January 25, 2008

Direct-Mail Executive Proposes Voluntary Fund-Raising Disclosure System

Following Congressional criticism of the fund-raising practices of some veterans charities, an executive at a prominent direct-mail company that became embroiled in the controversy has proposed a new system for providing information to donors.

The U.S. Supreme Court has restricted the ability of regulators to control the way charities raise money on grounds that such activities are tied to advocacy and education and thereby merit free-speech protection under the First Amendment.

But Mark Fitzgibbons, president of corporate and legal affairs at American Target Advertising, in Manassas, Va., says his system would pass muster because it would be voluntary. He has proposed that charities be asked to post online one standardized form giving details about their fund-raising activities—instead of requiring them to register in multiple states where they raise money.

That, he writes in his proposal, would replace a cumbersome process under which “hundreds of millions of donor dollars are diverted annually” by charities to fill out paperwork to comply with state disclosure laws.

Mr. Fitzgibbons has submitted the proposal to Rep. Christopher Shays, a Connecticut Republican who sits on the House Oversight and Government Reform Committee. That committee has held two hearings on veterans charities since December, with lawmakers blasting certain groups for spending large percentages of their donations on fund-raising activities, or in some cases on high salaries and perks.

Some lawmakers said legislation may be needed to rein in such practices.

Richard Viguerie, chairman of American Target Advertising—a pioneer in the use of direct mail to promote political causes—was asked to testify at the second hearing because his company raises money for one of the charities the committee scrutinized, Help Hospitalized Veterans, in Winchester, Calif.

Under Mr. Fitzgibbon’s “opt-in” proposal, charities and other nonprofit groups that raise money would complete a form to provide the kind of information that state regulators now demand — such as address, names of board members, executive salaries, source of revenue, as well as the amount spent on fund raising and the names of outside fund raisers.

The organizations would also post their contracts with fund-raising firms and any other information they wanted to add about their programs or other activities. They would include the Web address on all solicitation materials.

The voluntary nature of Mr. Fitzgibbons’s proposal will probably dismay people concerned about charity fund-raising abuses. But he argues that more nonprofit groups would make information available than they do now because his system is so much simpler and cheaper than the state-registration system, which he says many charities evade.

Furthermore, he says, since the data will be available online, “more donors across the country will have access to the information.”

At the Congressional hearing, Mr. Viguerie criticized lawmakers for failing to open their own fund-raising activities to the same kind of scrutiny that charities do. Mr. Fitzgibbons offers a remedy for that: His proposal would also apply to committees that raise money for state and national politicians.