Dear Chairman Muris:
As Ranking Member of the Senate Committee on Finance (Committee), I am committed tohelp ensure that charitable contributions to United States-based charities are timely distributed toqualified recipients. I believe that oversight of charities and foundations should also be part andparcel of the President’s charitable initiatives to ensure that our citizens’ tax dollars are spentappropriately and to strengthen our nation’s trust in its charitable institutions. Today I write to drawyour attention to a problem that has surfaced during the Republican Finance Committee staff’sinvestigation of misleading charities that may be engaging in deceptive fund-raising tactics.Recently, I have learned that Americans are receiving telephone solicitations from fund-raiserslocated offshore to possibly avoid U.S. telemarketing laws. I am aware of three instances where U.S.citizens have received telephone solicitations from telemarketers who claim to be located in thePhilippines and who fraudulently misrepresent themselves as affiliated with the Make-A-Wish®Foundation of America (Make-A-Wish). One of the citizens who agreed during the call to make adonation to “Make-A-Wish" subsequently received written information about another charity,Children’s Wish Foundation International, Inc. (CWFI). This information was not mailed from thePhilippines but, rather, from the Pittsburgh, Pennsylvania, address of Reese Brothers, Inc.
By way of background, Make-A-Wish is a well-respected charity that grants the wishes ofchildren with life-threatening illnesses and does not engage in any telemarketing activities whatsoever.CWFI is a purported wish-granting charity located in Atlanta, Georgia, that, over the past decade,has been the subject of investigations, administrative proceedings, and lawsuits initiated by charityregulators in several states for a variety of alleged fund-raising and financial reporting improprieties.Reese Brothers is CWFI’s primary telemarketer and has received in excess of $49.6 million since itwas hired by CWFI in 1996.
This confusion as to the identity of the charitable wish-granting organization does not appearto be accidental. Although there are many credible and ethical wish-granting organizations in theUnited States, a number of unscrupulous individuals have apparently found raising money to grantsick children’s wishes to be pretexts for fraudulent and deceptive fund-raising practices. Mark Reed,the President and CEO of the Make-A-Wish® Foundation of Iowa, has personally responded tonumerous complaints from Iowans who have received telemarketing calls supposedly from“Make-A-Wish" but actually from CWFI and/or Reese Brothers.
I question whether this apparently recent decision on the part of CWFI and/or Reese Brothersto telemarket American citizens from the Philippines has anything to do with the fact that on October25, 2001, President Bush signed into law the USA PATRIOT Act of 2001. This law includes a“Crimes Against Charitable Americans Act" that imposes disclosure requirements upon persons“engaged in telemarketing for the solicitation of charitable contributions," empowers your agency toexpand its Telemarketing Sales Rules to include additional disclosure requirements for charitablesolicitation calls, and amends the federal criminal statute proscribing telemarketing fraud to bringcharitable telephone solicitations within its reach.
Even if the timing of CWFI’s and/or Reese Brothers’ decision to commence offshoretelemarketing were merely coincidental, I am concerned about your agency’s ability to enforce itsTelemarketing Sales Rules when offending telemarketers are located more than 8,000 miles awayfrom U.S. soil. To help safeguard American donors from telemarketers who engage in fraudulent ordeceptive “charitable" solicitations, and particularly those soliciting offshore, I appreciate yourresponses to the following questions:
1. Will the Federal Trade Commission (FTC) investigate CWFI or Reese Brothers forthe activities described in this letter? If your answer is in the affirmative, I request that you keep theCommittee informed of the progress of your investigation including any referral to a law enforcementagency for prosecution. If your answer is in the negative, explain why not.
2. I am aware that FTC has previously expressed its view that there is “no doubt thatsellers or telemarketers located outside the U.S. are subject to the [Telemarketing Sales Rules] if theytelemarket their goods or services to U.S. consumers." Will your agency’s opinion remain the samewith respect to charitable telemarketing, especially in view of the provisions of the USA PATRIOTAct of 2001? Also, describe how FTC’s view on this subject has been adequately communicated tothe public and, particularly, to those involved in the telemarketing industry.
3. Explain how FTC identifies and stops fraudulent or deceptive fund-raising activitycommitted by U.S.-based entities through their agents located offshore. Please include in youranswer whether FTC works with federal, state or local charity regulators or other law enforcementagencies to identify illegal fund-raisers. If your answer is in the negative, explain why not.
4. For the past five years, state: (a) the number of U.S.-based telemarketing entitiessoliciting from offshore that FTC has investigated; (b) the number of such entities FTC has penalizedor referred for prosecution as well as the reason for the penalty or referral; and (c) the nature andamount of the penalty imposed. Moreover, identify any such entities that currently engage intelemarketing or other fund-raising despite a prior penalty from FTC or other law enforcementagency, and explain why each such entity was allowed to resume its activities despite such penalty.Finally, explain what FTC is doing, if anything, to ensure that any such entity’s current telemarketingor general fund-raising practices comply with U.S. law.
Please note that I have separately expressed my concerns about CWFI’s alleged fund-raisingand financial reporting improprieties to the Honorable John D. Ashcroft, Attorney General, UnitedStates Department of Justice, and to the Honorable Charles O. Rossotti, Commissioner, InternalRevenue Service. I enclose a copy of that letter for your consideration.
Your cooperation in responding to these requests by May 2, 2002, is appreciated.
Sincerely,
Charles E. Grassley Ranking Member Enclosure
CC Via Hand Delivery Senator Max Baucus, Chairman, Senate Committee on Finance
CC Via Regular Mail Mr. John Bridgeland Assistant to the President, Director of USA Freedom Corps White House
1600 Pennsylvania Ave NW Washington, D.C. 20500
