Planned Giving Marketing Impacts Legal Ruling

Wednesday, August 5th, 2009

There was an opinion issued by U.S. Court of Appeals involving Robert Dillie in a case that charged him with operating a fraudulent foundation from 1996 to 2001.  The foundation was actually in a ponzi scheme issuing $55 million gift annuities to more than 400 donors - these were sold through investment advisers receiving commissions on each sale.  The opinion was issued this past June and M. Dillie is now serving a prison sentence of 121 months.  However, the legal fallout from the operation lives on.

Due to return of commissions ruled by the lower court, investment advisors sued the receiver who’s assigned to recover the remaining funds and repay defrauded donors.  However, Federal Court of Appeals concurred with the rulings of the lower court and rejected the arguments of the investment advisers’ lawyer.

Truly, the underlying facts of this case were unique.  And the ruling’s significance is how the gift annuities were viewed by the Court in light of marketing techniques used.  When the court looked at various promotional advertisements used, it was clear that the gift annuities were actually investment contracts.  Therefore, charities should be careful in marketing their gift annuities or other life income vehicles.  Make sure to emphasize that these are gifts first and foremost.

Tags: commissions, court, donors, foundation, gift annuities, lawyer, Planned Giving, Robert Dillie, U.S. Court of Appeals
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