The following is a transcript of a report by Team 4 reporter Paul Van Osdol that first aired Nov. 1, 2007, on WTAE Channel 4 Action News at 5 p.m.

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It takes money to make money. That's conventional wisdom in the business world, but what about charities?

A Team 4 investigation found that for some charities, more than 80 cents of every $1 raised goes not to their cause but to the people soliciting the donations.

Team 4's Paul Van Osdol checked the most recent financial reports for all Pennsylvania charities. Two local charities among the state's top spenders on fundraising had this in common: They both use a New Jersey telemarketing company to raise money.

But that company has been repeatedly accused of using deceptive tactics by numerous state attorneys general and most recently the feds.

Bob Wieland lost both his legs in Vietnam. Now he travels the country giving motivational speeches. He said some veterans groups raise lots of money, but the vets themselves never see it.

"I just encourage anybody to check out the background to see where in fact these dollars are going," said Wieland.

Team 4 found the local chapter of the Paralyzed Veterans of America has raised more than $5 million using telemarketer Civic Development Group of New jersey, one of two fundraisers for the charity.

But the company, not the charity, has kept $4.3 million of the total.

Despite that ratio, the director of Paralyzed Veterans, Joseph Dornbrock, said donors should not be concerned.

Van Osdol: "They probably think that donation, most of that money is going to be used by the paralyzed veterans, and it's really not, is it?"

Dornbrock: "It's a common misperception that there should be an overwhelming amount of every $1. There are expenses along the way."

But a local expert on charity fundraising said 85 percent is way too much for a fundraiser to keep.

Van Osdol: "What should people be doing when they run into an organization like that?"

"They should not give them $1," said Peggy Morrison Outon of Robert Morris University. "Absolutely, they should not."

Civic Development Group has been a frequent target of charities regulators. Twenty states, including Pennsylvania have investigated the company and ordered more than $700,000 in fines and penalties.

In September, the Federal Trade Commission accused the company of deliberately misleading consumers by telling them all the money raised goes to the charities it represents, like the Pennsylvania Chiefs of Police Association, which has a fundraising center in Washington.

In fact, the FTC found very little of the money going to charities.

Team 4 tried to talk to CDG's supervisor at the fundraising office.

Van Osdol: "How come only 15 percent of the proceeds raised by your organization goes to the chiefs of police?"

CDG: "We're not at liberty to discuss that. If you have any questions you can call New Jersey."

Company officials in New Jersey declined Team 4's request for an interview, but they did issue a statement, saying, "In terms of the FTC complaint, we operate all business operations in full compliance with all applicable state and federal laws and do not believe that there is any basis for the complaint. We intend to defend it vigorously."

The FTC lawsuit said Civic Development was "unjustly enriched as a result of their unlawful practices."

The suit also said Civic Development employees falsely represented themselves as employees of the charities they were raising money for.

Former employee John Schaffer, of West Virginia, said he raised concerns about that practice with his supervisors.

Van Osdol: "And what did they say?"

Schaffer: "They said, 'Call after call, smile and dial.'"

Van Osdol: "Smile and dial?"

Schaffer: "Smile and dial. That was their answer. They gave me no logical explanation because, there wasn't one."

Schaffer said the company provided scripts for phone solicitors that urged them to keep asking for money, even if the person being called had a terminal illness.

"And we would say, 'I'm sorry you have cancer ma'am, I don't want to burden you. I understand times are tough. To make it easier for you, I'll just put you down for the smaller $15 Goodwill pledge and in about two or three days, you'll get your pledge kit. Fair enough?'" said Schaffer.

Schaffer said he felt so guilty and upset by what he did that he set up a Web site aimed at exposing Civic Development Group's practices.

The company sued to shut down the site, but Schaffer beat them.

"I owe society a bit of a debt for that, and hopefully this will help repay it by helping spread the message about what's going on," said Schaffer.

Despite Civic Development's history, the Paralyzed Veterans plan to keep using them.

The Chiefs of Police Association did not return Team 4's calls.

The Better Business Bureau said charities should spend no more than 35 percent of their budget on fundraising. Most spend far less than that.

The Carnegie Institute spends 5 percent on fundraising. The Pittsburgh Zoo spends 1.6 percent. The Salvation Army spends 0 percent.

Related:

Investigate A Charitable Organization At The Dept. Of State Web Site

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