Compassion and Fraud Call Out in Name of Charity : Rip-Offs Take Advantage of Spirit of Giving

There were two of them, Gay Geiser-Sandoval recalled. One man stood patiently by while his companion solicited donations in Geiser-Sandoval’s office across the street from the Orange County Courthouse.

“They said they were soliciting for something called the United Children’s Fund. They even had an address,” she said.

But there is no United Children’s Fund. And the office in which the two were illegally soliciting was that of Deputy Dist. Atty. Gay Geiser-Sandoval, who handles charitable fraud for the district attorney’s anti-fraud unit.

“I don’t know if they were bold or just ignorant,” she said.

The two pitchmen were arrested on misdemeanor charges, cited and released. They face up to six months in jail and a $2,500 fine, she said.

Orange County, with its soaring incomes and entrepreneurial image, is considered fertile territory for illegal scams ranging from door-to-door solicitations to sophisticated boiler-room telephone operations, according to the district attorney’s fraud unit.

And the holiday season is their prime time.

Every day, Geiser-Sandoval said, fraudulent solicitations divert thousands of dollars from the county’s more than 200 legitimate charitable organizations.

Each year more than $250 million is contributed to charities, according to United Way of Orange County figures. But with each holiday season, a growing amount of that figure finds it way into the pockets of sophisticated telephone solicitors, Geiser-Sandoval said.

The exact amount is unknown, she said, but her office has received 100 complaints about illegal fund raising this year, and six of those have resulted in criminal complaints since September, an increase over last year.

Additionally, police departments in Orange, Costa Mesa and Huntington Beach have reported arrests of suspects involved in major telephone scams.

For example, last holiday season one scam involved solicitations for Cancer Victims and Their Friends, which took in $36,000 during the month of December before it was stopped and the principals arrested, Geiser-Sandoval said.

In addition to legitimate charities losing out, those who contributed may never see their contribution again, she said.

Why do they pick the holiday season?

“It’s not because people have more money, but I think people are more conscientious and altruistic during the holidays, and the telephone solicitors know this,” she said.

Basically, Geiser-Sandoval said, there are two types of problems with illegal solicitations:

- Fictional charities: Rip-off artists usually go door to door, use the mail or encourage some solicitation by telephone.

The two individuals who sought donations in Geiser-Sandoval’s office were exposed and eventually arrested on misdemeanor charges, but police believe that the vast majority of this kind of illegal solicitation goes unreported.

“A lot of them are out there, and it’s hard to distinguish them from the legitimate ones, because they do borrow and play on names of the legitimate charities, too,” Santa Ana Police Detective Ken Smith said.

They use names such as “The Cancer Society,” the “United Children’s Fund” and “Optimists of Santa Ana,” in an effort to identify themselves with legitimate charitable organizations with similar names.

- Telephone solicitation companies: Sophisticated operators hire dozens of people to give pitches. These operators are usually affiliated with legitimate charities but may use illegal means to get you to contribute. While they sound legal, the percentage split always favors the solicitation company rather than the charity.

Geiser-Sandoval said: “The illegality is when the potential donor is not told the name of the solicitation company and what percentage is going to them. Under the law, they have to disclose this.

“Every time you receive a phone call from one of these types of solicitors, they have to tell you the percentage without your asking. Otherwise, they are not following the law.”

It’s the sophisticated boiler-room operator who rakes in the contribution dollars. Several even go so far as to lease temporary offices in a specific city in the county to take advantage of lower telephone rates, Geiser-Sandoval said.

One favorite location, she said, is on Brookhurst Street in Garden Grove, where several boiler rooms were once discovered.

Criminal Charges Filed

To help combat the problem, the district attorney’s consumer protection office began filing criminal charges against major illegal boiler-room operators in September because civil complaints “were ineffective,” Geiser-Sandoval said.

Part of the problem, she said, is that major telephone solicitors contract with legitimate charities. These boiler-room operators, while technically legal, typically hire young and inexperienced telephone sales people who are poorly trained--especially about what they can legally say to a potential donor.

It only compounds the problem for authorities, who concede that it’s much more difficult arresting operators because police have to listen to the pitch, then find their place of business--information that is often difficult or nearly impossible to obtain from an illegal operator.

Many operators have legitimate charities as clients who sign contracts to solicit funds on their behalf. But the contracts only promise a small percentage of the total received, and in some cases it’s as low as 15%, Geiser-Sandoval said.

“These boiler-room operators take as much as 85% of the donated dollar, or higher in some instances, as expenses and end up giving only 15% or less to the actual charity,” she added.

State law says that these operators legally can keep up to 99% of each donated dollar, Geiser-Sandoval said.

As a rule, the National Charities Information Bureau suggests that the cost of raising funds generally should not exceed 30% of the each donated dollar, leaving at least 70% that should go to the designated objective or charity.

Terminally Ill Patients

“We had one case which pitched to take young cancer patients who are terminally ill to a Christmas party. You buy $25 in tickets to sponsor these patients. But from the amount that was received by the boiler-room operators, they had solicited for about 16,000 terminally ill patients. We sat down and figured that out based on how much money was raised. There’s just not that many terminally ill children out there in Orange County,” Geiser-Sandoval said.

Maureen Williams, a spokeswoman for Childrens Hospital of Orange County, said the hospital was forced to drop its association with several fund-raising organizations after they borrowed the hospital’s name and made questionable solicitation pitches.

Williams said one group, which she did not identify, would ask for $20 donations on behalf of the hospital’s sick children. In turn, the soliciting company would buy tickets to a professional baseball game.

“We didn’t hear from them too often,” Williams said. “But from time to time we would get 40 to 50 tickets from this group, which was fine. But we would get them at 3 or 4 p.m. on a Friday afternoon for a Friday night game, and we can’t get that many kids together.

“There is no way we would do this again. We heard that some of these groups were keeping 75% or more of the donations. We don’t want to get only $25,000 if they keep $250,000. Now, we’re no longer willing to lend our name out.”

Geiser-Sandoval said her office’s biggest challenge is educating legitimate charities that continue to contract for telephone solicitation through operators who use questionable practices.

“The problem is, if you don’t know the law exists or how it works, obviously you don’t know if somebody is breaking it,” she said.

For example, when a boiler room operator began making pitches for the Cancer Society, people who had been solicited contacted the American Cancer Society. In turn, the charity complained to the district attorney’s fraud unit, which conducted an investigation.

Since September, the district attorney’s office has stepped up the campaign against illegal solicitations, in addition to maintaining the educational campaign to help increase awareness among the county’s social service agencies.

That will pay off with more arrests, Geiser-Sandoval said she hopes: “We used to file civil charges, but we’re not sure they’re as effective as criminal complaints.”

But the fraud unit has just three investigators who must also investigate all other fraud cases, in addition to fraudulent or illegal solicitations, Geiser-Sandoval said, so arrests are few.

Checking on Charities

If you want to check whether a charity is legitimate, you can call:

National Charities Information Bureau, New York City, (212) 929-6300.

California Secretary of State’s Corporate Division, (916) 445-2900, to verify corporate status.

Orange County Consumer Protection Unit, (714) 834-3600.

Your local police.

Checking Up on Charities

The consumer protection unit of the Orange County district attorney’s office and major charities suggest asking a few questions when someone requests a charitable donation:

- Before you respond to a telephone solicitation you have a right to ask for the name and address of the charitable organization.

- Ask for a telephone number so you can get more information.

- Ask what percentage of your contribution is to be received by the charity.

- Ask how much will be taken out of every dollar you contribute to cover fund-raising expenses.

- Ask about the solicitor’s tax-exempt status and get the tax-exempt number. If in doubt, call the corporate division of the California secretary of state’s office for confirmation.

If the solicitor hesitates to give any of this information, remember that you can just say no.