[ OUR OPINION ]
Public should know
charity telemarketing costsTHE average taxpayer in Hawaii last year donated $817, or 2 percent of income, to charities, but not much of that is likely to have reached its intended destination. The donor is left in the dark about how large a chunk goes to the telemarketer that solicited the contribution because Hawaii has no requirement that the split between charities and telemarketers be made known to the public. The upcoming Legislature should correct that to improve oversight of this massive activity.
THE ISSUE
The Hawaii Attorney General's Office is investigating a telemarketing operation used to raise money for a charity for the blind.
Hawaii's charitable fund raising does not differ greatly from that in other states. In New York, telemarketers kept 68 percent of the money raised for charities. Fifty-two of that state's 588 charities that used telemarketing received less than 10 percent of the amount raised on their behalf. That information is made public by New York law.
"Unlike many other states," Hawaii Deputy Attorney General Hugh Jones told the Star-Bulletin's Sally Apgar, "there is no governmental information for donors to turn to find out what percentage of their donations reaches the charity they want to benefit." The Internal Revenue Service puts charities' tax information online, but the activity of telemarketers can be camouflaged.
For example, a National Federation of the Blind Hawaii fund-raising campaign by its telemarketer, David Modansky's Ultimate Contact Management, raised $104,702, of which only $546 actually was spent for the tax-exempt purpose of "self-help for the blind." Modansky was paid $73,449 of the proceeds for what the tax document described as "community outreach" and $30,707 for "program services" -- a total of $104,156. Jones said his office is investigating Modansky's fund-raising activities.
Contracts that telemarketers are required to file with the state Department of Commerce and Consumer Affairs do not include such specifics. However, fillings in other states by telemarketers with contracts in Hawaii show they have kept the lion's share of proceeds from campaigns. Facter Direct Ltd. kept more than 90 percent of the $1.4 million it collected for the Multiple Sclerosis Association for America in New York and 74 percent of the $1.5 million collected in California for the Planned Parenthood Federation of America.
The U.S. Supreme Court has protected charities' First Amendment right to use telemarketing as free speech to promote causes. For that reason, they are exempt from the Federal Trade Commission's Do Not Call Registry. However, the high court ruled in May that a telemarketer can be prosecuted for fraud if it deliberately misrepresents the percentage of donations that goes to the charity.
The only effective way of detecting such fraud is to require that the percentage going to the charity be made public. Most states have such a requirement, and so should Hawaii.
