The NonProfit Times - July 15, 2008 - (Page 11)

REGULATION MARK HRYWNA ‘Mark’ed Man Fitzgibbons gives regulators a rough time hen a state charity regulator meets Mark Fitzgibbons in person, Fitzgibbons admits the typical response is usually something to the effect of, “You don’t have horns and a pointed tail.” State charity officials and their filing requirements have long been a target of Fitzgibbons, president of corporate and legal affairs at American Target Advertising, the Manassas, Va. firm run by direct marketing legend Richard Viguerie. Described as “very litigious,”“contemptuous of regulatory authority,” or just downright “arrogant” and “a royal pain,” Fitzgibbons has taken on state regulators and their policies in court, as well as in numerous missives over the years. He recently has turned his attention to the National Association of State Charity Officials (NASCO). In fact, many of those contacted declined to speak on the record, because they do business with or have clients that do business either with regulators and/or Fitzgibbons. Others did not even want to be identified by where they are located. As one person described the skirmish between Fitzgibbons and NASCO: Sometimes when people are fighting, you jump in and break it up; other times you sit back and don’t get in the way. “It’s pretty clear that there’s a serious back and forth” between Fitzgibbons and NASCO President Hugh Jones, said one former NASCO member who declined to be identified, while emphasizing it’s “a very professional, strictly ideological debate” about fundraising regulation. “Most NASCO people would describe him (Fitzgibbons) as provocative but irrelevant,” said Geoffrey Peters, pro bono counsel to American Charities For Reasonable Fundraising Regulation (ACFRFR). It’s been that way for some time, he said, regardless of who the NASCO president has been. “In all fairness, if you asked people 15 years ago about me, you would’ve heard nothing but the same stuff,” said Peters, who is president of Creative Direct Response in Bowie, Md. It was shortly after joining American Target Advertising 15 years ago that Fitzgibbons began contacting state charity officials about the constitutionality of filing requirements, and the assault hasn’t let up. “Something had to be done,” he said, since the first time he had to fill out a registration form or the first time a client was denied the right to mail into a state, not because they were committing fraud, but because they had not correctly filled out a form. Peters related a story from a NASCO conference some 10 years ago. As he and others were waiting for the public session of the conference to open, NASCO members emerged from the private portion and one representative had a sign on his chest that read, Richard Viguerie. “They were role playing,” he said. Fitzgibbons may be “fairly strident in W his viewpoint,” Peters said, but it’s “not dissimilar from my own on regulation.” Many of the things talked about are issues he has a very good point of view on. It’s just something provocative. “In five years, maybe someone at NASCO starts listening and that tension changes,” Peters said.“It did for me.” Fitzgibbons wrote to Jones this past fall inquiring about NASCO’s finances and transparency. More recently, he proposed legislation to create an online disclosure system for charities, to avoid having to register in each state, something he believes could save at least $500 million annually in regulation costs. The current system costs charities $500 million a year, he said, and if money can be saved while getting better information available to donors, get information online ver- post. But he does remember getting a letter complaining about the state requiring a bond for fundraising counsels.When the state subsequently passed legislation to remove the requirement, Kelley recalls getting a letter of thanks from Fitzgibbons. As for Fitzgibbons’s proposal, “he has certainly been dogging us about it; we’ve received several letters from him,” said Jones.“His theory is it costs more to comply with these state registration requirements than is lost to true charity fraud generally, which is not a premise that I accept or agree with. In the last nine months or so, he’s written us several times.” In general, Jones said, “we have a big philosophical difference with him,” pointing to a New York Times article this spring that estimated $40 billion was lost to charity fraud or theft last year. “It certainly Mark Fitzgibbons sus going to state officials, it would be better for donors as well.“The biggest opponents to that will probably be state officials because they like the current system,which is a failure,” Fitzgibbons said. “Because NASCO won’t give information on how much fraud is out there, just looking online, half a billion dollars a year seems to be more than the solicitation fraud they’re preventing,” he said. Jones, the supervising deputy attorney general in the Hawaii Attorney General’s Office, said NASCO members would describe Fitzgibbons as “persistent but offtarget.” It’s clear there’s no one in the industry like him; he “seems fixated on dogging NASCO.” While some charity regulators said they’ve have had little or no interaction with Fitzgibbons, in other offices around the country, eyebrows get raised at the mention of his name.“Out of all the folks who register with us, he’s very disagreeable to work with, out of all the folks who register with us, he’s unique in that regard,” said one person who asked to not be identified. Todd Kelley, director of the Division of Charitable Solicitations and Gaming within the Tennessee Department of States, hasn’t had much back and forth with Fitzgibbon in his two years in the doesn’t cost $40 billion to comply with these state registration laws,” he said. As an umbrella group, Fitzgibbons believes NASCO shares responsibility for “some states acting irresponsibly.” Most NASCO leaders “have been very good people,” he said, “it’s just that the whole process and the regulators that are part of the group have acted irresponsibly.” Fitzgibbons points to the uniform state registration process. “It’s a nice concept,” he said, and NASCO can’t control what states do but it ended up being as long a form as some of the state forms before it, “so it didn’t accomplish anything.” Fitzgibbons expects most state charity officials would oppose his idea “because it takes away some of their power and…because it will dry up the fees they get.” He thinks most people, including donors, would favor the proposal because they don’t have to call the state to get information. “If they are diverting more donor money to compliance than fraud, just under a cost/benefit analysis, it would look like they’re not very effective at all,” Fitzgibbons said.“And, they just don’t like me,” he quipped. The 13-member board of NASCO rotates annually, with the president moving up from vice president then president- elect before remaining on the board in an ex-officio capacity the following year and ultimately rotating off the board. All state charity officials are members of NASCO unless they elect not to be, Jones said, describing it as a support group for charity regulators, both in continuing education as well as resources for how new problems arise in states. State charity regulators are on the front line of charitable oversight and are the “eyes and ears” of the Exempt Organization Division of the Internal Revenue Service (IRS), Jones said, since the IRS only audits 1,500 of the nearly 2 million tax-exempt organizations in a given year. He added that the protection of charitable assets is inherently a function of state attorneys general. While the IRS confers tax-exempt status and imposes excise taxes on certain prohibited transactions, it’s states “that take action to protect the actual charitable assets from diversion and prevent, investigate and remedy charitable solicitation fraud,” he said. Most regulators think they’re just doing their jobs, Fitzgibbons said,“but you end up having people who have an awful lot of control over which organizations can contact citizens in their state. And that’s dangerous. This is the problem under the First Amendment, you have regulators saying who can and can’t fundraise in various states,” he said. Fitzgibbons has routinely railed against “the current multi-state licensing scheme (that) robs donors of untold millions of dollars diverted from their intended purposes.” In a perfect world, charities would voluntarily disclose all of their operational and financial data and there would be no fraud, theft or embezzlement, said Jones. “Charities are human institutions and suffer from human imperfection.”As a voluntary system, no enforcement sanction could exist for organizations that elect not to volunteer their information or volunteer accurate and complete information, Jones said. “The contention that today's non-compliant entities would participate in his voluntary system to save the costs they are already avoiding is logically flawed, and it holds no real promise of inducing any voluntary disclosures of unflattering or questionable financial information,” said Jones. While he expects many probably believe he’s against all regulation or thinks there aren’t any charities of fundraisers committing fraud, Fitzgibbons said he’s only challenging regulators. “It’s in everyone’s best interest in my industry to get rid of those folks because they hurt their contributions. “No one wants be told they’re doing something wrong,” Fitzgibbons said, “but when people are in positions of authority, they don’t like that.They brand you as the enemy instead of saying maybe we should fix this.They end up not being creative in trying to resolve problems.” NPT JULY 15, 2008 THE NONPROFIT TIMES www.nptimes.com http://www.nptimes.com

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The NonProfit Times - July 15, 2008

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