For Immediate Release:

November 13, 2000

FOR FURTHER INFORMATION CONTACT:

Genene W. Morris, Jennifer Doktorski

973-504-6327

New Jersey Sues Professional Fund-raiser
and Four Charities for Badge Fraud

NEWARK -New Jersey is prosecuting a professional fund-raiser, its principals and four corrections unions alleging they misled citizens through widespread and aggressive telemarketing campaigns to get them to give nearly $2 million in charitable donations to the unions, Attorney General John Farmer Jr., and Mark S. Herr said.

The State's 12-count complaint, filed in Monmouth County Superior Court, alleges that Community Affairs, Inc. ("Community Affairs"), of Woodbridge, violated the State's Charitable Registration and Investigation Act ("CRIA") between 1997 and 2000 when it used telemarketers, posing as State Troopers and local police, to tell thousands of prospective donors that it was raising money to buy bullet-proof vests for local police officers and to contribute to widows and orphans and scholarship funds.

In fact, the State Police does not solicit funds from the public and the solicitors were not State Troopers or local police officers.

At no time did the fundraiser or the unions tell donors that the money would go to jail guards' unions. Despite the claims made by the professional fund-raiser's battery of telemarketers about how the donations would be used, the fundraiser kept most of the money, $1.6 million, as fund-raising fees and no money went to local police or State Police. Instead, the money went to the four corrections locals. No more than 1.4 percent $26,000 of the $1.9 million raised was used to buy vests; less than 1 percent $9,000 of the $1.9 million was donated to the widows and orphans and scholarship funds.

The complaint also alleges that two of the unions purchased no bullet-proof vests at all until after Consumer Affairs subpoenaed their records and not until approximately a year after their fund-raising campaigns ended.

Instead, of the $300,000 actually retained by the defendant union locals, one union used $100,000 to invest, while the defendants together spent $106,000 of the $300,000 they retained after the campaigns on legal and accounting fees. At no time in the solicitations did Community Affairs or the union locals tell prospective donors they would use contributions sought in the name of protecting local police for investments and legal fees.

In addition to Community Affairs, the suit names as defendants, Burlington County Corrections Officers PBA Local # 249 ("PBA # 249"), of Mt. Holly and Pemberton, Somerset County Corrections Officers PBA Local # 177 ("PBA #177"), of Somerville, Union County Corrections Officers FOP Lodge # 123 ("FOP # 123"), of Elizabeth, and the New Jersey Superior Officers Law Enforcement Association ("NJSOLEA"), of Vineland.

The suit also names Community Affairs' principals, Christopher Heins, of Neshanic Station, and Louis Ferreira, of Edison. Community Affairs' principal place of business is located at 321 Main Street, Woodbridge; but it also conducted telemarketing campaigns from locations in Linden, Belmar, Trenton and West Virginia.

The suit also alleges that at least one defendant, PBA #249, tried to mislead State regulators by filing phony reports with Consumer Affairs, Herr said. The suit also alleges widespread problems with Community Affairs' reporting for 28 other organizations, including FOP 123, PBA 177 and NJSOLEA. The other organizations are not named as defendants.

The complaint also alleges Community Affairs concealed or misrepresented the identity of corrections officers unions in written solicitations. They also allegedly sent "donors" invoices thanking them for their pledges and requesting payment by a certain date even though the supposed "donors" had only requested information or, in fact, had refused to contribute. In other instances, the complaint alleges, Community Affairs sent invoices to people who had died.

"We call this Badge Fraud," Attorney General Farmer said. "and it is a multibillion-dollar enterprise that preys upon people's trust of the police and fire departments to boost a potential donor's willingness to give. Misrepresenting who you are, or what cause you're soliciting for, to ensure more donations, is not only reprehensible, but unlawful as well."

"There's no law which says you have to donate to charity," Herr said, "but the law does say that if you ask someone to donate, you have to tell the truth. These defendants did not tell the truth. They lied and committed fraud."

"If these unions wanted the public to pick up the tab for their legal fees and provide them with funds to invest, they should have come straight out and asked for it. I doubt that many of the public would have wanted to pay the jail guards unions' bills or give them money to invest, but that would have been an honest pitch and one which the potential donors could have decided on the merits. Instead, the defendant's deceit deprived the donors of the truth and that broke the law," Herr said.

Community Affairs misled potential donors as to the identities of the organizations and purposes so that it and the other defendants could take advantage of strong support for local police and fire fighters some of the most popular charitable appeals, Herr said.

A recent survey by the American Association of Retired Persons indicates that 42 percent of people are more inclined to give to a solicitor representing firefighters, 39 percent are more willing to donate to solicitors representing police or sheriffs associations, while 35 percent more inclined to give to a telemarketer calling from veterans organizations, Herr said.

"These are the people they trust the most and view their causes as near and dear to their hearts. That is why we do what we can to stop those who would take advantage of that trust," he said.

In fact, the fund-raising appeals relied on these very sentiments.

The State's suit alleges that PBA #249 asked Community Affairs to help it raise money to pay for a new union building and to pay for legal bills incurred for contract negotiations. But Community Affairs told PBA # 249 if it wanted to maximize fund-raising, it had to tell people of a more sympathetic goal and told PBA #249 to tell prospective donors the money would be used to buy bulletproof vests.

In February 1997, the complaint alleges, Community Affairs began telemarketing consumers and sending solicitation materials to potential donors about PBA #249's "Bulletproof Vest Fund-raising Campaign."

The drive raised more than $250,000, of which the PBA retained only $37,000. PBA #249 then spent a mere $4,260 of the $250,000 to buy only six bullet-proof vests. In contrast, it spent three times that amount, $14,000, on its legal fees. At no time in the fundraising appeal did PBA #249 ever tell donors it was asking for charitable gifts to pay for its contract negotiations.

The suit also alleges that PBA #249 then attempted to hide its actions from Consumer Affairs by submitting false reports about its fundraising. State law requires organizations which raise more than $100,000 to provide extensive disclosures of their financial activity. But PBA # 249, which raised $250,000, instead, submitted a short form disclosure report, suggesting it had earned less than $25,000 and that it did not hire a professional fund-raiser.

The complaint also alleges, that defendant PBA Local #177 and FOP Lodge #123, despite asking donors for contributions to buy bullet-proof vests, did not purchase vests until after the State subpoenaed their records. Of the $250,000 Community Affairs raised for PBA #177, the PBA kept $50,000 and paid $200,000 to the professional fund-raiser. Although the union eventually contributed $12,000 toward the purchase of vests, it spent $52,000 on legal and accounting expenses during the campaign.

The State's complaint also alleges Community Affairs raised $200,000 for FOP #123 and kept $166,000. The union got only $34,000 and then spent a mere $2,000 on five bullet-proof vests -1 percent of the total raised on behalf of the union in the name of bullet-proof vests . Community Affairs also raised $1.2 million for NJSOLEA ostensibly for scholarships and widows and orphans and kept $1 million, the complaint alleges. Of the $200,000 NJSOLEA got, it invested $100,000 and spent $40,000 on legal fees. While it spent $140,000 on itself, it used only $6,000 of the $1.2 million for widows and orphans, $8,000 on body armor and $3,000 on scholarships -1.4 percent of the total money raised for these causes.

The State's suit seeks an order requiring the defendants to pay restitution and civil penalties and barring Community Affairs from fund-raising in New Jersey.

The Community Affairs prosecution represents the latest attempt by the State to combat badge fraud. In 1997, Consumer Affairs joined with the Federal Trade Commission and 47 other states as part of "Operation False Alarm," a nationwide sweep aimed at combating badge fraud and warning donors of the threat it represented.

As part of that sweep, New Jersey sued Civic Development Group ("CDG") and the New Jersey State Law Enforcement Officers Association ("SLEOA") for violations of the CRIA alleging badge fraud.

Without admitting any wrongdoing, CDG agreed in December 1999 to pay the State $125,000 and to adopt new rules for their telemarketers to use during solicitation campaigns. SLEOA also settled Consumer Affairs' allegations by agreeing to obey the State's charities laws, to maintain records of consumer complaints and to pay a $50,000 penalty.

The CDG prosecution also led to separate investigations of and agreements with the New Jersey State Police Benevolent Association ("State PBA"), the New Jersey State Fraternal Order of Police ("State FOP") and the Firemens Mutual Benevolent Association ("FMBA") regarding their past fund-raising conduct. Under the agreements, the State PBA stopped telemarketing donors, while the State FOP and the FMBA agreed to spend at least $7,500 and $12,000, respectively, on a public education campaign.

In addition, Consumer Affairs negotiated a consent agreement with the State's Sheriff's Association to correct irregularities in its fundraising practices.

"We are taught from an early age to trust the men and women who serve and protect us," Attorney General Farmer said. "We will be relentless in prosecuting anyone who tries to take advantage of that trust and break that faith."

Deputy Attorney General Sharon A. McCloskey is handling the Community Affairs prosecution for the State.


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Posted January 2001