A host of nonprofit organizations and commercial fundraisers filed briefs with the U.S. Supreme Court yesterday supporting a telemarketing firm accused of committing fraud by returning only 15 percent of funds collected to a Vietnam veterans charity.
About 230 nonprofits and commercial fundraising firms submitted documents in the case of Ryan v. Telemarketing Associates. Legal experts think the case could have far-reaching implications for fundraisers, even those that don't use telemarketing.
Participating organizations included Mothers Against Drunk Driving, Disabled American Veterans, the Free Speech Coalition, the Direct Marketing Association and its Nonprofit Federation. Oral arguments before the Supreme Court are set for March 3.
Ryan v. Telemarketing Associates is an appeal by the Illinois Attorney General's office to overturn an Illinois Supreme Court decision in favor of Telemarketing Associates. The attorney general's office had charged the fundraising firm with fraud after discovering it had kept 85 percent of funds solicited for the nonprofit VietNow but told consumers donations would be used to provide food and shelter for homeless veterans.
Geoffrey Peters, the attorney who coordinated the efforts of the nonprofit groups and fundraising companies, called Ryan v. Telemarketing Associates “the most important case in more than a decade” concerning charities.
A ruling in favor of the state would mean that attorneys general have the power to arbitrarily judge how much money collected by fundraisers should go to charities, Peters said. And it would give no indication of what the standard should be, leaving fundraisers to try their luck every time they solicit funds, he said.
The ruling could go beyond telemarketing and affect all fundraising mediums, including direct mail and even charity events, he said.
“It means that every time a fundraiser engages in fundraising, that's a potential danger — that you may be engaged in fraud without even knowing it,” said Peters, general counsel for American Charities for Reasonable Fundraising Regulations.
Representatives of the Illinois Attorney General's office were unavailable yesterday. Jim Ryan, the Illinois attorney general who filed the charges against Telemarketing Associates, was succeeded this month by Lisa Madigan.
Errol Copilevitz, a fundraising law specialist whose Kansas City law firm Copilevitz & Canter is representing Telemarketing Associates, applauded the nonprofits and fundraisers for their support, which he said could affect the Supreme Court's thinking.
Copilevitz recalled that while he argued another landmark case, Riley v. National Federation of the Blind of North Carolina, in 1988, Justice Antonin Scalia noted that 60 charities had participated in the filing of briefs supporting the federation. The North Carolina attorney general had to defend his contention that the law in question — which required fundraisers to disclose how much of the donations they collected went to charities — was pro-charity.
The Supreme Court struck that law down. Now the Illinois Attorney General's office aims to accomplish the same end by forcing fundraisers into additional disclosures for fear of facing fraud charges, Copilevitz said.
“It's doing indirectly what the court already said you can't do directly,” Copilevitz said.
