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Judge labels third-party fundraising as a ‘necessary evil’ in recent decision

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The charitable sector was once again shaken by details of a recent court ruling. According to the decision, 38-year-old Ontario fundraiser, Adam Gour, was indicted for fraud, handed a 15-month sentence and ordered to pay close to $300,000 for having, “by deceit, falsehood or other fraudulent means defraud[ed] the people of Ontario the sum in excess of $5000..."

The case isn’t as simple as media reports lead you to believe. It never is. But, says Gour’s defense lawyer Sam Goldstein, by focusing too much on the salacious details it’s easy to lose sight of the decision’s potentially serious implications. Namely, this case may be setting a precedent for the duties of nonprofits and third-party fundraisers in Ontario. And it’s something the sector should be very wary of, he says.

The facts

First, the facts: Gour initially worked as a third-party fundraiser with Kare for Kids Canada, a nonprofit dedicated to improving the quality of life of disadvantaged children. “Adam Gour approached our organization to volunteer to raise funds for us in early 2009,” affirms director George Marton. It was already at this point, that his less-than-ethical fundraising practices began. Accusations are varied, including, using photos of sick children for posters without proper remuneration and keeping too much for himself and the canvassers (though Goldstein argues his client’s commission was outlined in his third-party fundraising contract). “We had no idea whatsoever of any of his illegal activities,” Marton states, adding his stint with the organization was short-lived.

In search of accountability

Gour then launched the Northern Ontario Sick and Disabled Children’s Foundation and became its director, along with two others. He also acted as its third-party fundraiser, with the organization’s other directors playing the roles of canvassers. Here’s where it gets more convoluted. To help raise funds, Gour reached out to a family, asking to use their ill child in a poster. They never responded but Gour used the picture anyway. The family wasn’t impressed. They called the police and he was arrested. “He didn’t use due diligence,” admits Goldstein.

But it turns out that’s only the tip of the proverbial iceberg. The crux lies with another issue altogether. The judge found that one of Gour’s canvassers lied to a donor, telling them that every penny raised was going directly to the nonprofit. They weren’t – canvassers were working on commission. What’s more, the judge ruled Gour told his canvassers to lie about their remuneration.

That failure to disclose was problematic according to Justice McIsaac. “The handsome commissions being paid to these apparent ‘volunteers’ constituted the hiding of a fundamental and essential element of this fundraiser-contributor relationship,” he decided, adding the failure to disclose to be misleading.

Long term implications

Allegations of impropriety aside, Goldstein believes the decision is simply bad policy. Obligating charities to declare how they spend their money sets a dangerous precedent for how nonprofits and third-party fundraisers operate, he explains. “People will be focusing on the fact that they’re paying fundraisers instead of the more important issue of whether beneficiaries are getting something; that should be the real issue.” Besides, the Canada Revenue Agency (CRA) already demands a level of disclosure and transparency on fundraising activities, he says. “It’s not fair for hardworking nonprofits to have to focus on what they pay fundraisers instead of their good work.”

The judge obviously disagreed. It comes down to informed choice, he said, in pretty strong terms: “I want to make it clear that I am not ruling that charities cannot employ the necessary evil of third-party fundraisers. They can do so and even allow them to charge 95% of their collections so long as they give the potential contributor an informed and transparent choice. If the donor is prepared to opt for a high-commission charity as opposed to a low or no-commission option, that is his or her choice. But, at least it is a choice that is fully informed.”

Let’s set aside for a moment Justice McIsaac’s use of the term “necessary evil of third-party fundraisers,” though one wonders what prompted such a negative reference and the potential impact that type of language can have on the sector and those who support it. Instead, let’s highlight the issues this case brings up and the unanswered questions it leaves us with.

For one thing, because Gour was acting both as director of a nonprofit and a third-party fundraiser, the decision isn’t clear as to whether the obligation is placed on the shoulders of the former, the latter, or both. Either way, it may make it difficult for an organization to operate, believes Goldstein.

Disclosure at what cost

The ruling also doesn’t clarify whether this requisite disclosure is necessary even when information isn’t requested. The distinction can prove significant. “It’s vague to the point where nonprofits can potentially be in a lot of trouble,” Goldstein says. “You don’t know when and how much to disclose and to whom.”

Sue Egles, for one, is watching the developments closely. President of Inspire, a fundraising consultancy based in Toronto, she’s a big fan of increased transparency in fundraising. “I’m always suspicious and skeptical myself,” Egles offers, adding she always inquires about a canvasser’s remuneration when approached by one. That said, she’s cautious of supporting the duty of full disclosure without being asked for it. After all, it’s tough enough to fundraise these days. “People, by and large, don’t like any fundraising costs,” she explains. “It could deter them from giving to good, well-run charities.”

Though Ontario hasn’t yet introduced charitable fundraising legislation, other provinces have. That may explain why World Vision Canada — a leader in promoting transparency and good governance in fundraising and a recipient of numerous Voluntary Sector Reporting Awards — isn’t yet concerned about the implications of the ruling. “World Vision is studying the ruling, but doesn’t believe it will have any impact upon its current fundraising plans,” says Caroline Riseboro. The VP of Marketing and Communications notes that in provinces like Alberta and Manitoba, World Vision is already required under law to disclose information regarding its charity fundraising efforts, including how much is being paid to third-party fundraisers.

And what would George Marton say? He would comfortably provide prospective donors with information on where their funds are distributed and would support any rule that makes that obligatory. The problem, however, is enforcement, he says. He relates how the organization was approached by a company offering telemarketing services. After deciding not to hire them, it was found the company was untruthful in their practice, including being dishonest with donors about the percentage of funds going to the charity on whose behalf they were calling. “They will tell you anything they want; which is often far from the truth,” he says. “I even heard of an extreme case, when after the campaign, the charity owed money to the telemarketers, because they claimed the funds they generated did not cover all their expenses.”

Bottom line for Marton? The sector needs to take care. “We agree with Superior Court Justice John McIsaac when he said: ‘It's vile and despicable’ what he did,” states Marton. “A lesson is to be learned here; the nonprofit sector has to be vigilant, have to be very careful with whom they are dealing with, including volunteers, and have to keep a tight control over the activities of people involved with any kind of fundraising. People, like Adam Gour, could do a lot of damage to the reputation of a truly good cause.”

For Goldstein, the decision’s shades of grey far outweigh its hues of black and white. An appeal of the conviction has been filed and his client has already received bail pending appeal. The defense lawyer is convinced the higher court will be more attuned to the case’s complexities, declaring an early sign of success in the proffering of bail. “It’s an indication that the appeal has merit.”

Elisa Birnbaum is a freelance journalist, producer and communications consultant living in Toronto. She is president of Elle Communications and co-founder of SEE Change Magazine and can be reached at: info@ellecommunications.ca.

Photos (from top) Courtesy of Toronto Community Foundation. All photos used with permission.

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