FTC, states challenge ‘charitable’ telemarketers responsible for 1.3 billion robocalls

You know those friendly calls from people contacting you on behalf of charities whose missions are close to your heart? According to the FTC and 46 agencies in 38 states and the District of Columbia, many of the 1.3 billion calls made by telemarketer Associated Community Services (ACS) and related defendants to 67 million different phone numbers were not friendly, did not have live operators, and have not resulted in consumer contributions supporting sick children, breast cancer patients, veterans services, and other worthy causes as claimed. The just-announced settlement with ACS and 12 affiliated companies and individuals signals a continuing crackdown on illegal activity by telefunders illegally.

According to the complaint, the defendants conducted an invasive robotic attack and kept the lion’s share of more than $110 million in consumer contributions — 90 cents of every dollar donated. And what about the supposed “charities” that ACS worked with? They used names like the Women’s Cancer Foundation, Autistic Children of America, and the Veterans Foundation of America, and ACS told consumers that the donations would benefit people in need “nationwide” or the consumer’s “local area.” But the FTC says ACS knew that the groups often spent just pennies (if that much) on the dollar of the already-gone percentage of ACS donations that went to them.

An interesting point of view. This is the first FTC case to specifically challenge the defendants’ use of soundboard technology to advance their scheme. For more than a decade, with a few narrow exceptions, the Telemarketing Sales Rule has prohibited robocalls. But telemarketers can disguise the use of robocalls with soundboard technology; a system where the spoken-sounding “caller” is actually a tape recorder run by an operator who plays pre-recorded shows for multiple consumers at the same time. They can even queue up a series of pre-recorded segments designed to answer anticipated consumer questions. Consumers often get the wrong impression that they are talking to a friendly caller who is helping a charity, rather than a for-profit telemarketer who is pushing buttons and making multiple calls behind the scenes to extract the maximum amount of money.

Starting its business with direct telemarketing calls, ACS introduced voice panel technology to its operations in 2011. In 2017, the company transitioned to an “every soundboard, always” business model for its charitable appeals. But, the complaint alleges, the defendants’ use of soundboard technology for first-time donors violated TSR’s prohibition against “initiating any outgoing telephone call that transmits a prerecorded message.” In addition, the complaint accuses the defendants of violating the TSR provision, which prohibits the delivery of pre-recorded messages to former donors unless the call provides the consumer with an immediate means to opt out of future messages.

The complaint also alleges that the defendants violated the TSR by subjecting consumers to a relentless barrage of abusive calls. For example, ACS called more than 2.29 million individual phone numbers three or more times in one day. A group of 1.3 million phone numbers received at least 10 calls in a week. And feel sorry for the people who received three or more calls in just one hour.

According to the complaint, the defendants also used deceptive direct mail to tug at the heartstrings and wallets of potential donors. Here is an example of a pledge letter from the American Children’s Cancer Foundation:

If it is at all possible, I ask you to fulfill your promise quickly. No, today please, because if we don’t intervene, the family’s lights will be turned off, the family has to pay the rent by the end of the week or they will be evicted, the little girl with cancer needs; new shoes, socks, t-shirts and pajamas because what he’s wearing now is old, worn out and feels awful. You know, John, it would be quite disturbing to think that you could go without heat, light, or even a roof over your head. But to go through such hardships while caring for a son or daughter with cancer, wouldn’t it be almost unbearable?

In addition to ACS, the complaint names its related companies Central Processing Services and Community Services Appeals; their owners, Dick Cole, Bill Burland, Barbara Cole and Amy Burland; and ACS Senior Managers Nicole Gilstorff, Tony Lea, John Lucidi and Scott Stepek. Also charged are two fundraising companies operated by Gilstorf and Lia, Directele and The Dale Corporation, which were taken over when ACS went out of business. The lawsuit alleges violations of the Telemarketing Sales Rules, the FTC Act and several state statutes.

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You’ll want to read the proposed settlement for details, but some of the defendants are banned for life from conducting or consulting on any fundraising activities and conducting any type of telemarketing to sell goods or services. Additionally, they may not use existing donor lists and are prohibited from making any other misrepresentations about products or services. The other parties are prohibited from using robo-calls and any fundraising work or consulting on behalf of any charitable group or non-profit organization claiming to be working for reasons similar to those stated in the complaint. Two corporate defendants, Directele and The Dale Corporation, must cease operations and be dissolved.

Based on their financial situation, the total judgment of $110,063,843 will be partially suspended after certain defendants turn over cash and valuables. The money will go to the Florida State Reserve Fund. With the court’s approval, the proceeds will go to legitimate charities that support causes such as those of the defendants.

Business leaders often play leadership roles in the nonprofit sector of their community. Before hiring professional fundraisers, vet them carefully to ensure their adherence to strict legal compliance. In addition, the FTC has advice for businesses and consumers – including video – oHow to evaluate charities, spot potential scams, and direct your donations where they can do the most good.

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