Confusing but legal, Cancer Fund returns to fund-raising wars State challenged it as misleading

October 07, 1992|By Laura Lippman | Laura Lippman,Staff Writer

The Sun reported incorrectly Oct. 7 that five charities had been barred by the secretary of state from raising funds in Maryland. In fact, three of the charities are legally entitled to solicit here. They are People Against Child Abuse, World Emergency Relief and the John F. Kennedy Library Foundation Inc.

The Sun regrets the error.

The Cancer Fund of America is back in Maryland, raising funds in a direct mail campaign that the state two years ago challenged in court as deceptive and misleading.

But the secretary of state's office lost its case, so the charity may continue raising money in what it bills as "the Baltimore Area Door-to-Door Campaign" -- even though the fund serves only 14 indigent cancer patients statewide.

FOR THE RECORD - CORRECTION

The case of the Cancer Fund -- a charity whose less-than-stellar reputation once warranted a warning in Ann Landers' national column -- points up the limited powers of the Charitable Division of the secretary of state's office.

"When I took this job a few years ago, it didn't seem so bad," said Secretary of State Winfield M. Kelly Jr. "Now every time I turn over a rock, there's something under it."

In July, Mr. Kelly announced that he wanted subpoena power and more stringent audit requirements in order to police more closely the state's nearly 1,700 charities. Mr. Kelly, who plans to run for governor in 1994, also has begun aggressively pursuing license revocations for charities that violate state laws.

Currently, the state simply requires any charity raising more than $25,000 to register with the secretary of state's office. But the office has little control over non-profit charities that pay their fees and provide the state with the required financial documents.

There are some rules. Paid solicitors must identify themselves. Charities also have to provide financial disclosure statements when requested.

But in 1984, the U.S. Supreme Court struck down a state law requiring charities to limit their costs for overhead and fund-raising to a certain percentage of their total expenditures.

Maryland also cannot forbid "sound-alike" organizations, which trade on the names and reputations of established charities.

And, although the office mails citizens financial forms upon request, only an amateur auditor can fully understand how the cost for program services can be mingled with fund-raising expenses.

All these issues come into play with the Cancer Fund of America, which claims its fund-raising and overhead account for 33 percent of its costs, the generally accepted standard for charities. (By comparison, American Cancer Society -- which accuses the Cancer Fund of riding its coattails -- reports it spends about 18 percent.)

The secretary of state's office says the Cancer Fund's 33 percent figure is based on some creative albeit legal accounting. When the Cancer Fund solicits, part of that cost is picked up by its "education" expenses. That's because the donor packet includes basic cancer prevention tips, such as "Avoid direct sunlight." It does disclose this accounting practice in the fine print on its mailings.

It does not disclose that there is some controversy over its claims of spending $6.9 million on program services last year. According to published reports in the Knoxville (Tenn.) Journal, that figure includes donations of books and seeds. The newspaper calculated that the charity spent about 8 cents of each donated dollar for cancer patients.

Not only did Mr. Kelly take the non-profit to court in 1990, but he also had settled in 1989 with the Cancer Fund and three other charities over a questionable sweepstakes.

The Cancer Fund sent notices informing people they were finalists in a sweepstakes, then requesting a donation with the return reply. Most people received checks for 10 cents. Under the terms of the settlement, they were eligible for refunds.

But the 1992 campaign is identical to the 1990 campaign, which already has withstood a court test. Mr. Kelly said his office, which learned of the Cancer Fund's return through a citizen's complaint, can only monitor it at this point.

William W. Schaake, 69, the citizen who called the office, said the letter asking him to participate in "the Baltimore area door-to-door campaign" led him to believe that the Cancer Fund is a local charity. He said he became angry when he learned otherwise.

After receiving the fund's letter, Mr. Schaake, of Northeast Baltimore, called the local chapter of the American Cancer Society, which told him that there was no connection between the two organizations -- which he had failed to see in the small print on the fund's solicitation.

"I was mad," Mr. Schaake recalled. "It looked like all the cancer people were getting together to raise money."

Pete Fennelly, director of public information for the Cancer Fund, said the charity cannot be responsible for those who misread its letter.

"The problem I have is the quick inference that we are soliciting for a local drive," he said. "We never claim that."

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