Charities Encouraged After Day in Supreme Court

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WASHINGTON -- Attorneys for professional fundraiser Telemarketing Associates said they were pleased with the reception they received yesterday before the U.S. Supreme Court, where they rebutted charges that the firm committed fraud in returning only 15 percent of donations raised for a charity.


The court heard oral arguments in Ryan v. Telemarketing Associates, in which the Illinois Attorney General's office argued that the fundraisers committed deception in a telemarketing campaign for Vietnam veterans group Vietnow.


Nonprofit groups are concerned that a victory for the state would let prosecutors arbitrarily judge how much money collected by for-profit solicitors should go to their nonprofit clients.


Court justices pressed Illinois assistant attorney general Richard Huszagh to justify his position that Telemarketing Associates should have been more forthcoming with consumers about how much money the agency kept. The court, in particular Justice Antonin Scalia, appeared concerned that the Illinois case would leave professional fundraisers without an indication of what disclosures they should make or what the standard overhead cost for a campaign should be.


Errol Copilevitz, the Kansas City-based attorney representing Telemarketing Associates, warned against reading too much into the court's line of questioning.


"I don't know that it's an outright indication," Copilevitz said. "It's certainly better than the other way around."


At one point in the hearing, it appeared that Scalia made Copilevitz's point for him.


"Certainly you don't have to tell someone everything that, if he knew it, he wouldn't donate," Scalia said. "Certainly that doesn't constitute fraud."


Copilevitz replied: "I agree."


Huszagh made the case that charity fundraisers can commit fraud not only by outright deception, but also by failing to be completely upfront with consumers. Telemarketing Associates was guilty "not of explicit lies, but misrepresentations in the form of half-truths," Huszagh said.


Illinois sued Telemarketing Associates in 1991. Though state courts threw out the case on First Amendment grounds, Illinois appealed, and in November 2002 the Supreme Court agreed to hear the case.


Copilevitz argued that Illinois was trying to circumvent previous Supreme Court cases in which justices overturned state laws requiring professional nonprofit solicitors to disclose how much of the donations they collect actually goes to charity. Copilevitz himself successfully argued the 1988 precedent-setting case Riley v. National Federation of the Blind of North Carolina.


"The First Amendment guards the right of unpopular organizations to zealously pursue their causes," Copilevitz said. "The petitioner (Illinois) comes to this court having presented one case but having pursued another."


Huszagh said Illinois was prosecuting not on the grounds that the percentage of funds returned to the charity was too low, but that Telemarketing Associates led consumers to believe that the majority of the donations went to the veterans group.


Deputy solicitor general Paul Clement of the U.S. Department of Justice, who argued in favor of Illinois, warned the court that a ruling in favor of Telemarketing Associates would rob prosecutors of the power to pursue charity-deception cases. Telemarketing Associates exaggerated the harm charities would experience if the agency lost the case, Clement said.


"The idea that the sky is falling is really a mistake in this case," Clement said. "If this court is to suggest that in this case there was not a fraud action, it really will be open season for charitable-solicitation fraud."


About 230 nonprofits and commercial fundraising firms submitted documents to the Supreme Court in support of Telemarketing Associates.


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