Phone Fundraisers Who Said Charities Received ‘100 Percent’ Of Donations Face Largest FTC Civil Penalty Ever

The operators of a New Jersey-based telemarketing scheme will pay a record $18.8 million and leave the charitable donation business to settle charges that they violated a Federal Trade Commission order by misleading consumers to believe that they were donating directly to legitimate charities serving police, firefighters, and veterans, when, according to the government, only a small slice of the donations actually went to these charities. 

The civil penalty against Civic Development Group, LLC; CDG Management LLC; and owners Scott Pasch and David Keezer is the largest ever in an FTC consumer protection case.  
 
Under the settlements, the defendants are permanently banned from telemarketing and soliciting charitable donations, and prohibited from making false claims about anything they sell. Pasch and Keezer are required to turn over numerous assets to a court-appointed liquidator.  Pasch will turn over a $2 million home; paintings by Picasso and Van Gogh valued collectively at $1.4 million; a guitar collection valued at $800,000; $270,000 in proceeds from a recently sold wine collection; jewelry valued at $117,000; three Mercedes, a Bentley, and various other assets.  Keezer will turn over a $2 million home, a Range Rover, a Cadillac Escalade, and a Bentley, among other assets.
 
According to the complaint, Civic Development Group’s telemarketers deceived consumers by telling them that they worked directly for the charities they called about, and that “100 percent” of the consumers’ donations would go to the charities.
 
The FTC first sued Civic Development Group in 1998, charging that telemarketers working for the company’s corporate predecessor misled consumers by falsely claiming that their donations would be used locally to buy bullet-proof vests and provide death benefits for deceased officers’ surviving family members.   In 2007, the Department of Justice filed a second complaint referred by the FTC, which alleged that the defendants had violated the prior FTC order.  The complaint charged that the defendants tried to circumvent state and federal telemarketing regulations by mischaracterizing themselves as “Professional Management Consultants” who were operating independently from Civic Development Group.  In fact, according to the government, the defendants continued hiring, firing, managing, and paying the telemarketers.  The telemarketers, in turn, continued to falsely tell consumers they worked directly for the charities, which received “100 percent” of the donations collected.  In fact, the charities received only 10 to 15 percent of the donations, and the balance went to Civic Development Group, the complaint alleged.