January 10, 2002 | Read Time: 2 minutes
New York Attorney General Eliot Spitzer has announced several efforts designed to crack down on fraud by companies that do telemarketing on behalf of charities, including changes in federal and state regulations for charities that hire solicitors and donors who make gifts to telemarketers.
Mr. Spitzer has also issued several subpoenas to charities and professional telemarketers as part of an investigation into possible fraudulent fund-raising activity. He issued the subpoenas in conjunction with the release of his agency’s annual report on professional solicitors for charities, which found that telemarketing campaigns in the state raised $188-million on behalf of charities in 2000, with more than two-thirds of the funds ($129-million) being kept by the companies to cover expenses and profits. In 1999, telemarketers raised $194-million in charities’ names, holding on to $139-million.
The attorney general’s office declined to name the organizations that received the subpoenas.
Mr. Spitzer also announced that he is preparing regulations designed to help charities make sure they get as large a return as possible from telemarketing campaigns. While the details of the regulations are still being worked out, they would generally require charities to do “comparison shopping” before hiring telemarketing companies. They would also require charities that sign contracts under which they receive a small percentage of the donations raised to win approval from more than a simple majority of the charity’s board, instead needing support from two-thirds or three-fourths of its directors.
He also plans to ask the state’s legislature to pass a law requiring telemarketers to tell potential donors they are entitled to know the percentage of funds the charity received in prior telemarketing campaigns run by the company.
Mr. Spitzer also said he would ask the state’s congressional delegation to seek federal legislation to change charitable-deduction laws so that if a charity receives less than half the proceeds from donations to a telemarketing campaign, the donor could claim a deduction only for the amount that actually goes to the charity.
The attorney general’s report notes that in 17 cases charities actually lost money under their fund-raising contracts.
Free copies of “Pennies for Charity” can be obtained from the attorney general’s Web site, http://www.oag.state.ny.us/charities/pennies01
/penintro.html, or from the Charities Bureau at 120 Broadway, New York, N.Y. 10271; (212) 416-8400.
