Wednesday, May 20, 2015

Charity Cases

Earlier this week, the Federal Trade Commission announced a massive lawsuit against four cancer "charities" which allegedly misused nearly $200 million in consumer donations. The complaint was filed in federal court on Monday, with the FTC as well as all 50 states' attorneys general offices listed as plaintiffs. As Virginia Attorney General Mark Herring noted in the FTC press release, "This is the first time the FTC, all 50 states, and the District of Columbia have filed a joint enforcement action alleging deceptive solicitations by charities and I hope it serves as a strong warning for anyone trying to exploit the kindness and generosity of others."

The FTC's case infographic starkly illustrates the discrepancy between the defendants' charitable aid and organizational overhead expenses, with the vast majority of donations going to employee compensation and other non-charitable uses, such as cars, tickets to sporting events, trips, and even dating site memberships. The complaint alleges that less than 3% of contributions were spent on direct aid to cancer patients.

Half of the implicated defendants (the Breast Cancer Society and Children’s Cancer Fund of America) have already agreed to settle. Proposed settlement orders (linked from the FTC press release) would dissolve the organizations and ban their executive directors from future charitable management and fundraising, as well as levy multi-million dollar judgments. The remaining defendants (Cancer Fund of America and Cancer Support Services) have opted to continue the litigation.

How can consumers be sure that their charitable donations are funding legitimate aid? The FTC maintains a site to warn about the common Charity Scams, including a helpful Charity Checklist to investigate particular organizations before donating. Duke University community members have access to GuideStar, a leading source of reliable nonprofit information. Charity Navigator is another option to review ratings of charitable organizations, including percentages of revenue spent on actual programs and services versus overhead.

To learn more about the legal issues surrounding nonprofit organizations, search the Duke Libraries Catalog for "Nonprofit organizations – Law and legislation – United States" or Ask a Librarian.