Court ruling on fund-raising could heighten scrutiny

NEW YORK –Jewish philanthropies could come under new scrutiny in the wake of a Supreme Court decision tightening rules on fund-raising.

The Supreme Court ruled last week that the First Amendment's guarantee of free speech cannot be used to protect telemarketing companies if they mislead donors about what portion of their contributions will go to the intended charity.

The 9-0 ruling arose out of an Illinois case in which Telemarketing Associates retained 85 percent of the money it raised for the veterans group VietNow, but told donors a significant amount would go to the veterans.

Legally the ruling will not deeply affect Jewish federations, foundations and other nonprofits because few of them use telemarketing widely in fund-raising. But the case could raise new public awareness about charities, many say.

"This is a wake-up call to the entire philanthropic community," said Michael Fischer, a consultant to the United Jewish Communities federation umbrella in New York. "Whenever there is significant abuse uncovered, it certainly has a significant effect on how everybody looks at what they do."

Despite that new focus, the high court's ruling is unlikely to prompt legal or ethical restrictions on many Jewish nonprofits.

Most Jewish groups don't rely on telemarketing firms to do their fund-raising, for a variety of reasons.

Most "dialing for dollars" by the UJC's 156 member federations is conducted by volunteers during annual Super Sundays and ongoing phonathon campaigns, Fischer said.

Federations also have a built-in "constituency," Fischer added, and don't generally need to spend money in order to raise money via contractors, a process known as "donor acquisition."

The S.F.-based Jewish Community Federation won't be affected at all by the ruling. "We don't make use of professional telemarketing services because of the cost," said Stacie Hershman, director of the JCF's campaign. "We never have and would never contract with a company that charges based on a percentage of what's raised."

Those federations that do rely on telemarketing tend to be smaller organizations, Fischer said.

The Jewish Community Federation of the Greater East took in $14 million and spent about $1.5 million on fund-raising — though only about $25,000 of that was for a telemarketing firm, the federation's executive vice president, Ami Nahshon, said.

But that federation hired the telemarketing firm for a flat fee, not on a per-dollar basis, which Nahshon said is in line with a standard code of ethics.

"When we use mass-marketing techniques, telemarketing or direct mail, we're very conscious of the cost," he said.

Though Nahshon said any new attention on fund-raising ethics arising from the telemarketing ruling was welcome, others said they doubted the ruling would make much of an impact on the Jewish philanthropic world.

Ira Kaminow, a Washington-based public policy analyst and a Jewish philanthropy watchdog, said the telemarketing ruling has not attracted much attention generally, and was not likely to stir much reaction.

"I don't think this will have any impact on any brand-name Jewish philanthropies," he added.

"I would be surprised if this had a shelf-life of more than one month or two," added Kaminow, who has launched a Web site called to raise ethical standards of Jewish philanthropies, and who was able to observe the closing arguments in the high court case.

Still, the ruling "might have a chilling effect in that organizations might be more reluctant to hire telemarketers," he said.

Mark Charendoff, president of the Jewish Funders Network, which supports Jewish family and other nonprofit foundations, said the ruling raises far-reaching questions about fund raising generally.

"Quite apart from what the law demands, is there an ethical standard that Jews working in the not-for-profit world, or Jews funding not-for-profit agencies, ought to hold themselves or others to, in terms of reasonable allocation of overhead costs?" he said.

"To me, the story was a wake-up call, or should serve as a wake-up call, to say, 'If this is something Washington is concerned with, I would much rather have the not-for-profit community, and certainly the Jewish not-for-profit community, take the high road in policing ourselves,' '' he said.