BATH TWP: InfoCision Management Corp. was riding high with positive publicity five years ago.
The company had paid $10 million for the naming rights to the University of Akron’s swanky new football stadium. It announced plans to build a $20.8 million corporate campus in Bath Township. Later, the firm was named one of the best places to work in Northeast Ohio.
Everybody, it seemed, loved the generous telemarketing company that had grown from a one-man operation in 1982 into a $180 million operation. With 4,400 employees in three states and about 1,000 locally, InfoCision has become one of the Akron area’s largest employers.
That rosy image was sullied last month after media scrutiny into InfoCision’s fundraising practices revealed that national charities were receiving, on average, only 30 percent of donations made through the company.
InfoCision now is dealing with the fallout.
After the Bloomberg Markets story was published nationally a month ago, including in the Akron Beacon Journal, and aired on a segment of The Today Show, the following has happened:
• Some charitable organizations for which InfoCision raises funds temporarily halted work, and some asked the company to change the scripts used to solicit donations, according to interviews.
• A Cleveland-area firm has filed a lawsuit seeking class-action status, and a New York law firm said it is exploring the same possibility.
• The company held internal meetings with employees to reinforce policies and ensure employees that the company believes it did nothing wrong.
• The company is concerned about whether it will be able to attract top talent after a negative public perception to the story.
• And this week, an announcement was broadcast over an internal system at InfoCision operations that CEO and President Carl Albright was being replaced as CEO by Craig Taylor, son of the founder, Gary Taylor, and as president by Steve Boyazis, an executive vice president.
The Bloomberg story, published the week of Sept. 13, said that in many cases, 75 percent of the money consumers donated to some of the nation’s largest charities through InfoCision campaigns did not stay with the charities, but instead was paid to the telemarketing firm.
That story also cited a $75,000 settlement this year with the Ohio Attorney General’s Office that included allegations InfoCision employees misled potential donors about how much of their contributions would go to charities. Some staffers identified themselves as volunteers as they called potential donors. InfoCision has said that the settlement did not include an admission of wrongdoing.
The company immediately issued a statement calling the Bloomberg story slanted, and asked to meet with the Akron Beacon Journal. In a wide-ranging discussion with Albright two weeks after the Bloomberg publication, Albright said there was internal discussion about whether to let the story blow over. He decided against that and said he wanted to “get out in front of it.”
“This is all a distraction for us,” he said. “We’re spending a lot of time fundraising. We have a lot of commercial clients. This is taking away from a lot of people’s valuable time right now.”
There was no suggestion at the time, or even this week, that Albright, who joined the company 21 years ago as a call-room floor supervisor, was a short-timer.
Charitable groups react
Although InfoCision says the Bloomberg story misrepresented the amount of money going to charities, interviews with the company and four charitable organizations named in the story showed some changed, or at least reviewed, their practices.
A spokeswoman with the American Diabetes Association confirmed the organization was modifying InfoCision’s fundraising scripts to avoid any confusion about the percentage of a donation that would go to the charity.
Asked about that, Albright confirmed that all fundraising scripts would be reviewed and a “handful” of other clients of InfoCision’s also requested script modifications.
He acknowledged that about a half-dozen clients suspended their fundraising programs for a few days while assessing the story, but no clients were lost and fundraising results by the company were up 20 percent the next week.
While Albright said he received many phone calls critical of the company, representatives of the charities said they received very few calls, though one charity said one donor indicated the desire to donate directly to the charity instead of through a telemarketer.
The American Cancer Society, which was named in the Bloomberg story, said it had voluntarily ended its business relationship with InfoCision in 2011 after it was determined the fundraising approach was outdated and a higher-cost program.
Greg Donaldson, society spokesman, said his group’s Notes to Neighbors program run by InfoCision generated net revenue for the society every year, contrary to the Bloomberg story, which cited documents filed with Maine and the U.S. Internal Revenue Service suggesting the Cancer Society had to pay InfoCision $113,006 in fees beyond the raised amount. Donaldson and InfoCision both said that is not true, but said it was against their policy to discuss specifics of a campaign.
A spokeswoman for Bloomberg said the news service stands by its story.
For a company that has built a reputation as charitable to its own community, it now has reason to be worried, said Bill Sledzik, associate professor of public relations at Kent State University. The storm eventually will blow over, but might have lingering effects, he said in an interview before the change in top management.
As the nation’s second-largest, privately held telemarketing company, InfoCision had “a pretty sterling reputation” within the industry and even survived the creation of Do Not Call lists, Sledzik said. He wrote about Bloomberg’s story concerning InfoCision in his marketing industry blog, ToughSledding.com.
But, he said, “When you tell people that I just contributed $100 and only $15 of it made it to the charity of my choice, it doesn’t sit well.”
InfoCision’s explanation has been that charitable organizations overall keep about 70 percent of all funds collected for all fundraising efforts by the charity, but there are different types of fundraising. Cold calls that attempt to develop new donor lists are less productive than calling regular donors. Some of InfoCision’s work is on the more costly side of the business, the company said.
But that doesn’t pass the test for donors, Sledzik said.
“The bottom line is that a lot of people look at this and say, ‘I’m not going to deal with these folks anymore,’ ” he said.
InfoCision and the charities can say the story was unfair or inaccurate, he added.
“That’s your side of it. But it’s a difficult sell.”
Sledzik said he would be nervous if he were Luis Proenza, president of the University of Akron. The university’s football stadium bears the InfoCision name after the Taylors contributed $10 million for 20-year naming rights. Also, UA’s Gary and Karen Taylor Institute for Direct Marketing is named after InfoCision’s founder and his wife, who gave their alma mater $3.6 million for the first institute of its kind.
Companies that use Hollywood actors and actresses to endorse their products are often dragged into the spotlight during any scandal involving the stars, Sledzik said.
UA Vice President of Public Affairs and Development John LaGuardia said the Taylors have been strong supporters of the university and extraordinarily generous. “We remain grateful for their continued philanthropy,” he said.
The company now faces at least one lawsuit that has a potential for opening the company’s practices to public scrutiny.
A lawsuit seeking class-action status was filed by Ohio personal injury firm Elk & Elk Associates, using the Bloomberg story as its evidence for cause. At least one other law firm, New York-based Sarraf Gentile LLP, has issued a news release that it is investigating InfoCision for possible litigation.
InfoCision has called the lawsuits baseless.
On Thursday, Sledzik said he has no inside information about why Albright is no longer CEO. But the public perception will be that it’s related to the poor publicity in the wake of the Bloomberg story.
“Those are the connections that people are going to make,” he said.
The public will question whether the chief executive was doing something wrong “or as so often happens in these cases, from everything from baseball to business, the person on the top takes the fall,” Sledzik said. “You’re in charge, and that’s how it goes.”
Of course, public perception isn’t as important as the response from clients, he said.