DIALING FOR DOLLARS
High court
often sides with
telemarketersRulings have upheld First
Amendment rights except in
cases of misrepresentation
In what would lead to a landmark U.S. Supreme Court case, two former soldiers from Rockford, Ill., founded a group to help veterans called VietNow and hired a professional telemarketer to raise money.
They solicited money for veterans' programs such as food baskets, job training, Agent Orange relief and aid to homeless veterans.
In the name of VietNow, Telemarketing Associates raised more than $7 million to help Vietnam veterans over almost a decade.
The telemarketers kept more than $6 million. Depending on the year, the telemarketer kept between 85 percent and 91 percent of what was raised.
Illinois Attorney General James Ryan called it fraud and wanted to prosecute. Ryan claimed the fund-raising contract that allowed Telemarketing to take 85 percent of the proceeds was unreasonable and ultimately designed to enrich the telemarketer, not help the charity.
Ryan filed suit in 1991 in a case that reached the U.S. Supreme Court last spring and tested the First Amendment protections granted telemarketers during the 1980s.
In those previous three cases, the Supreme Court found that soliciting for a charity is protected as free speech under the First Amendment because it involves expressing views for a cause.
The high court ruled that a fund-raiser could not be sued for fraud simply on the basis of taking high fund-raising fees, and that states could not set limits on those fees.
The court also found that states could not require fund-raisers to voluntarily disclose high fund-raising fees when calling potential donors.
Last spring, the VietNow case reached the Supreme Court, which once again upheld the rights of telemarketers.
The case became a huge issue in the nonprofit world, which cast it as a fight between the rights of consumers and those of telemarketers.
In a brief filed by the BBB Wise Giving Alliance, the consumer watchdog group said the case "is about donors, the tough choices they need to make and whether the First Amendment may shield solicitors who keep from donors the information needed by them. ... (It) is about the accuracy and completeness of information donors need to make informed giving decisions.
The BBB said that in the case of VietNow, the money going to the charity was "so marginal" that it would have "mattered to most donors."
Current Illinois Attorney General Lisa Madigan presented evidence to the high court that the telemarketers intentionally deceived potential donors about their cut of the proceeds.
In one instance, a woman was told "90 percent or more goes to the vets." Another woman testified that she was told that the telemarketing was being done by volunteers and that her donation would not go toward "labor expenses."
On May 4, the high court ruled that a fund-raiser can be prosecuted for consumer fraud if it deliberately misrepresents to potential donors the percentage going to the charity. It still cannot be prosecuted for having high fees in its contract.
The court reaffirmed that a telemarketer does not have to volunteer a high fund-raising fee to a potential donor.
Writing the opinion for a unanimous court, Associate Justice Ruth Bader Ginsberg wrote, "The First Amendment safeguards the right to engage in charitable solicitation, but it does not shield fraud."
Errol Copilevitz, an attorney in Kansas City, Mo., who argued the case on behalf of the telemarketers, said, "The First Amendment protects the rights of nonprofits to zealously argue for causes that can be very unpopular."
He said the money a charity spends raising money is not a measure of economic efficiency but a gauge of efforts needed to persuade donors.