Telemarketers take up to 90 percent cut in charitable donations
By MICHAEL GORMLEY
Associated Press Writer
December 24, 2004, 11:38 AM EST
ALBANY, N.Y. -- Diana Mey remembers the telemarketing call for a charity that pushed her "over the edge."
"I remember getting a hard sell," said the mother of three from her Wheeling, W.Va., home. "A telemarketer told me, `C'mon, can't you spare $20? How about $10? These people are really counting on you."'
So was the telemarketer's professional fund-raising company, which would have netted $16 of that $20 donation. She won a small claims suit against the telemarketer, testified at federal hearings and is credited with helping get federal and state Do-Not-Call telemarketing laws adopted. But she laments that the rules don't apply to professional fund-raisers hired by many charities.
"They think they're above the law," she said.
In the competition for Americans' disposable income, charities including police benevolent associations, veterans' groups and those combatting diseases, often find it best to hire professional fund-raisers, even knowing they'll get just a fraction of the proceeds.
In New York last year, 592 charity campaigns used professional fund-raisers to raise $187 million, of which one-third _ $63 million _ was kept by the nonprofit groups, according to the "Pennies for Charity" report released this week by New York Attorney General Eliot Spitzer.
"We don't expect 100 percent to go to the charity, but we would hope that over time it would be more than the 33 percent we're seeing," Spitzer said.
In New York, a professional fund-raiser based in New Jersey raised $4.1 million in 2003 for 15 charities to help disabled children, disabled police officers, kids with Leukemia and a program that helps find missing children. Thirteen percent _ $533,000 _ went to the charities.
In California, the average charity using professional fund-raisers kept less than 40 percent of the donations and a quarter of them ended up with 15 percent or less, Attorney General Bill Lockyer reported this year.
A report by the Chronicle of Philanthropy found that donations to the 400 largest nonprofit organizations increased by 2.3 percent in 2003, to more than $47 billion.
If donors ask, fund-raisers must confirm they are commercial solicitors and divulge their cut.
The Better Business Bureau's Wise Giving Alliance sets ethical standards for charities including a limit of 35 percent of donations going to professional fund-raisers. Most of the national charities it monitors meet that.
Regional charities can be a different story. In fact, despite the annual reports, enforcement actions and extensive press coverage, the cut kept by professional fund-raisers in New York in 2003 is unchanged from 1994.
So New York, California and other states are increasingly asking charities to no longer accept the promise of quick, easy cash. In California, a law effective Jan. 1 will require nonprofit groups to provide more consumer protections when hiring fund-raisers.
Simple, strict limits on fund-raisers' share would likely be struck down by courts because fund-raising is protected by the constitution as free speech, Spitzer said.
"The charities I've talked to that hire these guys, they say ... (professional fund-raisers) are keeping 90 percent of what they collect," said Tom Bartholomy of the Better Business Bureau in Charlotte, N.C. The charities say, "`Well, they promised a check for $50,000 and we've never been able to raise $50,000 before.' I say, aren't you concerned they are keeping $500,000? `Well, I guess not."'
"There always is another side," said Mark Gelvan of the All-Pro Telemarketing Associates Corp., the New Jersey professional fund-raiser that gave up its New York license to settle a Spitzer investigation. He said when a telemarketer collects 80 percent of the donation, "a good 70-plus percent could be expenses" including rent, the phone bill and mailing materials to donors.
"It's not really accurate what you're seeing here in terms of the professional fund-raiser," he said.
Spitzer sued Gelvan's firm in 2002 after it raised $5.8 million for the Fraternal Order of New York State Troopers over several years, and kept $4.93 million of it.
In September, the Maine Attorney General's Office sued All-Pro. Assistant Attorney General Stanley Piecuch accused the fund-raiser of claiming in part that donations would benefit a "major children's wish fulfillment organization" that sounded like the Make-A-Wish Foundation, which refuses to use telemarketers.
"Our fear is there are many people out there who now have less than kind thoughts about the Make-A-Wish Foundation," said Tom Peaco, executive director of the charity's Maine branch that provides trips, gifts and celebrity visits for seriously ill children.
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