Peter and all,

    Nothing much will happen about this until the Supreme Court of the
United States decides the case of Ryan v. Telemarketing Associates of
which it will hear oral arguements this spring.  The case is being
brought by the Illinois Attorney General because 91 percent of the money
received by VietNow went to fundraising when it was soliciting donations
at the same time that it said most of the money was used by the charity
for its activities.  Therefore, the Supreme court will decide if
sleezebag outfits like Heritage for the Blind can legally defraud the
public in the name of free speech.  An article about the case that
appeared last week in the New York Times is below.

Kelly


    Charity Disclosure Rift Exposed

    by Stephanie Stron

The New York Times

    Feb. 3, 2003

    A pending Supreme Court case has exposed a longstanding rift between
organizations representing donors and those representing nonprofit
agencies over how much charities must disclose to contributors about
their gifts.

    The case, Ryan v. Telemarketing Associates, was brought to the court
by the Illinois attorney general's office, which wants to pursue a
consumer fraud action against the telemarketer. It raises the question
of whether the First Amendment prohibits a state from bringing charges
of fraud against a professional fund-raiser that has told potential
donors their contributions will be used for charitable purposes but, in
fact, keeps the vast majority of their gifts. The question is
particularly resonant now, when nonprofit organizations are working hard
to dispel donors' concerns about financial accountability.

    The Independent Sector, a trade organization representing some 700
nonprofit agencies, has filed a brief on behalf of Telemarketing
Associates, a fund-raising company based in Illinois whose solicitations
for VietNow, an organization supporting Vietnam veterans, gave rise to
the case.

    A separate group of 176 charities, as well as some free speech
advocates and, not surprisingly, the Direct Marketing Association and
the Association of Fundraising Professionals have also filed briefs on
behalf of the telemarketing company.

    "We are absolutely not taking up the cause of any particular
organization," said Peter Shiras, interim president and chief executive
of the Independent Sector, who says his organization got involved
because it believes that consumers are adequately protected by existing
laws and that constricting solicitors' ability to raise money violates
their free speech rights.

    "We believe very, very firmly," Mr. Shiras said, "that in addition
to governments' having the laws on the books to prosecute illegal and
fraudulent activities, both the I.R.S. and the state attorneys general
offices need additional resources so they can provide guardianship and
oversee the sector effectively."

    The Better Business Bureau's Wise Giving Alliance, a charity
watchdog organization, has filed a brief in support of the Illinois
attorney general.

    The competing briefs have put H. Art Taylor, president and chief
executive of the Wise Giving Alliance, in an awkward position because he
sits on the Independent Sector's board.

    "I can't talk to you about the Independent Sector's position," Mr.
Taylor said. "I recused myself from the vote in that case."

    Both he and Mr. Shiras, who similarly awkwardly sits on the Wise
Giving Alliance's board, insisted that on most matters, they represented
convergent and agreeable interests.

    "Art and I have had several conversations about this," Mr. Shiras
said, "and I think there are important and significant areas of
agreement between us that are much larger than our areas of
disagreement."

    The two organizations see the case from two different perspectives.
One represents organizations that, in many cases, rely heavily on
professional fund-raisers like Telemarketing Associates and are loath to
see any development that might reduce donations coming through those
solicitors.

    The other represents the people who make those donations.

    "We are looking at this from a donor's perspective," Mr. Taylor
said, "and it's our view that no donor would make a contribution to this
particular organization if they had information that told them what was
really going on here."

    What donors to VietNow did not know was that as many as 91 cents of
every dollar they gave went to Telemarketing Associates, which was under
contract with the veterans support group. Donors were told in written
materials that a "substantial portion of the proceeds will be spent on
the cost of the public awareness campaign and our program service."

    When one donor asked what percentage of her gift would be used to
cover fund-raising costs, she was told that more than 90 percent would
go to veterans, according to the Illinois attorney general's office.

    VietNow's 2000 tax return shows that it spent $3,286,348, or 91
percent of its income, on fund-raising. Only 3 percent, $100,676 was
spent on programs. The rest, some 5 percent, was spent on administrative
costs.

    The Wise Giving Alliance said that VietNow had failed to meet 7 of
the 23 standards set by the alliance, and that it did not give the
alliance enough information to determine whether it met 8 others.

    Each year, a number of charities throughout the country spend a
similarly outsized part of their revenues on fund-raising. Each year,
the New York State attorney general's office publishes a report,
"Pennies for Charity," that lists the worst offenders in the state, but
most other states lack the resources to follow suit.

    The exempt organizations division of the Internal Revenue Service is
equally understaffed and poorly financed. In a recent presentation to
assistant attorneys general responsible for charity matters, the service

said 45 percent of nonprofit tax returns it received were not fully
filled out, further complicating accurate research.

    And the courts have prevented regulators from going after charities
that spend a high percentage of what they take in on fund-raising. A
trio of decisions by the United States Supreme Court in the 1980's
established that charitable solicitation is a form of free speech
protected by the First Amendment and held that state regulators were
constitutionally barred from designating a particular percentage of
receipts that had to reach a charity in order for the fund-raising to be
considered legitimate.

    "It is a free speech issue -- but what nonprofits seem to ignore is
that it is a free speech issue not only for them but for the donor,"
said Rick Cohen, executive director of the National Committee for
Responsive Philanthropy, a watchdog organization. "Shouldn't a donor be
told what his or her donation is actually going to? The withholding of
information, which the courts have thus far upheld, prevents the donor
from exercising accurate judgment."

    To be sure, a vast number of organizations, from the American Cancer
Society to the March of Dimes, use professional solicitors to raise
money, and their expenses are well within the Wise Giving Alliance's
recommendation that no more than 35 percent of solicited contributions


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