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DOJ - Montana Department of Justice

03/04/2021 | News release | Distributed by Public on 03/04/2021 15:11

MT DOJ Joins FTC to Shut Down Massive Charity Fraud Telefunding Operation

The Montana Department of Justice's Office of Consumer Protection, along with the Federal Trade Commission and dozens of agencies from around the nation, has stopped a massive telefunding operation that bombarded 67 million consumers with 1.3 billion deceptive charitable fundraising calls (mostly illegal robocalls). The defendants collected more than $110 million using their deceptive solicitations.

Associated Community Services (ACS) and several related defendants have agreed to settle charges by the FTC and state agencies that they duped 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, and ACS senior managers.

'We're glad to be taking these scammers offline. On my watch, the Department of Justice will continue to crack down on people who seek to take advantage of Montanans and their good will,' Attorney General Austin Knudsen said.

'Deceptive charitable fundraising can be big business for scammers, especially when they use illegal robocalls,' said Daniel Kaufman, Acting Director of the FTC's Bureau of Consumer Protection. 'The FTC and our state partners are prepared to hold fraudsters accountable when they target generous consumers with lies.'

According to the complaint, the defendants knew the organizations for which they fundraised spent little or no money on the charitable causes they claimed to support. The defendants kept as much 90 cents of every dollar they solicited from donors on behalf of the charities. The complaint also alleges the defendants made their deceptive pitches since at least 2008 on behalf of numerous organizations that claimed to support homeless veterans, house fire victims, breast cancer patients, autistic children, and other causes. ACS was also the major fundraiser for the sham Cancer Fund charities that were shut down by the FTC and states in 2015.

In many instances, the complaint alleges, ACS and later Directele knowingly violated the Telemarketing Sales Rule (TSR) by using soundboard technology in telemarketing calls. The complaint also charges ACS with making harassing calls, noting that ACS called more than 1.3 million phone numbers more than ten 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 defendants were the subject of 20 prior law enforcement actions for their fundraising practices. These 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 Montana laws, the FTC Act, the TSR, and numerous other state laws.

Montana consumers with concerns can visit the FTC Consumer Response Center, call the Attorney General's Office of Consumer Protection (OCP) at 1-800-481-6896 or (406) 444-4500, or email [email protected]. For ongoing consumer tips, follow OCP on Facebook.

Settlement terms:

Associated Community Services Defendants:Associated Community Services, Inc.; Community Services, Inc.; Central Processing Services, Inc.; Richard Cole; Community Services Appeal, Inc; Barbara Cole; Robert W. and Amy J. Burland:

These defendants will be permanently prohibited from conducting/consulting on any fundraising activities and from telemarketing. Additionally, 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/service. They will be also be subject to monetary judgments totaling $330,191,529, which was suspended all or in part due to an inability to pay. One defendant will also be required to surrender the proceeds of the sale of a vacation home; another 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 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. Additionally, the defendants will be required to clearly disclose when a donation they are requesting is not tax deductible.

Directele Inc. and The Dale Corporation:

These two corporate defendants must cease operations and dissolve. The defendants, Scot Stepek, Directele Inc., The Dale Corporation, Nikole Gilstorf, Antonio Lia, and John Lucidi, will also be subject to monetary judgments totaling $331,791,529, partially suspended due to an inability to pay. One defendant will be required to sell his boat and turn over the net proceeds; two others must each surrender $10,000; and another must turn over $25,000.

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

Read the complaint and final orders here:

ACS-CSA R. Cole

CSA B. Cole

Burlands

Stepek

Lucidi

Directele Inc. and The Dale Corporation