Text of Senator’s Letter to the FTC

April 18, 2002 | Read Time: 5 minutes

Following is a letter sent by Sen. Charles E. Grassley, Republican of Iowa, to the head of the U.S. Federal Trade Commission.

April 4, 2002

Via Regular Mail and Facsimile: 202-326-3585

The Honorable Timothy J. Muris
Chairman
U.S. Federal Trade Commission
6th & Pennsylvania Avenue, NW
Washington, D.C. 20850

Re: Offshore Telemarketing Fund

Dear Chairman Muris:

As Ranking Member of the Senate Committee on Finance (Committee), I am committed to help ensure that charitable contributions to United States-based charities are timely distributed to qualified recipients. I believe that oversight of charities and foundations should also be part and parcel of the President’s charitable initiatives to ensure that our citizens’ tax dollars are spent appropriately and to strengthen our nation’s trust in its charitable institutions. Today I write to draw your attention to a problem that has surfaced during the Republican Committee staff’s investigation of misleading charities that may be engaging in deceptive fund-raising tactics.

Recently, I have learned that Americans are receiving telephone solicitations from fund-raisers located offshore to possibly avoid U.S. telemarketing laws. I am aware of three instances where U.S. citizens have received telephone solicitations from telemarketers who claim to be located in the Philippines and who fraudulently misrepresent themselves as affiliated with the Make-A-Wish Foundation of America (Make-A-Wish). One of the citizens who agreed during the call to make a donation to “Make-A-Wish” subsequently received written information about another charity, Children’s Wish Foundation International, Inc. (CWFI). This information was not mailed from the Philippines but, rather, from the Pittsburgh, Pennsylvania, address of Reese Brothers, Inc.

By way of background, Make-A-Wish is a well-respected charity that grants the wishes of children with life-threatening illness and does not engage in any telemarketing activities whatsoever. CWFI is a purported wish-granting charity located in Atlanta, Georgia, that, over the past decade, has been the subject of investigations, administrative proceedings, and lawsuits initiated by charity regulators in several states for a variety of alleged fund-raising and financial reporting improprieties. Reese Brothers is CWFI’s primary telemarketer and has received in excess of $49.6 million since it was hired by CWFI in 1996.

This confusion as to the identity of the charitable with-granting organization does not appear to be accidental. Although there are many credible and ethical wish-granting organizations in the United States, a number of unscrupulous individuals have apparently found raising money to grant sick children’s wishes to be pretexts for fraudulent and deceptive fund-raising practices. Mark Reed, the President and CEO of the Make-A-Wish Foundation of Iowa, has personally responded to numerous complaints from Iowans who have received telemarketing calls supposedly from “Make-A-Wish” but actually from CWFI and/or Reese Brothers.

I question whether this apparently recent decision on the part of CWFI and/or Reese Brothers to telemarket American citizens from the Philippines has anything to do with the fact that on October 25, 2001, President Bush signed into law the USA PATRIOT Act of 2001. This law includes a “crimes Against Charitable Americans Act” that imposes disclosure requirements upon persons “engaged in telemarketing for the solicitation of charitable contributions,” empowers your agency to expand its Telemarketing Sales Rules to include additional disclosure requirements for charitable solicitation calls, and amends the federal criminal statute proscribing telemarketing fraud to bring charitable telephone solicitations within its reach.

Even if the timing of CWFI’s and/or Reese Brothers’ decision to commence offshore telemarketing were merely coincidental, I am concerned about your agency’s ability to enforce its Telemarketing Sales Rules when offending telemarketers are located more than 8,000 miles away from U.S. soil. To help safeguard American donors from telemarketers who engage in fraudulent or deceptive “charitable” solicitations, and particularly those solicitations offshore, I appreciate your responses to the following questions:

1. Will the Federal Trade Commission (FTC) investigate CWFI or Reese Brothers for the activities described in this letter? If your answer is in the affirmative, I request that you keep the Committee informed of the progress of your investigation including any referral to a law enforcement agency for prosecution. If your answer is in the negative, explain why not.

2. I am aware that FTC has previously expressed its view that there is “no doubt that sellers or telemarketers located outside the U.S. are subject to the [Telemarketing Sales Rules] if they telemarket their goods or services to U.S. consumers.” Will your agency’s opinion remain the same with respect to charitable telemarketing, especially in view of the provisions of the USA PATRIOT Act of 2001? Also, describe how FTC’s view on this subject has been adequately communicated to the public and, particularly, to those involved in the telemarketing industry.

3. Explain how FTC identifies and stops fraudulent or deceptive fund-raising activity committed by U.S.-based entities through their agents located offshore. Please include in your answer whether FTC works with federal, state or local charity regulators or other law enforcement agencies to identify illegal fund-raisers. If your answer is in the negative, explain why not.

4. For the past five years, state: (a) the number of U.S.-based telemarketing entities soliciting from offshore that FTC has investigated; (b) the number of such entities FTC has penalized or referred for prosecution as well as the reason for the penalty or referral; and (c) the nature and amount of the penalty imposed. Moreover, identify any such entities that currently engage in telemarketing or other fund-raising despite a prior penalty from FTC or other law enforcement agency, and explain why each such entity was allowed to resume its activities despite such penalty. Finally, explain what FTC is doing, if anything, to ensure that any such entity’s current telemarketing or general fund-raising practices comply with U.S. law.

Please note that I have separately expressed by concerns about CWFI’s alleged fund-raising and financial reporting improprieties to the Honorable John D. Ashcroft, Attorney General, United States Department of Justice, and to the Honorable Charles O. Rossotti, Commissioner, Internal Revenue Service. I have enclosed a copy of that letter for your consideration.

Your cooperation in responding to these requests by May 2, 2002, is appreciated. Please contact Faith Cristol on my Committee staff with any questions at (202) 224-5315.