Telemarketing Case Wasted Charity Money

To the Editor:

Now that the high-profile case Madigan v. Telemarketing Associates (formerly titled Ryan v. Telemarketing Associates) has been decided by the U.S. Supreme Court, one can step back and consider what was at issue in the case (“Prosecuting Fraudulent Appeals,” May 15).

Mr. Ryan, the former attorney general of Illinois, sued Telemarketing Associates for fraud, claiming that it “should have” notified donors that its contract with the charity VietNow called for Telemarketing Associates to retain 85 percent of the funds raised.

Three courts in Illinois, including the State Supreme Court, dismissed the case, finding that the Riley trilogy (Riley, Munson, and Schaumburg) of U.S. Supreme Court cases had decided the question, and that high fund-raising costs are not an indicator of fraud.

The U.S. Supreme Court remanded the case to the Illinois Supreme Court, reversing that state court’s judgment, and requiring “further proceedings not inconsistent with this opinion.” The opinion essentially says that Mr. Ryan may have had a prosecutable case of fraud based on documents in his own filings which claimed that Telemarketing Associates promised something that was not true, but that the attorney general may not sue based on what the telemarketer did not say, or on the high (85 percent) cost of raising funds.

This new decision may properly be quoted as the fourth pronouncement from the U.S. Supreme Court on the subject of fund-raising costs (Riley is now a quartet), stating that fund-raising costs are what they are, and are not an indicator of fraud.

But there is another, critically important issue at work in this case.

In order to assure that the U.S. Supreme Court had all relevant information available to make the correct decision, numerous charities and their representatives spent hundreds of thousands of dollars on legal fees, having briefs and amicus curiae briefs prepared. None of those expenses would have been necessary, and none of those funds would have been diverted from charitable pursuits, if the former attorney general of Illinois and his staff and successor had properly read and understood the settled Supreme Court decisions in the first place.

No legitimate charity wants any other charity to commit fraud. Any mud slung at one charity dirties all charities. But charity regulators have a responsibility, which too often they do not discharge, to assure that charges of fraud or other mis- or malfeasance are precise and appropriate. And they should remember that slinging mud also dirties the hands of the slinger.

Lee M. Cassidy
Executive Director emeritus
Direct Marketing Association Nonprofit Federation
Washington