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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 538 U.S. 600

## Text

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
CES. kc cc tbbcdédeceséecseeeseen i
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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

6a

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.

7a

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.

8a

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

10a

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

lla

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. -

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0568%3A19. Public record. Not legal advice.