Fundraiser Is Fined $1.054 Million By South Carolina

October 27, 2014       The NonProfit Times      

A St. Paul, Minn.-based fundraising agency was hit with the largest fine in South Carolina in nearly a decade for assorted alleged violations when it made telephone calls into the Palmetto state for some of the nation’s largest charities.

Secretary of State Mark Hammond announced the $1.054 million fine against St. Paul, Minn.-based Strategic Fundraising on Oct. 22, citing violations of mandatory disclosure provisions of the South Carolina Solicitation of Charitable Funds Act and violations for misrepresentation and failure to register individual professional solicitors required by state law.

Strategic Fundraising, Inc. has 30 days to appeal the fine to the Administrative Law Court but Melissa Dunlap, chief of staff and general counsel to the secretary of state is hopeful the two sides can reach a settlement. Messages left for Strategic Fundraising, Inc., were not returned.

The million-dollar fine is the largest levied against a fundraising firm in nearly a decade, since Fort Lauderdale, Fla.-based Xentel was fined $276,000 in 2005. That fine eventually was settled for $100,000, Dunlap said.

After receiving complaints in the spring, Dunlap said the state subpoenaed phone call records, agreeing to focus on one day (June 18) and in August reviewed recordings of some 350 phone calls made into South Carolina for some of the nation’s largest charities. In some cases, there were multiple alleged violations per call, she said.

Alleged violations resulting in fines included:

  • Failure to disclose that the caller was a “professional” or “paid” solicitor at the initial time of the solicitation;
  • Failure to disclose the name of the professional fundraising organization;
  • Failure to disclose the location of the charitable organization for which the caller was soliciting; and,
  • Misrepresentation of the percentage of donations used for charitable programs.

The violations allegedly occurred during calls that Strategic Fundraising, Inc., made into South Carolina on June 18 on behalf of several charities, including Special Olympics and Mothers Against Drunk Driving (MADD).

“South Carolina law clearly states that professional solicitors are required to inform charitable donors that they are ‘professional’ or ‘paid’ solicitors at the beginning of the solicitation,” Hammond said in a statement. “Professional solicitors are also required to provide their true name, and the true name, location and purpose of the charity for which they are soliciting. What makes this case so egregious is that these were ‘robo-calls’ in which the individual solicitors were using prerecorded scripts. This wasn’t a situation in which an individual caller made a mistake and went off script – these disclosure violations were a result of deliberate choices made by a professional fundraiser,” he said.

Under the act, organizations are given a notice of violation prior to receiving an administrative fine. Strategic Fundraising, Inc. had already received several notices of violation, and in 2009 entered into an Assurance of Voluntary Compliance with the Secretary of State, in which it agreed to abide by all provisions of the act, including making mandatory disclosures to donors and registering all of its individual solicitors.

Dunlap dismissed any suggestion about the timing of the announcement, just weeks before the Nov. 4 election in which Hammond is running for re-election. The case started several months ago after citizen complaints, with subpoenas issued over the summer. “It takes time to do an investigation,” she said, adding that the election did not factor into determining when the fine was announced.