FTC Announces Operation False Charity Law Enforcement Sweep

In a nationwide, federal-state crackdown on fraudulent telemarketers claiming to help police, firefighters, and veterans, the Federal Trade Commission, together with 61 Attorneys General, Secretaries of State, and other law enforcers of 49 states and the District of Columbia, today announced “Operation False Charity.” Federal and state enforcers announced 76 law enforcement actions against 32 fundraising companies, 22 non-profits or purported non-profits on whose behalf funds were solicited, and 31 individuals. These include two FTC actions against alleged sham non-profits and the telemarketers who made deceptive claims about these so-called charities. The FTC and state agencies also released new education materials, in both English and Spanish, to help consumers recognize and avoid charitable solicitation fraud.

“In these difficult economic times, Americans want to make every contribution count,” said FTC Chairman Jon Leibowitz. “The good news is they’re still being generous and donating to charitable organizations, including those that support our police officers, firefighters, military families, and veterans. The bad news is that some unscrupulous operators have seized on this goodwill to make a quick buck. The actions we’re announcing today demonstrate that federal and state partners will find charity scammers and we will stop them.”

“All of us share a deep trust and respect for our law enforcement officers, firefighters, and military service members,” said Attorney General Chris Koster of Missouri. “The attorneys general across the country will not stand idly by while greedy telemarketers take advantage of that trust and respect.”

“I encourage all donors to maximize their charitable contributions by getting basic financial information about an organization before giving,” said Pennsylvania Secretary of State Pedro A. Cortés. “Trustworthy resources are available through your department of state or attorney general’s office. By doing research and asking questions of a charity or its professional fundraisers, consumers can help ensure their donations have the impact they expect.”

FTC Enforcement Actions

The two FTC cases announced today involve federal court complaints and proposed settlement orders against defendants who allegedly tricked consumers into giving by claiming that donations would support police or firefighters disabled in the line of duty, often in the donors’ communities, or that the donations would assist military families in need, and by misleading consumers about how much of the money would go to those causes. According to the FTC, the defendants used legitimate-sounding names and described sympathetic causes to give their sham organizations a veneer of credibility. Their real goal, however, was to dupe consumers into contributing money that the defendants used overwhelmingly just to support themselves and their fundraisers.

In the first case, the FTC alleged that three sham non-profit organizations, American Veterans Relief Foundation, Inc. (AVRF), Coalition of Police and Sheriffs, Inc. (COPS), and Disabled Firefighters Fund (DFF), all based at the same address in Santa Ana, California, were created almost entirely to provide profits for the individual defendants and the for-profit fundraisers they hired. One defendant, Jeffrey Dean Duncan, ran COPS and DFF, while another defendant, William Rose, ran AVRF. Another defendant, Kathy Clinkenbeard, managed the telemarketers with which the entities contracted. The FTC contends that solicitors calling on behalf of AVRF falsely claimed that the money they were raising would support the families of soldiers fighting overseas through a program it called “Operation Home Front.” In fact, AVRF spent virtually no money assisting military families. AVRF’s bogus “Operation Home Front” is not connected to the genuine non-profit Operation Homefront, Inc., a national organization with 30 chapters across the country that provides real support to the families of troops and gets high ratings from watchdog groups.

According to the FTC’s complaint, the defendants misrepresented that donations would go to a legitimate charity, that the organizations have programs that do not actually exist, and that those programs benefit the donors’ local communities. The complaint also alleges that COPS misrepresents its affiliation with police officers and sheriffs, and charges the defendants with assisting others to commit deceptive acts and practices.

The proposed order settles the FTC’s complaint by barring the defendants from making false claims, or assisting anyone else in making false claims, in connection with charitable solicitations, or in connection with telemarketing. It also prohibits the defendants from violating the Telemarketing Sales Rule, requires that they make certain disclosures when fundraising, and it requires that they monitor any fundraisers that solicit on their behalf. Finally, the order imposes on defendants COPS, DFF, Duncan, and Clinkenbeard a judgment of $13.1 million and against defendants AVRF, Rose, and Clinkenbeard a judgment of $6 million. These judgments are suspended based on defendants’ documented inability to pay.

In the second case, the FTC alleged that defendant David Scott Marleau ran several for-profit fundraisers that solicited money on behalf of sham police, fire, and veterans non-profit charitable organizations. The FTC charged that Marleau and his companies, Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc., misrepresented the programs for which funds were solicited, misrepresented that donations would benefit the donor’s local community, mailed notices to consumers stating they had made a pledge when they had not even been called, and misrepresented their affiliation with sheriffs and police. Six additional counts in the complaint charged the defendants with multiple violations of the FTC’s Telemarketing Sales Rule, including ignoring company-specific do-not-call requests. The Commission also alleged that their operations often targeted seniors, sometimes debiting their accounts for donations without permission.

The proposed order settling the charges requires the defendants to stop misrepresenting facts, make certain disclosures when soliciting money from consumers, and stop violating the Telemarketing Sales Rule. The order also requires that the defendants substantiate any claims they make about a nonprofit or its programs prior to soliciting consumers, and requires that they train and monitor their telemarketers. Finally, the order imposes a monetary judgment of nearly $1.7 million against the corporate entities Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc. That judgment is suspended based on these defendants’ documented inability to pay.

The FTC would like to thank the Attorneys General of California, Idaho, Oregon, and Washington and the Secretary of State of Washington for their invaluable assistance with these cases.

State Law Enforcement and Public Education

Law enforcement and public education efforts by the states are integral components of “Operation False Charity.” The FTC would like to acknowledge the following state officials for their participation in Operation False Charity, either by taking enforcement action or initiating consumer education efforts: the Attorneys General of Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; and other state agencies including the Secretaries of State of Colorado, Georgia, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, West Virginia, and Washington, and the Georgia Governor’s Office of Consumer Affairs, the New York State Consumer Protection Board, the Rhode Island Department of Business Regulation, the Utah Division of Consumer Protection, the Virginia Department of Agriculture and Consumer Services, and the Eu Claire County (Wisconsin) District Attorney.

Information about these agencies’ participation is summarized on the FTC’s Web site at www.ftc.gov/os/2009/05/090520charitychart.pdf

Private-sector partners included AARP, the Better Business Bureau Wise Giving Alliance, the American Institute of Philanthropy, Guidestar, the National Association of State Charities Officials, and Charity Navigator.

Consumer Education

The FTC today issued a new consumer alert providing tips about charities that solicit donations on behalf of veterans and military families. According to the alert, which can be found on the agency’s Web site at www.ftc.gov/charityfraud/, while many legitimate charities are soliciting donations to support the nation’s military veterans, not all “charities” are legitimate – some are operators whose only purpose is to make money for themselves. Others are paid fundraisers whose fees can use up most of your donation.

The new alert, “Supporting the Troops: When Charities Solicit Donations on Behalf of Vets and Military Families,” offers the following tips to help consumers ensure that their donations go to a legitimate charity. Many of these tips apply to charitable giving to other types of organizations, as well.

• Recognize that the words “veterans” or “military families” in an organization’s name don’t necessarily mean that veterans or the families of active-duty personnel will benefit from your donation.
• Check out an organization before donating. Some phony charities use names, seals, and logos that look or sound like those of respected, legitimate organizations.
• Donate to charities with a track record and a history. Charities that spring up overnight may disappear just as quickly.
• If you have any doubt about whether you’ve made a pledge or a contribution, check your records. If you don’t remember making the donation or pledge, resist the pressure to give.
• Call the office in your state that regulates charitable organizations to see whether the charity or fundraising organization has to be registered.
• Do not send or give cash donations. For security and tax-record purposes, it’s best to pay with a check made payable to the charity.
• Ask for a receipt showing the amount of your contribution.
• Be wary of promises of guaranteed sweepstakes winnings in exchange for a contribution. You never have to give a donation to be eligible to win a sweepstakes.

Some sites where consumers can check out a charity include:

*www.nasconet.org - National Association of State Charity Officials, where you can look up and contact your state’s charities regulator for more information.

*www.guidestar.org - Guidestar

*www.bbb.org/charity - Better Business Bureau Wise Giving Alliance

*www.charitynavigator.org - CharityNavigator

*www.charitywatch.org - American Institute of Philanthropy

The Commission vote approving each complaint and proposed court order was 4-0. The complaint and proposed order against David Scott Marleau, et al. were filed in the U.S. District Court for the Western District of Washington on May 19, 2009. The complaint and proposed order against American Veterans Relief Foundation, Inc., et al. were filed in the U.S. District Court of the Central District of California on May 18, 2009.

The proposed orders announced today settle the FTC’s charges against the following defendants: 1) American Veterans Relief Foundation, Inc.; Coalition of Police and Sheriffs, Inc.; Disabled Firefighters Fund; Jeffrey Dean Duncan, individually and as an officer or director of Coalition of Police and Sheriffs, Inc., and Disabled Firefighters Fund; Kathy Clinkenbeard, individually; and William Rose, individually and as an officer or director of American Veterans Relief Foundation, Inc.; and 2) David Scott Marleau, individually and as an officer or director of Jedi Investments, LLC, Impact Fundraising, LLC, Millenium Fundraising, LLC, and PC Marl, Inc.; Jedi Investments, LLC; Impact Fundraising, LLC; Millenium Fundraising, LLC; and PC Marl, Inc.

NOTE: The Commission authorizes the filing of complaints when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaints are not a finding or ruling that the defendants actually have violated the law.

NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.

Copies of the complaints and proposed court orders 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 Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File Nos. 092-3065 and 092-3064)
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