N.J. charity scam, honed for skeptics, shut down

Even federal investigators seemed impressed.

The pair of New Jersey businessmen ran a massive, nationwide telemarketing scheme designed to enrich themselves while collecting money for police, firefighters, and military veterans.

In a brazen twist, their scripts were designed to address the skepticism of potential contributors, generous people burned previously by fraudulent fund-raisers. Ironically, some victims may have been twice-burned. The same New Jersey pair had been sued repeatedly in the 1990s, on similar grounds, by state and federal authorities.

To answer doubters' questions this time around, their phone solicitors claimed to be working directly for the charities involved, which they promised would get 100 percent of each donation. Instead, the fund-raisers pocketed an average of 85 cents of every dollar.

The Federal Trade Commission and U.S. Justice Department said Wednesday that they had finally put an end to the lucrative scheme engineered by the two men, Scott Pasch and David Keezer.

To settle civil charges against them, Pasch and Keezer agreed to a lifetime ban on telemarketing and soliciting for charities, the FTC said. And the two men and their companies also agreed to pay $18.8 million in civil penalties - the most in FTC history, the agency said. No criminal charges have been filed.

To pay the penalties, they're forfeiting a treasure-trove of assets: two $2 million homes, paintings by Picasso and Van Gogh valued at $1.4 million, an $800,000 guitar collection, $270,000 from a recently sold wine collection, $117,000 in jewelry, three Mercedes, two Bentleys, and a variety of other property.

Robert Kaye, an assistant director in the FTC's Bureau of Consumer Protection, said the lifetime ban reflected "the seriousness of what occurred" as Pasch and Keezer's fund-raisers, employed by a company called Civic Development Group L.L.C., made millions of misleading calls since 2004, with scripts honed to squeeze money from even the skeptical.

To those wary of fund-raising intermediaries that keep most of what they collect, the phone solicitors were told to say they "work directly" for the charity in question, and "I do not work for a fund-raising company," according to a 2007 complaint that led to Wednesday's settlement.

To those who asked how much the charity would receive, the solicitors were told to reply that "100 percent goes directly" to the charity and to say it "now runs an in-house fund-raising drive," the complaint says.

To those who asked why the solicitor's call failed to display a number on caller ID, the fund-raisers were told to state that the federal rule "exempts nonprofits" from caller-ID requirements - even though the exemption doesn't apply to businesses soliciting on nonprofits' behalf.

"This was a very sophisticated scheme that was designed to prey upon consumers who understandably have concerns about where their donation money is going," Kaye said in an interview.

Kaye said the property forfeitures also reflected the magnitude of the accusations against Pasch and Keezer.

"We were not prepared to settle the case with them retaining these valuable assets," he said. "We made that a condition of resolving the matter."

Under terms of the settlement, Pasch, of Warren, N.J., and Keezer, formerly of Monmouth Beach, N.J., were not required to admit any wrongdoing, the FTC said. Neither Pasch nor Keezer could be reached for comment.

The FTC first sued Keezer, Pasch, and CDG's corporate predecessor, Civic Development Group Inc., in 1998, in connection with fund-raising for the American Deputy Sheriffs Association. They were also sued in the mid-1990s by state attorneys general in New Jersey and Connecticut.

In the 1998 case, Pasch and Keezer's company said it was raising money for bulletproof vests or death benefits for deceased officers' families. The FTC said that "virtually no money raised by CDG in the name of the ADSA ever benefited state law enforcement officers or organizations in the consumer's locality."

The FTC says it settled the 1998 case with an order that barred Pasch, Keezer, or their businesses from "making any misrepresentation that would be material to a consumer's decision to make a charitable donation," or "assisting any organization in making such misrepresentations to consumers."

Kaye said they violated the terms of that order in part by claiming in their contracts to be "management consultants" for charities rather than outside fund-raisers. Rather than getting around the order, he said, Pasch and Keezer blew the second chance the FTC gave them.

"It's not unusual that we would allow a company to stay in business with a strict understanding that they will not violate the law going forward," Kaye said. "What this case shows is that if they do, we will take action and that the consequences can be severe."