Americans who make charitable donations to nonprofits like the American Diabetes Association and American Cancer Society are led to believe that the vast majority of their money will go directly to research.
But in some cases, the vast majority of their donations actually goes directly into the hands of telemarketers, even when donors are explicitly told otherwise, according to a major report released by Bloomberg Markets Magazine today.
In one case investigated by the magazine's David Evans, telemarketers from InfoCision Management Corp., a company that does marketing for nonprofits, corporations and political groups, told potential donors that 70 percent of their donations would go directly to the American Diabetes Association. In reality, just 22 percent of funds raised in that campaign went to the charity, according to a North Carolina regulators.
In another case, the same telemarketing firm raised $5.3 million for the American Cancer Society during FY 2010. But none of it went to fight cancer, according to Evans:
Hundreds of thousands of volunteers took part, but none of that money—not a single penny—went to fund cancer research or help patients, according to the society's filing with the U.S. Internal Revenue Service and the state of Maine. Every bit of it went to InfoCision, filings show. The society actually lost money on the program that year, its filings show. InfoCision got to keep 100 percent of the funds it raised, plus $113,006 in fees from the society, government filings show.
Some of the experts Evans spoke to said InfoCision's actions were deceitful and could potentially qualify as criminal. But the company, which brought it $424.5 million for its nonprofit clients between 2007 and 2010, has barely faced any repercussions, aside from a $75,000 settlement in a civil case brought by the Ohio Attorney General's Office.
So how do telemarketers dupe potential donors? Evans outlines a few deceptive tactics:
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When a telemarketer calls, the name of the charity appears on the caller ID, not that of the telemarketing firm.
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Solicitors sometimes identify themselves as "volunteers" instead of paid employees.
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Charity-approved scripts may lie about how much money will actually go to the charities.
Big charities bring in far more money through other initiatives—for direct campaigns like mailings, phone calls, websites and foundation grants, 70 to 80 percent of donations go directly to the cause, writes Evans.
But they don't seem to mind keeping up contracts with for-profit telemarketers like InfoCision. Mike Townsend, a spokesman for the American Lunch Association, told Bloomberg Markets Magazine, "We have break-even contracts with these telemarketers so we don't 'lose' money and sometimes we even make a little."
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