Professional Charitable Fundraiser Settles Allegations Of Fraud: Agrees to a Half-million Dollar Judgment

The Federal Trade Commission today announced a $500,000 settlement agreement with a Phoenix, Arizona, fundraiser who, the FTC alleges, fraudulently solicited donations on behalf of various nonprofit law enforcement, firefighting and veterans' organizations. The FTC charges against Leon Saja, doing business as Southwest Publishing, were filed as part of "Operation False Alarm," a joint federal/state sweep targeting badge-related fundraising fraud. In addition to the $500,000 judgment, Saja must post a $100,000 bond if he continues in the charitable fundraising business. The settlement also includes Stealth Publications, a subcontractor retained by Saja to solicit contributions. The FTC reached a separate settlement with Stealth's former president, Donald L. Ritta.

The FTC's complaint against Saja and Ritta, filed in April 1997, alleges that the defendants and their telephone solicitors routinely misrepresented to consumers and businesses that they were law enforcement officers; that donations would be used to benefit law enforcement agencies or firefighters in the donor's community; that solicited funds would support particular causes; that donations were tax deductible; and that businesses receiving bills for advertising had previously authorized the advertising in publications distributed on behalf of various nonprofit organizations.

In November 1997, after the parties agreed to a stipulated preliminary injunction, the FTC filed civil contempt charges against Saja, alleging that he continued fundraising misrepresentations in violation of the preliminary injunction. Prior to a scheduled hearing on the motion, Saja agreed to settle the contempt allegations. The contempt settlement imposed additional injunctive provisions and required Saja to pay $20,000 to the FTC.

The proposed final settlements with Saja and Ritta, which require the court's approval, would prohibit the defendants from making the specific misrepresentations alleged in the FTC's complaint and would prohibit any other fundraising misrepresentations. In addition, Saja and Ritta would be prohibited from engaging in fundraising on behalf of any nonprofit organization without written authorization. The proposed settlements would require certain disclosures by the defendants in connection with fundraising solicitations, including that the solicitation is being made by a professional fundraiser; the percentage and amount of donations distributed to the nonprofit organization for whom the solicitation is being conducted, if that information is asked for by the potential donor; and that the contribution is not deductible, if that is the case.

The settlements would also require Saja and Ritta to train and monitor the conduct of telephone solicitors they employ and verify prior to sending billing invoices that donors have agreed to make contributions. In addition, the settlements impose similar requirements on Saja and Ritta in connection with firms they subcontract with to conduct fundraising solicitations. Saja and Ritta are also required to seek supporting substantiation from nonprofits for solicitation claims they make on behalf of the nonprofits.

The proposed settlement with Saja imposes a judgment in the amount of $500,000, but specifies that the Commission will file a satisfaction of judgment if Saja pays a total of $75,000 in monthly installment payments of at least $3,000 each. In the event of default, the entire judgment, less any payments already made, would be due immediately.

In addition, Saja would also be required to post a $100,000 bond in order to continue as a professional fundraiser or assist others in doing the same. In connection with future fundraising activities by Saja, the FTC may use the bond for consumer redress if it demonstrates to the court that Saja has violated the FTC Act or the proposed order.

In a separate settlement, Ritta would be required to pay $50,000 to the FTC by December 31, 1998.

Money from the proposed settlements would likely be used, in part, for a consumer education program. Recent donors solicited by Saja will be sent a brochure concerning prudent charitable giving practices. A portion of the collected judgments will also be used to pay expenses incurred by a court-appointed receiver and any remaining amount will be turned over to the U.S. Treasury.

The Commission vote to file the settlements was 4-0. The case was handled by the FTC's Seattle Regional Office.

Copies of the news release announcing "Operation False Alarm," as well as a number of consumer education publications about charitable fundraising solicitations are available from the FTC's web site at http://www.ftc.gov and copies of the settlements are also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); 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 File No. X970042)
(Civil Action No. CIV-97-0666 PHX SMM)