Telemarketing Charities: An end run around the Do-Not-Call List?

[Derleth]

I've thought up something that might be possible and I want to know if it is. As you all know, charities are immune to the Do-Not-Call List: They can ring up people with impunity, regardless of their being on the List or not. Charities do this for the same reason everyone else mass-calls: money. They need money, and they think the outside world has enough of it to be worth the phone calls.

Businesses also have money in advertising budgets. Money that, until recently, could be spent in the millions (or, well, thousands) on the kinds of things the List is meant to curb.

So how about this: Businesses `donate' their ad budgets to charities on the condition that those charities do their dirty work for them: The charities, who are immune to the List, make the mass calls for the businesses, who are constrained by it.

Since the List is only effective against businesses, charities can make as many calls as they want to whoever they want. Can businesses harness that power to their own ends?

[Fear Itself]

Charities are strictly bound by the conditions 26 USC § 501(c)(3) that grants their federal tax exempt status. No charity is going to risk losing their tax exempt status and become liable for taxes on their income by playing fast and loose with the rules of their exemption:

501(3)(c) Federal Tax Exempt Status

A non-profit organization may elect to apply for the federal tax exemption status under 26 USC § 501(c)(3). An organization receiving a "501(c)(3) status" gains certain privileges and obligations. A 501(c)(3) organization is exempt from paying federal income taxes (but still may be required to file annual income information). Additionally, all persons and organizations that make contributions (money or property) to a 501(c)(3) organization will be able to claim deductions for their donations to the organization on the their individual federal income tax (amount of deduction to the extent allowable under federal statute, 26 USC § 170(c)(2)).

In order to be exempt under § 501(c)(3), an organization must file an application for exemption of Form 1023 showing that it meets the following tests: (1) It must be organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, for the prevention of cruelty to children or animals, or for the purpose of testing consumer products for public safety, or to foster national or international amateur sports competition (but only if no part of its activities involves provision of athletic facilities or equipment);

(2) Its net income must not be used, in whole or in part, to the benefit of private shareholders or individuals;

[snip]

(b) Do not expressly empower the organization to engage, except as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes.

[snip]

(2) The operational test requires that a 501(c)(3) organization be operated "exclusively for" the prescribed exempt purposes. The organization must engage primarily in activities that accomplish one or more of the exempt purposes. It is not regarded as exempt if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.

PROHIBITED ACTIVITIES:

[snip]

(b) The operational test requires that no private inurement results from the net income of the organization. An organization will lose its tax-exempt status if any part of the organization's net earnings inure to the benefit of any private shareholder or individual (i.e. persons having a personal and private interest in the activities of the organization).

1. An organization must not be organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or person controlled, directly or indirectly, by such private interests.

[snip]

(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does no participate in or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for pubic office.

[snip]

[Joe Random]

Originally posted by Derleth
So how about this: Businesses `donate' their ad budgets to charities on the condition that those charities do their dirty work for them: The charities, who are immune to the List, make the mass calls for the businesses, who are constrained by it.

Won't work. As soon as the charity starts taking money to make calls on behalf of a company, they are no longer acting as a charity, and thus they become constrained by the List.

[Dave_D]

Actually given the telemarking calls I've gotten in the past 2 days I think they've already gotten around it. All they had to do is just move the phone centers over seas.(I've gotten 2 telemarking calls from people with thick Indian accents and 1 with a really bad chinese accent.) I'm not sure what can be done if they do this. (And probably the people they use work rather cheaply.)

[Joe Random]

Originally posted by Dave_D
All they had to do is just move the phone centers over seas

Nope.

From http://www.donotcall.gov/FAQ/FAQConsumers.aspx

Q: Are telemarketing calls from overseas covered?

A: Yes. Any telemarketers calling U.S. consumers are covered, regardless of where they are calling from. If a company within the U.S. solicits sales through an overseas professional telemarketer, that U.S. company is liable for any violations by the telemarketer. The FTC can initiate enforcement actions against such companies.

[t-bonham@scc.net]

[quote]Note that it says "a company within the U.S.". So the obvious way to get around this is to have their foreign subsiduary hire the locals to make calls into the U.S.

P.S. I signed up on the no-call list (it worked fine), but mainly to indicate my support for anti-telemarketing efforts. I really don't expect it to have much effect on telemarketing. (The kind of slimeballs who do this for a living aren't likely to care much about such laws.) Certainly not as much effect as me saying "I'm not interested. Good-bye" and haning up within the first 10 seconds of their call.

[Joe Random]

Originally posted by t-bonham@scc.net
Note that it says "a company within the U.S.". So the obvious way to get around this is to have their foreign subsiduary hire the locals to make calls into the U.S.

The wording of the FAQ answer indicates that any company subject to US jurisdiction that hires someone else (even someone overseas) to make calls for them are still responsible.

I would venture to guess that if a foreign subsidiary were used to call you, the US-based parent company would still be ultimately responsible for any violation of the Do Not Call List. I really don't think that there would be such an obvious loophole.

The only people that would probably be exempt would be wholly foreign companies calling you on their own behalf, and that's not likely to happen.

The kind of slimeballs who do this for a living aren't likely to care much about such laws.

Considering that phone numbers can very easilly be traced, and violating the List can result in the company being fined of up to $11,000 per call, I'm pretty confident that the slimeballs will care about the list.

[Monty]

Plenty of people in the United States of America have "thick accents."

[yabob]

There's a more readily available loophole - surveys are allowed. I suspect that a fair number of telemarketing calls are going to become "surveys".

[Fear Itself]

Originally posted by yabob
There's a more readily available loophole - surveys are allowed. I suspect that a fair number of telemarketing calls are going to become "surveys".

How will telemarketers make money off of surveys? As soon as they ask you to buy something, it's not a survey, and they get fined $11,000. How do they get around that?

[yabob]

"Have you visited a Ford dealership in the last six months?"
"Would you consider buying a Ford automobile at this time?"
"Why not?"
"Were you aware that the new Ford Fliedermaus won best-in-its-class in the prestigous 'Driving machines for silly nits' awards?"

...

I'm conducting a "survey", not selling Fords, technically. I don't actually ask you to BUY a Ford, I just word the questions to imply that you ought to. And if called on it, I can state that I'm just trying to assess public awareness of my product. Yeah, right.

[Duke]

I work for a 501(c)(3). If a telemarketing concern tried to hide under the guise of a 501(c)(3) charity, let me assure you that the IRS would be very interested in it.

[t-bonham@scc.net]

Originally posted by Joe Random
Considering that phone numbers can very easilly be traced, and violating the List can result in the company being fined of up to $11,000 per call, I'm pretty confident that the slimeballs will care about the list.

Considering that the Republican Governor of our state has a plan to release sexual psychopaths from a state prison hospital to save money, I can't imagine much likelihood at all of any state prosecutor spending their budget on pursuing "telemarketers" -- they'll be far too busy with the murderers, rapists, etc. to pursue minor things like telemarketers.

I'm sure the law allows such fines: I just say they aren't very likely to actually happen.

Did you notice the recent conviction of the man responsible for the infamous "my late husband from Nigeria..." email scams -- he is known to have bilked people out of over $6 million -- he was sentenced to 18 months probation! What a tremendous deterrent that must be to other SPAMmer scammers. Haven't you all noticed a great reduction in the SPAM scams you get? Yeah, right!

[Fear Itself]

Originally posted by yabob
I'm conducting a "survey", not selling Fords, technically. I don't actually ask you to BUY a Ford, I just word the questions to imply that you ought to. And if called on it, I can state that I'm just trying to assess public awareness of my product. Yeah, right.

You obviously haven't recieved many telemarketing calls. Telemarketers (the employees making the calls) are paid by the sales they make. No sales, no paycheck. Nobody is going to pay somebody an hourly wage to make phone calls all day that can't be tied to sales. There is no motivation to succeed.

[Fear Itself]

Originally posted by t-bonham@scc.net
I can't imagine much likelihood at all of any state prosecutor spending their budget on pursuing "telemarketers" -- they'll be far too busy with the murderers, rapists, etc. to pursue minor things like telemarketers.

That's the beauty of the American system of law; if I get a call violating the law, I can sue the telemarketer. There will be no shortage of lawyers eager to take a portion of the $11,000 fine on contingency. No burden on state prosecutors at all.