With all due credit to National Public Radio (NPR) broadcast 9/12/12:
When Telemarketers Pocket Money Meant For Charity
Americans donate billions of dollars to charity each year, and a portion of that money is raised by telemarketing solicitations.
Some of those charitable contributions are solicited by InfoCision Management Corp., an Ohio-based telemarketing company that, on its website, claims to raise more money for nonprofit organizations over the phone than any other company n the world.
InfoCision holds, or has held, contracts with some of the biggest American charities, including the American Diabetes Association, the American Cancer Society and the March of Dimes Foundation, among many others — including some public broadcasting stations.
But an investigative report in the October issue of Bloomberg Markets magazine found that, in many cases, most of the money raised by InfoCision never makes it to the nonprofits the company says it’s supporting.
The report, by Bloomberg senior writer David Evans, focuses on one technique used by InfoCision solicitors: campaigns in which telemarketers ask people to distribute pre-printed letters among their neighbors on behalf of a charity. Those letter recipients, in turn, are asked to send monetary donations to the charity.
Evans explains to All Things Considered host Audie Cornish how InfoCision has raised millions of dollars for charity — but that, in some cases, InfoCision kept much, and sometimes all, of that money, while also misrepresenting how much of a donor’s contribution would reach those in need.
On the telemarketing campaign Bloomberg Markets studied
It’s important to understand that most charities use telemarketing as part of their overall fundraising strategy. Without proactively attempting to renew lapsed members or acquire new members, any charity will ultimately lose its membership through normal attrition and in time may no longer exist. Once the lapsed member has been renewed or the new member has been acquired, all their subsequent gifts will provide significant net return to the client over time.
For-profit businesses roll out new customer acquisition types of campaigns all the time, such as free giveaways of sample products. Consumers don’t question this strategy even though it drives up marketing costs. Stores use what’s called loss leaders to get people through their doors. They’ll take a loss on say a gallon of milk in hopes the consumer will purchase other marked-up items in the same trip and become a regular customer because of their shopping experience.
A casual look at the solicitation reports with the various state attorneys-general gives an incomplete view of acquisition campaigns. Anyone who is looking to determine the overall allocation of resources which a nonprofit organization commits to its core mission should review the nonprofit’s Form 990 filed each year with the IRS, which provides a comprehensive summary of an organization’s good stewardship of the funds entrusted to them.
“[InfoCision telemarketers] call and they say they’re not asking for money, but they’re asking for you to volunteer and to send out a solicitation letter to 15 of your friends or neighbors. And people perceive that since they’re saving the charity the stamp, that this is actually an efficient way to raise money.”
On how much charities typically receive from InfoCision fundraising efforts
“We found for a four-year period, from 2007 to 2010, InfoCision raised about $425 million for nonprofits, and most of that … 52 percent was kept by InfoCision, with the minority going to the charities. And in the case of some charities, it was actually much, much less than that. …
“[In one campaign] we found the American Cancer Society never got more than half — and typically they got less than half — of the money raised. In some cases they got zero. In 2010, it was even worse than that. In 2010 the contract with InfoCision estimated that the cancer society would get 44 percent of the money. The script that was being used, that was approved by the cancer society, told folks that about 70 percent of the money overall was going to the cancer society.
“In fact, when the reports came in, we found the filings that showed how much the cancer society actually got for 2010. And it was zero. And in fact, the cancer society had to pay $113,000 to InfoCision in addition to turning over the $5.4 million that had been raised.”
On why charities would agree to contracts in which they would lose money
“The [American] Cancer Society referred to it as a ‘loss leader.’ They said that they hope that the people who participate in these telemarketing programs eventually become donors; that over time they become profitable donors to the charities. …
“The American Diabetes Association told us that they’re hoping to get names that they can get more money from in the future. But … Richard Erb, a vice president of the American Diabetes Association, told me, ‘If we came into it and said, ‘Geez, I’m not going to make a dime on this,’ do you think we’d have anyone who’d give us money?’
An InfoCision Phone Solicitation
“In other words, they can’t tell people the truth in order to get money through telemarketing, so they have to conceal the vast amount of money that’s actually going to the telemarketer. So far as they’re concerned, as long as they’re getting a little money, it’s better than getting no money.”
On how InfoCision telemarketers misrepresent themselves on the phone
“The most alarming thing that we found is that the solicitors are taught, using scripts, to lie. To tell people that most of the money is going to the charity, when in fact, most of the money is going to InfoCision.”
On the legality of the telemarketing practices
“It’s definitely illegal to lie. InfoCision paid a $75,000 fine in February to the Ohio Attorney General’s Office, after they were accused of lying about the amount of money that was going to the charities. And they were also accused of having their employees pose as volunteers in order to coax money out of donors.”
On how donors can avoid pitfalls with their charitable donations
“An important thing people can do is research. And not to be responding to a telemarketer’s call, but to do your due diligence, and find out if this is a charity that you really want to give to.”
Listen to the broadcast: