Client Alert: A Cautionary Fundraising Tale for Charities, Nonprofits and their Fundraisers
Date: October 15, 2025
By:
Heidi K. Abegg
On September 25, 2025, the FTC, joined by a bipartisan group of nineteen state attorneys general, announced a proposed settlement order in a case, involving allegations that a breast cancer charity fundraiser participated in deceptive acts or practices in violation of Section 5 of the FTC Act and state laws, by misrepresenting, and failing to support claims that the donations would be used to support the charity’s services depicted in the advertising. The proposed settlement includes restrictions and bans on future fundraising, reporting obligations for ten years, as well as a judgment in the amount of $3,882,091, and the payment of $550,000 to one or more charities whose mission or purpose is consistent with the mission of the original charity.
The complaint alleged that over the course of five years, the professional fundraiser raised over $45.5 million, and of this, $34.9 million went to the fundraiser and its vendors. The complaint also alleges that the ads, broadcast in English and Spanish on national and local TV networks, radio, and online, falsely claimed that donations would go towards free and low-cost breast cancer screenings, and that such screenings had saved lives or would save thousands of women’s lives.
The fundraiser’s services included orchestrating “all aspects of their clients’ fundraising activities”, including advertising on TV, radio, on their own website, and on social media platforms. Subject to their client’s “purported approval,” the fundraiser also drafted scripts and responses that their call centers would use to process calls from potential donors. The fundraiser also handled all donor inquiries and retained all donor lists resulting from the fundraising campaigns.
Of particular note, the FTC and states alleged that the fundraiser knew or should have known that the claims that donations would save lives by supporting free or low-cost breast screening services were deceptive or unsubstantiated. For example, although the fundraiser visited the charity’s website, the fundraiser admitted that it did not review the charity’s Form 990 or any other financial forms posted there that would clearly show that the charity spent minimal amounts on breast screening services. The FTC also claimed that had the fundraiser done any due diligence, other red flags would have been uncovered.
Rather than independently ascertain the truthfulness of the ad’s claims, the FTC alleged that the fundraiser focused on language that would generate substantial revenue. “Defendants took no meaningful steps to investigate the truthfulness of the claims they made to the public so long as the ad claims generated revenue – even though a simple online search would have produced [the charity’s] IRS Form 990s and financial reports, charity watchdog ratings, and news articles . . . . A simple internet search would have also revealed the widely publicized action that the FTC and attorneys general of numerous states filed against [another fundraiser] for making deceptive fundraising claims regarding [the charity’s] provision of free breast screening services” including that the charity spent less than one-half of one percent of donations on breast screening services.
The FTC also noted that the fundraiser had notice of a deceptive claim from the charity itself when the charity informed the fundraiser that it did not have an exact testimonial for an ad’s claim that the charity’s free breast cancer exam saved the mother of the featured woman.
Enforcement Remains a Priority
The FTC has a link (currently lapsed due to the government shutdown) whereby anyone can report a fundraiser or charity not playing by the rules. As noted at the October 2025 National Association of State Charity Officials (NASCO) conference, and also detailed within its Annual Report on State Enforcement and Regulation, state regulators continue to enforce their laws against charities and nonprofits engaged in false or misleading solicitations. Compliant fundraising programs are critical, see Client Alert.
Takeaways for Charities and Other Nonprofits
While the charity was not a defendant in this particular matter, there are takeaways. First, nonprofits fundraising for themselves are still liable to actions by state regulators for the truthfulness of their fundraising. Staff should verify that all claims made in fundraising materials are accurate, and substantiation should be recorded and maintained. Second, nonprofits should review fundraising advertisements and materials prepared by third parties, including scripts or other materials that may be used to communicate with potential donors. Nonprofits should ensure appropriate language is included in their vendor contracts that gives the nonprofit the ability to review and correct fundraising materials.
Although primarily directed at fundraisers, nonprofits may also find the FTC’s due diligence tips helpful: Professional fundraisers: Don’t skimp on your due diligence — or the truth | Federal Trade Commission.
The Associations, Nonprofits and Political Organizations practice group at Whiteford has extensive experience and expertise in advising clients on all aspects of fundraising. Please contact Heidi Abegg or another member of the practice group if you have any questions or concerns regarding your compliance obligations.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.