Fund-Raising Firm Is Target of 2 Investigations

State and local agencies announced parallel investigations into a telemarketing business Monday after disclosures by The Times that the firm has received donations for nonexistent charities and real charities that it does not represent.

Robert Burns, general manager of the city’s Social Service Department, said he will begin an investigation of Valley Fund-raisers in conjunction with the Los Angeles Police Department bunco/forgery unit and the city attorney.

“We’re taking a look at it,” James Cordi, Los Angeles-area supervising attorney for the state attorney general’s Registry of Charitable Trusts, said Monday.

The Times reported Sunday that Burbank-based Valley Fundraisers, which collected more than $2.6 million in charitable donations in the last four years, deposited checks made out to at least nine charitable organizations that had not authorized the firm’s solicitations and received no contributions.

The firm also deposited checks made out to more than 24 names that could not be matched to any charity registered with the Internal Revenue Service, The Times reported.

Thomas Galambos, president of Valley Fundraisers, acknowledged in aninterview that what he called “mistakes” have been made, blaming overzealous employees who had acted without his knowledge.

He said he has corrected every error he learned of by refunding the donors’ money. He said he has issued hundreds of refunds over the years.

Valley Fundraisers, a business whose telephone solicitors call households across the Los Angeles area, is licensed in California and Los Angeles to solicit on behalf of only three charities. Its contracts with those charities allow it to keep 85% to 90% of all the money it raises to pay solicitors’ commissions and operating expenses and as profit.

Both Cordi and Burns said it was too early in their investigations to discuss what sanctions might be sought against the firm. Investigations of other charity telemarketing firms have resulted in revocation of solicitation licenses, injunctions prohibiting continued operations and prosecutions seeking civil penalties. State and municipal laws prohibit fraudulent solicitation but have rarely been used, said Burns and Assistant Atty. Gen. Carole Kornblum, head of the Registry of Charitable Trusts.

The leaders of charities listed as payees on checks collected by Valley Fundraisers had differing reactions to the disclosures.

Arthur Stein, president of Children’s Wish Foundation International of Atlanta, said the organization’s attorney will contact the attorney general’s office to find out what steps can be taken for prosecution.

Others feared that the misuse of their names would tarnish the image of all charities.

Valley Fundraisers’ activities “could potentially hurt charities that do so much good for so many people,” said Ted Federici, chief operating officer of the March of Dimes Birth Defects Foundation. “We hope people will not stop giving to worthy causes because of this incident.”

“Charity telefunding is one of the newest and trendiest types of telemarketing fraud we’re looking at,” said Sue Frauens, acting regional director in the Federal Trade Commission’s Los Angeles office.

“I think the shift from straight commercial telemarketing scams to (charity) fund raising is the belief that they’ve found an enforcement loophole,” Frauens said. “Many believe that because charities are exempt from a number of statutes they can get through these loopholes.”

In the past year, the commission has filed four complaints against charity telemarketing firms based in Nevada, which has no telemarketing registration requirement.

Frauens said she could not comment on Valley Fundraisers. Generally, though, the trade commission asserts jurisdiction only when telephone solicitations are made across state lines, she said.