High court takes hard look at charity telemarketing

Push made for crackdown on deceptive fund raising

March 04, 2003|By David G. Savage | David G. Savage,SPECIAL TO THE SUN

WASHINGTON - The callers said they were seeking donations for VietNow, a charity that provided for Vietnam veterans who were hungry, homeless, disabled or unemployed.

That much was true. What the donors were not told was that only 3 percent of the money collected went to support these veterans.

Yesterday, the Supreme Court took a hard look at this practice to decide whether such fund-raising pitches can be prosecuted as frauds.

Until now, telephone soliciting has been deemed to be free speech and protected from laws that force fund-raisers to tell donors what share of contributions goes to true charitable work.

Under its contract with VietNow, a professional fund-raising firm known as Telemarketing Associates kept 85 percent of the donations it solicited. And VietNow spent 80 percent of the rest on its operations and overhead.

During yesterday's argument, Illinois prosecutors and the Bush administration urged the court to drop the First Amendment barrier and to allow a broader crackdown on these deceptive fund-raising schemes.

"Charitable solicitors are not free to commit fraud just because they are charitable solicitors," said Illinois prosecutor Richard Huszagh. The fund-raisers did not tell "explicit lies, but they engaged in misrepresentations. And half-truths are not constitutionally protected."

The Illinois attorney general brought a fraud charge against Telemarketing Associates, but it was thrown out on free-speech grounds by the state courts.

"Nothing in the First Amendment says that fraud in charitable solicitations need go unpunished," argued Deputy Solicitor General Paul Clement.

But the state's case ran into surprisingly sharp questioning. Since no one could say just when high fund-raising costs became too high, fund-raisers would not know they are violating the law, several justices said.

"I'm not comfortable leaving this to a jury," said Justice Antonin Scalia.

If 85 percent is too high, what about 65 percent or 50 percent, asked Justice David Souter. "My concern is there is no way to predict in advance" what is considered a fraud, he said. "It would be a dice throw."

But other justices wondered how the public can be protected. Probably 95 percent of those who donated money would not have done so if they thought nearly all of it went to the fund-raisers, said Justice Anthony Kennedy.

"Isn't that saying this is a misrepresentation?" he asked.

But a lawyer for the telemarketers stood his ground and argued the government has no authority to "second guess" how solicitors do their work.

"High fund-raising costs alone are not enough to make out a case of fraud," said attorney M. Errol Copilevitz. He said that professional fund-raisers "commonly have fees of 80 percent to 90 percent."

David G. Savage is a reporter for the Los Angeles Times, a Tribune Publishing Newspaper.

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