In 2018, the Federal Trade Commission announced “Operations Donate with Honor,” as law enforcers united to challenge deceptive fundraising.

At the time, 54 Attorneys General from all 50 states, the District of Columbia, American Samoa, Guam, and Puerto Rico, and 16 additional state agencies that oversee charities joined forces to announce a coordinated effort to target fraudulent and deceptive fundraising for military and veterans causes. As part of the initiative, the FTC published tips for businesses and new resources to help ensure corporate and individual contributions truly benefit servicemembers and vets.

One striking feature of the more than 100 actions announced as part of Operation Donate with Honor is the breadth was the alleged illegality.

Some operators allegedly claimed to be collecting for homeless or disabled vets and then simply kept the cash.

Others allegedly spent the lion’s share on their own salaries and to hire for-profit fundraisers. In other examples, “charities” claimed to raise funds to send care packages or phone cards to deployed troops only to spend pennies for that purpose. The defendants allegedly duped donors in a variety of ways, including misleading door-to-door campaigns and solicitations outside stores, bogus raffles, deceptive direct mail, illegal telemarketing, and false statements on websites.

The FTC announced two cases as part of Operation Donate with Honor.

The first against Help the Vets, Inc. where the company settled charges brought by the FTC, Florida, California, Maryland, Minnesota, Ohio and Oregon alleging that the defendants collected more than $20 million by falsely claiming that donations would help veterans in need. The second against Veterans of America where the FTC charged an individual with making illegal robocalls to solicit donations for purported groups with names that sound like legitimate veterans’ charities – such as Veterans of America, Vehicles for Veterans, Saving Our Soldiers, Donate Your Car, Act of Valor, and Medal of Honor.

Since then, the FTC has showed no signs of slowing down its investigation and enforcement efforts against sham charities or fundraisers.

An alleged sprawling fundraising operation that purportedly scammed consumers out of millions of dollars were recently banned from charitable fundraising along with its owner and others involved in its operation as a result of a lawsuit brought by the Federal Trade Commission and Attorneys General of New York, Virginia, Minnesota, and New Jersey. The operation was allegedly made up of multiple companies all under the control of an individual, along with his associates. The complaint filed by the FTC and the states alleged that the defendants served as the primary fundraisers for a number of sham charities that were the subject of numerous law enforcement actions.

The complaint also alleged that the sham charities claimed to use consumers’ donations to help homeless veterans, retired and disabled law enforcement officers, breast cancer survivors, and others in need. In fact, according to regulators, these organizations spent almost none of the donations on the promised activities.

“This action puts fundraisers on notice: the FTC will not only shut down sham charities, it will aggressively pursue their fundraisers who participate in the deception,” said then acting FTC lawyer Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.

The complaint alleged that as much as 90 percent of the money raised by the defendants for these sham charities went to the defendants themselves as payment for their fundraising services. What little money the charities did receive was purportedly rarely spent on any of their supposedly charitable missions, sometimes less than two percent.

According to the complaint, the defendants orchestrated the sham charities’ fundraising operations by soliciting donations, writing fundraising materials, and providing other key support to the sham charities. Defendants allegedly placed calls misrepresenting how donations would be used, and in many instances, the calls violated consumers’ do-not-call requests.

In another recent alleged deceptive charitable telefund regulatory action, the Federal Trade Commission, along with 46 agencies from 38 states and D.C., took action to stop a purported operation that bombarded 67 million consumers with 1.3 billion deceptive charitable fundraising calls (mostly alleged to be illegal robocalls). Here, the defendants settled charges that they duped generous Americans into donating to charities that failed to provide the services they promised.

According to the complaint, the defendants knew that the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support—in some cases as little as one-tenth of one percent. The defendants allegedly kept as much as 90 cents of every dollar they solicited from generous donors on behalf of the charities.

The complaint alleged that the defendants made their deceptive pitches since at least 2008 on behalf of numerous organizations that claimed to support homeless veterans, victims of house fires, breast cancer patients, children with autism, and other causes that well-meaning Americans were enticed to support through the defendants’ high-pressure tactics.

In many instances, the complaint alleges, knowingly violations of the Telemarketing Sales Rule by using soundboard technology in telemarketing calls. With that technology, an operator plays pre-recorded messages to consumers instead of speaking with them naturally. Use of such pre-recorded messages in calls to first time donors violates the TSR. Use of the technology in calls to prior donors also violates the TSR unless call recipients are affirmatively told about their ability to opt out of all future calls and provided a mechanism to do so; the defendants did not make that disclosure.

The FTC and states continue to investigate and prosecute sham charities and fundraisers that participate in the deception. Consult with an experienced FTC compliance and defense attorney if you or your company have received a CID, are the subject of an enforcement action or are interested in the implementation of proactive, liability limiting measures to designed to fend off unwanted regulatory scrutiny.