WASHINGTON, Nov. 4 (UPI) -- The Supreme Court Monday agreed to review whether professional fundraisers can be prosecuted when they claim donations will be used for a specific charity but keep most of the money for themselves.
A lower court decided that the fundraisers were protected by the First Amendment. An eventual Supreme Court decision will have major repercussions across the professional fundraising industry, which raises about $200 billion a year.
The case before the court comes out of Illinois and involves a for-profit company called Telemarketing Associates Inc.
A petition from Illinois Attorney General James Ryan told the Supreme Court that the company raises money on behalf of VietNow, a charity with its national headquarters in the state.
"Telemarketing calls individuals to ask for donations," the petition said, "telling them that their contributions will be used for charitable purposes, including providing food, shelter and financial support for hungry, homeless and injured Vietnam War veterans."
In fact, the Illinois petition said, "Telemarketing keeps 85 percent of the donations it generates pursuant to its agreements with VietNow, which in turn spends only about 3 percent of all the money raised by Telemarketing to provide such charitable services to veterans."
Illinois sued the company, owner Richard Troia and an affiliated company in Cook County court, alleging common law fraud and violations of state fraud statutes.
The defendants asked a state judge to dismiss the complaints, saying they were barred by the free speech protections of the First Amendment.
The judge dismissed the complaints, and eventually the Illinois Supreme Court upheld the judge.
The state then asked the Supreme Court of the United States for review.
Illinois told the justices in its petition that the state Supreme Court was right when it said "this case has far-reaching implications for all fundraisers."
Telemarketers are handling an ever-greater volume of fundraising business, the state said, and the Illinois courts have ruled that the amount of money withheld from charities can never be used to support a claim of fraud.
The Illinois Supreme Court ruling "transformed the First Amendment into a license for unscrupulous fundraisers to defraud the public in the name of raising money for charity," the state said.
In contrast, a brief filed by the defendants said the state court was right when it said the First Amendment barred such claims.
The fraud claims were "based solely upon allegations that the professional fundraisers earned gross fees which the Illinois attorney general considered excessive and their gross fees were not voluntarily disclosed to potential donors."
The U.S. Supreme Court granted review Monday in a one-line order. Though not yet scheduled, the justices will probably hear argument this spring.
(No. 01-1806, Illinois vs. Telemarketing et al.)
