News : Telemarketers Keep Dollars Raised for Charity
Chicago, IL, USA, Aug 28, 2015 -- In a faded brown brick building on the Far Northwest Side, minimum-wage workers reading from scripts asked ordinary Americans to help heal war-torn veterans, equip cops with bulletproof vests and fulfill the wishes of ailing children.
Their pleas brought donations pouring into the call center and a handful of others in the Chicago area run by Safety Publications Inc., a for-profit telemarketer that told Illinois authorities it raised $4.9 million for U.S. charities from 2008 through 2014.
But if people asked what percentage of the money actually went to a charity, "we would basically just say we didn't know. 'I don't have that information available,'" said Joseph Rosellini, a former Safety call center worker.
Safety gave the nonprofits only about 15 cents of every dollar raised in those seven years and kept the rest for itself, a Tribune analysis of government records found. Many of those charities in turn spent their nickels on administrative overhead, leaving pennies for those in need, the records show.
Safety and a linked charity telemarketer also have employed at least 10 callers who served prison terms for bank robbery, forgery, child rape and other felonies since 2007, the Tribune found, despite Illinois' prohibition against using felons to raise charity money. The law is designed to ensure the trustworthiness of nonprofit solicitors.
"Here I am an ex-con, raising all this money for coppers," said former caller Michael Veysada, 51, who has spent much of his adult life locked up for aggravated battery, theft of truckloads of industrial equipment, 10 bank robberies and a carjacking.
Veysada said he learned about the Far Northwest Side call center through fellow ex-inmates at a Chicago halfway house. "I got the job because there's a bunch of convicts working there," he said.
Safety co-owners Adam Herdman and Arthur Olivera did not respond to requests for comment, but Herdman issued a written statement saying, in part: "Professional fundraisers that solicit charitable contributions are heavily regulated by state agencies. ... Safety Publications works hard to comply with these laws regulating charitable solicitations in Illinois and the other states in which it solicits."
The Illinois attorney general pursued Herdman and Olivera for years with civil court allegations that they misled the public, failed to make required state filings and hired felons as callers.
Yet the partners endured in a money-draining sector of American philanthropy that frustrates government authorities and reputable nonprofits alike — a nationwide network of for-profit telemarketers and substandard charities that cite free-speech rights to stave off regulators and raise millions from the public each year.
Authorities can fine or even shut down charity telemarketers who intentionally deceive potential donors — those who promise that all donations go to the cause, for example, or falsely state they are police officers or veterans.
But the U.S. Supreme Court in 2003 said state regulators cannot limit the percentage kept by for-profit solicitors because doing so could choke off the free-speech rights of all charities.
That case centered on VietNow National Headquarters, a Rockford charity that pledges to help veterans overcome joblessness and post-traumatic stress disorder. After paying Safety and other telemarketers and then racking up its own convention and administrative expenses, VietNow last year spent well under 10 percent of the donations on direct service to military veterans, the Tribune found.
"Basically, I don't know how else to raise money," VietNow President Joe Lewis told the Tribune. "That's the truth, and that's the sad part."
To protect people who support nonprofits, Illinois requires charities to report the dollar amount raised by for-profit solicitors and the percentage of donations they take. Telemarketers must separately file their contracts with charities and provide data about callers' criminal backgrounds.
But a Tribune examination of publicly available reports since 2007 revealed record-keeping shortfalls that undermined efforts to determine who raised the money and where it ended up. Safety did not provide the attorney general with a required list of its callers for 2011-12, for example.
And though VietNow reported that Safety had raised $2 million for the charity from 2008 to 2014, Safety did not disclose raising any money for VietNow on its separate state filings. In 2011 and 2012, Safety filed a copy of its VietNow contract to solicit donations in Illinois and Indiana but did not provide a dollar amount raised.
A spokeswoman for Illinois Attorney General Lisa Madigan said Safety might have solicited donations for VietNow only outside of Illinois — in which case Safety would not have to report its activity — or Safety could have omitted required records.
With registration papers filed by hundreds of telemarketers, thousands of hired callers and more than 30,000 charities each year, the attorney general works to spot wrongdoing but cannot investigate every filing, spokeswoman Eileen Boyce said.
Similarly, Boyce said, the attorney general is not expected to verify telemarketers' statements about the criminal backgrounds of their callers.
Illinois court cases show how persistent some charity telemarketers are even as state authorities take repeated action against them.
Madigan in 2004 accused Chicago telemarketer Peter Ruderschmidt and his Vet-Pol Advertising of falsely claiming their callers were police officers. Madigan was back in court two years later to allege similar breaches and then sued a third time in 2009 before Vet-Pol shuttered.
Two key charity executives working with Vet-Pol in that case, David Dierks and Phil LeConte, continued to operate despite those Illinois court actions. Their Austin, Texas-based Police Protective Fund raised more than $5 million in 2013 — the most recent year for which figures are available — amid warnings by police agencies around the country that the fund is a "scam" not associated with law enforcement, records and news reports show.
That fund's executives and Ruderschmidt did not respond to requests for comment.
From 2002 through 2009, Madigan's office filed at least nine civil fraud lawsuits against allegedly unscrupulous charity telemarketers, but the Tribune could identify only one case since then. In May, Madigan joined the Federal Trade Commission and state regulators from 49 states and the District of Columbia to accuse the operators of four Florida cancer charities of bilking more than $187 million from donors nationwide.
Boyce said that summary does not account for other recent cases in which the attorney general's office fought charity fraud that did not involve telemarketers.
A resilient business
In Safety's call center at 5944 N. Milwaukee Ave., workers said, they sat hunched over computerized phones that automatically dialed potential donors in Illinois and across the country, waiting for someone to pick up.
"It was sweatshop, obviously," said former caller Martin Andrews. "... You are talking to old people: 'Sonny, I don't know, I don't get my Social Security check until the first of the month,'" Andrews recalled. "You can't have a conscience."
Former Safety caller Alex Fracek remembered the donors as "mostly elderly people who seemed like they wanted somebody to talk to. I feel like that's part of their business plan," he said.
"They are leaving key pieces of information out that should probably be put forth for the decision-making process, because 90 percent of those people, if it had been mentioned in the call that only a small amount is going to charity, I don't think they would have given anything."
New hires typically worked the phones within two to four hours after listening in and role-playing with a floor manager to recite charity-approved scripts that emphasized politeness even when being rejected, according to court records and interviews with former workers.
At the top of one fundraising script for a police organization was a warning to callers: "You must recite verbatim! ... If you fail to adhere to these guidelines in any way, your employment will be terminated immediately, and you may be prosecuted!!!"
Herdman, 41, and Olivera, 51, launched Safety and linked companies in the mid-1990s. Their operation barely broke even in its early years, and the co-founders didn't always take salaries, Olivera said in a 2006 deposition for an unsuccessful lawsuit brought by disabled police officers.
Olivera acknowledged in that deposition that he had a 1983 felony arson conviction. Yet in Safety's state registrations since 2007, he checked a box stating that no officers or shareholders had felony convictions.
"Our office was not aware of the conviction," Madigan spokeswoman Boyce said. "If he has a 1983 felony conviction, then the forms that he signed were inaccurate."
By 2011, Safety reported annual donations of $1 million, though the firm states in records that revenues dropped sharply in subsequent years. Telemarketing has gotten tougher as American households shed landlines — it is illegal in most cases to autodial cellphone numbers — and use caller ID to deflect unwanted solicitors.
Like similar telemarketers across the U.S., Safety made calls on behalf of charities known for inefficiency.
For example, Safety and other telemarketers raised $472,000 in donations for Firefighters Burn Fund Inc. in 2013 but kept 82 percent of it. That charity dispensed just $29,500 in "grants and assistance" to burn victims, tax filings show.
The same year, Childrens Charity Fund Inc. received only 19 percent of the $430,000 in donations raised by Safety and other professional fundraisers. The charity spent just $9,500 in grants and medical equipment for seriously ill youths, and another $33,000 "educating the public," according to tax filings.
Representatives of those two Florida-based charities did not respond to requests for comment.
Herdman and Olivera's rise in this industry came amid repeated court actions by Illinois' attorney general.
In a 2002 lawsuit, Madigan accused Herdman, Olivera and Safety of hiring felons and of concealing their fundraising for a Chicago police organization through subcontractors, court records show. Without admitting wrongdoing, Herdman and Olivera signed a court agreement to refrain from hiring felons, uphold Illinois law and pay $30,000 to the state Charity Bureau Fund.
Yet when Tribune reporters recently ran criminal background checks on 56 Safety callers registered since 2007, six had felony records.
On a Safety registration form filed with the Illinois attorney general in July 2010, Thomas M. Siebert checked boxes stating he had not been convicted of any prohibited crimes.
But Siebert, 60, had served more than 12 years in Florida prisons for felony convictions including cocaine possession, robbery, theft and battery, the Tribune found.
After his last release from a Florida prison in 2007, Siebert moved to Elgin, where he was convicted in 2008 of felony aggravated battery and attempted kidnapping for punching a 21-year-old college student several times in the head as he dragged her by her hair toward his car.
Siebert, who no longer works at Safety, declined to comment on his 2010 telemarketing registration form or on his criminal background. "I paid my debt to society and, more important, Jesus Christ paid my sin debt. Mine is ultimately a success story," he told the Tribune.
A few months after taking the Safety job, Siebert was arrested twice in Kane County for peeping inside women's public restrooms and also resisting arrest during one of those incidents. He resolved those cases by pleading guilty to one count of misdemeanor disorderly conduct, court records show.
Siebert said he learned only from Tribune reporters that Safety kept more than 80 percent of the charity donations he and other callers raised.
"It's surprising to me that the law would allow that," Siebert said. "The way it was presented to us as employees is that we were making a contribution to the betterment of society."
Blurred company lines
Five years after its first lawsuit in 2002, the Illinois attorney general sued Herdman and Olivera again, alleging that they failed to register the firm Automated Professional Marketing when calling homes for donations to buy bulletproof vests for police officers, and also that they misled donors by suggesting the callers were cops.
State lawyers wrote in court papers that Herdman and Olivera's alleged breaches "are rendered more egregious and knowing by the fact that they have previously been sued by the Illinois Attorney General and have previously consented to a permanent injunction."
Without admitting wrongdoing, the partners in 2007 agreed to pay an additional $30,000 to the state. Since then, a Madigan spokeswoman told the Tribune, Automated "has never registered or, as far as we know, operated as a professional fundraiser in Illinois."
Yet records and Tribune interviews show blurred lines between Safety, which is publicly registered, and Automated, which is not.
Signs on the Milwaukee Avenue call center advertise both firms, and five callers registered by Safety since 2007 told the Tribune their paychecks came from Automated. One employee registered by Safety declared in separate federal bankruptcy documents that he worked for Automated, and didn't mention Safety.
In addition to the six felons registered by Safety, the Tribune identified through records and interviews at least four unregistered charity callers with felony records who said they worked for Automated.
Patrick E. Conroy, 45, served prison time in Iowa and Illinois for forgery, theft and criminal sexual assault of a 14-year-old girl before working at Automated in 2007 and 2008, according to government records and a telephone interview with Conroy at his central Illinois home.
"It was a means to surviving," he said of the job.
Conroy's brief stint as a charity telemarketer came after he was released from one prison sentence and lasted until he was incarcerated again, records show. He said the pitches to help cops and firefighters felt demoralizing.
"You interrupt someone doing something or other and they're not happy about it, especially when you are asking them for money," Conroy said.
Laurence Stepney, 55, served prison sentences for armed robbery and aggravated criminal sexual assault of a 17-year-old before working his way up to floor manager at Automated, according to court records and Stepney's account in an interview.
"When I was a manager, I had ankle bracelets on each leg," he said.
Stepney said he helped recruit ex-convicts for the Milwaukee Avenue call center by dropping off help-wanted fliers at halfway houses. Asked whether new recruits were properly registered with the state, he would say only that there were "gray areas" and "a little crack in the law."
"Keep in mind, professional fundraising is a hustle," Stepney said. "Anyone who lasted more than six weeks had a hustler's instinct."
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Terry L. Conner, 58, told the Tribune in a letter that he worked for Automated for "about six months, give or take a month or so." That stint followed Conner's 2006 release from an Illinois prison after serving time for convictions including armed violence, aggravated battery and theft.
Conner is now serving a 31-year sentence in Washington state for stabbing a man to death during a 2008 crack house robbery that netted $7.25.
Veysada, a career offender with what federal prosecutors called "a startling history of crime and violence," acknowledged in a phone interview from an Arkansas federal prison that he had solicited charity donations for Automated.
"There were high school kids there too," said Veysada, who is best known as the "Winnie the Pooh bandit" owing to a sweatshirt he wore during a Chicago-area bank robbery. State registration forms show some Safety callers were as young as 15.
Veysada said floor managers listened in to ensure that he and other callers didn't misrepresent themselves as law enforcement. His voice boomed as he recounted telling a potential donor:
"No ma'am, I am not a trooper. If all the troopers were in the phone booth, the bad guys would be running the street, taking over the street. We work for the troopers. Would you like a gold, silver or bronze packet? It's going to come complete with stickers ...."
Veysada said he openly disclosed his criminal past on his job application. "I put that I am a felon."
"I was actually working a job," he added. "I could have been out doing bad and just scamming everybody."
Posted by Veronica Silva Cusi, news correspondent
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About Safety Publications Inc:
Safety Publications Inc. is a for-profit telemarketer.
Published: Monday, August 31, 2015
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