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Gross Profit: Money Given to Clipboard Kids Rarely Makes It to Nonprofits 

Wednesday, Sep 28 2011

Most San Franciscans know this scene: A group of energetic young people with clipboards want your attention and money. Pedestrians walking past Sansome and Clay streets register the fluorescent shirt, the readiness to pounce, before the solicitor can get out her opening line: "Hi, sir! Do you support Planned Parenthood?" With three more girls in the same hot pink apparel blocking the walkway nearby, there's no sidestepping this solicitation. You might avert your eyes, answer a nonexistent phone call, or mutter an excuse: "Yes, I already do;" "Of course, but I'm in a hurry." And then there's always "No."

This work teaches you how to become numb to rejection. The canvasser, who introduces herself as Marquita Davis, dances in place, revving up for the next interaction. Showing no signs of wear and tear, upbeat and earnest, she is a poster child of do-goodism.

When Anastasia Petro takes the bait and stops, Davis launches into a cascade of facts about how Planned Parenthood has fought to retain its federal funding. It works. Petro gives what most people won't — her ear and $10. "My interest was sparked because Planned Parenthood has had funds cut," she says. "It seemed like a good cause."

If Davis can track down more Petros to donate a one-time gift, or perhaps $30 monthly, she might get to keep going another day.

Don't be fooled by her Planned Parenthood shirt or impassioned speech; Davis may look like a volunteer, but she is a paid solicitor with Grassroots Campaigns, Inc., a for-profit company that nonprofits pay millions of dollars to run expensive, nationwide fundraising drives on their behalf. Headquartered in Boston, GCI uses Craigslist, college outreach, and other forms of advertising to recruit idealistic teenagers and twenty-somethings who will take the long days in exchange for minimum wage, some commissions, and a platform to support liberal, progressive organizations — what the company refers to on its website as "good causes and candidates." This summer, GCI employees across the country also canvassed for the American Civil Liberties Union, Amnesty International USA, Freedom to Marry, and Save the Children.

Most people, like Petro, say Davis' breezy introduction that she is a "paid fundraiser for Grassroots Campaigns" — a disclosure that is required by law — does not resonate with them. Coupled with the Planned Parenthood insignia, "Grassroots Campaigns" does not connote for-profit fundraising. Because Davis does not elaborate, it's left to patrons to ask: How much of the donations will the charity receive and how much will GCI keep? The answer GCI provides time after time is that 100 percent of the money goes to the charity.

In fact, most of the nonprofits are expected to receive zero percent after expenses — as was the case eight out of nine times in California last year. GCI's charity clients rarely make any revenue during a campaign, and may not see returns for years down the line. Yet GCI and the charities it works for continue to defend the "100 percent goes to the nonprofit" claim. Under California law and according to the contracts between GCI and the charities, all of the money GCI collects must initially be placed in the nonprofit's custody. From that perspective, the charity does receive 100 percent of the money.

Just one small caveat people on the street never hear: GCI bills the charity, usually on a weekly basis, and that bill could total thousands of dollars. Telling people that 100 percent of their donations will go to the charity is akin to telling restaurant patrons that meals are free ... until the check arrives.

Fundraising regulators and experts call this tactic unethical, dishonest and an omission of material fact.

GCI, proponent of progressive candidates and organizations, has not embraced transparency as its governing philosophy. When questioned, most of the young hires could not and most of their superiors would not explain why they tell donors that the nonprofits get 100 percent of their money — which is only about 10 percent of the truth.

Each year, the California Attorney General's Registry of Charitable Trusts requires its 331 registered commercial fundraisers to submit information about every national campaign they conduct that concurrently runs within the state — detailing the amount of money raised, their own costs, and how much the charities received after expenses were deducted.

According to the state's most recent data from 2009, charities kept an average of 42 percent of the total funds raised by commercial fundraisers. Though GCI's 0 percent return rate is rare, the U.S. Supreme Court has ruled that state regulators cannot set arbitrary limits on costly fundraising. They can, however, insist that fundraising professionals divulge these expenses. Such is the case in California, where solicitors, if asked, must disclose the percentage of money the for-profit is expected to receive, based on the previous year's annual report.

Though the contracts between GCI and the charities vary, the nonprofits generally pay a set rate, and some pay the company an additional percentage-based bonus commission. According to the 2011 contract between GCI and the American Civil Liberties Union, the ACLU pays GCI a flat $180 for every canvasser per 4.5 hours.

People solicited on the street, however, would not know GCI is paid according to such contracts — even though California law prohibits commercial fundraisers from misrepresenting "directly or by implication" what the charity is expected to receive after fundraising costs have been subtracted. Legally, a misrepresentation "may be accomplished by words or conduct or failure to disclose a material fact." If asked, canvassers must immediately disclose what percentage of money will be spent on GCI's fundraising costs.

SF Weekly reporters posed the same question to 10 GCI canvassers: "How much of the donation will go to the charity?" Even when specifically asked how much money the charity would keep after GCI's bills, the canvassers gave the same answer: 100 percent. We asked them how this was possible, "if you are a 'paid fundraiser for Grassroots Campaigns.'" They floundered for an answer.

"We get paid, and then the rest of the money goes to Planned Parenthood,"said Davis.

"I don't know. That's a good question," replied Elle Segal, a canvasser in a blue ACLU shirt, who is also a director in GCI's San Francisco office. She said she would ask someone.

Throughout the city, canvassers affirmed that all of the money would be given to and remain with the organizations emblazoned across their shirts — in this case, the ACLU, Amnesty International USA, and Planned Parenthood (only the ACLU responded to interview requests).

Every morning before hitting the streets, the canvassers attend a briefing where they go over the information in their scripts, or "raps." Located in One Hallidie Plaza near Union Square, the entrance to GCI's suite promotes summer jobs: "Equality for All," "End Poverty," "Protect Civil Liberties." Inside, the canvassers' uniforms — a technicolor collage of different charity T-shirts — adorn one wall. On a recent summer day, the office was vacant except for canvasser and director Segal; Michael Moeder, the San Francisco regional director; and Lindsay Harkins, the national recruitment director. Harkins and Moeder said they did not know how many employees worked in the San Francisco office. They both said that 100 percent of the money would go to the charities, but would not elaborate on how. That was a question for the national office, said Harkins.

Further up the chain of command, GCI Vice President Wes Jones declined to speak on the phone, and also turned down our requests to attend a morning training session and interview other GCI executives. In an e-mail, he wrote, "In fact, we turn over 100 percent of the money raised on the streets and at the door to the organizations we are representing. In turn, the organizations pay GCI a fee for the services we're providing, which are inclusive of, but not limited to, signing on donors."

Jones failed to explain why canvassers, directors, and a member of the national team could not articulate this information — that the charities pay GCI in return, leaving them with little, if any, of the money (at least in the short-term).

"You seem to place no value on the visibility, public education, and grassroots campaigning work that groups are hiring us to provide, in addition to building the membership base and raising money, when they hire us to canvass," Jones said.

He also did not respond to a question about why GCI employees in California claimed "100 percent" of money raised went to charities, when, in Massachusetts, GCI reported the opposite. Question 11 on the Massachusetts Attorney General's Form 10A asks commercial fundraisers the following: "If prospective contributors ask how much of their contributions will go to the charitable organization, what will they be told?" GCI often responded, "We estimate that after expenses roughly 0% of the average donor's contributions will go to the charity." These forms were signed by GCI and the respective charities. Question 10 asked for the "approximate percentage of gross receipts that the charitable organization will receive or retain." Again, 0 percent.

Gerri Engel, deputy director of development for the ACLU, said she had not conferred with GCI about the appropriate answer, should someone ask what amount of donations her organization receives. "You know it [100 percent] isn't [accurate]. You have the forms," she said.

"You can look at it a lot of different ways," she added. "So, is it a misrepresentation? Not really. Because all that money is coming back to the charity." But she said she would prefer the canvassers say something different. "I think there's a better answer — but it's a long answer, and one that a lot of people might not understand."

Steve Yaver, the director of member services and development operations for the Sierra Club, contracted with GCI in 2009. He said because canvassers don't represent the same charity every day, they could get mixed up if they needed to know financial information for multiple organizations. Was he comfortable with canvassers' "100 percent" response? "I wouldn't be terribly pleased," he said. "Quite frankly, if you told donors [the fundraising costs], they're not going to be terribly thrilled to hear that, so you've got a very straightforward, simple answer that's accurate as well. Any explanation that is truthful is what I'm looking for."

Representatives of all the charities SF Weekly spoke with said the high costs to hire GCI are worth it, even if explaining these costs could derail a solicitation. The dismal figures reported to the Massachusetts Attorney General's office don't paint an accurate picture, they said, because GCI's work is crucial to the charity's longevity. Unlike volunteers, who can only dedicate so much of their time, paid canvassers sign up new members and increase awareness full time. Charities pay GCI for donors who will contribute for years, said Cindy Hellmann, the marketing and fundraising director for Oxfam America, a nonprofit that specializes in international relief.

The Federal Trade Commission, the Better Business Bureau Wise Giving Alliance, the American Institute of Philanthropy, the Association of Professional Fundraisers, and several nonprofit attorneys all said that the "100 percent" response is at odds with what they consider to be honest fundraising.

Laurie Styron, an analyst for the American Institute of Philanthropy, said it's purely a semantics game. "Regardless of whether it's legal or illegal, it's highly unethical." She said donors don't care who takes legal possession of the funds and when it happens. "What donors want to know is, 'If I hand you $100, how much of it is really going to go to gay rights, or be against gay rights, or help the dolphins?'"

The experts said telling donors "100 percent" qualifies as an "omission of material fact," because the charity won't keep 100 percent of the money. Tony Martignetti, an attorney who runs the nonprofit consulting firm Martignetti Planned Giving Advisors in New York and hosts the Nonprofit Radio show, cited the part of California law that he believes most conflicts with GCI's answer: Commercial fundraisers are prohibited from "representing directly or by implication that a charitable organization will receive an amount greater than the actual net proceeds reasonably estimated to be retained by the charity for its use."

"I don't think 100 percent is a reasonableestimate [of the net proceeds]," he said.

Those doubts and that law aren't limitedto California.

Nick Winkler, press secretary for the Pennsylvania Department of State, said GCI employees' "100 percent" response would be considered "dishonest, false and misleading" in his state. "The company is probably not working for free, so it's not 100 percent,"he said.

Though its financial statements are not available to the public, and GCI Vice President Jones declined to disclose the company's income, it is safe to say GCI is not working for free. According to the annual reports with the California state Attorney General's office, only one charity made money from GCI last year: Oxfam America reportedly received approximately $774,000, or 39 percent of the total revenue. Conversely, Save the Children and the American Society for the Prevention of Cruelty to Animals reported deficits of $1.8 million and $1.9 million, respectively.

These reports of low or no returns can be deceiving. Several charities said GCI submits projected numbers, or estimates, to the Attorney General, instead of the actual amounts it collects and doles out to the charity. Oxfam calculates its net proceeds based on a five-year projection, because its members contribute for an average of eight to 12 years, according to Hellmann, the fundraising director. Therefore, $774,000 is an inflated amount the charity might make from GCI's yearlong effort — five years later. And while Oxfam spokeswoman Helen DaSilva said in an e-mail that the charity paid GCI approximately $1 million in 2010, she would not say how much GCI actually raised that year. "It's like trying to figure out how effective a retirement plan is by looking at what it can offer you over the course of 12 months," she said.

GCI's Jones wrote that the company's calculations are in compliance with state regulations. Yet, California Attorney General press secretary Lynda Gledhill said she believes the annual reports call for actual revenue — not projections. She was tight-lipped about whether GCI's projection-based reporting and "100 percent" response violate state law. "I don't want to opine," Gledhill said. Senior Assistant Attorney General Belinda Johns, in the Charitable Trusts department, did not respond to interview requests.

That the charities, the California Attorney General's office, and GCI are reluctant to talk about fundraising costs and regulations is exactly the problem, according to Michael Nilsen, the vice president of public affairs for the Association of Professional Fundraisers, an organization with more than 30,000 members internationally (of which GCI is not included).

In his opinion, canvassers should have an honest conversation with donors about the costs and benefits of fundraising. "I think the problem with saying '100 percent' is that it makes it look like there's something wrong with fundraising, and there isn't. Fundraising costs money, but it's one of the big ways charities make money and raise awareness. When you start playing around with the numbers, we lose a lot of credibility, and it doesn't just affect the bad apples."

Styron, from the American Institute of Philanthropy, isn't so sure a more accurate answer will get the results the charity wants. Donors, she said, want to know their money is going to, as she put it, help the dolphins — not pay overhead costs. "Unfortunately, if you said to a donor, point-blank, 'Hey, we're raising money for this important cause. Please give me $50. By the way, none of it will actually go to the charity, because I need to be paid my hourly rate to be soliciting you.' ... Donors aren't going to be enthusiastic to donate under those circumstances," she said.

Donors expect to hear the truth from charities — or the people wearing the charities' names. But in order to raise money, those people may have to stretch the truth.

Unsurprisingly, charity watchdog groups like Styron's advise that people resist street solicitations. Better to go home, do research, and send a donation directly to the organization if it checks out.

"We can come up with theoretical ways of how the system can be changed, but I don't know in practice if it will ever happen. I suspect that it won't," she said.

Changing the system would require aligning for-profit interests with nonprofit values. The union between GCI and the charities is rife with double standards. The "good causes and candidates" — the people in the business of saving the children — seem to look the other way as GCI and its canvassers continue to give donors fuzzy financial information. At the same time, some employees complain that working conditions are less than ideal.

When GCI was founded in December 2003, its founder and president Douglas Phelps was already at the helm of a host of nonprofits and commercial endeavors. Currently, he serves as the chairman of the board for U.S. PIRG, the federation of state Public Interest Research Groups — the first of which was founded by Ralph Nader in the 1970s. Since 1982, Phelps has been the chairman of U. S. PIRG's nonprofit fundraising arm, the Fund for the Public Interest, commonly known as the Fund. He also serves as president of the for-profit telemarketing and fundraising company Telefund, Inc., and trustee of mutual funds investment group Green Century Funds — as well as director of its administrative body, Green Century Capital Management. Green Century Funds is owned by several of the nonprofits and PIRGs.

The list of charities and tie-in organizations that Phelps and other GCI and Telefund executives run is exhaustive. Ten groups are listed as part of an informal umbrella group called the Public Interest Network. A bevy of other organizations also shares some of the leadership and provide aid to the groups within the network.

Owing to the organizations' interconnectedness, GCI has much in common with the Fund, even canvassing for many of the same nonprofits. Sociology professor and former canvasser Dana R. Fisher criticized the Fund in her 2006 book Activism, Inc.: How the Outsourcing of Grassroots Campaigns is Strangling Progressive Politics in America, in which the Fund was called "People's Project." Fisher blamed the progressive left's outsourcing of fundraising for treating young people like an expendable resource, and tainting their experience in public service.

In 2009, San Francisco law firm Rudy, Exelrod, Zieff & Lowe won a $2 million settlement on behalf of Fund employees who claimed they were not paid overtime. In December 2004, a year after GCI's formation and shortly after it began campaigning for the Democratic National Committee, a group of canvassers from Oregon claimed they had not been paid the state's minimum wage. They later received an undisclosed settlement. In 2008, San Bruno lawyer Rob Nelson won a class action suit in San Francisco on behalf of former GCI employees who claimed they too were not paid minimum wage or overtime. Though GCI argued that the plaintiffs were a special class of exempt employees, as it did in the Oregon case, the California employees received a $600,000 settlement. Another settlement from a 2009 case against GCI awaits finalization in San Francisco Superior Court.

Perhaps an episode in Chicago best highlights canvassers' uphill battle for answers and support from the charities and GCI. In 2008, Tim Pool came from the Fund to GCI to make more money by fundraising for the ACLU. Pool quickly became a star fundraiser. His star began to dim when he questioned whether he and his coworkers were being compensated correctly. His plight evoked the sympathy of a director at the office, who spoke to us but requested not to be named. We'll call her Justine.

Justine said that when she took Pool's frustrations to GCI headquarters, the national team was more concerned with why he was questioning the status quo. Unable to resolve the problem in-house, Justine accompanied Pool and two other employees to the ACLU of Illinois, hoping for guidance. According to Justine, what they got instead was free ACLU paraphernalia and a call informing them that the organization would have to recuse itself because of a conflict of interest.

After starting an effort to unionize, with the help of the National Labor Relations Board, Pool and two coworkers were fired.

Justine asserted the person who fired the three employees didn't know it was illegal. "The people I experienced who were directors at Grassroots Campaigns knew nothing about being a staff manager, nothing about HR or any of those things," she said. "It's a company that is wide open to these kind of lawsuits." The NLRB ultimately took Pool's case and won him back pay. Justine quit as soon as Barack Obama was elected president.

Engel, the ACLU's deputy director, said that if GCI was not in compliance with the law before, she has been assured it is a non-issue now. "They're always able to put our minds at rest that there's not a problem.... People get upset. It doesn't mean they were mistreated; it means they didn't have a good experience."

But the charities and the California Attorney General's office also say there simply isn't enough manpower to keep tabs on all fundraisers. Case in point: In what Jones called an "administrative oversight," GCI did not file the majority of its annual reports for 2006-2009 in California. Nor was the company notified of this by the Attorney General's office, until SF Weekly requested the documents.

Through conversations with present and past GCI employees, it appears that many do not challenge what happens inside the office and outside on the streets during the short amount of time they work for GCI. In fact, Justine said GCI's retention rate is so poor — generally, two to three weeks — that not a day went by when she wasn't conducting interviews, at times averaging five or more a day. Those who do not quit can be fired if they fail to raise enough money.

A handful of canvassers said they still took the job despite finding unflattering accounts of GCI by disgruntled former staffers online. Too trusting, idealistic, or just hard up for work, the new employees entered the office prepared to endure the hardships for the good of the cause.

"They find people who are true believers, and they cultivate this idea that you're either with us or against us," said Nelson, the lawyer who successfully sued GCI in San Francisco.

Take Efe Ogbeide from Alameda, who worked in GCI's San Francisco office for approximately four months in 2009. Then 18, Ogbeide said going door-to-door and pressing people for contributions during the recession weighed heavily upon her. Nothing about the job was glamorous, but she stuck it out because, as she put it, Save the Children was getting 90 percent of the donations — one of the few exceptions to the "100 percent" response.

"I was telling people 90 percent so that they weren't thinking the money was going to a corporation," she said.

Robin Van Etten, the associate director of sponsorship marketing at Save the Children, confirmed 90 percent is the organization's go-to response. "All of the money that comes into this organization, 90 percent of it goes to programming expenses," she said.

This does not address where the donor's individual contribution goes — the fundraising pot.

According to the Attorney General's documentation, 0 percent goes to programming.

"It's funny," Ogbeide said. "I recently ran into a Grassroots kid who was promoting Amnesty International. I was laughing about the job, and I ended up giving him money. I still do feel that the work is for a good cause."

For Justine, the facts — and the math — don't add up. To this day, she does not understand GCI's finances. When she learned that GCI got back most of the money her office raised, she paused. "I'm not happy about that," she said.

Caroline Chen and Dean Schaffer contributed reporting to this story.

About The Author

Taylor Friedman


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