Amicus Curiae Brief — Illinois Ex Rel. Madigan, Attorney General of Illinois v. Telemarketing Associates, Inc.

No. 01-1806 JAN $3

IN THE

Supreme Court of the United States

JAMES E. RYAN, ATTORNEY GENERAL OF ILLINOIS,

Petitioner,

V.

TELEMARKETING ASSOCIATES, INC., ef al..,

Respondents.

On Writ of Certiorari

to the Supreme Court of Illinois

BRIEF AMICI CURIAE

ON BEHALF OF INDEPENDENT SECTOR

AND OTHER NONPROFIT ORGANIZATIONS

IN SUPPORT OF RESPONDENTS

(List of Other Amici Printed on Inside Front Cover)

ROBERT A. BOISTURE*

ALBERT G. LAUBER

LLOYD H. MAYER

SHARON P. LIGHT

CAPLIN & DRYSDALE, CHARTERED

One Thomas Circle, N.W.

Washington, D.C. 20005

(202) 862-5000

Attorneys for Amici Curiae

*Counsel of Record

PRESS OF BYRON S. ADAMS @ WASHINGTON, D.C. # 1-800-347-8208

Advocacy Institute Council for Advancement

Alliance for Children and and Support of Education

Families (CASE)

Alliance of Nonprofit Mailers | Council for Opportunity in

American Association of Education

Museums Easter Seals, Inc.

American Autoimmune Girls Incorporated

Related Diseases Association HalfthePlanet Foundation

(AARDA) International Youth Foundation

American Cancer Society Islamic Society of North

American Diabetes America

Association KaBOOM! Inc.

American Foundation for AIDS Kidney Cancer Association

Research (amfAR) The Learning Center

American Foundation The Leukemia and Lymphoma

for the Blind Society

American Heart Association Maryland Association of

American Lung Association Nonprofit Organizations

American Society of National Asian Pacific American

Association Executives Legal Consortium

American Symphony Orchestra National Civic League (NCL)

League National Committee to Preserve

Americans for the Arts Social Security and Medicare

ANGELCARE National FFA Foundation, Inc.

The ASPIRA Association National Health Council

Association of Fundraising National Marfan Foundation

Professionals (AFP) National Mental Health

The Catholic Charities of Santa Association

Clara County National Multiple Sclerosis

Center on Philanthropy Society

CIVICUS: World Alliance for National Puerto Rican Forum

Citizen Participation National Urban League

Clean Water Action, Inc. National Wildlife Federation

Colorado Association of NOW Legal Defense and

Nonprofit Organizations Education Fund

Community Anti-Drug Pennsylvania Association of

Coalitions of America Nonprofit Organizations

The Conference Board Points of Light Foundation

Cooperative for Assistance Public Education Network

and Relief Everywhere, South Carolina Association of

Inc. (CARE, Inc.) Nonprofit Organizations

Theatre Communications Group

YMCA of the USA

QUESTION PRESENTED

Whether a State may prosecute, consistently with the

First Amendment, an action for fraud against a professional

fundraiser soliciting contributions on behalf of a charitable

organization, where the fundraiser describes the charitable

purposes for which the funds are being solicited, but does not

disclose to prospective donors the fees and terms of the

fundraiser’s contract with the charity.

ll

TABLE OF CONTENTS

Page

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Argument:

laws prohibiting affirmative misrepresentations

by charities and their fundraisers, represents the

most effective and least intrusive means of

protecting the public against fraud .........

B. Information collected about charities is

iin. “i - I tenes -

Page

II. It is inconsistent with the First Amendment to

predicate a fraud complaint solely on

nondisclosure of an allegedly “excessive” fee

arrangement between a fundraiser and a charity

III. The Illinois Attorney General’s fraud suit would

violate the First Amendment because it would

force charities and their fundraisers either to

keep their fundraising costs below whatever

level the Attorney General deems “excessive” or

to speak the words compelled by the Attorney

iv

TABLE OF AUTHORITIES

Page(s)

CASES:

Bob Jones Univ. v. United States, 461 U.S. 574 (1983) . 2

Camps Newfound/Owatonna, Inc. v. Town of Harrison,

DP cucceccoetevesobeses 2

Cornelius v. NAACP Legal Defense and Education Fund,

ig Ga a CIEE Secbcecesececcees 2

Hurley v. Irish-American Gay, Lesbian and Bisexual

GUE, SD Ge Ge GED ccc ccccescccees 22

Int’l Society for Krishna Consciousness, Inc. v. Lee, 505

DE 6.60 eekSebee woveseneeees 18

Meyer v. Grant, 486 U.S. 414 (1988) ............ 18

New York Times Co. v. Sullivan, 376 U.S. 254 (1964) . 22

Regan v. Taxation with Representation, 461 U.S. 540

SE ¢ cdvecdcecdessebbeteedeeoeseos 2

Riley v. National Fed’n of the Blind, 487 U.S. 781

tt ¢é¢béseenehe 6beebaed boone tae passim

Sec'y of State v. Joseph H. Munson Co., 467 U.S. 947

DP sdcceotebakiaestecteuss tébasees passim

United Cancer Council, Inc. v. Comm’r, 165 F.3d 1173

os SE rr ee 16-17, 27

United States v. Kokinda, 497 U.S. 720 (1990) ...... 18

Village of Schaumburg v. Citizens for a Better Envir't,

SPURT? ccccneececaascéons passim

v

Table of Authorities continued

Page(s)

STATUTES & REGULATIONS:

DTT che eneudedteceseuceeceeecs 17

BP eis POE GED oc cc ccccccccccccess 8

PPE ccaacesseeessseeaneenre 8

26 U.S.C. § 6104(d)(1M AMG) . 2... ee ee eee 8

es GED ccccescccceesececes 8

General Not for Profit Corporation Act of 1986, 805 Ill.

Comp. Stat. 105/112.50(a)(4) (West 1993) ...... 16

Illinois Income Tax Act, 35 Ill. Comp. Stat. 5/205 (West

SE DEC 6EE OES OCEC Oe EeCoeESeseesas 17

Solicitation for Charity Act, 225 Ill. Comp. Stat. 460 er

seq. (West 1998):

225 Til. Comp. Stat. 460/2(f) ... 2... eee ee ees 9

225 Ill. Comp. Stat. 460/2(i) ............... 8

225 Ill. Comp. Stat. 460/6(g), (h) ............ 8

225 Ill. Comp. Stat. 460/7(g), (h) ............ 8

225 Ill. Comp. Stat. 460/9(g), (h) ............ 8

225 Ill. Comp. Stat. 460/17(a), (bo) ........... 27

Telemarketing Sales Rule, 16 C.F.R. § 310.4(b)(1)(iii),

2 Sivece habe celacidesdheeeuewe seas & 27

Gee PED cece cccecesccceces 17

Pa EEE ccccvccececccoececes 8

vi

Table of Authorities continued

Page(s)

Ill. Admin. Code tit. 14, § 400 ef seg. (2002),

implementing the Solicitation for Charity Act:

Ill. Admin. Code tit. 14, § 400.40(a) ........... 7

Ill. Admin. Code tit. 14, §400.60............ 7

Ill. Admin. Code tit. 14, § 400.60(e)(3) ........ 7

Ill. Admin. Code tit. 14, §400.65............ 7

Ill. Admin. Code tit. 14, §400.70............ 7

MISCELLANEOUS:

Sandra Block, How to Give to Charities Without

Receiving Solicitations, USA Today, November 12,

Exempt Organizations Division, Internal Revenue

Service, FY2003 Exempt Organizations (EO)

Implementing Guidelines (September 2002) ...... 14

IRS Announcement 2002-87, 2002-39 I.R.B.624..... 13

Make Your Donations Count, Smart Money, Nov. 12,

TE 6 vase cebeevédeboedsaecesaseseoedés 11

Dirk Smillie and William P. Barrett, Good Works,

. §: 5 & Brrr rrrrererere ll

Special Report NPT 100 - America’s Largest Nonprofits,

The NonProfit Times, Nov. 1, 2002 .......... 11

Ian Wilhelm, Charity Under Scrutiny, The Chronicle of

Philanthropy, Nov. 28, 2002 ...........+55. 10

Reshma Memon Yaqub, Not Exactly Top 10, Worth,

| BPPTTIrrrrrrerererereeeie 11

Vii

Table of Authorities continued

Page(s)

Reshma Memon Yaqub, To Give Well, Give Wisely: The

Worth 100, Worth, Dec. 2002 .............. 11

Rev. Rul. 75-284, 1975-2 C.B. 204 ............. 16

Rev. Rul. 97-21, 1997-1C.B.121 .............. 16

Survey of State Laws Regulating Charitable Solicitations,

The Philanthropy Monthly (2002) ............ 6

BRIEF AMICI CURIAE

ON BEHALF OF INDEPENDENT SECTOR

AND OTHER NONPROFIT ORGANIZATIONS

IN SUPPORT OF RESPONDENTS

Independent Sector submits this brief amici curiae in

support of respondents on behalf of itself’ and fifty-five other

nonprofit organizations. The nonprofit organizations joining

this brief are listed on the inside front cover, and their

charitable purposes are described more fully in an appendix

hereto. All parties have provided written consent to the filing

of this brief. Letters of consent have been lodged with the

Clerk.

INTEREST OF AMICI CURIAE

Independent Sector is a coalition of more than 700

national organizations and companies representing the vast

diversity of the nonprofit sector and the field of philanthropy.

Its members include many of the nation’s most prominent

nonprofit organizations, leading foundations, and Fortune 500

corporations with philanthropic giving programs. This

network represents millions of volunteers, donors, and people

served in communities around the world. Independent Sector

members work globally and locally in human services,

education, religion, the arts, research, youth development,

health care, advocacy, the advancement of democracy, and

many other areas.

It is part of Independent Sector’s mission to ensure that

the voices of nonprofit organizations are heard in important

cases affecting them. Independent Sector, along with many of

the other amici, has regularly participated as amicus before

' No counsel for any party authored this brief in whole or in part, and

no person or entity, other than amici curiae, their members or their

counsel, made a monetary contribution to the preparation or submission of

the brief. S. Ct. Rule 37.6.

2

this Court in cases of importance to the nonprofit sector,

including cases addressing fundraising issues. E.g., Camps

Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564

(1997); Riley v. National Fed’n of the Blind, 487 U.S. 781

(1988); Cornelius v. NAACP Legal Defense and Educ. Fund,

Inc., 473 U.S. 788 (1985); Sec’y of State v. Joseph H.

Munson Co. , 467 U.S. 947 (1984); Bob Jones Univ. v. United

States, 461 U.S. 574 (1983); Regan v. Taxation with

Representation, 461 U.S. 540 (1983).

The other amici are charitable and educational

organizations and associations. They rely on the general

public for support, and fundraising from the public is

therefore essential for their continued existence. At the same

time, thes organizations strive to educate the public about

issues of importance to them, and educational materials are

often distributed in conjunction with their fundraising appeals.

To aid in their fundraising and public education efforts, many

amici use professional fundraisers.

Amici have a special interest in preserving the good

reputation of the charitable sector and protecting the donating

public. For this reason, amici for many years have been

strong advocates of fair and effective government regulation

and of increasing the transparency of charities through greater

disclosure of financial and programmatic information and

enhanced public access to that information. At the urging of

amici and others, the states and the federal government have

already taken major steps to ensure greater public access to

data about charities. The charitable sector itself has also

stepped forward to imcrease access to information about

charities and to provide better tools to help donors evaluate

Despite these advances, unscrupulous fundraising

practices unfortunately continue to exist. Such practices are

3

damaging both to the public and to the nonprofit community,

and amici condemn them. Amici are submitting this brief not

because they look with favor on the particular contractual

arrangements at issue here, but because they share this

Court’s historic commitment to the First Amendment

principle at stake. Avnici are firmly convinced that increasing

public access to information about charities, combined with

vigorous enforcement of laws prohibiting fraud in a manner

that does not chill the free speech of all charities, represents

the best method of protecting both the public and the

charitable sector.

SUMMARY OF ARGUMENT

Donors now have an unprecedented ability to judge which

charities are worthy of their contributions. Charities and their

fundraisers are required by law to make very extensive

regulatory filings; there are increasing public and private

efforts underway to make such filings and related information

about charities readily available to the public, particularly on

the Internet; and numerous tools to evaluate charities have

been developed. These developments, combined with the

ability of the states and the federal government to prosecute

fraud based on affirmative misrepresentations and to revoke

the charitable status of organizations that violate the law,

provide sufficient means to protect the donating public from

fraud without chilling charities’ speech.

In this case, the Attorney General of Illinois has

predicated a fraud prosecution solely on his retroactive

judgment that a certain level of fundraising costs is

“excessive” and that the nondisclosure of such costs to

potential donors at the point of solicitation amounts to

“misrepresentation.” Allowing the Attorney General’s lawsuit

to proceed would have a profound chilling effect on protected

speech because it would force charities and their fundraisers

4

to choose between two unacceptable options. Charities would

be forced to keep their fundraising costs below whatever level

the prosecuting authority in a given jurisdiction deems

“excessive,” a standard that will rarely be knowable in

advance. Alternatively, charities would be forced to engage

in “compelled speech” — to disclose their fundraising costs to

each prospective donor in a manner that would seriously

hamper the effectiveness of their appeals. Neither alternative

is acceptable under the First Amendment. See Riley v.

National . .d’n of the Blind, 487 U.S. 781, 789-90, 799-800

(1988); Sec’y of State v. Joseph H. Munson Co., 467 U.S.

947, 967-68 (1984); Village of Schaumburg v. Citizens for a

Better Envir’t, 444 U.S. 620, 636-37 (1980).

ARGUMENT

I. Increasing Public Access To Information About

Charities, Coupled With Vigorous Enforcement

Of Laws Prohibiting Affirmative Misrepresentations

By Charities And Their Fundraisers, Represents

The Most Effective And Least Intrusive Means Of

Protecting The Public Against Fraud

In 1991, the Attorney General of Illinois filed this civil

suit against respondents, for-profit professional fundraisers

soliciting charitable contributions on behalf of an Illinois

charity, VietNow National Headquarters (“VietNow”). The

Attorney General’s complaint did not allege affirmative

misrepresentation. Rather, the suit relied on allegations that

respondents committed fraud and breached their fiduciary

duties by representing to potential donors the charitable

purposes for which the donations were sought, without also

disclosing the percentage of gross contributions that the

fundraisers would be paid pursuant to their contracts with

VietNow. According to the Attorney General, disclosure of

fundraising fees in these circumstances is essential because

5

prospective donors allegedly “have significantly less access to

such information.” Pet. Br. 11, 36.

This Court made clear fifteen years ago, before the advent

of the information age, that “fraud” may not be predicated on

nondisclosure of fundraising fees. See Riley, 487 U.S. 781

(1988). Today, predicating fraud solely on nondisclosure of

such fees is even less appropriate, because donors have the

benefit of unprecedented access to information about charities.

Through a combination of required disclosures to the

government, public and private efforts to make such

information widely available, and the proliferation of tools for

evaluating charities, donors are better equipped than they ever

have been to evaluate the worthiness of charities. These

continuing efforts, strongly supported by amici, are already

providing greater accountability and transparency for the

charitable sector. Combined with the existing ability of the

states and the federal government to prosecute fraud based on

actual misrepresentations by fundraisers, these efforts

represent the best and least intrusive way of protecting the

public from questionable fundraising practices. The Illinois

Attorney General’s approach, by contrast, would compel

speech and thus violate well-established First Amendment

rights.

A. The States And The Federal Government

Require Extensive Disclosure By Charities Of

Their Activities And Finances

The legally required disclosures by charities are

extensive. The IRS requires charities to file annually a six-

page Form 990 (Return of Organization Exempt from Income

Tax), a six-page “Schedule A” to Form 990 specifically

6

designed for charities, and a list of major donors.’ As part of

the Form 990, charities are required to provide detailed

information about their fundraising costs. See Form 990, Part

II (requiring a breakdown of fundraising costs and

information about “joint costs” for combined educational and

fundraising campaigns).’

Almost all of the states and many localities require

charities and their professional fundraisers to register and file

regular reports on their activities and finances, particularly

their fundraising costs.‘ These jurisdictions generally require

?__ Acharity with annual gross receipts of less than $100,000 and end-of-

year assets of less than $250,000 is permitted to file the two-page Form

990-EZ in place of the Form 990, but it is still required to file the six-page

Schedule A and the list of major donors. See Instructions for Form 990

and Form 990-EZ (2001), at 1-2. Only charities with annual gross receipts

that are normally $25,000 or less, and certain specific types of charities,

primarily churches and church-related entities, are exempt from having to

file either Form 990 or Form 990-EZ. /d. at 2.

> Charities are also required to make a one-time filing of Form 1023

(Application for Recognition of Exemption Under Section 501(c)(3) of the

Internal Revenue Code) with the IRS to receive recognition of their tax-

exempt charitable status. Only charities with annual gross receipts that are

normally less than $5,000, churches and church-related entities are exempt

from this requirement. See Instructions for Form 1023, at 1. This form

also asks for information about fundraising activities. Form 1023, Part II,

Question 3. The IRS has recently proposed modifying Form 1023 to

activities involve professional fundraisers. See proposed Form 1023, Part

VIII, Questions 3a, 3b, available at http://www.irs.gov/pub/irs-

tege/draft_f1023.pdf (last visited January 17, 2003).

‘ Forty states and the District of Columbia require charities to register

and file regular reports, although most states exempt certain categories of .

charities, such as churches, from this requirement. Forty-four states and

the District of Columbia require professional fundraisers to register and

file regular reports, again with some exemptions for professional

fundraisers hired by certain categories of charities. Survey of State Laws

Regulating Charitable Solicitations, The Philanthropy Monthly (2002).

7

charities to report information above and beyond the

information provided to the IRS on Form 990, as well as

requiring professional fundraisers to provide extensive

information.

For example, in Illinois each charity that solicits

contributions from persons in the state is required to file

annually with the Attorney General a copy of its IRS Form

990, an Illinois Charitable Organization Annual Report (Form

AG990-IL), an Individual Fundraising Campaign report

(Form IFC) for each fundraising campaign in which the

charity used a paid professional fundraiser, and audited

financial statements if either the charity’s gross contributions

for the year exceeded $150,000 or it used a paid professional

fundraiser that raised contributions in excess of $25,000. Ill.

Admin. Code tit. 14, § 400.60 (2002); see also

http://www.ag.state.il.us/charitable/require.htm (last visited

January 17, 2003) (listing filing requirements).’ Professional

fundraisers are required to file every six months a financial

report (Form PFR-02), a compensation report (Form PFR-

04), an explanation of fundraising fees (Form PFR-05), and

a Form IFC for each fundraising campaign conducted. Ill.

Admin. Code tit. 14, § 400.65 (2002). They are also required

to file annually a registration statement (Form PFR-01), a list

of charities and contracts (Form PFR-06), a copy of each

fundraising contract, and a bond. Jd. § 400.70. The Illinois

Attorney General in fact appears to have based his complaint

in this case primarily on information contained in filings that

respondents themmsslves made. See J.A. 21-35 (1984 and

1988 contracts between Telemarketing Associates and

$ Charities with annual contributions of $25,000 or less are subject to

less onerous filing requirements, and religious charities can receive an

exemption from these filing requirements. [ll. Admin. Code tit. 14, §§

400.40(a), 400.60(e)(3) (2002).

VietNow), 41-82 (financial reports filed by Telemarketing

Associates, Inc.), 90-100 (1992 contract between respondent

Telemarketing Associates and VietNow).

Failure to file the required reports can lead to severe

penalties. The IRS late-filing penalties accumulate at a rate of

$20 per day, increased to $100 per day for charities with

more than $1 million in annual gross receipts. 26 U.S.C. §

6652(c)(1)(A). The states can immmes fines, require

professional fundraisers to forfeit any coiipensation they have

received, seek injunctive relief to prevent a charity or

fundraiser that has not registered or filed the required reports

from soliciting in the state, and even file criminal charges.

See, e.g., 225 Ill. Comp. Stat. 460/2(i) (civil penalties;

injunctive relief), 460/6(g) & (h) (criminal penalties;

forfeiture of compensation), 460/7(g) & (h) (late penalties;

injunctive relief; forfeiture of compensation), 460/9(g)

(punitive damages; injunctive relief), 460/9(h) (forfeiture of

compensation) (West 1998).

B. Information Collected About Charities Is

Readily Available To The Public

The information described above has been made available

to the public both by governments and by private enterprises.

All of the information reported to the IRS, except for the

donors, is available to the public from the IRS on request. 26

U.S.C. § 6104(a)(1), (6); 26 C.F.R. § 301.6104(b)-1. All

charities are also required by law to provide copies of their

Form 990 and schedules, except for information about major

donors, to any person who requests a copy. 26 U.S.C. §

6104(d).°

* — Charities are also required to provide copies of Form 1023 to the

public upon request. 26 U.S.C. § 6104(d)(1)A)ii). For more

information about Form 1023, see supra note 3.

9

Philanthropic Research Inc. (PRI), itself a charity, has

taken further steps to ensure that information about charities

is readily available to the public. Funded by contributions

from charitable private foundations and others interested in

increasing the transparency of the charitable sector, and

working with the IRS, PRI makes all Form 990s filed by

charities available to the public at no charge through its web

site, http://www. guidestar.org (last visited January 17, 2003).

Searchable by name, key words, type of charity. income

range, and location, the PRI database provides easy access to

extensive information about every charity that files the Form

990.

Information filed with states is generally available on

request from the appropriate agency, usually either the

Attorney General or the Secretary of State. In Illinois, for

example, any reports and documents filed with the Attorney

General are open to public inspection. 225 Ill. Comp. Stat.

460/2(f) (West 1998). The Illinois Attorney General’s office

also provides for a nominal fee copies of reports it receives.

See http://www.ag.state.il.us/charitable/aboutcharitydb. htm

(last visited January 17, 2003) (stating that copies of reports

are available for fifteen cents per page).

~ Many states have placed on the Internet, or are in the

process of doing so, the reports they receive from charities

and professional fundraisers. As noted by the [Illinois

Attorney General, a copy of VietNow’s 2000 IRS Form 990

is available on the California Attorney General’s web site,

along with VietNow’’s audited financial statement for the same

year. See Pet. 2 n.1. VietNow’s Form 990 and audited

financial statement clearly show the portion of contributions

received that it spent on fundraising costs. See 2000 VietNow

Form 990, Part I, line 15 & Part II, column (D); VietNow

June 30, 2001 Financial Statement 3, 7. The Illinois Attorney

10

General is in the process of establishing an Internet-accessible

database to provide the public with access to the reports it

receives. See http://www.ag.state.il.us/charitable/charity .html

(last visited January 17, 2003).

C. Potential Donors Have Numerous Tools,

Provided By A Growing Number Of Sources,

By Which They Can Evaluate Charities

The ready availability of information about charities has

led to a proliferation of organizations rating and analyzing

charities. The American Institute of Philanthropy publishes

its ratings of more than 400 major charities, including

VietNow, in its Charity Rating Guide & Watchdog Report,

which is available by mail for $3.00; it also lists the top-rated

charities at http://www.charitywatch.org (last visited January

17, 2003). Other organizations that evaluate charities include:

the Better Business Bureau Wise Giving Alliance, which

makes reports available at http://www.give.org (last visited

January 17, 2003) on hundreds of charities, including

VietNow, that solicit nationally or have national or

international programs; Charity Navigator, which rates more

than 1,700 charities at http://www.charitynavigator.org (last

visited January 17, 2003); and Ministry Watch, which rates

485 large Christian charities at http://www.ministrywatch.org

(last visited January 17, 2003). See Ilan Wilhelm, Charity

Under Scrutiny, The Chronicle of Philanthropy, Nov. 28,

2002, at 22 (reporting on the growth of charity watchdog

services). In addition, state and local organizations, such as

the Charities Review Council of Minnesota, also evaluate

charities. See, e.g., http://www.crcmn.org (last visited

January 17, 2003).

N hershi —

fundraising and other standards for specific types of charities.

For example, the National Health Council promulgates

11

standards for voluntary health agencies, the Council on

Accreditation for human services charities, the Land Trust

Alliance for land trust charities, and the Evangelical Council

for Financial Accountability for religious charities. To

become members of these organizations, and receive the right

to represent themselves to donors as members of these

organizations, charities must satisfy their ethical standards.

Ratings of charities are also published on a regular basis

by the media. For example, each December Worth magazine

reports on the 100 best charities and a number of less-

deserving charities. Reshma Memon Yaqub, Jo Give Well,

Give Wisely: The Worth 100, Worth, Dec. 2002, at 80;

Reshma Memon Yaqub, Not Exactly Top 10, Worth, Dec.

2002, at 95. Similarly, Forbes magazine reports annually on

the largest charities, focusing in particular on their financial

efficiency. Good Works, Forbes, Dec. 9, 2002, at 186 (annual

survey of 200 major charities). Smart Money also annually

ranks the nation’s 100 largest charities by the percentage of

budget dedicated to programs and the percentage spent on

fundraising. Make Your Donations Count, Smart Money,

Nov. 12, 2002, at 70. In addition, The NonProfit Times has

been ranking charities for fourteen years, providing

information on income and expenses drawn from IRS Form

990s. Special Report NPT 100 - America’s Largest

Nonprofits, The NonProfit Times, Nov. 1, 2002, at 30.

Many organizations also offer models and guides for

evaluating charities. In addition to the organizations

mentioned above that rate charities, organizations providing

model standards include amicus Association of Fundraising

Professionals (AFP) and amicus Independent Sector. For

example, AFP distributes a Code of Ethics and a Donor Bill

of Rights, and Independent Sector provides a compendium of

standards and codes for nonprofit organizations at

12

http://www. independentsector.org/issues/accountability/

standards. html (last visited January 17, 2003). All of these

organizations have educational campaigns designed to increase

public awareness of the available resources for learning more

about charities. It is also common for the media to provide

guidelines to help potential donors evaluate charities. See,

e.g., Sandra Block, How to Give to Charities Without

Receiving Solicitations, USA Today, November 12, 2002, at

B3 (offering suggestions on how to research a charity).

Government agencies also provide materials to help

donors learn about and evaluate charities. For example, the

Federal Trade Commission publishes a guide on telemarketing

and charitable donations (Charitable Donation$: Give or

Take), available at http://www.ftc.gov/bcp/conline/pubs/

tmarkg/charity.htm (last visited January 17, 2003). Many

state Attorneys General provide similar guides. For example,

the California Attorney General publishes Guide to Charitable

Solicitation, available at hittp://caag.state.ca.us/

charities/publications/99char1.pdf (last visited January 17,

2003); the Illinois Attorney General publishes Tips for

Informed Charitable Giving, available at

http://www.ag.state.il.us/charitable/charitygive.htm (last

visited January 17, 2003); and the New York Attorney

General publishes Tips on Charitable Giving, available at

http://www .oag.state.ny.us/charities/chargive.pdf (last visited

January 17, 2003).

13

D. Steps Are Underway To Provide Even

Greater Access To Information About

Charities

The IRS and state charity regulators are working in

collaboration with charities to enhance further the reporting

of fundraising costs. For example, the IRS is considering

expanding the amount of information that charities are

required to report about fundraising costs on their Form 990s.

See IRS Announcement 2002-87, 2002-39 I.R.B. 624 (noting

recent changes to Form 990 to increase the accuracy of

reported fundraising costs and seeking comments on other

means to improve such reporting). Amicus Independent Sector

plans to submit comments to the IRS in late January, 2003 in

support of these efforts.

The accounting profession, working with the charitable

sector, is also taking steps to improve the reporting of

fundraising costs by charities. For example, in 1998 the

American Institute of Certified Public Accountants issued a

Statement of Position to govern how charities allocate costs

for joint activities, such as mailings that have both a public

education and a fundraising component. Known as “SOP 98-

2” and entitled “Accounting for Costs of Materials and

Activities of Not-for-Profit Organizations and State and Local

Government Entities that Include Fundraising,” this Statement

is helping to standardize how fundraising costs are calculated

and reported.

The IRS and a number of states, with strong support from

the charitable sector, are also creating systems for electronic

filing and even greater public dissemination of “orm 990s and

other charity filings. For example, twelve state charity

offices are working with the Urban Institute’s National Center

for Charitable Statistics on a system for the electronic filing

of Form 990 and state registration forms. Two of these

14

states, Pennsylvania and Colorado, already accept

electronically-filed Form 990s and state charity forms. See

http://nccs.urban.org (last visited January 17, 2003)

(reporting on the status of this e-filing initiative). The

Exempi Organizations Division of the IRS is working on an

electronic filing process for the Form 990 at the federal level.

See Exempt Organizations Division, Internal Revenue

Service, FY2003 Exempt Organizations (EO) Implementing

Guidelines (September 2002), at 4, 14-15 (listing electronic

filing as one of the agency’s “Key Strategic Initiatives”).

Electronic filing is an important step in increasing public

access to information about charities because it will shorten

the time between the filing of returns and their public release.

Electronically filed information is also much easier to process

and to check for completeness and accuracy. The IRS and

State regulators will therefore need to spend fewer resources

on data processing and so will have more resources for audits

and enforcement efforts.

In March 2002, leaders in the nonprofit community,

including amicus Independent Sector, launched the Electronic

Data Initiative for Nonprofits (EDIN), which seeks to

promote an integrated federal and state effort to streamline the

reporting and dissemination of data on nonprofit organizations

through the appropriate use of electronic technology. The

goal is to create a comprehensive, secure, integrated, and

publicly accessible database about the operations of nonprofit

organizations and to reduce the barriers to electronic filing of

Form 990s. The coalition will educate nonprofit organizations

about the benefits of electronic filing, collect feedback from

charities and foundations, and share this information with the

IRS and with Congress. The coalition will also attempt to

secure support from tax preparation software vendors and the

accounting and legal professions to help ensure successful and

15

rapid transition to electronic filing. As increasing numbers of

nonprofit organizations transmit their data to the IRS and the

States in electronic format, more accurate, timelier

information about them will be available to potential donors.

Amicus Independent Sector has also launched a multi-

tiered accountability initiative to help the boards and staffs of

charities and other nonprofits develop clear standards and

procedures for ethical behavior. The priority objectives of

this initiative include enhancing accountability to the public

and increasing openness about charitable activities and

finances. Along with the other public and private efforts

already mentioned, this initiative represents a highly effective

way of ensuring that potential donors are fully informed about

the activities and finances of charities.

E. The Government Retains The Ability To

Prosecute Fraud Based On Affirmative

Misrepresentations And To Revoke The

Charitable Status Of Organizations That

Violate The Law

The First Amendment does not prevent the states or the

federal government from pursuing fraud claims against

charities and their fundraisers based on affirmative

misrepresentations to potential donors. In this respect, we

agree with the Solicitor General that, if the Illinois Attorney

General’s amended complaint alleged that respondents

intentionally made affirmative misrepresentations to potential

donors about how much was to be paid to VietNow, such as

telling donors that “90% or more goes to the vets” when this

was not the case, then the amended complaint would state a —

cause of action for fraud that is permissible under the First

Amendment. See U.S. Gov’t Br. 4. The Supreme Court of

Illinois appears to have foreclosed such a reading of the

complaint, however, with its conclusion that, absent a

16

constitutionally impermissible attempt to impose a percentage-

based limitation on fundraising costs, the complaint fails to

state a cause of action under Illinois law for fraud or breach

of fiduciary duty. Pet. App. 17; see also id. at 2 (“there is no

allegation that [respondents] made affirmative misstatements

to potential donors”).

If a charity were found to have engaged in fraud based on

such affirmative misrepresentations, or to have routinely

failed to meet its legal obligations to make required filings

with the IRS or state regulators, it could be subject to the loss

of its tax-exempt status under both federal and state law. The

IRS has ruled that a charitable organization may not engage in

substantial unlawful activities because the conduct of an

unlawful activity is inconsistent with charitable purposes.

E.g., Rev. Rul. 97-21, 1997-1 C.B. 121 (ruling that a

charitable hospital convicted of violating the Medicare and

Medicaid anti-kickback statute does not qualify as a tax-

exempt charity); Rev. Rul. 75-284, 1975-2 C.B. 204 (ruling

that an antiwar protest organization that urges demonstrators

to commit violations of local ordinances and breaches of

public order does not qualify as a tax-exempt charity).

Illinois law provides that if an Illinois nonprofit corporation

has solicited money and failed to use the money for the

purpose for which it was solicited, or has fraudulently

solicited money or fraudulently used the money solicited, the

Circuit Court may, in an action by the Attorney General

establishing these facts, dissolve that corporation. 805 IIl.

Comp. Stat. 105/112.50(a)(4) (West 1993).

In certain circumstances, improper relationships between

a charity and a professional fundraiser may also be cause for

revocation of the charity’s tax exemption. For example, in

United Cancer Council, Inc. v. Comm’r, 165 F.3d 1173,

1179-80 (7th Cir. 1999), the Court of Appeals, while

17

rejecting IRS allegations of private inurement on the facts

presented, recognized that if a charity were found to be

operated to a significant degree for the private benefit of a

fundraiser, the IRS could revoke the charity’s tax-exempt

status. Loss of federal tax-exempt charitable status would

generally also result in loss of such status under state law.

E.g., 35 Ii. Comp. Stat. 5/205 (West 1996) (conditioning

state tax exemption on federal tax exemption). If a fundraiser

exercises substantial influence over a charity, the IRS can also

impose financial penalties known as “intermediate sanctions”

on the fundraiser and force it to repay any “excess benefits”

it has improperly enjoyed at the charity’s expense. See 26

U.S.C. § 4958 (imposing financial penalties on persons with

substantial influence over a charity who engage in “excess

benefit transactions” as defined by statute); 26 C.F.R. §

53.4958-3(e)(2) (providing that improper influence over a

charity does not require formal or decisionmaking control, but

includes practical dominance of a charity’s affairs).

State and federal regulators thus have a large and growing

arsenal of weapons that they may use to combat fraud by

charities or their fundraisers. Amici strongly support the

vigorous enforcement of these laws in ways that do not chill

legitimate charitable speech.

II. It Is Inconsistent With The First Amendment To

Predicate A Fraud Complaint Solely On

Nondisclosure Of An Allegedly “Excessive” Fee

Arrangement Between A Fundraiser And A

Charity

Beginning in the long line of cases cited in Village of

Schaumburg v. Citizens for a Better Envir’t, 444 U.S. 620,

628-32 (1980), and continuing through Sec’y of State v.

Joseph H. Munson Co., 467 U.S. 947, 961-62 (1984), and

Riley v. National Fed’n of the Blind, 487 U.S. 781, 789

18

(1988), into the more recent cases of United States v.

Kokinda, 497 U.S. 720, 725 (1990), and Internat’! Soc’y for

Krishna Consciousness, Inc. v. Lee, 505 U.S. 672, 677-78

(1992), this Court has repeatedly reaffirmed that charitable

solicitation speech is entitled to the highest degree of First

Amendment protection because it is necessarily linked with

informative and persuasive speech. As the Supreme Court of

Illinois noted, this conclusion is particularly apposite here

because “the fundraising services [respondents] provided * * *

were inextricably intertwined with the advancement of

VietNow’s philosophy and purpose.” Pet. App. 15.

Government action infringing on such speech must therefore

be narrowly tailored to serve a substantial governmental

interest. Riley, 487 U.S. at 789; Schaumburg, 444 U.S. at

637.

Since speech requires a means to speak, this protection

extends not only to speech in which charities engage directly,

but also to speech of others who act on their behalf. See,

e.g., Meyer v. Grant, 486 U.S. 414, 422-23 (1988) (holding

that prohibiting proponents of a ballot initiative from hiring

paid petition circulators to obtain the required signatures to

place such an initiative on the ballot violates the First

Amendment in part because it limits the number of voices that

will convey the speaker’s message). When a charity retains

a professional fundraiser, therefore, First Amendment

protection extends to solicitations that the fundraiser makes on

behalf of the charity. Riley, 487 U.S. at 789; Munson, 467

U.S. at 960-61 & 967 n.16; Schaumburg, 444 U.S. at 635-36.

Restrictions on how much a charity can pay a professional

fundraiser, whether enacted by statute or imposed by

individual fraud prosecutions, necessarily limit the ability of

charities to speak, particularly charities that support unpopular

causes or include significant educational or advocacy

messages with their fundraising appeals. Riley, 487 U.S. at

19

794; Munson, 467 U.S. at 967; Schaumburg, 444 U.S. at

636-37.

Fundraising costs, whether incurred by a charity

internally or paid to a professional fundraiser, vary widely

_ depending on many factors, including factors outside the

charity’s control. Riley, 487 U.S. at 791-92; Munson, 467

U.S. at 961-62, 967; Schaumburg, 444 U.S. at 636-37 n.10.

Charities seeking to raise funds for unpopular or novel causes

almost inevitably incur high fundraising costs. Charities often

use telemarketing communications, not only to raise funds,

but also to acquaint the public with their charitable mission

and to encourage citizen action. “Prospecting” solicitations,

directed toward individuals with no prior giving history, are

extremely expensive and time-consuming, and in the short run

they usually generate an out-of-pocket loss. Therefore, basing

fraud prosecutions solely on the existence of al'egedly “high”

fundraising costs, or requiring mandatory disclosure of such

costs, threatens to chill the speech of the very charities that

are in the greatest need of protection so that they may make

their voices heard.

The government indisputably has a substantial interest in

preventing fraud. This Court has repeatedly recognized,

however, that the level of a charity’s fundraising costs has

little if any correlation with fraud. Riley, 487 U.S. at 793 &

n.7; Munson, 467 U.S. at 966-67 & n.15; Schaumburg, 444

U.S. at 636-37. This Court has therefore struck down, as not

narrowly tailored to serve this interest, statutes that

conditioned a charity’s right to speak on maintaining

fundraising costs below a specified level. Riley, 487 U.S. at

798; Munson, 467 U.S. at 967-68; Schaumburg, 444 U.S. at

636-37.

20

There are many reasons why a charity could legitimately

incur very substantial fundraising costs, either in a given

fundraising campaign or over time. As noted in Riley:

[T]}here are several legitimate reasons why a charity

might reject the State’s overarching measure of a

fundraising drive’s legitimacy — the percentage of

gross receipts remitted to the charity. For example,

a charity might choose a particular type of

fundraising drive, or a particular solicitor, expecting

to receive a large sum as measured by total dollars

rather than the percentage of dollars remitted. Or, a

solicitation may be designed to sacrifice short-term

gains in order to achieve long-term, collateral, or —

noncash benefits. To illustrate, a charity may choose

to engage in the advocacy or dissemination of

information during a solicitation, or may seek the

introduction of the charity’s officers to the

philanthropic community during a special event

(e.g., an awards dinner). 7

487 U.S. at 791-92. In Munson, Maryland officials had

actually determined that the fundraising costs of thirteen

charities (out of sixteen applicants) were reasonable even

though they exceeded the statutory limit of 25%, including

five charities with fundraising percentages of 80% to 85%.

Munson, 467 U.S. at 967 n.15.

Better and less intrusive methods of combating fraud

exist. The government may prohibit false statements and

affirmative misrepresentations by solicitors; require truthful

answers to questions about fundraising expenses; require

extensive financial disclostres by charities and fundraisers;

make this information readily accessible to the public in forms

that permit efficient evaluation of individual charities; and

prosecute charities and fundraisers that violate these

21

requirements. The federal government and the states also have

the ability to investigate whether an organization with high

fundraising costs is in fact a charity under the applicable laws,

and to revoke the tax-exempt charitable status of an

organization that engages in fraud or routinely fails to make

its legally required filings.

This Court has specifically recognized that requiring

charities to disclose their financial information to the

government and then making that information available to the

public is an available and constitutional means for addressing

the fundraising concerns raised by the states. Riley, 487 U.S.

at 795, 800; Munson, 467 U.S. at 967-68 n.16; Schaumburg,

444 U.S. at 637-68. As noted earlier, the amount of financial

information collected about charities and the public’s access

to that information have increased dramatically since this

Court’s decision in Riley. These are exactly the methods for

combating questionable fundraising practices that this Court

has recognized as being consistent with the First Amendment.

Ill. The Illinois Attorney General’s Fraud Suit Would

Violate the First Amendment Because It Would

Force Charities And Their Fundraisers Either To

Keep Their Fundraising Costs Below Whatever

Level The Attorney General Deems “Excessive”

Or To Speak The Words Compelled By The

Attorney General

This Court has flatly rejected any attempt by states to

require charities to demonstrate that their fundraising

expenses are “reasonable” in amount. Riley, 487 U.S. at 793

(rejecting as unconstitutional any requirement that a speaker

prove “reasonableness” of fundraising fees “case by case

based upon what is at best a loose inference that the fee might

be too high”); Munson, 467 U.S. at 966 (“The flaw in the

statute is not simply that it includes within its sweep some

22

impermissible applications, but that in ail its applications it

operates on a fundamentally mistaken premise that high

solicitation costs are am accurate measure of fraud.”)

(emphasis added). Such a requirement necessarily chills

speech because “in every such case the fundraiser must bear

the costs of litigation and the risk of a mistaken adverse

finding by the factfinder, even if the fundraiser and the charity

believe that the fee was in fact fair.” Riley, 487 U.S. at 794;

see also New York Times Co. v. Sullivan, 376 U.S. 254, 279

(1964) (noting that even if the facts exist to sustain the defense

of truth for a speaker facing a libel suit by a public official,

allowing such a suit to proceed absent actual malice on the

part of the speaker impermissibly infringes on speech

“because of doubt whether [the defense of truth] can be

proved in court or fear of the expense of having to do so”).

This Court has also rejected as unconstitutional any

attempt by states to compel charities or their professional

fundraisers to disclose their fundraising costs to potential

donors, absent a question from those individuals about such

costs. Riley, 487 U.S. at 795-801; see also Hurley v. Irish-

American Gay, Lesbian and Bisexual Group, 515 U.S. 557,

573 (1995) (stating that outside of the commercial advertising

context, the First Amendment gives speakers the right to

tailor their speech, including the right to omit “statements of

fact the speaker would rather avoid”). Yet that is exactly

what the Illinois Attorney General is attempting to do in this

case by making respondents’ nondisclosure of their fee

arrangement the basis for his claims of fraud and of other

violations of state law. J.A. 10, 85-88.

Contrary to the Solicitor General’s suggestion (U.S.

Gov’t Br. 9), the theory of the instant fraud complaint would

inescapably impose on fundraisers an affirmative duty to

disclose fundraising fees regarded by the government as

23

“excessive.” The Solicitor General correctly recognizes that

imposition of an absolute duty to disclose fundraising fees,

whether by statutory prescription or by a common-law fraud

action predicated on nondisclosure of such fees, would

contradict this Court’s holding in Riley. The Solicitor General

accordingly argues that a duty to disclose is not absolute

under the Illinois Attorney General’s theory, but would arise

only where disclosure of fundraising fees is necessary to

ensure that other representations made by the fundraiser are

not misleading. See U.S. Gov’t Br. 9, 24-25.

In the eyes of an aggressive attorney general, however,

virtually any statement that a fundraiser would make in a real-

world solicitation could be said to be “potentially misleading”

if not accompanied by disclosure of his fees. For example,

the mere statement that funds received “would go to Charity

X,” or that “Charity X would benefit from the contribution,”

could be said to be misleading unless the fundraiser also

explained that the fees it received would diminish the charity’s

net receipts. Indeed, the allegedly “misleading” statement by

the fundraiser here was a straightforward recitation of

VietNow’s charitable purposes; it is hard to imagine any

fundraising solicitation that would not identify the charity’s

tax-exempt mission. Thus, if this Court allows the Attorney

General’s complaint to proceed, the only practical way for a

charity or its professional fundraiser to be assured that the

agreed-upon payments to the fundraiser will not expose the

fundraiser to a claim of fraud would be for the fundraiser to

to make such disclosures would seriously hamper the

legitimate efforts of fundraisers to raise money for the

charities they represent, in violation of the First Amendment.

Riley, 487 U.S. at 799-800.

24

Illinois here has attempted to impose a fee-disclosure

requirement on fundraisers, not by statute as in Riley, but

through the in terrorem effects of an individualized fraud

complaint. But all of the reasons for rejecting such attempts

when made through statutes or regulations apply with equal

force to attempts made through individual prosecutions. This

is particularly true here, because the Attorney General is not

only seeking various monetary penalties if fraud is shown but

also seeking to enjoin respondents from speaking in the State

of Illinois in the future. J.A. 12-13, 88. The Attorney General

is therefore attempting to impose a prior restraint of speech on

respondents that for respondents is as broad and debilitating

as any statute or regulation. As this Court noted in Munson,

it makes little difference whether a charity or professional

fundraiser is subject to a pre-donation regulation or to a post-

donation prosecution based on fundraising costs, since the

adverse effect on protected speech is the same. Munson, 467

U.S. at 969.

The governmental action here is actually more flawed

constitutionally than the statutes invalidated in Schaumburg,

Munson, and Riley, because those statutes at least provided

clear guidance regarding what level of fundraising costs

would be permitted. Respondents here face prosecution based

solely on the Illinois Attorney General’s after-the-fact

judgments that the level of their fundraising costs is

“excessive” and, therefore, that nondisclosure of such costs

converts into a “misrepresentation” an otherwise accurate

description of VietNow’s charitable purposes. But a charity

would have no way of knowing, in advance, what types of

fundraising arrangements prosecutors would later regard as

“excessive,” or even what factors would enter into such a

determination. Nor could a charity predict in advance how

prosecutors would later parse particular statements made

during the fundraising solicitation, which might be deemed

25

“misleading,” or not, depending on subtle variations in

language. Thus, if the Attorney General’s complaint were

allowed to proceed, any prosecutor would have it in his

discretion to pursue claims of fraud against whatever charities

he chose, based on highly subjective, after-the-fact

For example, the Attorney General of Maryland, under

this approach, could seek to impose the same 25% limit on

fundraising costs rejected in Munson by bringing or

threatening to bring fraud claims against any charity that paid

a professional fundraiser more than that amount, unless the

fundraiser disclosed the fee arrangement to potential donors.

Such discretionary power would create “a threat of censorship

that by its very existence chills free speech.” Munson, 467

U.S. at 964 n.12. This threat is particularly acute for

charities that engage in advocacy or support unpopular causes

— charities that are likely to have high fundraising costs and,

concurrently, to engage in speech that governmental officials

may be especially desirous of silencing. See Riley, 487 U.S.

at 794 (expressing concern that uncertainty about what

fundraising costs are in fact “reasonable” would discourage

professional fundraisers from engaging in “solicitations

combined with the advocacy and dissemination of

information” or fundraising for “primarily small or

unpopular” charities); Munson, 467 U.S. at 967 (“It is

equally likely that the statute [based on fundraising costs] will

restrict First Amendment activity that results in high costs but

is itself a part of the charity’s goal or that is simply

attributable to the fact that the charity’s cause proves to be

unpopular.”).

Charities and their fundraisers would also face a

proliferation of varying standards regarding what level of

fundraising costs are “excessive,” how the determination of

26

“excessive costs” is made, what other statements by a

fundraiser might thereby be rendered “misleading,” and what

evidence is required to counter such allegations. The

proliferation of diverse and vague standards, combined with

substantial prosecutorial discretion, would have a strong

chilling effect on the speech of charities that solicit

contributions in more than one jurisdiction. This chilling

effect would be compounded by the prospect of rulings on

such claims being issued by juries in multiple jurisdictions,

potentially accompanied by large and unpredictable

compensatory and punitive damage verdicts, and imposing

high litigation costs even on charities and fundraisers that

successfully defend themselves. The inevitable consequence

would be a de facto requirement that charities disclose their

fundraising expenses, which would enable the government to

impose indirectly the very obligation that this Court, in Riley,

held that the government may not impose directly.

The federal government and the states have an array of

constitutionally permissible options for addressing their

legitimate interests in combating fraud and in ensuring that

organizations making charitable fundraising appeals are

government’s ability to require extensive disclosure of

financial information by charities and their fundraisers and to

make that information readily available to the public is one

such option.’ The government can also require fundraisers to

answer truthfully questions posed by prospective donors about

fundraising costs, as Illinois in fact does. See Riley, 487 U.S.

at 799 (noting that an unchallenged portion of the North

7 The Illinois Attorney General was in fact allowed to proceed with his

claim that respondent Armet, Inc. had failed to comply with the Illinois

registration requirements for professional fundraisers, but chose to dismiss

that claim in order to appeal immediately the dismissal of the rest of his

claims. Pet. App. 22.

27

Carolina statute at issue required disclosure to donors of a

fundraiser’s professional status, and another statute required

fundraisers to disclose upon request how much of the

contributions would be turned over to the charity); 225 Il.

Comp. Stat. 460/17(b) (West 1998) (requiring a professional

fundraiser that receives a certain percentage of the gross

amount of each contribution to disclose that percentage

amount if the potential donor asks for this information). The

federal government requires professional fundraisers that raise

funds through telephone calls to promptly identify the charity

on behalf of which they are calling, to state they are calling to

solicit a contribution, and to agree to remove a person’s name

from their calling list on request. 16 C.F.R. § 310.4(b)(1)(iii),

(e). Illinois law has a similar requirement that paid

professional fundraisers promptly identify themselves as such,

and inform the potential donor that contracts and reports

regarding the charity are on file with the Attorney General.

225 Ill. Comp. Stat. 460/17(a) (West 1998).

As noted above, the states and the federal government

also have the ability to pursue fraud prosecutions based on

false statements and affirmative misrepresentations, and to

revoke the tax-exempt status of charities that engage in fraud

or violate laws governing charitable solicitations. Amici

strongly support vigorous enforcement of these laws.

Furthermore, if the states or the federal government are

concerned that an organization is not a legitimate charity

because it is providing an improper benefit to its professional

fundraisers, the best way to address that concern is not to rely

on the vague standard of materiality found in a common-law

fraud claim, but to seek instead to revoke the tax-exempt

charitable status of the offending organization itself. See

United Cancer Council, Inc. v. Comm’r, 165 F.3d 1173,

1179-80 (7th Cir. 1999).

28

In short, the government has more than sufficient

methods for addressing questionable fundraising practices,

and those methods are becoming more and more effective

every day. The explosive growth of information about

charities available through the Internet and from government

agencies in particular has increased the transparency of the

charitable sector and provided the public with enormous

amounts of information to guide their giving decisions. There

is therefore no need or constitutional justification for allowing

the Illinois Attorney General’s claim of fraud based on the

level and nondisclosure of fundraising costs to proceed, with

all of the negative ramifications on the speech of charities and

their professional fundraisers that would ensue.

CONCLUSION

The judgment of the Supreme Court of Illinois should be

affirmed.

Respectfully submitted,

ROBERT A. BOISTURE*

ALBERT G. LAUBER

LLOYD H. MAYER

SHARON P. LIGHT

CAPLIN & DRYSDALE, CHARTERED

One Thomas Circle, N.W.

Washington, D.C. 20005

(202) 862-5000

Attorneys for Amici Curiae

*Counsel of Record

Date: January 2003

la

APPENDIX

Charitable Purposes Of Amici

Other Than Independent Sector

Advocacy Institute

The Advocacy Institute works to make social justice

leadership strategic, effective, and sustainable in the pursuit

of a just world.

Alliance for Children and Families

The mission of the Alliance for Children and Families is to

strengthen the capacities of North America’s child and family

nonprofit service organizations and to advocate for children,

families, and communities.

Alliance of Nonprofit Mailers

The Alliance of Nonprofit Mailers is a national coalition of

nonprofit organizations interested in nonprofit postal policy

that use the mail to raise funds, solicit members, and

disseminate information.

American Association of Museums

The mission of the American Association of Museums (AAM)

is to represent the museum community, address its needs, and

enhance its ability to serve the public.

American Autoimmune Related Diseases Association

(AARDA)

AARDA works to bring a national focus and collaborative

effort to more than 80 autoimmune diseases and relieve their

socioeconomic impact through education, awareness, and

research support.

2a

American Cancer Society

The American Cancer Society is the nationwide community-

based voluntary health organization dedicated to eliminating

cancer as a major health problem by preventing cancer, saving

lives, and diminishing suffering from cancer through

research, education, advocacy, and service.

American Diabetes Association

The American Diabetes Association is the nation's leading

nonprofit health organization providing diabetes research,

information and advocacy. The mission of the organization is

to prevent and cure diabetes and to improve the lives of all

people affected by diabetes.

American Foundation for AIDS Research (amfAR)

The American Foundation for AIDS Research (amfAR) is the

nation's leading nonprofit organization dedicated to the

support of HIV/AIDS research, AIDS prevention, treatment

education, and the advocacy of sound AIDS-related public

policy.

American Foundation for the Blind

The American Foundation for the Blind is a national

charitable nonprofit whose mission is to eliminate the

inequities faced by the ten million Americans who are blind

or visually impaired through the critical issues of literacy,

independent living, employment, and access through

technology.

American Heart Association

The American Heart Association is a national voluntary health

agency whose mission is to reduce disability and death from

3a

American Lung Association

The American Lung Association is a national voluntary health

agency whose mission is to prevent lung disease and promote

lung health.

American Society of Association Executives

The mission of the American Society of Association

Executives is to advance the value of associations to society

and to support the professionalism of the individuals who lead

them.

American Symphony Orchestra League

The American Symphony Orchestra League provides

leadership and service to American orchestras while

communicating to the public the value and importance of

orchestras and the music they perform.

Americans for the Arts

Americans for the Arts is the nation’s leading nonprofit

organization for advancing the arts in America. It is

dedicated to representing and serving local communities and

creating opportunities for every American to participate in and

appreciate all forms of art.

ANGELCARE

ANGELCARE’s mission is to offer an opportunity for a

partnership with caring people who become members of their

“band of angels” to answer prayers of the world’s children for

food, clothing, schooling, and disaster relief.

The ASPIRA Association, Inc.

Established in 1961, the ASPIRA Association, Inc., is a

national nonprofit organization whose primary mission is to

4a

foster the socioeconomic development of the Latino

community.

Association of Fundraising Professionals (AFP)

AFP, an association of professionals throughout the world,

- advances philanthropy by enabling people and organizations

to practice effective and ethical fundraising.

The Catholic Charities of Santa Clara County, California

Catholic Charities strives to empower the working poor to

move beyond basic survival living to a state of meaningful,

quality living through economic, family, and emotional

stability.

Center on Philanthropy

The mission of the Center on Philanthropy is to increase the

understanding of philanthropy and improve its practice.

CIVICUS: World Alliance for Citizen Participation

CIVICUS is an international alliance dedicated to

strengthening citizen action and civil society throughout the

world.

Clean Water Action, Inc.

Clean Water Action is a nonprofit citizen’s environmental

organization with goals of clean, safe, and affordable water,

prevention of health-threatening pollution, creation of

environmentally safe jobs and businesses, and empowerment

of people to make democracy work.

Colorado Association of Nonprofit Organizations

The mission of the Colorado Association of Nonprofit

Organizations is to lead, serve, and strengthen Colorado's

nonprofit organizations.

Sa

Community Anti-Drug Coalitions of America

CADCA’s mission is to build and strengthen the capacity of

community coalitions to create safe, healthy, and drug-free

communities.

The Conference Board

The Conference Board is a global independent public-purpose

membership organization that conducts research, brings

executives together to learn from one another, convenes

conferences, publishes information, and forecasts and assesses

trends.

Cooperative for Assistance and Relief Everywhere, Inc.

(CARE, Inc.)

The mission of CARE, Inc. is to provide internaticnal

humanitarian relief and development in over 40 developing

countries around the world.

Council for Advancement and Support of Education

(CASE)

CASE is the leading resource for professional development,

information, and standards in the fields of education

fundraising, communications, and alumni relations.

Council for Opportunity in Education :

The mission of the Council is to advance and defend the ideal

of equal educational opportunity in postsecondary education.

As such, the focus of the Council is assuring that the least

advantaged segments of the American population have a

realistic chance tn enter and graduate from a postsecondary

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Easter Seals, Inc.

The mission of Easter Seals is to create solutions that change

the lives of children and adults with disabilities or other

special needs and their families.

Girls Incorporated

Girls Incorporated is a national nonprofit that inspires all girls

to be strong, smart, and bold. Since 1945, Girls Incorporated

has offered public education and programs that empower girls

to understand and assert their rights.

HalfthePlanet Foundation

HalfthePlanet Foundation is a nonprofit organization that

supports the application of technology to promote the values

of the Americans with Disabilities Act (ADA)—independent

living, social inclusion, equality of opportunity, economic

self-sufficiency, and empowerment.

International Youth Foundation

The mission of the International Youth Foundation is to

positively impact the greatest number of young people, in as

many places as possible, in the shortest amount of time, with

programs that are effective, and in ways that are sustainable.

Islamic Society of North America

The mission of the Islamic Society of North America is to

provide a platform of expression for Islam, to develop

educational outreach and social services that translate the

teachings of Islam into everyday living, and to enhance

Islamic identity in society.

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KaBOOM! Inc.

It is KaBOOM!’s mission that every child, through the

participation of their communities, should have healthy play

opportunities. KaBOOM! leads safe and accessible

community-building playground projects that are critical to

the development of children.

Kidney Cancer Association

The Kidney Cancer Association is a membership organization

made up of patients, family members, physicians, researchers,

and other health professionals. Its mission is a world without

kidney cancer.

The Learning Center

The Learning Center provides prevention and early

intervention services for children from birth through 5 years

of age and works in collaboration with both families and the

community.

The Leukemia and Lymphoma Society

The Leukemia and Lymphoma Society is the world's lai gest

voluntary health organization dedicated to funding blood

cancer research, education and patient services. The Society's

mission is to cure leukemia, lymphoma, Hodgkin's disease

and myeloma, and to improve the quality of life of patients

Maryland Association of Nonprofit Organizations

The Maryland Association of Nonprofit Organizations works

to strengthen and support the ability of nonprofit

organizations to serve the community, and to enhance public

understanding of, confidence in, and support for the nonprofit

sector.

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National Asian Pacific American Legal Consortium

The National Asian Pacific American Legal Consortium is a

national nonprofit, nonpartisan organization whose mission is

to advance the legal and civil rights of Asian Pacific

Americans.

National Civic League (NCL)

The National Civic League (NCL) is a 107-year-old

nonprofit, nonpartisan organization dedicated to strengthening

citizen democracy by transforming democratic institutions.

NCL accomplishes its mission through technical assistance,

training, publishing, research, and the All-America City

Awards, the nation's oldest and most prestigious community

National Committee to Preserve Social Security and

Medicare

The mission of the National Committee to Preserve Social

Security and Medicare, a membership organization, is to

protect, preserve, promote, and ensure the financial security,

health, and well being of current and future generations of

National FFA Foundation, Inc.

The National FFA Foundation, Inc., provides financial

support for Future Farmers of America (FFA) programs.

FFA makes a positive difference in the lives of students by

developing their potential for premier leadership, personal

9a

National Health Council

The National Health Council advances patient care, medical

research, health education, and community services

nationwide through voluntary health agencies that serve

people with chronic diseases and/or disabilities. ;

National Marfan Foundation

National Marfan Foundation is a volunteer health organization

dedicated to saving lives and improving the quality of life for

individuals affected by Marfan syndrome by providing

education, awareness, research and support.

National Mental Health Association

The National Mental Health Association is dedicated to

achieving victory over mental illness through advocacy,

National Multiple Sclerosis Society

The mission of the National Multiple Sclerosis Society is to

end the devastating effects of MS. The Society and its

network of chapters nationwide promote research, educate,

advocate on critical issues, and organize a wide range of

programs—including support for the newly diagnosed and

those living with MS over time.

National Puerto Rican Forum

The National Puerto Rican Forum is a leadership organization

working to enhance the socio-economic conditions of the

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National Urban League

The mission of the Urban League movement is to enable

African Americans to secure economic self-reliance, parity

and power, and civil rights.

National Wildlife Federation

The mission of the National Wildlife Federation is to educate,

inspire and assist individuals and organizations of diverse

cultures to conserve wildlife and other natural resources and

to protect the Earth's environment in order to achieve a

peaceful, equitable and sustainable future.

NOW Legal Defense and Education Fund

NOW Legal Defense and Education Fund is a leading national

nonprofit civil rights organization that for more than thirty

years has used the power of the law to define and defend

women’s rights.

Pennsylvania Association of Nonprofit Organizations

PANDO is the statewide membership organization serving and

advancing the charitable nonprofit sector through leadership,

advocacy, education, and services in order to improve the

quality of life in Pennsylvania.

Points of Light Foundation

The mission of the Points of Light Foundation is to engage

more people more effectively in volunteer service to help

solve serious social problems.

Public Education Network

The mission of the Public Education Network is to build

education for all children through a national constituency of

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South Carolina Association of Nonprofit Organizations

The mission of the South Carolina Association of Nonprofit

Organizations is to improve charitable services to the citizens

of South Carolina by strengthening the leadership and

management capacities of nonprofit organizations. This is

accomplished through advocacy, cost-saving programs,

networking, information, resources, education, and training.

The Theatre Communications Group’s mission is to

strengthen, nurture, and promote the professional not-for-

profit American theatre.

YMCA of the USA

The mission of the YMCA of the USA is to put Christian

principles into practice through programs that build healthy

spirit, mind, and body. -