Major Valley Fund-Raising Firm Criticized

At a suite of inconspicuous offices on Alameda Avenue, a handful of hard-selling solicitors work the phones into the night, calling San Fernando Valley residents to solicit donations for charity.

Reading from scripts, they say they are calling for groups with wholesome names, such as Helping Hands for the Blind, Missing Children’s Report and American Wheelchair Veterans Assn.

When someone agrees to make a contribution--or buy a token item such as a flag or a doormat--a courier is dispatched to pick up the check.

What the donors wouldn’t know, unless they ask, is that less than 12 cents of every dollar they contribute ever gets to the charity. The rest goes to Valley Fundraisers Inc., the profit-making company that runs the Burbank telephone bank and a satellite in Santa Monica.

Last year, according to reports filed with the California Attorney General’s Registry of Charitable Trusts, Valley Fundraisers’ couriers brought in $607,947 in tax-exempt charitable contributions. After taking its share, the company handed over only $76,423 to its six client charities.

The remaining $531,524 was consumed as a cost of doing business. Some paid the telephone solicitors’ commissions, some the couriers’ salaries, some the company’s rent and telephone charges. And, finally, there was a profit for Valley Fundraisers’ president, Thomas Galambos.

Filling a niche in the world of philanthropy just beyond the reach of the law, Valley Fundraisers represents what experts call the bottom rung of a virtually unregulated industry that in California annually garners almost $100 million in charitable dollars--for profit.

At best, these groups return 75% or more of their revenues to the charities they represent--but the average is a far less impressive 30%. The most any charity has ever received from Valley Fundraisers was 16 cents of every dollar.

Representatives of philanthropic organizations, though reluctant to criticize any group specifically, say Valley Fundraisers’ record and practices violate widely accepted standards of ethics.

There are other professional fund-raisers that solicit donations for charity in the San Fernando Valley, but Valley Fundraisers is the largest.

Judging the company’s performance a violation of the public trust, law enforcement agencies from the Simi Valley Police Department to the state attorney general’s office have scrutinized Galambos’ operation, but so far have found no cause to shut him down.

“What they’re doing is legal,” said Robert Burns, general manager of the Los Angeles Social Service Department. “It’s a simple matter of fact: Valley Fundraisers is a licensed and bonded fund-raising firm in the city of Los Angeles and their activities are legal.”

That, Burns said, is a shame.

“I think that an organization on contract, whereby 10% of the donations are given to the charity, erodes the integrity of the entire charitable sector,” he said. “I have yet to meet a donor who is pleased with the knowledge that but 10% of a donation goes to the charity.”

In an interview with The Times, Galambos stoutly defended his business, saying he observes all laws and does not care what others think.

“We are here for two reasons, for us to make money and to make money for the charities, which I think is a good thing,” he said.

Unlike nonprofit charity organizations, such as the United Cerebral Palsey Fund, which keep their costs down by relying on wide networks of volunteers to bring in money, Galambos readily concedes that Valley Fundraisers is designed from the bottom up as a profit-making organization.

A 56-year-old Hungarian immigrant who said he left his home in the 1950s to escape communism, Galambos sees his work as a commendable manifestation of the free enterprise system that he embraced in coming to America.

He takes pride in providing work for about 40 people, mostly down-and-out men who get commissions working in his two boiler rooms as free-lance solicitors.

“Most of them are discarded people, homeless, alcoholic, drug addict,” Galambos said. “Most of the time they sleep in the office without my knowing it. I don’t say a word because, without me, these people don’t have any place to sleep.”

Galambos himself appears to have a comfortable, though far from extravagant, lifestyle. He rents a condominium in Tarzana and says his personal income is only about $30,000 a year. But public records suggest he makes considerably more than that.

Although Valley Fundraisers is not required to report its profit, the company’s annual statements to the Registry of Charitable Trusts showed that $72,900 went for “salaries to officers and employees” in 1992 and $70,684 the year before.

A typical report on file with the Los Angeles Social Service Department on a $582,453 campaign for the American Wheelchair Veterans Assn. shows $262,105 for telemarketers, delivery people and sales manager; $74,690 for telephones, advertising and postage; $94,018 for cost of merchandise; $24,017 for unspecified “other,” and $87,368 for the charity.

That left another $40,255 unaccounted for. Burns, of the Social Service Department, said there was no reason for his office to question the omission, since the law provides no limit on how much the company can keep.

In the $111-billion business of philanthropy nationwide, the question of how much of each donation should be given to the charity is a delicate one.

Both the National Society of Fundraising Executives and the American Assn. of Fundraising Council--the two professional organizations that set standards nationally--avoid the question in their codes of ethics. Instead, they deem it unethical to solicit funds for a percentage, as Valley Fundraisers does, calling the practice “detrimental to the financial health of the client organization.”

In its contracts with charities, Valley Fundraisers clearly spells out the percentage of receipts that will be turned over to the charity--from a low of 10% to a high of 16%. Galambos said that the percentage is determined by negotiation and that his costs determine the percentage he can offer.

Galambos said he shuns all professional societies that set ethical standards for his business.

“Who decides what is ethical?” he asked. “Me making $30,000 is a tough living. That’s not ethical? Making a living for the homeless, that is not ethical because they don’t wear a white shirt and tie?”

Galambos, who had fled to Canada before finally settling in the United States, said he was a laborer most of his life before going into business. He said he built the first motorized hot dog stand, from which he peddled food in Studio City during the 1970s. Later he and an optometrist made and marketed prescription sporting goggles. He said he made some money, but not enough to retire on.

Without any background in charity, Galambos started Valley Fundraisers seven years ago when his sister-in-law introduced him to American Wheelchair Veterans Assn., a tax-exempt organization that was promoting sporting events and retreats for disabled veterans in the western United States.

During the next six years, he brought in more than $2 million, of which the Las Vegas-based group received $336,261. The president of the veterans group, James E. Smith, said he dropped Valley Fundraisers last year when Galambos decided to take on other clients.

But he isn’t critical.

“It’s a hard business,” Smith said. “It isn’t the type of thing that gets people wealthy if they do it legitimately. But it keeps people like us going.”

Galambos contends that his company plays a significant role in society by providing cash to worthwhile organizations that couldn’t survive without him.

“The American Wheelchair Veterans never raised a dime in its life,” he said.

Indeed, Valley Fundraisers appears to be the lifeblood of five small organizations--two of them in the San Fernando Valley. All are in good standing with the Los Angeles Social Service Department, the Registry of Charitable Trusts and the Internal Revenue Service.

Although each organization has a different purpose, all are similar in that they are shoestring operations unable to raise money.

One, the Brotherhood Rally of All Veterans’ Organizations, uses the about $400 to $500 it receives weekly from Valley Fundraisers to produce a half-hour video, “Sound-Off,” on veterans affairs. The show appears twice-weekly on public television stations nationwide.

BRAVO spends almost 90% of its annual $56,000 budget on producing the video in its Calabasas studio and headquarters.

“We need the money,” BRAVO President Tony Diamond, a former stand-up comic and Korean and Vietnam war veteran, said unabashedly. “It’s the only way I have of getting the funds we need.”

Although Diamond said BRAVO has an extensive volunteer organization he can call out for advocacy, the organization lacks the sophistication to raise money.

“We’ve been too busy doing the job,” he said emotionally.

The accomplishments of another of Valley Fundraisers’ clients, the AIDS and Cancer Research Foundation of Beverly Hills, are not as substantial. The foundation’s tax returns show 1992 expenses of $17,945 for automobile, office, supplies, telephone, travel and education and public awareness efforts. A mere $7,300 went to research. The agency received $18,065 from Valley Fundraisers, about 15% of the $118,829 the company raised on its behalf.

For more than a decade, governmental oversight agencies across the nation have struggled for a formula to prevent such depletion of charitable dollars. Their efforts have consistently been foiled by coalitions of charitable organizations, which took their fights to the U. S. Supreme Court three times since 1980 to defeat restrictive laws.

In the most recent decision, striking down a North Carolina law that set a limit of 35% for overhead, the High Court said: “The solicitation of charitable contributions is protected speech, and using percentages to decide the legality of the fundraiser’s fee is not narrowly tailored to the State’s interest in preventing fraud.”

Given such little leeway, some agencies have resorted to public calumny as their primary weapon against wasteful charitable solicitation. In California, a 1990 law requires the state’s 165 commercial fund-raising organizations to file annual financial reports.

Using these reports, Atty. Gen. Dan Lungren last year calculated that only 30% of all charitable donations made through commercial organizations actually got to the intended charity. He branded this process “illusory charitable giving.”

Lungren has filed criminal fraud charges against two of the state’s largest professional fund-raisers and is investigating others. The state also is investigating Valley Fundraisers, but declined to say why.

Most complaints on record about Valley Fundraisers concern not fraud but exaggerated or coercive statements allegedly made by phone solicitors.

BRAVO President Diamond said he had a run-in with Galambos over reports that a solicitor was asking for donations to help “70 homeless veterans on the steps of the Armed Services Building.”

“We called Valley Fundraisers and said, ‘Get in line!’ ” Diamond said. “ ‘You’re giving us a bad name.’ ”

Similar complaints of misrepresentation by solicitors touched off an investigation of Valley Fundraisers last year by the Simi Valley Police Department.

In an affidavit, fraud Detective Steve Delamater said two residents received calls purportedly on behalf of the Simi Valley Police Officers Assn. asking for donations to the Missing Children’s Report. The Simi Valley Police Officers Assn. was not conducting a fund-raising campaign.

After searching Valley Fundraisers’ Burbank office, Delamater determined that there was insufficient evidence to file any charges because it was impossible to identify the person who had made the false statement.

Galambos said he dropped the Missing Children Report because the literature that the organization provided “could be misinterpreted” by solicitors. He said he also terminated solicitors who have misrepresented the charity or lied.

Delamater passed the information gained in the search to state investigators for examination of possible failure to pay employee taxes. A representative for the Franchise Tax Board in Van Nuys said the case was under evaluation, but said he could not comment because of confidentiality laws.

Galambos said he is confident that no action will be taken because he has not done anything illegal. He said he doesn’t exercise direct control over his solicitors. They are not his employees, Galambos said, but rather free-lancers who come and go as they please, often walking off the job as soon as they meet their daily needs.

“The hotel is $20 a day,” Galambos said. “If two guys check in, it’s $10. Five or six for food, a couple bucks for cigarettes. If they make that $20, they’re gone.”

Galambos remains indignant over the search.

“They interrupt our business and they find nothing,” he said. “It doesn’t justify to take 15 policemen from Simi Valley to Burbank and take my records away.”

Questions Can Expose Deceptive Practices

How do you protect yourself from deceptive charitable solicitations?

Ask a lot of questions, the experts say.

“The basic question is, ‘Do you represent the charity, or do you represent a private profit-making organization working on behalf of the charity?’ ” said Robert Burns, general manager of the Los Angeles Social Service Department, which registers and monitors the performance of charitable campaigns in the city.

Under a new state law that went into effect Jan. 1, fund-raisers must say, if asked, whether they are working for a profit-making business. Fund-raisers do not have to volunteer how much money they keep but they are obliged to answer another key question: How much of the contribution will actually go to the charity?

But there is also no simple way to know whether the solicitor is telling the truth.

“It’s hard for me to believe that solicitors routinely offer up that 90% of the donation is going to be consumed in fund-raising costs,” Burn said.

Burns recommends asking how to visit the charity’s office or program service sites and requesting copies of the charity’s federal tax return--which it is required to make public--and a certified audit.

If, “after receiving and reviewing these materials . . . you are satisfied, the charity may deserve your donation,” Burns said.

There is a simpler option for those who can’t decide whether a solicitation has merit: Call the Social Service Department.

“We have files on thousands of charities and do the best we can to tell callers where the money is going,” Burns said. “They can talk to me, Bob Burns. Ask for me.”

The number is (800) 77-DONAT.

Burns also makes available a pamphlet, “How to Give Wisely.” It recommends two methods of giving that are preferable to responding to telephone or mail pitches: Give to a local charity you know personally, or give through a “united” campaign that pools money for established organizations.

Then, the pamphlet suggests, you can tell the solicitor, “thank you, but I give all I can now to a few charities.”

Valley Fundraisers

Valley Fundraisers, a for-profit company, conducts solicitations on behalf of several tax-exempt organizations. Of $2.1 million raised for these organizations in recent years, only 11.6%, or $245,979, actually got to the charities. Valley Fundraisers consumed the rest as a cost of doing business. Some nonprofit groups have contracted with Valley Fundraisers for several years, others for only a year. Experts say the percentage passed on to the charities is unusually low.

American Wheelchair Veterans Assn.

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $251,027 $37,658 15% 1991 $829,230 $68,458 8.2% 1990 $636,180 $95,428 15% TOTALS $1,716,437 $201,544 11.7%

*

Helping Hands for the Blind

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $146,187 $14,618 9.9% 1991 $27,223 $3,200 11.7% TOTALS $173,410 $17,818 10.2%

*

AIDS and Cancer Research Foundation

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $118,829 $18,065 15.2% 1991 $18,296 $2,279 12.4% TOTALS $137,125 $20,344 14.8%

*

Adopt-a-Family

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $8,469 $1,016 11.9%

*

Missing Children Report

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $41,219 $6,183 15%

*

Brotherhood Rally of All Veterans’ Organizations

YEAR AMOUNT RAISED AMOUNT GIVEN TO CHARITY % GIVEN TO CHARITY 1992 $42,216 $5,066 12%

Source: California Attorney General’s Registry of Charitable Trusts