DUANE J. KOLVE PLEADS GUILTY TO RACKETEERING IN CONNECTION WITH HIS FRAUDULENT CHARITABLE TELEPHONE SOLICITATION PRACTICES
DUANE J. KOLVE PLEADS GUILTY TO RACKETEERING IN CONNECTION WITH HIS FRAUDULENT CHARITABLE TELEPHONE SOLICITATION PRACTICES
EAU CLAIRE - An extensive three-year investigation and prosecution involving fraudulent charitable telephone solicitation practices engaged in by a group of Eau Claire businesses was successfully concluded today with the guilty plea of Duane J. Kolve, the person responsible for the operation of those businesses, to a felony charge of Racketeering. Kolve was convicted of Racketeering based upon his ownership or control of telephone solicitation businesses which fraudulently obtained over $10,000,000 in donations to claimed charities from in excess of 450,000 separate donations during the time period of 2002 through 2005. Three of Kolve's associates were earlier convicted of lesser charges in return for their agreement to cooperate in the Kolve prosecution.
Eau Claire County Circuit Court Judge Benjamin D. Proctor withheld sentence and placed Kolve on probation for six (6) years and ordered him to serve 10 months jail with Huber privilege. Judge Proctor ordered additional conditions that Kolve not own, operate or perform any work for businesses or individuals engaged in the solicitation of donations for charities and that he pay $20,000 as a financial penalty, with the initial portion being reimbursement of the cost of this prosecution and the remaining amount, up to the total of $20,000, being a fine.
These fraudulent telephone solicitation businesses skimmed off approximately 85% of the donations. Individuals who ran the claimed charities located in Louisiana, California and Wisconsin took further amounts of the donated sums, leaving behind only between 35Ð’Ñž and $2.92 of every $100 donated, which was then actually utilized for a charitable purpose.
This joint federal, state and local investigation and prosecution was spear-headed by the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP), the Wisconsin Department of Justice (DOJ) and the Eau Claire County District Attorney's Office. Significant investigative support was provided by United States Postal Inspectors, the Altoona, Eau Claire, Grand Chute and New Richmond Police Departments, the Wisconsin Department of Revenue, the Eau Claire County and Chippewa County Sheriff's Departments and the Wisconsin Department of Justice, Division of Criminal Investigation.
FALSE IMPRESSION CREATED BY SOLICITATIONS
The fraudulent telephone solicitation practices which were the subject of this case consisted of the Kolve companies providing false and misleading information to donors from several states. The telephone solicitations were deliberately conducted in a fashion to create the false impression that these claimed charities in Louisiana, California or Wisconsin were actually local charities in the states where the donors lived. The false impression was created by use of "mail drops" in the solicited states, together with techniques such as training telemarketers to utilize local news, sports or weather information from the solicited states in their solicitations and to speak in a regional accent and dialect.
The solicitations also consistently created the false impression that extensive amounts of donated sums would be utilized for charitable purposes such as purchasing needed safety equipment for law enforcement officers, funding children's burn camps, providing housing assistance to homeless veterans and financially assisting disabled firefighters and law enforcement officers. Telemarketers were trained to advise potential donors that their donations would be "put to good use right away." In reality, only minuscule amounts were actually utilized for these laudable, charitable activities (only between 35Ð’Ñž and $2.92 of every $100 donated).
Several specific examples of the vast difference between the grand proclamations of the claimed charitable activities and the actual charitable activities were uncovered in this case. One of these claimed charities, the American Veteran's Relief Foundation, (AVRF) admitted in an IRS filing for 2003 that only .35% or $3,750 out of total donations of $1,070,224 was actually utilized for a charitable purpose. Another of the claimed charities, the Association of Disabled Firefighters (ADF), reported for the same year that it expended $14,330 of $2,659,374 in donations for a charitable purpose, or literally 54Ð’Ñž of every $100 raised. Donors were not advised that shockingly few charitable activities would actually be funded with their money.
FALSE STATEMENTS OF SOLICITATIONS
Beyond creating a false impression as to the location of the claimed charities, or the extensiveness of the charitable activities to be funded, the fraudulent telephone solicitations which led to Kolve's racketeering conviction routinely consisted of factual mis-statements. For example, literally thousands of donations to the American Deputy Sheriff's Association (ADSA) were obtained by, in part, claiming that, "I don't know if you know this, but deputies have to buy their own bulletproof vests, taxes don't buy them. So what the ADSA does is buy the vests and pass them out. The goal is to get every deputy one." In contrast, the investigation in this case revealed that the general practice of law enforcement agencies is to provide bulletproof vests for their officers. Since ADSA expended only 36Ð’Ñž, 41Ð’Ñž and 86Ð’Ñž of every $100 donated to the charity in 2002, 2003 and 2004 respectively on charitable activities, this claim can only be viewed as blatant fraud. In actual numbers, ADSA astoundingly only expended $19,180 out of $5,391,787 in donations for charitable purpose (benefits to deputies) in 2002.
That representation, and others like it, were contained in scripts utilized by the telemarketers to complete these solicitation calls. Multiple individuals associated with these businesses advised investigators that Kolve was responsible for writing or approving these scripts. Multiple of the seized AVRF scripts described the claimed situation of veterans in VA hospitals by stating, "You know, the majority of the guys don't even have their own combs or toothbrushes!!" Contrary to that assertion, investigators received information from the Chief of Voluntary Services at a VA hospital in Madison, Wisconsin, that each patient admitted to a VA hospital is given a welcome tote bag which contains various personal items such as a toothbrush, writing paper, pen, etc.
TARGETED VICTIMS OF SOLICITATIONS
One of the more disturbing aspects of the fraudulent telephone solicitation practices leading to Kolve's racketeering conviction involved both the recurring nature of these calls and the fact that certain individuals appeared to be targeted by them. Although the scripts commonly contained language such as, "this year's drive," in reality, Kolve and the people working for him routinely targeted the same individuals for donations multiple times a year. Once a pledge was successfully obtained from a donor for one of these seemingly unrelated charities, that individual would then be repeatedly contacted by Kolve's telephone solicitors in an attempt to repeat that success for other claimed charities. On November 10, 2004, Kolve's solicitation company successfully obtained a pledge for a $15 donation to a claimed charity known as the Coalition of Police and Sheriff's (COPS) by making various representations including that the call involved "our drive going this year." Seized records of Kolve's company show that this same individual had contributed to that same charity two weeks before on October 28, 2004 and had pledged over 18 times totaling $275 to claimed charities on whose behalf these solicitation calls were made.
The investigation here revealed that elderly or otherwise vulnerable individuals were commonly a target of these calls. One telemarketer was advised by a potential donor that he was retired, had cancer and was in pretty bad shape. The telemarketer was apparently undeterred and continued to seek a donation by stating that he was sure that the potential donor would "agree the job of an officer is one of the most dangerous in terms of death or injury." It was apparent that this sort of persistence by Kolve's telemarketers resulted in donations routinely being received from elderly or otherwise vulnerable individuals.
One of the contributors who was exemplary of this pattern of repeatedly targeting individuals who appeared to be vulnerable was a donor from the State of Wyoming. It is astounding to note that during the 2Ð’Ð… year time period of January 11, 2002 through August 3, 2004, Kolve's company successfully solicited this individual on six separate occasions on behalf of AVRF for a total of $190, four separate times on behalf of COPS for a total of $260, five separate times on behalf of ADF for a total of $335 and five separate times on behalf of ADSA for a total of $165. When contacted by investigators, this donor stated that she may have received phone calls from deputies, sheriffs and firefighters, but did not remember any calls. She additionally stated that she certainly would not contribute money to those groups. Contrary to the belief of this donor, the accounting records from Kolve's company showed that the above-listed donations were received by the company.
Investigators received further information regarding the targeting of vulnerable individuals in connection with a series of donations made by an Iowa citizen. A review of the seized records of Kolve's company reveals that between 2003 and 2005 that individual had contributed $4,980 to claimed charities for which the company was conducting telephone solicitations, including $1,500 to ADSA. Investigators were advised by this individual's nephew that the donor was 61 years old, suffered from mental and emotional problems and could not say "no" to people who asked for money.
Given the information obtained during the course of this investigation, it is hardly surprising that one of the telemarketers for a Kolve company stated that, "It seemed like the people he called were lonely old seniors who nobody has talked to for a long time." Another telemarketer for that company stated, "You would get a lady on the phone whose husband has been dead for a year," and you're expected to keep pressuring someone in that position for a pledge.
QUOTES FROM PUBLIC OFFICIALS
In discussing the amount of time devoted to this investigation, DATCP Regional Manager Dave Tatar stated that, "hundreds of hours were expended by DATCP investigators listening to taped solicitation calls by employees of Kolve's company." As a result, Tatar stated that it was, "painfully apparent that donors were routinely misled as to the nature of the claimed charities, the extent of the charitable activities which would be funded and factual matters regarding the charities." Tatar summarized the DATCP investigative efforts here by noting, "The expenditure of considerable resources was well worth it here because it allowed prosecutors to hold Kolve and multiple of his associates criminally responsible for defrauding hundreds of thousands of individuals who believed they were donating to legitimate charities. Hopefully, this case will deter others from engaging in similar fraudulent telephone solicitation practices in the future."
Wisconsin Attorney General J.B. Van Hollen noted that, "nationally, criminal prosecutions of individuals engaging in this extreme fraud are infrequent. But this conduct is criminally culpable, and civil remedies may not adequately deter this conduct and punish this wrongful behavior." He went on to state, "I would like to think that this successful criminal prosecution will encourage prosecutors and regulators from other states to fully consider criminally prosecuting these extraordinary fraudulent practices so that individuals like Kolve will not be able to simply sidestep civil penalties, re-incorporate their businesses in a new name and re-initiate their fraudulent practices. I thank District Attorney Rich White, Assistant Attorney General John Greene from my office, and our partners at the Department of Agriculture, Trade, and Consumer Protection for their excellent work and forward thinking on this matter."
Eau Claire County District Attorney, Rich White, stated that "Kolve's activities here were particularly reprehensible because they resulted in the most unsophisticated and vulnerable members of our society being victimized, without even realizing that they were victimized." Equally as important, he pointed out, "these fraudulent practices interfere with the legitimate efforts of true charities to obtain support for their programs."
Investigators received information from one of Kolve's associates that Kolve had stated to her husband that his telephone solicitation business, "may be unethical or immoral, but it's legal." Van Hollen and White noted that, "the message of this prosecution is that those fraudulent telephone solicitation practices were unethical, were immoral and were illegal."