Massive Charity Fraud Telefunding Operation Shut Down

Published on March 04, 2021, 2:18 pm
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New York Attorney General Letitia James and the Federal Trade Commission (FTC) today announced the shutdown of a massive telefunding operation that bombarded 67 million consumers with 1.3 billion deceptive charitable fundraising calls, most of which were illegal robocalls. Associated Community Services (ACS) and its affiliated companies and individuals made more than 72 million calls to New York residents alone, haranguing thousands of them more than 100 times each. This operation illegally collected more than $110 million by falsely claiming that funds would go to charities that support veterans, children, and firefighters.

The defendants have agreed to settle charges by Attorney General James, the FTC, and agencies from 38 states and the District of Columbia that they duped generous Americans into donating to charities that failed to provide the services they promised. The complaint names ACS and its sister companies Central Processing Services and Community Services Appeal; their owners, Dick Cole, Bill Burland, Barbara Cole, and Amy Burland; and ACS senior managers Nikole Gilstorf, Tony Lia, John Lucidi, and Scot Stepek. In addition, the complaint names two fundraising companies allegedly operated by Gilstorf and Lia as spin-offs of ACS, Directele and The Dale Corporation.

“These telemarketers illegally solicited contributions from New Yorkers and inundated them with millions of harassing phone calls,” said Attorney General James. “There is no tolerance for this type of unlawful and predatory behavior. We will continue to work aggressively with partners around the country to stop deceptive fundraising tactics that cheat hardworking New Yorkers.”

According to the complaint, the defendants knew that the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support — in some cases as little as one-tenth of one percent. The defendants kept as much 90 cents of every dollar they solicited from generous donors on behalf of the charities. Since at least 2008, the defendants made these deceptive calls on behalf of numerous organizations that claimed to support homeless veterans, victims of house fires, breast cancer patients, children with autism, and other causes that well-meaning Americans were enticed to support.

The complaint also charges ACS with making harassing calls, noting that ACS called more than 1.3 million phone numbers more than 10 times in a single week and 7.8 million numbers more than twice in an hour. More than 500 phone numbers were even called 5,000 times or more. ACS made more than 72.6 million calls to New Yorkers over the last three and a half years. The fundraiser called 73,500 New Yorkers more than 10 times in a single week and called 477,000 New Yorkers two times or more within a single hour.

The ACS defendants were the subject of 20 prior law enforcement actions for their fundraising practices. The ACS defendants stopped operating in September 2019. Gilstorf purchased Directele and Dale Corp in October 2019 and, with Lia, the Directele defendants allegedly continued the deceptive fundraising and illegal telemarketing practices. The complaint alleges the defendants violated New York’s Executive Law §§ 63(12), 171-a through 175, the FTC Act, the TSR, and numerous other state laws.

The terms of the settlements with the defendants are as follows:

Associated Community Services Defendants

Each of these defendants will be permanently prohibited from conducting or consulting on any fundraising activities and from conducting telemarketing of any kind to sell goods or services. In addition, they will be prohibited from using any existing donor lists and from further violations of state charitable giving laws, as well as from making any misrepresentation about a product or service. The defendants will be also be subject to the following monetary judgments:

  • Associated Community Services, Inc.; Community Services, Inc.; Central Processing Services, Inc.; and Richard “Dick” Cole are subject to a monetary judgment of $110,063,843, which is suspended due to an inability to pay.
  • Community Services Appeal, Inc. and Barbara Cole are subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Barbara Cole also will be required to turn over the proceeds of the sale of a vacation home in Michigan.
  • Robert W. “Bill” Burland and Amy J. Burland are subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Amy Burland will be required to turn over $450,000.

Directele Defendants and ACS Senior Managers Scot Stepek and John Lucidi

Each of these defendants will be permanently prohibited from any fundraising work or consulting on behalf of any charitable organization or any nonprofit organization that claims to work on behalf of causes similar to those outlined in the complaint. They will also be prohibited from using robocalls for any form of telemarketing, using abusive calling practices, or making any misrepresentation about a product or service. In addition, the defendants will be required to clearly and conspicuously disclose when a donation they are requesting is not tax deductible.

In addition, the two corporate defendants — Directele Inc. and The Dale Corporation — will be required to cease operations and dissolve.

The defendants will also be subject to the following monetary judgments:

  • Scot Stepek will be subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Stepek will be required to sell a ski boat in his possession and turn over the net proceeds from the sale.
  • Directele Inc., The Dale Corporation, Nikole Gilstorf, and Antonio Lia will be subject to a monetary judgment of $1.6 million. Gilstorf and Lia also will be subject to a judgment of $110,063,843. The judgments are partially suspended due to an inability to pay. Gilstorf and Lia will each be required to turn over $10,000.
  • John Lucidi will be subject to a judgment of $110,063,843, which is partially suspended due to an inability to pay. He will be required to turn over $25,000.

The funds being surrendered by the defendants will be paid to an escrow fund held by the state of Florida, and, following a motion by the participating states and approval by the court, be contributed to one or more legitimate charities that support causes similar to those for which the defendants solicited.

Today’s settlement is the second time in six months that New York, in collaboration with the FTC and other states, has banned a fundraising network from fraudulent charitable fundraising. In September 2020, Attorney General James announced a settlement with Outreach Calling, Inc., its owner and various associated companies and individuals, barring them from all charitable fundraising and from deceiving consumers in any other fundraising effort.

Other state agencies joining in the case with Attorney General James and the FTC include the attorneys general of Alabama, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia; the secretaries of state of Colorado, Georgia, Maryland, North Carolina, and Tennessee; the Florida Department of Agriculture and Consumer Services; and the Utah Division of Consumer Protection.

The complaint and final orders were filed in the U.S. District Court for the Eastern District of Michigan.

The matter is being handled by Assistant Attorney General Peggy Farber, under the supervision of Enforcement Section Co-Chief Yael Fuchs and Bureau Chief James G. Sheehan. The Charities Bureau is a part of the Division for Social Justice, led by Chief Deputy Attorney General Meghan Faux, under the oversight of First Deputy Attorney General Jennifer Levy.


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