Last year alone, there were more than 50,000 newly established charities, according to the Internal Revenue Service. As ABCNEWS discovered during a yearlong undercover investigation designed to see just how easy it is to set up a charity where most of the money would benefit the organizers and fund-raisers, it was easy.
Operating out of the ABCNEWS offices in New York, producer Rhonda Schwartz put out word to the telemarketing industry via telephone, Web sites and at marketing conventions that she wanted to join those cashing in on the charity business.
"We told them we wanted to start a charity from scratch, we wanted to make plenty of money doing it, plenty of money, for us," said Schwartz.
After several weeks, ABCNEWS was led, with undercover cameras rolling, to a longtime, behind-the-scenes player in the charity business, Richard Troia. A self-described charity broker, he told ABCNEWS he had "access to 10,000 phones," i.e., phones available for telephone fund-raising.
His fund-raising operation, including a network of telemarketers, takes 90 percent — $9 out of $10 — of all the money raised.
As Troia told Schwartz at an Atlanta hotel, charity operators would get only what's left: one dollar out of 10. And it would be up to them to decide how much of that one dollar out of 10 would actually be used for charity, although he did confirm that some of that one dollar out of 10 would have to go to the charitable cause.
‘You Can Make Good Money’
Troia showed Schwartz how to create a worthy-sounding charity and make money — a rare insight into the charity business.
"And you can make good money," he was captured saying on a hidden camera. "You'll be able to make a good living off it."
Troia now runs his operation out of a waterfront home in Deerfield Beach, Fla., but he made his money in Chicago, where he was the frequent subject of newspaper and television stories about his operation and repeated but unsuccessful efforts by then-Illinois Attorney General Jim Ryan to shut him down.
"The donors think they're giving to these charities and instead what they're really doing is lining [Troia's] pockets," said Ryan.
Troia's telemarketers are responsible for a lot of fund-raising phone calls and he regaled the ABCNEWS undercover team with stories of his repertoire of charities, from kids to veterans and even pets.
"United Pet Way for animals," he said referring to one of the charities for which he provides fund-raising services. "And I am gonna be the first guy out there that's gonna be doing it. But I got a feeling, it's gonna kill."
With a carefully crafted telemarketing pitch to get kindhearted Americans to part with their money, to save dogs from being put to sleep, "it's like a tear jerker," Troia said.
In ABCNEWS' conversations with him, Troia was careful to outline the do's and don'ts of the charity business. He advised giving some money for the charitable cause and not to take too much out of it at first.
"In the beginning, you shouldn't take money out of it," Troia told the undercover team. "You should let it stay, just for a little while, 'cause it, in the beginning, they are gonna look at you.
"When there is enough money in there then you're gonna have to spend it, anyways," he said. "When the money starts coming in, your biggest problem is, is gonna be how to get rid of the money."
Troia told ABCNEWS about success he's had with other charities, including the Firefighters Charitable Foundation.