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Charitable Fraud Enhanced Enforcement Measures

Concerning measures for enhanced enforcement against acts of charitable fraud.
2016 Regular Session
Business & Economic Development
Courts & Judicial
Crimes, Corrections, & Enforcement
State Government

Section 1 of the act creates enhanced penalties under the 'Colorado Consumer Protection Act' for committing acts of charitable fraud involving knowledge or intent under the 'Colorado Charitable Solicitations Act'. The penalty for each violation is up to $10,000, with a cap of $3,000,000 for a related series of violations. The act includes a mechanism to adjust the $3,000,000 limitations cap for inflation. Penalties collected are paid to the attorney general and held as custodial money to be granted within 2 years after receipt to a charity in accordance with the cy pres doctrine.Sections 2, 3, and 5 of the act require:
  • A statement on each application for registration by a paid solicitor to the secretary of state, indicating whether the paid solicitor or any officer, director, or employee serves on the board of directors of a charitable organization, directs the operations of a charitable organization, or otherwise has a financial interest in a charitable organization for which the applicant solicits contributions. If this relationship exists, the application must include a statement that the relationship meets the standards set forth for conflicting-interest transactions for directors of business entities in Colorado.
  • Paid solicitors to either have a bond or a savings account, deposit, or certificate of deposit in a financial institution payable to the state of Colorado in the amount of $15,000, conditioned upon the performance of the paid solicitor in good faith without fraud or fraudulent representation and without violating the 'Colorado Charitable Solicitations Act'.

Section 4 defines charitable fraud to include any misrepresentation that a charitable organization for which a paid solicitor solicits has a significant membership of a certain type, such as active police, sheriff, patrol, firefighters, first responders, or veterans. A charitable organization is also liable to the same extent as a paid solicitor if the charitable organization knew or should have known that the paid solicitor was engaged in charitable fraud on behalf of the charitable organization. Section 4 also clarifies that this provision does not extend personal liability to board members of a charitable organization beyond the personal liability allowed by law prior to enactment of the act.(Note: This summary applies to this bill as enacted.)


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