund-raising counsel” to register with the state.
Utah’s charitable-solicitations act requires that fund-raising consultants get a license from the state, make annual financial disclosures, pay an annual $250 registration fee, and secure a $25,000 bond or letter of credit before their charity clients can seek contributions in the state.
The case arose when Judicial Watch, a conservative watchdog group, sought to register to solicit in Utah. Under the state’s solicitations law, Judicial Watch was unable to send fund-raising letters developed by its fund-raising consultant, American Target Advertising, to Utah residents unless the company had also registered.
American Target Advertising, a Virginia company, last year sued the State of Utah, arguing that the solicitations act violated its free- speech rights under the Constitution.
“The act makes the exercise of First Amendment rights without a license a crime,” the company said.
American Target Advertising said that the Utah law did not meet a U.S. Supreme Court test that a state could impose regulations if they were “narrowly tailored” to prevent fraud and protect charities and the public.
For example, the company said that the state’s requirement that consultants maintain a bond or letter of credit was unconstitutional because it was not “narrowly tailored” and was more burdensome than necessary.
“Fund-raising counsel must tie up $25,000 of their assets so that their clients can mail to approximately one per cent of the total population of the United States,” the company said. “If the fund-raising counsel does not have $25,000 of unencumbered assets, its clients cannot mail into Utah.”
American Target Advertising concluded: “If a system of laws creates the possibility that protected First Amendment rights may not be exercised because one cannot afford to comply with the conditions placed on the exercise of free speech, the system should be deemed as an undue interference.”
But U.S. District Judge Dee Benson rejected all of the company’s arguments, including its contention that the law infringed on its rights to due process and improperly interfered with interstate commerce.
The requirement of a bond “protects the public by providing a fund from which victims can draw in the event that they are defrauded by charitable solicitors,” Judge Benson said. “Simultaneously, it also acts as a deterrent to fraudulent activity — presumably, fund raisers will be less likely to defraud Utahans if they know that if they get caught, they will pay for it.”
Richard A. Viguerie, president of American Target Advertising, said that his company would ask the U.S. Court of Appeals for the Tenth Circuit to reverse the lower court’s ruling.
“America’s First Amendment freedoms are being eroded often and by many sources,” said Mr. Viguerie, a well-known conservative. “We shall continue to fight for the rights of Americans to receive mail by non-profit organizations, both on the political right and left.”
Both sides of the lawsuit drew support from influential quarters.
The Utah Division of Consumer Protection, which handles registrations, was backed by 19 state attorneys general who filed a friend-of-the-court brief.
American Target Advertising was supported by a brief filed in behalf of the Free Speech Coalition and more than two dozen other organizations.
In California, the state’s Legislature passed a bill that would close what lawmakers see as a loophole in existing law by extending registration and disclosure requirements to fund-raising counsel.
Current law covers “commercial fund raisers” that receive or control solicited donations for charities. But the law does not require registration by those who advise charities on how to raise funds.
The bill would require fund-raising counsel — a person who “plans, manages, advises, counsels, consults, or prepares materials for” charity solicitations in California — to register each year, provide detailed information about their work, and pay an annual $200 fee. An exemption would be given to those whose total annual gross compensation for helping with a solicitation was $25,000 or less.
The Legislature passed the bill so that the Attorney General’s Office could keep tabs on fund-raising counsel.
“We want to know who is doing business in our state,” said Belinda Johns, Deputy Attorney General. “This would allow us to keep track of who is soliciting our citizens so we know who to go to if problems arise.”
Gov. Pete Wilson now will decide whether to sign or veto the measure.
