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It's Breast Cancer Awareness month, and the FTC and nineteen states have announced an enforcement action involving a deceptive fundraising scheme for breast cancer prevention services. The complaint alleges that Kars-R-Us, a fundraiser, and its principals, solicited charitable donations of vehicles on behalf of United Breast Cancer Foundation, in English and Spanish language tv and radio ads, and online. Kars claimed in ads that the donations allowed UBCF to provide low and no-cost breast cancer screenings and "save lives." However, while Kars raised $45 million through the donated vehicles, less than 1% of the funds were actually used to provide breast cancer screening. The rest, the complaint alleges, went to the defendants and their vendors, and UBCF's CEO.
And it was no secret. UBCF's publicly filed financial documents "consistently demonstrated UBCF's very minimal spending on breast cancer services." Other publicly available information had other obvious red flags, including an Attorney General complaint against another entity for making deceptive charitable solicitations for various non-profit organizations, including UBCF, as well as investigative reports in the general media and philanthropic journals warning of UBCF's poor practices. But such red flags were ignored by the defendants because they focused "instead on the substantial revenue generated by [their] claims"; indeed, UBCF was defendants' most profitable client.
The regulators' complaint alleged violation of Section 5 of the FTC Act and of state consumer protection laws and sought both injunctive relief and other relief as provided by the state laws, including civil penalties, refund of monies paid, disgorgement, and more. The proposed settlement restricts Kars and its operators from future fundraising activities and permanently bans one of the defendants from any fundraising. The settlement also includes a monetary judgment of nearly $4,000,000.
Some takeaways:
Even if a marketer is not promising to provide a specific percentage of solicited funds to a charity, donating only an incidental amount will never pass muster, particularly if the funds provided to the charity are not sufficient to carry out the very activities it has promised to perform, and particularly if its own executives are getting rich on the funds raised. (It's worth noting that a legitimate commercial co-venture campaign is a different type of charitable solicitation program than general fundraising: in a CCV, consumers know – or should know, as required by the BBB Wise Giving Alliance -- what percentage of the purchase price or what amount will be donated to the charity when they purchase the product.)
Regulators can and will go after individuals as well as companies. Here, according to the complaint, the individual defendants, co-owners and officers of Kars, "formulated, directed, controlled, had the authority to control, or participated in the acts and practices of Kars." In such circumstances, it's not surprising that the regulators would charge the principals too.
It's crucial to do your due diligence. The enforcement action here involves extreme conduct: it seems pretty obvious that the defendants didn't really care about the legitimacy of the charity on whose behalf they were fundraising. But companies working with charities, whether in a commercial co-venture, or simply as a donor, should do their homework to make sure the charities with whom they're partnering are doing the good works they're touting. And there is almost no excuse not to do that homework because so much of the information is publicly available, like on a charity's Form 990. Be particularly careful when selecting a charity if it has a name that sounds like other – legitimate – charities. It may well be a legit charity too, or it may just be trying to sound like a better-known and established one.
And a final note: As cited by the Center for Disease Control, breast cancer is the second most common cancer among women in the U.S. It is second only to lung cancer, as the leading cause of cancer death among women in the US. And for non-Hispanic Black women and Hispanic women it is the leading cause of cancer death. Get educated and get screened.
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