Fraudulent Badge-Related Fundraising Appeals Targeted inJoint Law Enforcement and Public Education Initiative
The Federal Trade Commission and 50 state Attorneys General, Secretaries of State and other state charities regulators today announced, "OPERATION FALSE ALARM," an unprecedented attack against "badge-related" fundraising fraud. The joint federal/state law enforcement and public education campaign targets the deceptive activities of certain for-profit fundraisers who misrepresent ties with police departments, fire fighters and other community organizations, and gives consumers key information about checking out the fundraisers who solicit them. Federal and state officials said 57 law-enforcement or regulatory actions have been brought as part of this initiative against companies who engage in deceptive fundraising.
Deceptive badge-related fundraising targets both consumers and small businesses. For- profit fundraisers call consumers and, in some instances, falsely represent that they are police officers or firefighters and solicit donations. The solicitors may claim that contributions will be used locally, to support particular causes popular with consumers, such as funding a drug abuse education program, or buying bullet proof vests for local police. In some cases, contributions are solicited in the name of a fallen officer. According to the FTC, consumers should beware of solicitation claims like these, which are frequently false. Claims that the caller is a police officer should especially raise red flags for consumers because in many states and locales, police are prohibited by law or department policy from soliciting donations. The FTC warns consumers not to be fooled by misrepresentations about badge-related fundraising and suggests that consumers check with local police or fire departments BEFORE donating if the solicitor promises that money will be used locally or to fund particular programs.
Small businesses also are targeted by organizations claiming a badge affiliation. For- profit companies solicit small businesses by telephone, requesting that the business purchase advertising in publications with law enforcement, public safety or other civic purpose themes. In many cases, according to the FTC, the publications for which the ads were solicited lack the implied connection to legitimate law enforcement and are rarely distributed in the community as claimed, so that the businesses fail to get the promised advertising benefit. Worse, once a business purchases an ad, it faces repeated billing for more ads -- whether authorized or not -- and aggressive collection tactics for unauthorized invoices -- including threats that the bill will be turned over to a collection agency. Thousands of small businesses all over the country have paid unauthorized invoices for unordered advertising in these publications, the agency added.
"Depriving police, fire fighting and other community organizations of funds and support intended for them by members of their community is a despicable act that preys on the public trust," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "OPERATION FALSE ALARM" unites state and federal officials to send the strongest message possible against these tactics, which cause legitimate fundraising efforts to suffer. We encourage consumers to continue to give to the causes of their choice, and suggest that consumers call the local organization to verify a fundraiser’s claim that they are collecting on their behalf."
"Badge-related fraud is a multi-billion dollar illegal enterprise that preys on people’s trust in their local police and fire departments. It can seriously damage the public safety community’s reputation for integrity and charitable giving," said Massachusetts Attorney General Scott Harshbarger, president of the National Association of Attorneys General. "The most effective counter attack is a straightforward, common sense public education campaign, combined with unrelenting prosecution of unscrupulous telemarketers."
"OPERATION FALSE ALARM" FTC LAW ENFORCEMENT:
Deceptive Fundraising Case:
The FTC filed one deceptive fundraising case:
Leon Saja, d/b/a Southwest Publishing
Leon Saja, doing business in Phoenix, Arizona, as Southwest Publishing, directly and through a nationwide network of some 25 telephone rooms fraudulently solicits donations on behalf of various non-profit law enforcement, firefighting and veteran’s organizations, including for example, the American Deputy Sheriffs’ Association, the United Fire Fighters Association and the International Union of Police Associations, the FTC alleged. The FTC's complaint names Leon Saja along with Stealth Publications, a major subcontractor of Saja’s, and its president, Donald L. Ritta. The complaint alleges that the defendants routinely make misrepresentations that they are law enforcement officers; that donations will be used to benefit law enforcement agencies or firefighters in the consumer’s community; that solicited funds will support particular causes; that donations are tax deductible; and that businesses have authorized the purchase of advertising. (Filed under seal in the U.S. District Court for the District of Arizona, in Phoenix, on March 31, 1997. Civil Action No. CIV 97-0666 PHX sm; The seal was lifted April 8. FTC staff contact: Tracy S. Thorleifson or Laureen France, Seattle Regional Office, 206-220-4481 or 206-220-4471.) The FTC’s Seattle Regional Office wishes to thank and acknowledge the Anchorage, Alaska Police Department; the Androscoggin County Sheriff’s Department (Auburn, Maine); the Arizona Telemarketing Task Force, and the Attorneys General of Arizona, Colorado, Connecticut, Iowa, Idaho, Louisiana, Pennsylvania, South Carolina, and Texas.
The FTC has asked the court for and has obtained a temporary restraining order and an asset freeze, as well as the appointment of receiver to take charge of the companies.
Deceptive Billing Cases
The FTC filed four deceptive billing cases -- three in Fort Wayne, Indiana, and one in Houston, Texas.
Southwest Marketing Concepts, Inc.
Southwest Marketing Concepts, Inc., d/b/a The Journal -- The Voice of Law Enforcement, and its principal, Stephen Inmon, solicited thousands of small businesses by phone and mail in almost every state. According to the FTC, telemarketers for The Journal have routinely represented that advertising in The Journal is a meaningful way for businesses to support important causes, such as fighting crime or preventing drug abuse. The FTC’s complaint alleges that the defendants have falsely represented that the purchase of advertising will benefit a law enforcement organization or other civic endeavor and will benefit the advertiser’s local community; that businesses have previously authorized advertising for which they are obligated to pay; and that businesses have ordered the advertisements for which they are invoiced and must pay or risk their credit ratings. (Filed under seal in the U.S. District Court for the Southern District of Texas, Houston Division on April 1. The seal was lifted on April 3. Civil Action No. H-97-1070; FTC staff contact: Tom Carter or Judith A. Shepherd, Dallas Regional Office, 214-979-9372 or 214-979-9383.) The FTC’s Dallas Regional Office wishes to thank and acknowledge the invaluable assistance of the Texas Attorney General’s Office, the Oregon Attorney General’s Office, the Texas Department of Public Safety, the U.S. Postal Inspection Service in Memphis and Fort Worth, and the Better Business Bureau of Metropolitan Houston.
Dean Thomas Corporation
The Century Corporation
Image Sales & Consultants, Inc.
Although unrelated, these Fort Wayne, Indiana companies, according to the FTC, run virtually identical operations. The defendants have convinced small businesses in more than 18 states to pay for "advertising" in their publications by falsely claiming that their booklets enjoy a widespread distribution in the businesses’ local communities, the complaints charge. Businesses who refuse the advertising appeal are subsequently barraged with false invoices and other collection efforts for the unordered advertising. These efforts run the gamut from harassing collection calls and repeated mail invoices, to personal visits by intimidating "collectors" and unauthorized COD packages. These complaints allege that the defendants have misrepresented that advertising proceeds will support a local, civic purpose. They also allege that the defendants misrepresent that businesses have previously authorized advertising for which they are obligated to pay, and that businesses have ordered the advertisements billed to them and must pay the invoices or face collection action. These cases were brought in close cooperation and coordination with the Office of Attorney General Betty Montgomery of Ohio, which shared staff and other investigative resources with the FTC.
"As our investigation of these ?advertisements’ progressed, we were shocked at the magnitude and sophistication of this fraudulent operation. We found businesses in almost every county of Ohio that lost money through these scams. The stories these victims told us of intimidation and high pressure tactics that were used to make them pay for ads they never agreed to purchase are alarming," Ohio Attorney General Betty D. Montgomery said. "As a former prosecutor, I’m pleased to be part of this joint operation with the FTC to shut down these con artists. It’s my hope that today’s action will warn business owners to use extreme caution when giving money over the phone or through the mail for journals that are supposed to educate the public about drug awareness or fire safety."
In one complaint, the FTC named as defendants: The Dean Thomas Corporation, The Game Club, Inc., Professional Publishers, Inc., which does business as Professional Publishing, Inc., and Thomas Publishing Company, Inc., which does business as Quality Publications. In addition, the complaint names the following individuals: Dean R. Thomas, the director, president and secretary of The Dean Thomas Corporation, The Game Club, Inc., Professional Publishers, Inc., and Thomas Publishing Company, Inc.; and Randy B. Lonis and Ray Celie, who operate and manage one or more of the defendant corporations. (The FTC filed this complaint under seal in the U.S. District Court for the District for the Northern District of Indiana, in Ft. Wayne, on April 7. The Thomas Corporation: Civil Action No.: 1:97 CV 0129)
The FTC’s complaint naming The Century Corporation also names Richard A. Haffenden, president of The Century Corporation, and Clifford Belvin, secretary of the company, as defendants. (The FTC filed this complaint under seal in the U.S. District Court for the District for the Northern District of Indiana, in Ft. Wayne, on April 7. Century Corporation Civil Action No.: 1:97 CV 0130)
The complaint against Image Sales and Consultants, Inc., also names company president and sole owner, Michael Dewayne Dague, as a defendant. (The FTC filed this complaint under seal in the U.S. District Court for the District for the Northern District of Indiana, in Ft. Wayne, on April 7. Image Sales and Consultants, Inc.: Civil Action No.: 1:97 CV 0131; FTC staff contacts for all three Ft. Wayne cases: Brinley Williams or Dana Barragate, Cleveland Regional Office, 216-574-2439.) Information also is available from George Shaffer, investigator, Ohio Attorney General’s Office, 614-466-3180.
The seals on the Ft. Wayne cases were lifted this morning.
In these four cases, the FTC has asked the court for and has obtained temporary restraining orders and asset freezes, as well as the appointment of receivers to take charge of the companies.
"OPERATION FALSE ALARM" PUBLIC EDUCATION CAMPAIGN
"OPERATION FALSE ALARM" also launches a nationwide public education campaign. The FTC and the National Association of Attorneys General (NAAG), have prepared and released a series of consumer and business education materials with tips on reducing the risk of being victimized by deceptive solicitations. Included are fact sheets and publications for consumers and businesses about public safety fundraising appeals and charitable donations. Also available is a brochure for non-profit organizations that may be considering hiring a professional fundraiser. Copies of these publications are available from the FTC’s Web site at: http://www.ftc.gov and from the FTC’s Public Reference Room, located at the address below -- as well as from each state’s charities regulator, typically the Attorney General or the Secretary of State.
Tips for consumers and businesses include:
- Call your local police or fire department. Find out if they are aware of the fundraising campaign and if they have or will benefit from the funds raised.
- Ask for written information, including the non-profit’s name, address, and telephone number. A legitimate charity or fund raiser will give you materials outlining the charity’s mission, how your donation will be used, and proof that your contribution is tax- deductible.
- Watch out for similar sounding names. Some phony non-profits use names that closely resemble those of respected, legitimate organizations.
- Refuse high pressure appeals. Legitimate fund raisers won’t push you to give on the spot, and be wary of non-profits offering to send a courier to collect your donation immediately.
- Give generously -- but on your own terms. Make an annual giving plan and stick to it. Identify the causes you want to support and then do your homework by checking out the charities that support those causes. Don’t stop giving!
The FTC wishes to express its thanks to NAAG for their invaluable assistance in "OPERATION FALSE ALARM."
The Commission votes to file the FTC cases were 5-0.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually has violated the law. The cases will be decided by the courts.
Copies of the complaints, and the consumer and business education materials are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202- 326-2502. 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: www.ftc.gov
(FTC File No. P96 9105)
Office of Public Affairs
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