A telemarketing operation that made its money duping consumers into thinking they were donating directly to charities -- not going through a high-priced middleman -- was ordered to stop soliciting on behalf of charities and pay a record $18.8 million penalty, the Federal Trade Commission said.
(To learn more about the FTC, watch this exclusive Consumer Ally interview with FTC Chairman Jon Leibowitz.)




The penalty against Civic Development Group, LLC; CDG Management LLC; and owners Scott Pasch and David Keezer was the largest in FTC history for a consumer protection case.
"This scheme packed a one-two punch: it deceived the people who donated, and it siphoned much-needed funds from police, firefighters, and veterans groups," FTC Consumer Protection Director David Vladeck said in a written statement. "The court's final settlement order packs a one-two punch of its own: a record-breaking financial penalty for violating an FTC order and a lifetime ban on soliciting charitable donations."

To pay the penalty, the company's owners have been ordered to turn over some of the luxuries they've accumulated from their enterprise including:

• a $2 million home
• Picasso and Van Gogh paintings worth a total of $1.4 million
• an $800,000 guitar collection
• $270,000 from a recent sale of a wine collection
• $117,000 in jewelry
• vehicles including three Mercedes, a Bentley and a Range Rover.

In a complaint filed in 2007, the FTC printed scripts it said came from the company, in which telemarketers denied they worked for a fundraising company and said 100% of all donations would go to the charity. Instead, the FTC said 85% --90% stayed with the company, which went so far as telling its clients to refer to it as its management company rather than a fundraising company in an alleged attempt to dodge federal telemarketing laws.

The FTC's involvement dates to 1998, when the government alleged Civic Development had misled consumers into believing their donations would buy bullet-proof vests for local police and pay death benefits for the survivors of officers who had died.