New Jersey Division of Consumer Affairs Files Consumer Fraud Action Against Newark Organization that Allegedly Misled Charitable Donors, Transferred Contributions to For-Profit Business
NEWARK – New Jersey Youth Club, Inc. (NJYC), a Newark-based organization that claims to help underprivileged New Jersey youths, has been ordered to temporarily cease seeking door-to-door solicitations, and has had its assets temporarily frozen, under an Order to Show Cause entered by the Superior Court Judge in connection with an action filed on behalf of the New Jersey Division of Consumer Affairs.
The Division of Law, acting on behalf of the Division of Consumer Affairs, has filed a Complaint against NJYC, alleging that it violated the Charitable Registration and Investigation Act and regulations, as well as the Consumer Fraud Act, by soliciting for contributions although it is not registered as a charitable organization in New Jersey, and by making misleading and untruthful statements while soliciting donations.
"This organization solicited donations from the public by saying contributions would help fund constructive programs for at-risk New Jersey youths," Acting Attorney General John J. Hoffman said. "Instead, Newark teenagers allegedly were directed to make door-to-door solicitations for contributions, the majority of which were transferred to a for-profit business in New York."
NJYC represents on its website, and through its youth members who conduct door-to-door solicitation for the organization, that donations from the public will help create a better future for at-risk youths by paying for mentoring programs, positive recreational activities, and trips to sports events or amusement parks. Instead, however, the Division's Complaint alleges that NJYC has applied only minimal funds to such activities, while transferring the bulk of donated funds to a for-profit New York-based business called Big Apple Confectionary, Inc.
NJYC youth members solicit donations by walking door-to-door and selling cookies or other merchandise for $9.99 per item, under the guise that these sales constitute charitable donations that will fund positive activities for the youths. The youth members, aged 13 to 18 and mainly residing in Newark, at times conducted these door-to-door solicitations for up to nine hours per shift in various neighborhoods throughout New Jersey. Of the money raised by the youth members in 2012 and 2013, the vast majority appears to have been transferred to Big Apple Confectionary's business account.
As announced today, Superior Court Judge Walter Koprowski Jr., acting on the Division's Complaint, has ordered NJYC to temporarily stop holding itself out as a charity and temporarily cease soliciting charitable donations. The Judge also ordered the temporary freeze of NJYC's assets. The Judge's Order will remain in effect pending a January 26 hearing at which time the State will seek a further order that would continue these restraints throughout the time the litigation is pending.
"New Jersey law requires charities and their representatives to be truthful and honest when seeking donations," Division of Consumer Affairs Acting Director Steve C. Lee said. "Those who attempt to unlawfully take advantage of the generosity of New Jerseyans will be held accountable."
As set forth in the Complaint, which was filed by the Division of Law on behalf of the Division of Consumer Affairs:
NJYC's website has stated that the organization has a "mission of saving teenagers before they become perpetrators or victims of crime; help more teens discover a sense of self-respect thereby reducing teenage pregnancies; and discover the intrinsic and monetary rewards abounding in teamwork and self-reliance." The NJYC website has stated that youth members are rewarded for their work with "trophys (sic), plaques, gift certificates, gift cards and checks of up to $500" as well as with "all expense paid trips and activities such as: Six Flags, Splish Splash, Hershey Park, Knicks, Nets, Yankees, Bowling Nights, Go Carting, Laser Tag, Movie Night, Paintball and much more."
At least one of NJYC's teenage door-to-door solicitors used a solicitation script that repeated the message about positive activities and all-expense-paid activities for youths.
However, the website's "Activities" section did not include any specific information such as dates or locations of trips and activities actually offered to New Jersey youths. The website has displayed photographs depicting teenagers in various locations, or holding what appear to be recognition plaques or large checks, but without descriptions or captions indicating any connection to NJYC.
NJYC raised approximately $191,171.31 in contributions during 2012 and 2013, but has not registered with the Division of Consumer Affairs as a charitable organization, as required, and has not responded to a November 2013 letter from the Division about the registration requirement. The State's Charities Registration and Investigation Act requires such registration from non-exempt charities, in order to help ensure that all charitable fundraising in New Jersey is conducted with transparency, and that charities and their representatives provide accurate and truthful information when soliciting donations from the public.
Despite its failure to register as a charitable organization with the Division, NJYC's website has misleadingly stated that it is a "state-sanctioned, not-for-profit agency."
Despite NJYC's claims about the ways donations would be used, its bank account records reflect only two payments that might relate to recreational activities for youths, specifically a $138 check to "High Velocity Paintball" in May 2012, and a $240 check with "Splish Splash" noted in the memo line in July 2013.
Meanwhile, during 2012 and 2013 NJYC transferred at least $126,693 to Big Apple Confectionary, the New York-based business that supplied the cookies and other merchandise sold by NJYC's youth members during door-to-door solicitations. The organization also transferred $10,294 to a New York corporation called NADAR Communications, whose public relations director is also identified as NJYC's Chief Executive Officer.
Deputy Attorney General Natalie Serock, of the Consumer Fraud Prosecution Section within the Division of Law, is representing the State in this action.
Division of Consumer Affairs Investigator Brian Morgenstern conducted this investigation.
Advice for Consumers
The Division of Consumer Affairs encourages New Jersey consumers to learn as much as possible about any charity before deciding to make a donation. Consumers should:
- Find out whether the charity is registered in New Jersey, or is exempt from having to register. (Certain religious and educational organizations, and charities whose annual income includes less than $10,000 in public contributions and fundraising, are exempt from having to register with the State.)
- Find out how much the charity spent during recent fiscal years on program costs, management costs, and fundraising.
- Learn about the charity's stated mission.
Consumers may obtain information about a charity in several ways. They can ask the charity itself (reputable charities encourage you to do so), or visit the charity's website.Consumers can also obtain this information from the New Jersey Division of Consumer Affairs. Visit the Division's Charities Registration section; call the Division's Charities Hotline at 973-504-6215 during regular business hours; or use the Division's free "New Jersey Charity Search" smartphone app.
Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse, can file an
online complaint with the State Division of Consumer Affairs by visiting its
website or by calling 1-800-242-5846 (toll free within New Jersey) or 973-504- 6200.
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