On-Line Solicitors: a Tangled Web

Companies’ ‘one-stop’ charity sites make it easy to give but raise questions about regulation

A handful of World-Wide Web sites are vying to become donors’ one-stop choice for giving on the Internet.

While many charity leaders have high hopes for sites that benefit an array of causes, many non-profit officials, lawyers, and state charity regulators have also begun to raise questions about how best to insure that such sites do not take unfair advantage of charities or donors.

So far the Internet sites, many of which are run by for-profit companies, are so new that they have attracted few donations. Among the efforts under way:

* Benefice (http://www.benefice.com), run by a Boston company, seeks to provide information about charities to donors. Non-profit groups pay to be listed on the site, as well as on a companion CD-ROM. Donors can make pledges on line to any charity that is listed, with all of the money going to the charity.

* Give to Charity (http://www.givetocharity.com), was started in November by a Tampa, Fla., businessman. The company takes 15 per cent of every donation made through the site and sends the rest to charities selected by the donor. Give to Charity would not say how much has been raised so far.

* CharityWeb (http://www.charityweb.com), a Mountain View, Cal., company, offers to help charities solicit donations by creating a Web site for them. The company uses its own site as a gateway to affiliated charity sites. CharityWeb charges groups to set up a site and takes up to 7.5 per cent of the donations raised. Started in September, CharityWeb has three customers and has not received any gifts.

* Give On-Line (http://giveonline.org), a non-profit group in Alpharetta, Ga., has a questionnaire on its site that asks people to provide their name, address, the amount they want to pledge, and other information. Give On-Line then forwards the information to the charity of the donor’s choice. Ron Bocinsky, the group’s founder, would not say how much has been raised through the donors who filled out the questionnaire, but he said it was less than $50,000.

The chief question raised by the new sites is whether the people who run them should be considered “professional solicitors” and therefore be covered by state regulations designed to keep people who conduct mail, telephone, or other appeals for charities from running deceptive or fraudulent campaigns.

Rules vary widely from state to state, but many require solicitors to file reports on the amount they pass along to charities, post bonds to guarantee their financial stability, or pay registration and other fees.

The Internet poses a challenge for the current state regulatory system, however. A charity solicitor from Kansas who mails appeals to potential donors in Maryland knows that he has to abide by Maryland’s rules for professional fund raisers. But organizations that raise money via the Internet have the potential to reach people in any state — or almost anywhere in the world — and therefore do not necessarily know what rules they must follow.

“We’re pouring new wine into old wineskins,” says Craig R. Mayton, chief of the charitable-foundations section of the Ohio attorney general’s office. “It raises brand new issues that the courts have never addressed and that we’re working very hard to get our arms around.”

How those new issues are resolved will not only affect organizations that seek money for a multitude of groups but also charities that set up their own sites to accept donations.

Mr. Mayton and other regulators say that they have received few complaints about charity fund raising on line, but that fraud is a big concern for many in the non-profit world. They fear that it is far easier to run scams in cyberspace, where there are no major up-front costs like those involved in putting out mail appeals or hiring telephone solicitors.

Boosters of Internet fund raising say that the new sites provide a way to simplify giving for both the donor and the charity. They note that the Internet provides a means to reach potential donors more efficiently than through direct mail or telephone calls and that as people become more comfortable giving out credit-card information on line, the potential for fund raising will continue to grow.

None of the sites has so far complied with state regulatory requirements for professional solicitors. And most say that there is no reason for them to do so.

Michael Storm, founder of Give to Charity, which advertises itself as “Internet philanthropy made easy,” says that his operation is a “third-party payment service,” more akin to a credit-card company than a fund-raising business. He says the key distinction is that Give to Charity does not support any one non-profit group but merely provides a service to donors.

“A fund raiser must represent a charity, endorse it,” Mr. Storm says. “That point where you pass the line from passive to active is where I believe legally you become a fund raiser.”

But some lawyers and non-profit officials say that companies are potentially putting themselves — and the charities for whom they solicit — on the wrong side of the law. CharityWeb has consulted a lawyer to insure that it is not running afoul of state regulations. The lawyer’s advice: Follow the state requirements for professional fund-raising companies.

Kurt Hansen, who founded CharityWeb with his wife, Nancy, says that the company is trying to meet the requirements one state at a time.

CharityWeb plans to register in California, where its offices are; in Pennsylvania, where its Internet computers are; and in states where the charities for which it raises money are based.

“If that’s the law, I really don’t have much choice,” Mr. Hansen says.

In recent years, many states have adopted or strengthened charitable-solicitation laws to counter fraud. Many experts say that the need for that kind of over sight is just as critical in cyberspace and that at least one of the new on-line fund-raising sites, Give to Charity, raises concerns about whether donors are being misled.

The main problem that non-profit officials have with the Give to Charity site is that only a few of the almost 300 charities listed have given their permission for the company to use their names. In a Chronicle spot check of 15 charities listed on the site only two said they had ever heard of Give to Charity, and none had authorized the company to raise money in their behalf.

Mr. Storm notes that charities that have not signed up for the service are only listed in “demo mode” and that no donations are accepted for those groups. Indeed, a donation submitted by The Chronicle for a charity listed in “demo mode” was returned with a note stating that “Donations are only accepted and processed after a charity enrolls in our service.”

Says Mr. Storm, “There’s no attempt here at all to mislead anyone.”

Charity officials have other concerns about the site. Much of the information listed on Give to Charity is incomplete or inaccurate. The listing for the Epilepsy Foundation of America — which was listed in “demo mode,” but has since been removed from the site at the charity’s request — had the wrong phone number and electronic-mail address. What’s more, the Epilepsy Foundation’s mission statement was listed as “no description,” and there was no link to to the charity’s own Web site.

Give to Charity and other sites that offer to raise money for charities are particularly attractive to small organizations. Those charities often do not have the funds to set up their own secure on-line donation service, which can cost $1,000 or more. While small charities may stand to benefit from collective Web sites, they often lack the resources to investigate before signing up with an on-line donation service.

The Youngstown Steel Heritage Corporation, in Ohio, which raises about $10,000 a year, was initially skeptical of the Give to Charity Web site. But after seeing large, national charities such as the American Red Cross and the Vietnam Veterans of America Foundation listed, the Youngstown group decided to sign on. The group, which is building a museum dedicated to the steel mill, did not know that those charities had not given the site permission for their names to be used.

State charity regulators have been cautious about deciding how to regulate the on-line donation services — in part because they have lost out in previous legal skirmishes over the regulation of professional solicitors.

In the last two decades, when lawmakers and regulators have tried to curb abuses by requiring professional solicitors to give at least a certain amount to charity, they have been shot down by the courts. From the Supreme Court on down, judges have made clear that they think such laws stifle free speech and unfairly discriminate against small charities. Many experts say that requiring on-line fund-raising companies, and the charities for which they solicit funds, to meet regulatory requirements in every state would run into similar court opposition.

In Ohio, Mr. Mayton, the top charity regulator, says officials are waiting for guidance from the courts before attempting to enforce any regulations on Internet solicitors. But in the meantime, he says, investigators are cataloguing Web sites that raise concerns “so that when things do become a little bit clearer, we can hit the ground running.”

Most state charity officials say that since there has been no outcry from donors, they are content at this point to uphold the libertarian ethos of the Internet and leave on-line fund raisers alone.

“We’ve not received any complaints,” says Terry M. Knowles, registrar of charitable trusts in the New Hampshire attorney general’s office. “When we receive a complaint on any solicitation, that really sends up a red flag to us.”

Even though few state officials have taken any action to regulate sites that solicit donations for charities, some non-profit leaders are not taking any chances.

Diversity University, a non-profit group that offers on-line education programs, has looked into soliciting contributions through the Internet. Eric Mercer, the group’s manager of services, says that the donation services are appealing to Diversity University, which raises about $100,000 a year, because they would allow the charity to raise money on line without incurring unreasonable overhead costs.

But after checking out the various Web sites that offer to accept donations in behalf of charities, Mr. Mercer says that he believes that most — if not all — of them qualify as professional solicitors under existing state laws.

“It may be outright illegal, both for this Web host and for us if we accept any money from them,” Mr. Mercer says. “I really don’t want to find our non-profit organization suddenly being a test case. We can’t afford a lawyer.”

But Mr. Mercer says that he can understand the appeal that on-line donation services hold for charities. “The bottom line,” he says, “is it’s hard to turn down free money.”