May 25, 2016, Star Tribune (Minneapolis, MN)

This week, Minnesota’s AG filed suit against telemarketer Associated Community Services (ACS) for allegedly using fraudulent tactics to solicit donations on behalf of the Foundation for American Veterans (FAV).

Here’s how the Star Tribune described one family’s interaction with the group:

When the phone rang in November 2015, Danette Crenshaw of Glencoe, Minnesota, declined to donate $20 to an organization called the Foundation for American Veterans.

So she was confused when she got a call from the same group a few days later, claiming that she had pledged $20 and asking that she immediately pay over the phone.

Things became more perplexing when the pledge reminders started appearing in the mail. Meanwhile, she and her husband, Jan, a U.S. Army veteran, kept getting the calls.

Concerned by what he thought were high-pressure tactics and deceptive messaging, Jan did some research and didn’t like what he discovered.

“Basically it amounts to an outfit preying on senior citizens and ex-military,” said Jan Crenshaw, who served in the Army from 1960 to 1967.

Swanson’s office says that around 28,000 Minnesotans have donated nearly $930,000 to FAV in the last five years, and in excess of 35,000 Minnesotans asked ACS to put them on the do-not-call list. The suit alleges violations of state charity and consumer protection laws and asks for an injunction and monetary damages.

The problem with unscrupulous telemarketers and bogus charity partners is that such contests with the authorities are evidently merely a part of the business plan. Accusations and fines for ACS and FAV stretch back years. This is merely an update on a kind of scorched earth, mobile strategy that has been hard to stop legally.

Readers may remember that NPQ reported last week on a similar case in Michigan where Attorney General Bill Schuette filed a “Notice of Intended Action and Cease and Desist Order” to Firefighter Support Services of Wyandotte, a Nevada-based corporation operating as a nonprofit, and to Associated Community Services of Southfield. Together, he said, the pair participated in a multimillion-dollar charity scam.

NPQ has reported on ACS in the past, but attorneys general may have taken particular notice of their activities after concluding the cancer charities fraud case, a historic action taken by all 50 states and the District of Columbia in which ACS was deeply involved.

Despite every effort taken by the Federal Trade Commission (FTC), telemarketing fraud abounds, costing Americans $40 billion a year. The elderly are disproportionately targeted. Veterans, police/fire, cancer, and children are typically the causes exploited.

Remember the Tampa Bay Times 50 Worst Charities list (further discussed here)? They also listed the worst solicitors, and ACS is among them. Here’s the ACS executive team. (Read the many comments from their victims through the years.)

It doesn’t help that there are champions to the far end of telemarketing. “The way we think about charity is dead wrong.” That was the title of Dan Pallotta’s 2013 TED talk boasting 3,881,389 views. In 2015, Pallotta wrote in his HBR blog about “the economics of charity telemarketing” and used as his frame of reference this article that condemns five telemarketers, including ACS. Here’s how Pallotta concludes his dead wrong apologetic on telemarketing: “If you don’t want a charity to spend money calling you, make regular gifts to them without being asked. And then encourage them to hire a reputable telemarketer to go after the people who don’t.”

Here’s NPQ’s opinion on telemarketing, fraudulent or not: “It’s time for the nonprofit sector to call a spade a spade and come out against paying billions to for-profit telemarketing solicitors who give all charities a bad name.” When the Supreme Court was asked in 2003 to decide if telemarketing was free speech or fraud, this is what Rick Cohen wrote:

The concern here centers on misleading donors to believe that most or all of their donations go directly to a charity—when in fact the for-profit telemarketer pockets nearly all of their money. The issue here is fraud, not free speech. America’s charities should know better than to defend the former in the guise of protecting the latter.

The Foundation for American Veterans (FAV) is a 501(c)(19) with two employees: Larry Siedell and Robert McDonald. It is located in a 1,202-square-foot condo home at 7473 Wilshire West Bloomfield, Michigan. Its mailing address is in Kansas City. The Star Tribune reports that FAV “paid ACS and its affiliates more than $27 million since 2010 to conduct its fundraising campaign. The foundation spends about 10 percent of its cash donations to help vets, while ACS and its affiliates get about 85 percent of the donations.” Suffice it to say that this hideous alliance is condemned by the rating agencies and everyone else.

In House of Games, the grifter explains, “It’s called a confidence game. Why? Because you give me your confidence? No. Because I give you mine.”

“The way we think about charity is dead wrong.” The hardly-there Charity Defense Council tried to make that case to Senator Grassley, and he was not persuaded.

“The way we think about charity is dead wrong.” Tell that to the disabled veteran being harassed on the phone and then in the mail to give what little she has to anything but charity.

We expect that the environment will continue to heat up around ACS.—James Schaffer