Monday, September 16, 2013
Meet the lawyer who keeps some of America's worst charities in business
A large painting that dominates Errol Copilevitz’s conference room depicts him speaking before the U.S. Supreme Court in March 2003. In that case, his second before the court, Copilevitz successfully argued that limiting what charities pay solicitors is a violation of the First Amendment.
Credit: Maurice Rivenbark/Tampa Bay Times
"...Copilevitz won both cases on behalf of the American Association of State Troopers, which went on to raise tens of millions of dollars.
In the past eight years alone, the association has raised nearly $45 million through professional solicitation companies, IRS records show. About $36 million of that went straight to the solicitors, placing the charity at No. 9 on the Times/CIR list of America’s worst."
Meet the lawyer who keeps some of America's worst charities in business
Tampa Bay Times
The Center for Investigative Reporting
Sep 12, 2013
Errol Copilevitz started his legal career representing strip clubs and porn shops on the seedy side of Kansas City.
Then he took free-speech arguments honed defending topless bars to a more lucrative field.
Today, Copilevitz is the undisputed king of the charity world.
From his offices in a renovated turn-of-the-century warehouse in Kansas City, Mo., Copilevitz and his four partners represent more nonprofits and professional solicitors than any other law firm in the nation.
Last year, the NonProfit Times, an industry journal, named Copilevitz as one of the sector’s 25 “Best and Brightest,” thanks to his First Amendment work.
That expertise has been especially beneficial to a particular kind of charity – those that spend a tiny fraction of the cash they raise helping people in need.
The Tampa Bay Times and The Center for Investigative Reporting spent a year identifying the 50 worst charities in America based on the money they paid to professional solicitation companies over the past decade.
Copilevitz & Canter has represented nearly three-quarters of them, as well as most of their for-profit telemarketers and direct mail companies.
If there’s a dollar being donated over the phone in America, there’s a good chance the firm had a role in creating, registering or advising at least one of the parties involved.
More importantly, Copilevitz has won landmark First Amendment cases that have undercut government efforts to regulate sham charities and helped unleash an avalanche of junk mail and telemarketing calls on the American public.
Thanks in part to Copilevitz, the government can’t limit how much charities spend on fundraising.
And their for-profit solicitors don’t have to disclose how much they keep unless donors ask.
It’s impossible to calculate how much Copilevitz’s courtroom victories have meant to his clients’ bottom line. But the 37 charities he represents that were ranked among the 50 worst raised a total of $1.2 billion in cash over the past decade. Of that, nearly $880 million went to pay their outside solicitors, most of which also were the lawyer’s clients.
In a two-hour interview with the Times and CIR, Copilevitz calmly deflected criticism aimed at his clients.
He sat at a conference room table in a tweed jacket and patterned blue tie, rarely raising his voice, occasionally tapping the table to emphasize a point.
He knows that there are bad guys in the charity business.
“There’s no doubt there are some people who start charities whose intentions aren’t the greatest,” he said. “They’re looking to create a job for themselves, I suspect.”
But to Copilevitz, the choice is simple.
Put up with groups that don’t do enough to help people in need, or stifle everyone, including the charity “that actually may come up with the cure to cancer.”
As for those donors who give without realizing that only pennies will reach the cause, Copilevitz has little sympathy.
“I think people understand that there’s a cost (to raising money),” he said. “How long do you have to be telling them that?”
From vulgar to virtuous
Trim and tanned at 70, Copilevitz is reveling in the rewards of a long career.
He rubs shoulders with Julie Andrews at benefits for the National Children’s Cancer Society, a client in St. Louis.
On his wrist he wears a black rubber bracelet in support of Wounded Warrior Project, another high-profile account.
He owns a condo overlooking Kansas City, a winter getaway in Scottsdale, Ariz., and a couple of commercial real estate investments in Florida and Georgia.
He has about 40 employees and a multimillion-dollar practice that was recently named by U.S. News & World Report as one of the best law firms in the country.
He built it all himself.
The son of a grocer raised in rough-and-tumble East St. Louis, Copilevitz saw a career in law as the ticket to a better life.
After earning a law degree from University of Oklahoma in 1968, Copilevitz moved to Kansas City and landed a job at the radio station where his brother worked.
Within a decade, he had his own practice defending topless bars, adult bookstores and traveling circuses.
He represented strip club owners with alleged mob ties against a crusading district attorney intent on shutting them down. He defended a promoter facing criminal charges after a hippo went on a rampage at a fundraising event. And his firm represented clients like Pleasure Chest and Erotic City in battles with the city over their coin-operated video booths.
Copilevitz’s fight against regulators – people he derided for years as censors – culminated in a showdown in St. Louis in 1987. The U.S. Justice Department, under Attorney General Edwin Meese, had declared a war on pornography. More than 200 video store owners fought back with Copilevitz as their lawyer.
Calling the government’s crackdown an attack on the First Amendment, Copilevitz told a newspaper that banning the rental of porn movies would have “a chilling effect on the community.”
Less than a year later, he was making a similar argument in a much loftier venue: the U.S. Supreme Court.
This time, Copilevitz was arguing on behalf of charities and their paid solicitors.
The high court
It was a big leap for a tiny law practice. But Tom Gray, a former colleague, said the same legal principals held true, whether Copilevitz was defending strip clubs or charities.
“The fundamental issues of the First Amendment were the connecting piece,” he said.
In the case before the Supreme Court, Copilevitz’s clients were charities and professional solicitors challenging a new state law that required fundraisers to tell donors how much of their money actually got passed on to a charity. The attorney general said telemarketers, typically working with transient circus promoters, were keeping 80 percent or more of the money raised.
When the case reached the U.S. Supreme Court in 1988, Copilevitz argued that the law presented “a real and present danger of censorship” and could be especially harmful to small charities advocating unpopular causes.
If telemarketers were forced to start conversations by disclosing where donations wound up, he warned, they would “end up with a dial tone.”
The court sided with Copilevitz, building on a series of previous decisions that limited state regulators’ ability to crack down on fundraising costs. The ruling slammed the door on officials who had been trying for years to find a way to stop charities from funneling almost everything they raised to for-profit solicitors.
“There’s not much left to protect the donor,” David Ormstedt, Connecticut’s assistant attorney general, told reporters at the time.
Telemarketers and charities of all stripes celebrated the verdict.
A major trade journal described Copilevitz’s success in the case as “the year’s biggest gift to philanthropy.”
[Maura Larkins' comment: No, it's the biggest gift to scammers and their lawyers. Philanthropy involves a completely different approach to life.] The rise of telemarketing
If donors lost as a result of the 1988 decision, Copilevitz clearly won.
He also had the good fortune of being on the ground floor of an industry that was about to boom.
Computerized phone dialers introduced in the late 1980s made calling faster and more efficient.
Phone rates plummeted with the breakup of AT&T’s monopoly on long-distance service.
Dozens of entrepreneurs spied the opportunity, opened call centers and started signing up charity clients.
Robert Preston was one of them. He’d been running a part-time phone room for the Police Benevolent Association in South Florida for years when he decided to open a telemarketing company in 1991.
Preston said the computerized dialer made calling more efficient.
“It increased human productivity,” he said.
To help him launch a telemarketing business, Preston turned to Copilevitz, who had built a reputation as a guy who could get your business started and get you out of a jam with regulators.
“I realized he was the 800-pound gorilla in terms of understanding this area of the law,” Preston said.
Over the years, Preston’s company, Organizational Development, has relied on Copilevitz & Canter to file annual reports with regulators. Copilevitz helped negotiate a settlement in Maine in 2010 when Preston’s firm was charged with misrepresenting itself to donors. Copilevitz has also reviewed contracts between the telemarketer and its charity clients.
At its peak a few years ago, Preston’s company had $10 million in revenues; it keeps about 85 percent of donations.
Preston also turned to Copilevitz for help when he started a charity, WorldCause Foundation, in late 2010 to create a job for his son. The law firm handled the new charity’s IRS application and state filings.
Apart from their lawyer-client relationship, Copilevitz has joined Preston in several commercial real estate investments over the years.
“He’s not a baby if a deal goes sour,” Preston said of Copilevitz. “And when I would get angry with tenants, he would talk me off the ledge. He’s like a rabbi.”
Shutting regulators down
As telemarketing calls multiplied exponentially over the next decade, Copilevitz’s firm worked to make sure the calling continued unfettered.
In 1994, he knocked down a Georgia law designed to stop charities from using a law enforcement agency’s name, without permission, to drum up donations.
Three years later, Copilevitz stopped Louisiana from limiting how many police organizations could solicit in the state.
Copilevitz won both cases on behalf of the American Association of State Troopers, which went on to raise tens of millions of dollars.
In the past eight years alone, the association has raised nearly $45 million through professional solicitation companies, IRS records show. About $36 million of that went straight to the solicitors, placing the charity at No. 9 on the Times/CIR list of America’s worst.
Copilevitz was on hand again in 2001, when Florida lawmakers made their own attempt to crack down in high-cost fundraising.
They passed a law forcing charities to declare on mailers and fliers how much they spend on solicitors.
Copilevitz filed suit on behalf of two charities, including the Committee for Missing Children, No. 13 on the Times/CIR list.
He won yet again. Copilevitz convinced a federal judge that spending 86 percent of donations on professional solicitors – as the Committee for Missing Children had done that year – does not make a charity unworthy of support.
By 2003, Copilevitz’s reputation made him a natural candidate for another case before the Supreme Court. Illinois’ attorney general had sued Telemarketing Associates, claiming it misled donors and that it was keeping 85 cents of every dollar raised on behalf of one of its clients.
Copilevitz took the case, with no pay, and stepped before the nation’s highest court for the second time in his career.
This time nearly 200 charities, many of them Copilevitz clients, had signed briefs in support of his case.
Again he argued that limiting what charities pay solicitors is a violation of the First Amendment.
Again the justices agreed.
A large painting that dominates Copilevitz’s conference room shows him speaking before the court that day in March 2003.
“It was very gratifying,” Copilevitz said. “We had gone from representing this distasteful, small-time telemarketer in the circus days to these major trade associations that understood the issues went far beyond the case at bar. It affected the industry.”
The regulatory shuffle
Regulatory filings, disciplinary records and court documents collected by the Times and CIR show that Copilevitz & Canter has done work for more than 400 charities over the past decade.
Often that work involved nothing more than filing a charity’s annual registration papers with state regulators. Some of the firm’s most prominent clients – the American Cancer Society and Susan G. Komen Foundation – told reporters they fall into that category.
But the firm also has helped dozens of clients navigate more serious legal issues, including fighting allegations that they misled donors.
Copilevitz said that shouldn’t be a surprise.
“There are only a small handful of law firms in the country that focus on the myriad state charitable solicitation laws,” he said. “We happen to be one of them.”
When the United States Deputy Sheriffs’ Association was accused by Kentucky’s attorney general in 2009 of deceiving donors by telling them their money would buy bulletproof vests for local law enforcement, the nonprofit called Copilevitz & Canter.
Within a month, Copilevitz negotiated a settlement. His client would pay $30,000 to the state, donate $71,000 in equipment to Kentucky sheriffs’ departments and briefly stop soliciting in the state.
At the same time, he negotiated a separate case brought by Oregon against the charity.
In both cases, the charity admitted no wrongdoing and showed no lasting impact.
In its 2011 tax filing, the group reported spending nearly $1.7 million on fundraising out of total expenditures of $2.4 million – or about 70 cents of every dollar.
When charities and solicitors run into regulatory problems in one jurisdiction, they’re supposed to report it if asked by other states where they solicit. But in more than a dozen cases identified by the Times and CIR, Copilevitz’s firm filed annual registration forms in which charities and solicitors did not disclose prior actions in other states, despite being asked on the application.
United States Deputy Sheriffs’ Association did not disclose either the Kentucky or Oregon actions in its subsequent registrations in Florida, filings that were handled by Copilevitz’s firm. After being asked about the omissions, a spokesman for the Florida Department of Agriculture and Consumer Services said the matter is under investigation.
In another case, JAK Productions’ $300,000 settlement with the Federal Trade Commission, which was signed by Copilevitz in June 2010, was not mentioned in the solicitor’s filing the following year in North Carolina. Copilevitz & Canter submitted the paperwork to North Carolina on the solicitor’s behalf.
According to a spokeswoman for North Carolina’s charitable division, “The solicitor should have responded ‘Yes,’ ” to the question that asked if there had been actions taken by other state regulators in the previous five years.
And in Florida and Ohio, Copilevitz’s firm handled registration paperwork that failed to disclose a $100,000 fine by California in 2010 against the Association for Firefighters and Paramedics.
Asked about these filings, Copilevitz said his law firm never advises clients to omit such information. He said clients, not his firm, are responsible for ensuring the accuracy of their registrations.
But Michael Gamboa, president of the Association for Firefighters and Paramedics, which is No. 14 on the Times/CIR list, blamed Copilevitz’s office.
“They know all about those fines,” he told the Times and CIR. “They’re supposed to make sure it’s in the registration.”
Traci Gundersen, Utah’s former top charity regulator, said law firms like Copilevitz & Canter that specialize in state charity filings should have systems to track disciplinary cases to ensure they are disclosed as required.v “It’s almost like you’re burying your head in the sand if you fail to have a safeguard like that,” she said.
To understand how deeply involved Copilevitz gets with some of his clients, consider the case of Civic Development Group.
In 1998, the FTC sued the telemarketer for falsely claiming that donations would be used locally to buy bulletproof vests and provide benefits for dead officers’ families.
With Copilevitz’s assistance, the company negotiated a settlement that did little to affect its practices or hinder its success.
Within a decade, the New Jersey-based company became one of the largest telemarketers in the country.
It ran boiler rooms in at least 18 states and collected tens of millions of dollars each year on behalf of its charity clients, according to documents filed with state and federal regulators.
But in 2001, a law passed by the Indiana legislature threatened to cut into collections.v In most states, telemarketers calling for charities can solicit people on the Do Not Call list.
But Indiana’s new law said only people directly employed by a charity could; calling people on the list was off limits to hired-gun solicitors.
That put a damper on returns to the Indiana Fraternal Order of Police, which had hired Civic Development Group for telemarketing.
Civic Development turned to Copilevitz for advice.
According to court documents, Copilevitz walked Civic Development through a new fundraising arrangement that got around Indiana’s restrictions.
Civic Development’s phone room workers became employees of the Indiana Fraternal Order of Police, giving them access to people on the Do Not Call list. Callers also began telling donors that 100 percent of their donation went to the charity.
Civic Development morphed from being a telemarketer to acting as a “consultant” to the call center operation. But its managers retained the right to hire and discipline workers. And through its consulting fees, Civic Development continued to take most of what was collected from donors. In 2007, the FTC again sued Civic Development, calling the new setup a sham.
In court filings, the company said Copilevitz had reviewed the new contract with the Indiana police charity and reviewed solicitation material. Though Civic Development admitted no wrongdoing, it agreed in 2010 to a pay a record $18.8 million settlement. The former owners of the company, Scott Pasch and David Keezer, were banned from the industry.
Pasch and Keezer sued Copilevitz and his firm earlier this year, alleging they were given bad legal advice. When they asked attorneys at the firm whether they should seek FTC approval for their new fundraising model, they were told to “let sleeping dogs lie,” according to the complaint, which is pending. Copilevitz denied the claims made by his ex-clients and told reporters he never advised Civic Development to do anything improper. He said he outlined a legal way to deal with Indiana’s new law.
Mark Josephs, the former U.S. attorney who prosecuted the case against Civic Development, said he believes Copilevitz should have at least been aware of his client’s deceptive scripts.
Copilevitz told the Times and CIR that the company’s in-house lawyers prepared the scripts and when he learned they were claiming 100 percent went to charity, he advised them to stop.
“They did not follow my advice,” he said...(Read more: Meet the lawyer who keeps some of America's worst charities in business
Times researchers Caryn Baird and Carolyn Edds contributed to this report.