Attorney General Suthers Sues National Charitable Fundraiser And Announces Fraud Charges Against Three Local Charities

DENVER – Attorney General John Suthers today announced a series of lawsuits filed by his Consumer Protection Section against Xentel, Inc., a major national charitable fundraiser, and against three local charities, Colorado Children’s Assistance Center, Front Range Charitable Services, and Veterans for the Homeless. Charges were also brought against their officers.

“Each year, millions of dollars are donated to Colorado charities,” said Suthers. “Yet, not all of this money always ends up with where it ought to go. Consumers should always do their homework about a particular charity before opening their wallet.”

Xentel lawsuit

Xentel, Inc., and Xentel America, Inc., both Delaware companies, were sued yesterday in Denver District Court for allegedly violating Colorado’s Charitable Solicitation Act (CCSA), No-Call List Act, and Consumer Protection Act (CCPA). Xentel and Xentel America are for-profit telemarketing companies that made calls to Colorado consumers on behalf of various charities. The State alleges that, in the course of their telemarketing campaigns on behalf of numerous charities, these companies repeatedly violated the state’s registration requirements for charitable campaigns and thereby illegally obtained hundreds of thousands of dollars from unsuspecting Colorado donors.

Colorado law requires paid solicitors, such as Xentel and Xentel America, to file solicitation notices 15 days prior to commencing a fundraising campaign and to file financial reports that account for the donations collected within 90 days after the conclusion of the campaign. The lawsuit alleges that in only 3 out of more than 40 fundraising campaigns conducted by Xentel in Colorado were campaign notices filed in a timely manner, depriving thousands of Colorado donors of accurate and timely information about those campaigns.

Further, Xentel failed to file a number of financial reports about some of these campaigns within 90 days after the close of the campaign. In fact, the lawsuit alleges that Xentel engaged in fundraising activities for several charities during times in which it had no solicitation registered at all. Since Xentel failed to comply with the state’s solicitation laws, the suit claims that it also violated Colorado’s No-Call List Act, which allows charitable solicitations to consumers on the No-Call list only when the registration requirements under the Charitable Solicitations Act are followed.

Attorney General Suthers’ lawsuit against Xentel and Xentel America seeks disgorgement of profits, restitution to consumers, civil penalties of up to $2,000 per violation of the Consumer Protection Act, and attorney fees and costs. The lawsuit also seeks an injunction preventing defendants from engaging in any future violations of the CCSA, the No-Call Act, and the CCPA.

“The Charitable Solicitations Act was re-worked years ago to make charitable fundraising more transparent so that consumers could make informed decisions about their donations,” said Suthers. “The various registrations and financial reports required by that Act provides consumers with a wealth of information about an organization’s purpose and spending. Attempts to thwart that process by failing to register or to file financial reports cuts at the very heart of what this Act was designed to do.”

At today’s announcement, Attorney General Suthers was joined by Secretary of State Gigi Dennis.

“The Secretary of State's charitable database is in place to assist the public by making informed choices as to which charities should be supported,” Secretary of State Gigi Dennis said. “I strongly urge the public to research charities before handing over their hard-earned dollars.”

Boulder charitable fraud lawsuits

During the past week, separate lawsuits were also filed against the following local charities and their officers:

  • Colorado Children’s Assistance Center and David Michael St. John, the founder and director of this charity, and against Hernando Hennings, a paid solicitor raising funds for CCAC;

  • Front Range Charitable Services and Colleen Gardenour Holmes, president of FRCS, and against Hernando Hennings, a paid solicitor raising funds for FRCS; and

  • Veterans for the Homeless, Inc. and Jay Wyss and Rhett Cline, officers of VHI and other charities.

These cases were filed in Boulder County District and arose out of investigations conducted by the Boulder District Attorney’s Office and the Attorney General into local charities that solicited tens of thousands of dollars from an elderly Boulder resident. Cindy Taylor, director of the Boulder District Attorney’s Consumer Affairs Unit, joined General Suthers in announcing these filings.

Generally, these lawsuits allege that, in the course of soliciting contributions and spending the money collected in donations, the Defendants repeatedly violated the state’s registration requirements. Specifically, they failed to register as charities, used individuals to raise funds that were not registered as paid solicitors, and failed to file required financial reports. Further, the lawsuits claim that the founders, and other individuals associated with these charities, spent most of the money on themselves and that very little money was spent on any legitimate charitable purposes.

These lawsuits ask the court to require disgorgement of moneys solicited illegally, restitution to consumers, civil penalties, and attorney fees and costs. Civil penalties alone can be up to $2,000 per violation or up to $10,000 per violation if the victims are over the age of 60. The lawsuits also seek injunctions preventing defendants from engaging in any future violations of the CCSA and CCPA.

Consumers with complaints regarding charitable fraud may call the Colorado Consumer Line toll-free 1-800-222-4444 (in Colorado) or 1-800-332-2071 (out of state) or may download a complaint form from http://www.ago.state.co.us/consline/complaint.pdf.

Consumers should check the registration status, financial statements, and campaign reports of charities and paid solicitors BEFORE making any charitable donation. That information is available on the Secretary of State’s website at: http://www.sos.state.co.us/ccsa/CcsaInquiryMain.do.

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