The Federal Trade Commission has announced another enforcement action aimed at curbing deceptive charitable solicitations on behalf of local law enforcement agencies. Civic Development Group, a professional fundraising company and its principal officers, have agreed to a settlement of FTC charges that they misrepresented to consumers nationwide that contributions they were soliciting on behalf of a non-profit organization, the American Deputy Sheriff's Association (ADSA), would benefit law enforcement in their own communities. The proposed settlement with CDG, based in Hopelawn, New Jersey, would prohibit misrepresentations to consumers concerning how and where their contributions would be used and how and where similar contributions had been used in the past. In addition, the settlement would require the company to tape-record, and review at least 1,000 telephone solicitation calls each month during the life of the order accompanying the settlement agreement. The settlement also would require CDG to terminate any employee that violates the order more than once in 12 months.
According to the FTC's complaint detailing the charges, CDG, along with Community Network, Inc. (CNI), also based in Hopelawn, New Jersey, and company officers Scott Pasch, David Keezer, and Richard McDonnell (collectively, CDG), misrepresented to consumers nationwide that contributions will buy bullet-proof vests, provide death benefits for deceased officers surviving family members, or otherwise benefit local law enforcement. In fact, the FTC charged, virtually no money raised by CDG in the name of the ADSA ever went to the consumer-donor's local or state law enforcement offices.
The proposed settlement agreement would prohibit CDG from misrepresenting, in any way, how or where a solicited charitable donation would be used. The settlement also would require CDG to set up an education and monitoring program that includes:
Further, the proposed settlement would require CDG to tape record and review 1,000 telephone solicitation calls every 30 days, for as long as the order accompanying the proposed settlement is in effect, to ensure that CDG's employees are complying with its terms. The settlement would require CDG to terminate any employee found to be in violation of the settlement more than once in any 12 month period. The proposed settlement also includes a number of recordkeeping and reporting requirements designed to ensure compliance.
The settlement would provide CDG in any action brought by the FTC to enforce the order -- unless CDG knows or reasonably should know of violations of the order -- with a rebuttable presumption that CDG exercised good faith in complying with Parts I through III of the order, if CDG shows by a preponderance of the evidence that it has established and maintained the education and monitoring program required by Part IV of the order.
A summary of the proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
The Commission vote to accept the proposed agreement for public comment was 3-0, with Commissioners Mary L. Azcuenaga and Orson Swindle not participating. In a joint separate statement, FTC Chairman Robert Pitofsky and Commissioner Sheila F. Anthony supported the "limited rebuttable presumption" provision in Part V of the proposed order. "We present our views on one particular provision in the proposed Order to ensure that it is not misconstrued to suggest to some that the Commission is steering in a new direction," Pitofsky and Anthony said. The statement noted that under current law, good faith is among those factors relevant to determining an appropriate civil penalty amount where an order has been violated, and that Part IV of the order establishes significant monitoring and education requirements designed to ensure the respondents make no deceptive representations in connection with any charitable solicitations by telephone. "This [limited rebuttable] provision does not establish a defense to any subsequent enforcement actions. Similarly, it in no way precludes the Commission from taking action should it determine that respondents are not in full compliance with any final order...We consider it highly unlikely that other facts would present themselves -- in the administrative or federal court context -- that would warrant application of the same or a similar rebuttable presumption."
In a separate, concurring statement, Commissioner Mozelle W. Thompson supported the acceptance of the proposed consent agreement, but expressed reservations about a provision contained in the proposed order. "I question the propriety of accepting a consent agreement that results in shifting the burden of proof to benefit a party that the Commission is claiming engaged in unlawful conduct," Thompson said. "There are serious risks in permitting any party or adjudicative body to interfere with the Commission's well-supported prosecutorial discretion...For purposes of this case only, I accept the order's burden-shifting provision and concur with the Chairman, Commissioner Anthony, and staff that this order is acceptable based on the unique and specialized aspects of this case. Accordingly, in my view, the order presented here should not be regarded as having precedential value."
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed agreement and order, an analysis of the agreement to assist in public comment, the joint statement by Chairman Pitofsky and Commissioner Anthony, and the separate statement by Commissioner Thompson are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128, or by calling 202-326- 3627; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov (no period).
(FTC File No. 972 3025)