California Company Settles FTC Charges of Deceptive Fundraising

To settle Federal Trade Commission charges, West Coast Advertising & Marketing and its principals have agreed to pay $90,000 and verify the accuracy of claims they make on behalf of nonprofits for whom they solicit funds. As part of that obligation, the defendants must determine that the nonprofits they represent spend more than an incidental amount of the contributions they receive on the programs or services described in defendants’ solicitations and materials.

The FTC filed its lawsuit against West Coast Advertising & Marketing, Mark Christiansen, and Mike Thomas in May 2003, as part of “Operation Phoney Philanthropy,” a law enforcement and public education campaign by the FTC and state charity regulators to stop deceptive fundraising. The complaint alleged that the defendants, based in San Diego, California, deceptively solicited donations for two nonprofit organizations, Junior Police Academy (JPA) and American Veteran’s Network (AVN). The complaint alleged that the defendants’ telemarketers falsely claimed that JPA was officially connected with a local law enforcement agency that sent police officers into the donor’s state and local schools to conduct programs that benefit children, and that donations to AVN supported particular programs that benefitted needy veterans.

To settle the FTC charges, the order prohibits the defendants from misrepresenting:

• that any nonprofit for which they are fundraising has any connection to, or any affiliation with, a law enforcement agency or other public agency;
  
  
• that the donors’ contributions will directly benefit individuals or groups in the donors’ state or local area; or
  
  
• that the donors’ contributions, or any portion of the contributions, will be used for general or specific charitable purposes.

The order further requires the defendants to disclose the company’s name and status as a commercial fundraiser prior to any solicitation over the phone and on written materials sent to donors. If asked by any donor, the defendants must disclose the percentage or regularly distributed amount of donations that is paid or will be paid to any nonprofit on whose behalf the defendants are seeking contributions. The defendants must also clearly and conspicuously disclose on each receipt or invoice sent to consumers that the solicitation was made by a paid fundraiser and that the donor’s contribution is not tax deductible, if that is the case. The defendants are required under the order to document that more than an incidental amount of the contributions received are spent on the programs or services described in the solicitation scripts.

The order also requires the defendants to pay $90,000 in redress and contains a $800,863 suspended judgment, which will become due immediately if the defendants default on the redress payment.

Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants’ compliance.

The Commission vote authorizing staff to file the stipulated permanent injunction and final order was 5-0. The stipulated permanent injunction and final order was approved by the U.S. District Court for the Southern District of California on January 3, 2005.

NOTE: This stipulated permanent injunction and final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation.

Copies of the stipulated permanent injunction and final order are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. X030049)
(Civil Action No. 03-CV-00980-LAB-JMA)