Tuesday, May 6, 2003

Justices set new limits on telemarketers



By Anne Gearan
The Associated Press

WASHINGTON - It won't stop those annoying phone calls at dinner time, but the Supreme Court set new limits Monday for telemarketers who solicit money for charities. If the fund-raiser lies or misleads about where the contributions go, states can take them to court.

The Constitution's guarantee of free speech does not protect telemarketers or other fund-raisers who intentionally deceive potential donors, the court said in an opinion written by Justice Ruth Bader Ginsburg.

"Like other forms of public deception, fraudulent charitable solicitation is unprotected," she wrote.

The unanimous ruling allows Illinois to go after a telemarketing firm that took in more than $8 million on behalf of a Vietnam veterans' charity - and pocketed 85 percent of the money. That's 21/2 times more than the Better Business Bureau considers reasonable administrative cost for a charitable fund-raiser.

Illinois authorities claimed would-be donors were told their money would go for food baskets, job training and other services for needy veterans.

"This is clearly a victory for consumers who want to give to charities and know that their dollars are being spent on the programs they were told about, not on profits for a telemarketing company," said Melissa Merz, spokeswoman for Illinois Attorney General Lisa Madigan.

Charitable solicitation is protected under the First Amendment, and the Supreme Court has three times struck down state or local laws intended to regulate how much charity fund-raisers were paid or what donors must be told about the costs.

The latest ruling makes clear that while fund-raisers have leeway to keep quiet about the high costs of running a charity drive, they may not lie about it.

"While bare failure to disclose that information directly to potential donors does not suffice to establish fraud, when nondisclosure is accompanied by intentionally misleading statements designed to deceive the listener, the First Amendment leaves room for a fraud claim," Ginsburg wrote.

Telemarketing Associates Inc. had argued its activities in the name of the charity VietNow were protected under prior Supreme Court rulings, and lower courts agreed.

The BBB calculated VietNow spent only 3 percent of raised funds on charitable programs.




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