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Federal and state agencies close down huge charity fraud operation

Money-Two Hands Holding $100 Charities 652560_640Two companies that operated a massive phone operation that placed 1.3 billion deceptive fundraising charity calls to 67 million consumers have agreed to settle charges by the Federal Trade Commission and 46 agencies from 38 states and D.C.

The defendants collected more than $110 million using mostly illegal robocall solicitations. 

“Deceptive fundraising can be big business for scammers, especially when they use illegal robocalls," said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection.

These settlements are the result of a 2019 multistate investigation that revealed that ACS and Directele deceptively solicited donations on behalf of nonprofit organizations, violating federal and state law laws.

The investigation found that ACS and Directele knowingly deceived the public by lying about how donations to their nonprofit clients would be used, keeping for themselves as much as 90 cents of every dollar donated.

They led donors to believe that all of their contributions would go to supporting certain programs – such as housing homeless veterans or helping children with cancer – when often only pennies on the dollar were spent on those programs.

ACS and Directele also falsely assured donors that their donations would benefit “local areas” or be used “nationwide,” when the programs – if they existed at all – were available in only limited geographic areas, not local to donors.

The investigation also revealed that ACS and Directele generated the vast majority of their fundraising through abusive and repetitive robocalls, violating the federal Telemarketing Sales Rule or TSR and state laws.

The majority of those calls were robocalls employing "soundboard" technology, which plays prerecorded messages to potential donors and responds to questions and comments with prerecorded audio clips.

The TSR prohibits the delivery of prerecorded messages soliciting donations to a charity from individuals who haven’t previously donated to it, and also prohibits the delivery of the messages to previous donors, unless the call promptly provides the donor with a way to opt out of future messages.

Both ACS and Directele repeatedly violated these provisions of the TSR.

Under the terms of the settlement, Directele and its corporate affiliate, The Dale Corporation, will stop operations and dissolve. ACS and its corporate affiliates ceased operations in 2019.

In addition, the court prohibited the defendants from:

  • Fundraising or providing fundraising services to any nonprofit organization.
  • Initiating or assisting others in initiating robocalls.
  • Engaging in abusive telemarketing practices.
  • Making misrepresentations regarding goods, services, or donations.
  • Violating state laws.
  • Violating the TSR.

Also, a judgment of more than $110 million will be entered against each defendant, but partially or completely suspended due to an inability to pay.

The funds being surrendered by the defendants will be distributed to one or more legitimate charities that support causes similar to those for which the defendants solicited.

For more information about giving to charities, including tips on how to spot sham charities, go to https://ftc.gov/charity. In addition, report charity fraud or robocalls to the FTC at https://reportfraud.ftc.gov. You also can file a complaint with your state Attorney General’s Office.

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