Charity-business marketing: Before you give, take time to check on legitimacy


After the Persian Gulf war, many Americans were seen proudly wearing Operation Desert Storm T-shirts, caps and pins. In some cases, the people thought part of the money spent on those mementos was being used to help war veterans and their families. Usually, that's exactly what happened, as money was funneled to groups such as the USO.

In other cases, however, no money went to a war-related cause. The people who sold the products benefited from the patriotic tie-ins, but the profits went into their own pockets, according to the U.S. Council of Better Business Bureaus.

Linking a charity to a product or a credit card is known as charity-business marketing, or a commercial co-venture. As the fund-raising season shifts into high gear between now and Christmas, people will not only have to figure out which charities asking for direct donations are legitimate, they'll also have to sort through the increasing variety of marketing schemes that may or may not help a charitable cause.

It's not easy.

In a typical charity-marketing arrangement, the company selling a product promises that "a portion" of the purchase price will go to a charity or non-profit organization.

Or, a charity may work with a bank to issue a special credit card with the charity's logo on it. When a consumer uses one of these "affinity" cards, a few cents of each purchase is passed along to the charity.

Music concerts such as Live Aid and Farm Aid also raise money by giving people a product -- in this case, entertainment -- to induce them to help a cause.

Even with legitimate charity-marketing efforts, finding out how much goes to the charity can be difficult. "Disclosure of the extent to which the charity benefits is the exception rather than the rule," says David E. Ormstedt, Connecticut assistant attorney general. "In most cases, there is no disclosure, as such."

With better groups that have been in business for a few years, however, it is usually possible to find out how much went to a charity in previous years, Mr. Ormstedt said.

In some cases, he noted, even the officials of a charity may not know exactly how much money they are getting from a promotion, because they aren't managing the sale of the product. "This can be embarrassing" for them, Mr. Ormstedt said. "By implication, it looks like they don't know what they're doing."

In any case, "the amount of money going to the charity is going to be small," says Richard Allen, director of the Massachusetts attorney general's division of public charities. "The bulk of the money is going to pay for the product or the performance."

Because the number of vague or fraudulent charity-marketing deals is growing so rapidly, the Council of Better Business Bureaus' Philanthropic Advisory Service sponsored a seminar on the subject recently.

"Not all ads are a problem," says Bennett Weiner, a vice president with the Philanthropic Advisory Service. "Many ads are completely accurate in the description of the charity and the amount of money that is given."

However, many other charity-marketing promotions "don't disclose at the point of sale how much of the purchase price is going to the cause," he adds.

In some cases, the cause may be legitimate, but the product is not. For example, the Statue of Liberty-Ellis Island Foundation has raised some $7.6 million for the restoration and

maintenance of those landmarks by selling coins, T-shirts, posters, clocks and other memorabilia over the last eight or nine years, says Gary E. Kelly, the foundation's vice president and controller.

The foundation's main problem, Mr. Kelly says, has been the sale of counterfeit items or items not authorized by the organization. In these cases, no money went to the foundation.

Sometimes, products don't benefit any charity, though they are sold on that premise.

One such operation was fined last month when the Massachusetts attorney general's office won an injunction and a $10,000 penalty against Floyd Lutz of Beverly, Mass., owner of Pride Products. The complaint charged that Pride Products' telemarketers falsely represented themselves as employees of, or volunteers for, charitable groups helping the blind or handicapped, and that proceeds from the sale of products such as trash bags, light bulbs and mops would benefit these groups.

The operation "was a sham," Mr. Allen says.

Consumers who want to support a charity by purchasing a product, souvenir or concert ticket or by using an affinity card should ask the fund-raisers, and themselves, some questions first, Mr. Weiner says.

* Will part of my purchase go directly to the charity? Or has the amount that will be given already been determined and, as a result, not depend on sales of the product?

* If part of the sales price is going to a charity, exactly how much is it? Is there a "cap" on the maximum amount the charity can receive?

* If this is a worthwhile charity, would it make more sense to make a direct contribution?

* Is the full name of the charity in the advertisement? Does the ad also include, or can I get, the address and phone number of the charity?

* How long will the campaign last? Will money from my purchase be received in time to help?

* If there is more than one charity involved in the promotion, how will the money be distributed?

* What are my plans for donating to charities this year, including direct donations to groups like the United Way, the Red Cross, or organizations supporting medical research?

One tactic used by many fund-raising groups, including those selling products and those asking for direct donations, is an appeal to urgency.

That may be fine for a well-known, respected charity. But if you haven't heard of the organization or cause, don't be rushed.

Also, Mr. Weiner says, "watch out for emotional appeals that describe a problem but don't say what the charity is doing to address the issue." A picture of a hungry child is sad, but the ad should say how your donation or your purchase of a product will help feed hungry children.

Finally, he suggests, don't give cash. Make out a check or money order in the name of the charitable organization, not in the name of the individual asking for money.

TC The Better Business Bureau has several publications to help people learn more about charities. One of them, "Give But Give Wisely," is a bimonthly list of about 300 charities that have generated the greatest number of inquiries. It tells whether a charity meets the group's standards for charitable solicitations.

For a copy, send $2 and a stamped, self-addressed envelope to Philanthropic Advisory Service, Council of Better Business

Bureaus, Box 023, Washington, D.C. 20042-0023.

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