Gurbir S. Grewal, Attorney General
Division of Consumer Affairs
Kaitlin Caruso, Acting Director
Division of Law
Michelle L. Miller,
For Immediate Release:
March 4, 2021
Further Information Contact:
Lee Moore 609-292-4791
AG Grewal: New Jersey Joins FTC, 37 Other States
in Shutting Down Massive Robocall-Driven Charity Fund Raising Scam
TRENTON – Attorney General Gurbir S. Grewal announced today that a lawsuit filed by New Jersey, the Federal Trade Commission (FTC), 38 states and the District of Columbia has permanently shut down a charitable fundraising scam operation that made 1.3 billion deceptive fundraising calls – the bulk of them illegal robocalls – while collecting more than $110 million dollars from trusting donors.
A complaint and series of settlement agreements filed today in the U.S. District Court for the Eastern District of Michigan center on deceptive fundraising activities by Michigan-based Associated Community Services (ACS), as well as a number of related defendants. ACS and the other defendants have agreed to settle claims by the FTC, New Jersey and the other participating states and jurisdictions that they duped generous Americans into donating to charities that failed to provide the services they promised.
Under the settlements announced today, money surrendered by the defendants will eventually be contributed to one or more legitimate charities that support causes similar to those for which the defendants solicited. Those causes include supporting homeless veterans, victims of house fires, breast cancer patients, and children with autism, among others in need of assistance.
“The conduct of these defendants was outrageous, as they took advantage of the trust and compassion of people in New Jersey and across the U.S. by persuading them that they were raising money to aid some of our most vulnerable Americans,” said Attorney General Grewal. “In collecting more than $100 million in donations nationwide – most of which went into their own pockets -- the defendants hammered hundreds of thousands of New Jersey residents multiple times per hour with disruptive and annoying robocalls. In fact, the investigation showed that New Jersey residents were among the most frequently targeted by this sham operation, and we’re proud to have worked with the Federal Trade Commission and our partners in other states to end it. We’re also glad to join an effort that will see the defendants’ ill-gotten funds redirected to charities that do great work on behalf of those in need.”
The lawsuit names as defendants ACS and its sister companies Central Processing Services and Community Services Appeal, as well as their owners Dick Cole, Bill Burland, Barbara Cole, and Amy Burland, and ACS senior managers Nikole Gilstorf, Tony Lia, John Lucidi, and Scot Stepek (collectively, the “Associated Community Services defendants”).
In addition, the complaint names two fundraising companies allegedly operated by Gilstorf and Lia as spin-offs of ACS: Directele, Inc. and The Dale Corporation (which, collectively with Gilstorf and Lisa, are the “Directele defendants”).
According to the complaint filed today, the defendants were fully aware the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support. In some cases, that amount was as little as one-tenth of one percent. The defendants kept as much as 90 cents of every dollar they solicited from generous donors on behalf of the charities.
New Jersey was a favorite target of the bogus fundraisers, as ACS placed nearly 68 million solicitation calls to New Jersey residents between 2016 and 2019 – a number surpassed only by the scam operations’ call volumes in California, New York and Texas.
Of the calls to New Jersey targets, more than 125,000 individuals were called more than three times a day, more than 422,000 individuals were called two or more times in an hour, and more than 12,000 were called three or more times in an hour.
“These predatory fund raisers profited by robocalling thousands of New Jersey residents, just to exploit their trust and that of compassionate people all across the country,” said Division of Consumer Affairs Acting Director Kaitlin Caruso. “More than one million New Jersey residents give to charity each year, supporting causes they believe in. We at the Division of Consumer Affairs take a dim view of those who would prey on that generosity, and are committed to holding accountable any individual or group who does so.”
Today’s announcement comes five-and-a-half months after Attorney General Grewal joined the FTC and other States in announcing the
shutdown of a sprawling, New-Jersey-based charitable fundraising operation that scammed donors out of millions of dollars.
That case resolution – announced on September 15, 2020 – closed down the deceptive fundraising activities of multiple companies controlled by Mark Gelvan, a Florida resident who once lived in Montville, New Jersey. Gelvan’s network of sham charities claimed to use donations to help homeless veterans, retired and disabled law enforcement officers, breast cancer survivors and others in need, but kept most of the funds raised.
“Deceptive charitable fundraising can be big business for scammers, especially when they use illegal robocalls,” said Daniel Kaufman, Acting Director of the FTC’s Bureau of Consumer Protection. “The FTC and our state partners are prepared to hold fraudsters accountable when they target generous consumers with lies.”
The ACS complaint filed today alleges that the defendants began making their deceptive pitches no later than 2008 on behalf of numerous organizations that claimed to support a number of causes that well-meaning individuals were enticed to help fund through the defendants’ high-pressure tactics.
ACS was also the major fundraiser for the
sham Cancer Fund charities that were shut down by the FTC and States in 2015.
In many instances, the complaint alleges, ACS and later Directele knowingly violated the FTC’s Telemarketing Sales Rule (TSR) by using soundboard technology in telemarketing calls.
With that technology, an operator plays pre-recorded messages to consumers instead of speaking with them naturally. Each soundboard operator routinely handled three calls at once, allowing the defendants to contact more would-be donors much more frequently than a live agent working in a conventional telemarketing setting.
Use of such pre-recorded messages in calls to first time donors violates the TSR. Use of the technology in calls to prior donors also violates the TSR, unless call recipients are affirmatively told about their ability to opt out of all future calls and provided a mechanism to do so.
The defendants did not make that disclosure.
Today’s complaint also alleges ACS made harassing calls, noting that ACS called more than 1.3 million phone numbers more than ten times in a single week and 7.8 million numbers more than twice in an hour. More than 500 phone numbers were called 5,000 times or more.
The ACS defendants were the subject of 20 prior law enforcement actions for their fundraising practices. They stopped operating in September 2019.
Defendant Nikole Gilstorf purchased Directele and The Dale Corporation in October 2019 and, with defendant Tony Lia, the Directele defendants allegedly continued their deceptive fundraising and illegal telemarketing practices.
In addition to alleging violations of the TSR, today’s complaint alleges the defendants violated the New Jersey Consumer Fraud Act, the New Jersey Charitable Registration and Investigation Act, and the Federal Trade Commission Act, among other laws in the participating States.
The terms of the settlements, which are currently pending court approval, are as follows:
Associated Community Services Defendants
Each of these defendants will be permanently prohibited from conducting or consulting on any fundraising activities, and from conducting telemarketing of any kind to sell goods or services. In addition, they will be prohibited from using any existing donor lists and from further violations of state charitable giving laws, as well as from making any misrepresentation about a product or service. The defendants will also be subject to the following monetary judgements:
- Associated Community Services, Inc.; Community Services, Inc.; Central Processing Services, Inc.; and Richard “Dick” Cole are subject to a monetary judgment of $110,063,843, which is suspended due to their inability to pay.
- Community Services Appeal, Inc. and Barbara Cole are subject to a monetary judgment of $110,063,843, which is partially suspended due to inability to pay. Barbara Cole will be required to turn over the proceeds of the sale of a vacation home in Michigan.
- Robert W. “Bill” Burland and Amy J. Burland are subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Amy Burland will be required to turn over $450,000.
Directele Defendants and ACS Senior Managers Scot Stepek and John Lucidi
Each of these defendants will be permanently banned from any fundraising work or consulting on behalf of any charitable organization or nonprofit organization that claims to work on behalf of causes similar to those outlined in the complaint. They will also be prohibited from using robocalls for any form of telemarketing, using abusive calling practices, or making misrepresentations about a product or service. In addition, the defendants will be required to clearly and conspicuously disclose when a donation they are requesting is not tax deductible.
In addition, the two corporate defendants—Directele Inc. and The Dale Corporation—will be required to cease operations and dissolve. The defendants will also be subject to the following monetary judgments:
- Scot Stepek will be subject to a monetary judgment of $110,063,843, which is partially suspended due to an inability to pay. Stepek will be required to sell a ski boat in his possession and turn over the net proceeds from the sale.
- Directele Inc., The Dale Corporation, Nikole Gilstorf, and Antonio Lia will be subject to a monetary judgment of $1.6 million. Gilstorf and Lia also will be subject to a judgment of $110,063,843. The judgments are partially suspended due to an inability to pay. Gilstorf and Lia will each be required to turn over $10,000.
- John Lucidi will be subject to a judgment of $110,063,843, which is partially suspended due to an inability to pay. He will be required to turn over $25,000.
Other state agencies joining in today’s complaint and settlement with New Jersey and the FTC include the Attorneys General of Alabama, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Also joining are the Secretaries of State of Colorado, Georgia, Maryland, North Carolina, and Tennessee, the Florida Department of Agriculture and Consumer Services, and the Utah Division of Consumer Protection.
Deputy Attorney General Monisha A. Kumar, of the Consumer Fraud Prosecution Section of the Division of Law’s Affirmative Civil Enforcement Practice Group, handled the ACS matter on behalf of the State.