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Fund-Raiser Is Undaunted by State, Federal Scrutiny

Charities: Mitchell Gold's tactics, profits have been criticized. He maintains he's doing nothing wrong.

May 16, 1999|DANIEL YI and JACK LEONARD and RAY F. HERNDON | TIMES STAFF WRITERS

The telephone pitches were appeals to the heart: Firefighters disabled on the job needed help. So did young victims of fires, left with scars "that will haunt them for years to come."

Telemarketers told donors to leave checks under their doormats for immediate pickup. Those who balked at the request were disparaged as unkind or uncaring. Some said they were even threatened by the solicitors, who identified themselves as police officers and firefighters.

"We are the police. We know where you live," one phone operator told a man who refused to make a donation.

Such tactics, detailed in interviews and court papers, have long been the practice of Orange County-based fund-raising companies run by San Juan Capistrano businessman Mitchell Gold and his family, state and federal officials say.

Five states have sued Gold's various companies over the aggressive sales pitches, and courts in California and three other states have prohibited his firms from raising funds there. Gold appealed the California judgment and continues to collect millions of dollars.

"I am not hiding under a rock. I believe what I am doing here is right, legal and moral," said Gold, who has never been charged criminally in connection with the fund-raising activities.

Charities that contract with Gold's firms received only a fraction of total donations, according to a Times analysis of financial reports filed with the California Registry of Charitable Trusts.

The records indicate that Gold's companies collected $6.8 million between 1995 and 1997 on behalf of roughly a dozen charities, which received about 11% of the sum.

The Foundation for Disabled Firefighters, for example, received $26,000 out of $431,457 raised in its name in 1997. Another charity, American Deputy Sheriff's Assn., received $55,500 out of $299,027.

By contrast, the state's 112 commercial fund-raisers as a whole passed on nearly 44% of the $193 million they raised for charities in 1997. The law doesn't limit how much fund-raisers can keep, and critics have long complained that the industry receives little government regulation and oversight.

FTC Sues Companies, Gold in Federal Court

The National Charities Information Bureau, a New York-based watchdog group, recommends that charities spend at least 60% of all money raised on causes or programs.

Now, the Federal Trade Commission is targeting Gold, his firms and several company officials with a civil lawsuit accusing his telephone operators and subcontractors of posing as police officers and firefighters.

The civil suit, filed in U.S. District Court in Santa Ana last November, also charges that some solicitors for Gold's firms falsely told donors that the majority of money raised in the name of disabled firefighters and police officers, hospitalized children, veterans and others went to the charitable organizations.

The FTC cites dozens of examples of alleged misrepresentation in court papers, including one case when a solicitor promised donations would go to provide smoke detectors for children. Federal officials charge that the smoke detectors were never purchased.

The FTC allegations are similar to those raised in 1992, when the California attorney general's office accused Gold, one of his companies and firm officials in a civil lawsuit of misleading donors. Officials also accused him of creating charities whose main purpose was to profit his telemarketing operation. An Orange County Superior Court judge eventually ordered Gold and his family-run company to cease fund-raising in California and to account for nearly $15 million the firm had raised between 1988 and 1993.

Gold appealed the judgment, changed the name of the company and continues to do business while the case is on appeal.

Gold strongly asserts he's done nothing wrong, saying his legal problems are the result of a few rogue subcontractors and overzealous government officials who disapprove of commercial fund-raising.

He acknowledges that a relatively small percentage of the money his companies raise actually goes to the charities. But telephone fund-raising involves high overhead costs, Gold said, and most of the proceeds go to his subcontractors who make the calls. Most charities that contract with his firms are grateful for the proceeds they do receive, he added.

"Their survival depends on people like us," he said. "It is an expensive process."

He said some phone pitches may have gone too far but blames subcontractors for the problems.

Government attorneys disagree, saying Gold's companies have a long history of deceptive fund-raising practices. The FTC lawsuit alleges that Gold knew about the questionable tactics of his fund-raisers and showed "deliberate indifference to the truth."

Critics Call Oversight of Fund-Raisers Weak

To critics, the cases highlight the loose regulations and weak oversight of the $138-billion-a-year charity fund-raising industry.

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