America’s Worst Charities Enriching For-Profit Telemarketers

June 6, 2013; Tampa Bay Times

Which charities qualify as “America’s 50 worst”? The Center for Investigative Reporting and the Tampa Bay Times developed a methodology to compile the list that focused on those charities that, during the past decade, reported paying professional solicitation companies to troll for donations (groups with relatively few such fundraising campaigns or receiving  most of their funding from other sources were excluded from the analysis). To identify the bottom 50, the investigative team honed in on charities that kept 33 percent or less of the moneys raised by their for-profit fundraisers.

Which well-known charities did the investigative team capture in this very useful analysis? Although we were tempted to run all 50, here are the top—or bottom, so to speak—20 charities on the CIR /Tampa Bay Times list:

It’s a pretty horrifying and disgusting list. CIR and the Times note, for example, that Kids Wish spends less than three cents on every dollar raised to help kids, but has paid $4.8 million to the founder of the charity and his consulting firms. As with Kids Wish, the team notes that, “These nonprofits adopt popular causes or mimic well-known charity names that fool donors. Then they rake in cash, year after year.” Their total payment to paid solicitors over the past decade has been nearly $1 billion. Calling these “charities” is, of course, a stretch. They are so abominable in their approaches that they truly give a bad name to the entire nonprofit sector.

Our special reason for reprinting these 20 is to call out the 19th group on the list, the VietNow organization. More than a decade ago, the attorney general of Illinois went after VietNow’s telemarketer, Telemarketing Associates, for its deceptive fundraising efforts on the part of VietNow, failing to tell donors that no more than 15 percent of their donations would reach the charity. Although the AG won at the state supreme court, VietNow and Telemarketing Associates appealed to the U.S. Supreme Court. There, although the court said that fraud under the guise of charitable fundraising is not protected free speech, the state’s efforts to clamp down on the telemarketers violated the charity’s free speech rights.

The state AG had tried to require telemarketers to disclose to potential donors how much of the donations would be retained by the for-profit telemarketers. Amazingly, national nonprofit organizations defended the telemarketers and opposed the AG, claiming that disclosure “would prevent honest, responsible charities from educating the public about their issues and causes.” Although  VietNow claimed in the original litigation that it got 15 percent of the telemarketer’s fundraise, we calculated three percent at the time—and now CIR and the Tampa Bay Times indicate that VietNow only gets 2.9 percent. To defend the likes of Telemarketing Associates and VietNow under the guise of First Amendment free speech rights was, on the part of national nonprofit associations, truly shameful.

As CIR and the Tampa Bay Times point out, many of the 50 worst don’t have particularly robust charitable programs to start with, suggesting that there is more fraud and less charity there than meets the eye. A decade ago, we saw the same about VietNow:

“Not that it can be doing all that much given the mere trifle of funding it expends on program services, but just what is VietNow’s program? …The VietNow Web site lists numerous activities, but according to those who listened to the Telemarketing Associates pitch, a big part of the organization’s services involves providing fruit baskets to needy veterans. It also lists a handful of $1,000 and $2,000 scholarships given to children of Vietnam-era vets.”

There is no free speech worth protecting in the fundraising tactics of Kids Wish or VietNow. 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.—Rick Cohen