Some Charity Promotions Violate State Laws

“Now the long-distance calls you make can help save wolves, dolphins, elephants, grizzlies, panthers, wild birds, tigers, and other important wildlife,” declares a brochure promoting a Sprint telephone calling card. For every call, Sprint vows, a contribution will go to the Defenders of Wildlife, a national environmental group.

The recipient is never told, however, how much Defenders of Wildlife will receive. Because the promotion lacks such information, Defenders of Wildlife and Sprint have violated charitable-solicitation laws in several states. What’s more, Defenders of Wildlife has run afoul of the fund-raising guidelines issued by the Philanthropic Advisory Service, a charity watchdog group run by the Better Business Bureau.

To comply with state laws — as well as the watchdog guidelines — promotions such as the one by Sprint and Defenders of Wildlife are supposed to state exactly what percentage of each sale will be given to the charity. In addition, some of the laws, as well as the Philanthropic Advisory Service, require the promotions to state the total dollar amount that the charity expects to receive.

But numerous charities and corporations fail to provide such specifics in their joint promotional campaigns. Instead, they offer only a vague statement like “a portion of the profits” will go to charity. The Philanthropic Advisory Service estimates that one-fourth of the marketing promotions it reviews fail to provide the required information.

Many charities say that while they don’t want to break the law, they find themselves in a bind because some companies refuse to participate in promotions in which dollar amounts or percentages are made public.

Charity leaders say corporations seem reluctant to disclose such information because they are only giving the charity a tiny portion of each sale — a fraction of a cent in many cases — and they do not want to look stingy.

Other companies do not want their competitors to know how much they are spending on marketing.

But a number of fund raisers and charity-watchdog officials say that the widespread practice of not disclosing specifics misleads consumers. In addition, they say, it allows companies to get the public-relations benefits of working with a charity while giving away a relatively small amount. Full disclosure, they say, would elicit better deals for all charities by making companies publicly show how generous they really are.

Besides Defenders of Wildlife, non-profit groups cited by the Better Business Bureau for their lack of disclosure within the past year include Ducks Unlimited, the National Audubon Society, People to People International, and Second Harvest.

Bennett Weiner director of the Philanthropic Advisory Service, says that fully disclosing the terms of marketing deals is “the ethical thing to do.”

“For the consumer, the disclosure provides a chance to make an informed choice,” he says. “If you’re looking at five different credit cards that support environmental groups, disclosure is a significant factor in helping you make a good choice.”

Amy Longsworth, vice-president for corporate programs at the Nature Conservancy, says her charity always makes sure that promotions have clear statements about what it will receive.

“We’re asking people to buy a product,” she says. “A part of the proposition to the customer is, this is going to do something good for a charity. The customer has a right to know how much of their payment is going to the charity.”

If all charities insisted on full disclosure, adds Ms. Longsworth, “it would force the businesses to commit substantial amounts that they could be proud of. I’d certainly like to see more in the charity community buy into the guidelines.”

In part, the lack of disclosure is widespread because there is no federal law that governs joint marketing ventures between businesses and charities. That leaves non-profit groups and companies to thread their way through a complex maze of state laws.

States that require explicit disclosure in joint marketing promotions by charities and companies include Alabama, Connecticut, New Hampshire, New Jersey, New York, Ohio, Oregon, and Wisconsin. In addition, the Massachusetts legislature is considering a proposal to add a disclosure requirement.

However, none of those states appears to be enforcing the laws, mostly because the states are devoting law-enforcement resources to more-pressing problems, officials say.

In Ohio, violators of its charitable-solicitation law — including the provision on marketing disclosures — can be punished with up to six months in jail and a $10,000 fine. But “we have never prosecuted a case for this,” says Craig R. Mayton, an Assistant Attorney General.

“This has not been one of the areas where we’ve had complaints,” he says. “Our first priority is to take care of the public’s complaints, and those keep us busy.”

But in Massachusetts, state officials are showing new interest in encouraging disclosure. “Donors deserve to know the amount of their purchase going to charity,” says Richard Allen, an Assistant Attorney General in Massachusetts. “The problem with vague statements is that there are often assumptions that the amount will be appropriately significant and, if it is not, it is unfair to cloak that behind vague statements.”

Many charities that failed to meet disclosure standards — such as People to People International and Second Harvest — say they did not know about the rules or they misunderstood them. Most are now amending their promotions to be in compliance.

When the Better Business Bureau informed Defenders of Wildlife last fall that it had failed to meet fund-raising guidelines for the Sprint calling card, the charity says that it asked Sprint to start informing consumers how much the charity gets from each phone call but that Sprint refused.

“Their argument was heavy competition from other long-distance providers,” says Charles Orasin, vice-president for operations at Defenders of Wildlife. “They really don’t want their competitors to know what kind of relation they build with groups like ours.”

Catherine Goodson, Sprint’s manager of corporate communications, says that decisions about how much information to disclose in charity promotions are handled on a “case-by-case basis.”

She says while it is not against Sprint policy to disclose the percentage given to charity, she could not explain what happened in the Defenders deal because the executive who handled that promotion is no longer with the company.

Defenders of Wildlife, which has earned less than $10,000 from the Sprint promotion, says it will strive to meet the Philanthropic Advisory Service guidelines in all future promotions.

But other charities plan to continue flouting the disclosure requirements as long as it benefits them financially.

Ducks Unlimited was told it failed to meet the Better Business Bureau standards last fall for several promotions, including the sale of furniture and outdoor wear.

Even though consumers may be in the dark, says Stephen Tonning, director of licensing at Ducks Unlimited, the charity will continue promotions that do not disclose specifics “as long as they generate substantial revenue and, in our opinion, are fair and equitable business relationships.”

So far, promotions have brought in healthy returns, Mr. Tonning notes. A promotion with Kincaid Furniture Company, in Hudson, N.C., yielded more than $1-million for Ducks Unlimited in the last two years. And the sale of sportswear by Whitewater Outdoors, in Hingham, Wis., is expected to bring in about $100,000 for the organization over the same period.

Though the National Audubon Society has recently added a disclosure statement to a credit-card solicitation, officials say that they still think that the requirements are too stringent.

“We take exception to this standard set up by the B.B.B.,” says John Bianchi, communications director at Audubon. “It doesn’t make any sense for this organization or its licensees to reveal the dollar amount or percentage amount on packaging or on our press materials.”

Mr. Bianchi says the charity wrote a letter to the Philanthropic Advisory Service protesting the guidelines.

But watchdog officials say they feel strongly about the need for disclosure requirements.

Matthew Landy, vice-president of the National Charities Information Bureau, says he wants to see the federal government weigh in on the matter and pass a law requiring disclosure. His watchdog group does not have its own guidelines on marketing promotions, but it informally recommends that charities make full disclosure in promotions.

“It should be clear and unequivocal,” he says. “I wish the federal government had legislation. Without it, there’s a loophole — a big one.”