July 24, The Honorable Wayne Williams Colorado Secretary of State 1700 Broadway, Suite 200 Denver, CO 80290

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1 Jonathan M. Anderson Phone Fax The Honorable Wayne Williams Colorado Secretary of State 1700 Broadway, Suite 200 Denver, CO Re: Request For Investigation Pursuant to C.R.S Secretary Williams: The Humane Society of the United States (HSUS) has been at the center of a national controversy involving its charitable fundraising activities. This issue has a direct and serious impact in Colorado. Since 2005, HSUS has been registered as a Colorado charitable organization and has been active in soliciting charitable contributions from potential donors located in Colorado. As such, HSUS is subject to statutory legal restrictions related to its charitable solicitations in Colorado. As demonstrated in this letter, HSUS s solicitation activities in Colorado are in violation of the Colorado Solicitation Act, Article 16 of Title 6 of the Colorado Revised Statutes. The Center for Consumer Freedom, by and through its counsel Holland & Hart LLP, submits the following letter requesting that the Colorado Secretary of State investigate this matter pursuant to C.R.S I. Summary of Colorado Solicitation Act Violations The Colorado Charitable Solicitation Act was enacted to prevent charitable organizations from seeking contributions under false or deceitful pretenses. The Act serves an important consumer protection and public trust function by protecting Colorado charitable donors and legitimate charities from fraudulent charitable solicitations. HSUS has directed a deceptive and fraudulent solicitation campaign scheme in Colorado that intentionally misrepresents how Colorado based contributions will be used by HSUS. As detailed below, HSUS requests charitable contributions from Colorado citizens through advertisements, direct mail, and telemarketing solicitations that are clearly and intentionally designed to convince donors that their non-profit contribution will be used to save rescued and sheltered dogs and cats. Specifically, solicitations to potential donors showcase dogs and cats, often in cages and shelters, and appearing abused, neglected or hungry and requesting a charitable donation for HSUS. These solicitations are designed and implemented to target potential donors compassion toward saving these domestic animals from imminent danger. Holland & Hart LLP Attorneys at Law Phone (303) Fax (303) th Street Suite 3200 Denver, CO Mailing Address Post Office Box 8749 Denver, CO Aspen Billings Boise Boulder Carson City Cheyenne Colorado Springs Denver Denver Tech Center Jackson Hole Las Vegas Reno Salt Lake City Santa Fe Washington, D.C.

2 Page 2 While an analysis of HSUS TV ads found that 85% of the animals were dogs and cats, in reality, HSUS gives just 1% of its annual budget for the purpose of rescuing, sheltering and caring for pets. 1 The representations HSUS makes through its charitable solicitations are in conflict with how the money is actually spent. This charitable solicitation bait and switch is precisely the type of illegitimate activity that the Colorado Charitable Solicitation Act prohibits. This advertisement scheme is a deceptive practice that is illegal under Colorado law. I. Colorado Solicitation Act HSUS solicitations made through television advertisements, direct mailings, and telemarketing in Colorado are regulated by the Colorado Charitable Solicitation Act. See C.R.S , and Solicitation activities by HSUS meet the standards of charitable fraud set forth in at least two provisions of the Colorado Charitable Solicitations Act: Misrepresentation of Contribution Purpose. An organization commits charitable fraud under the Colorado Charitable Solicitation Act if it represents or causes another to represent that a contribution to a charitable organization will be used for a purpose other than the purpose for which the charitable organization actually intends to use such contribution. C.R.S (1)(i). The solicitation activities of HSUS are a blatant misrepresentation of contribution purpose as the solicitations represent that some significant amount of contributions will be used for rescuing, sheltering, and caring for pets, but HSUS intends to use the contributions for other purposes. Misrepresentation by Fraudulent Representation and Failure to Disclose a Material Fact. A person commits charitable fraud under the Colorado Charitable Solicitation Act if he or she obtains money, property, or services by means of a false or fraudulent pretense, representation, or promise in the course of a solicitation. A representation may be any manifestation of any assertion by words or conduct, including, but not limited to, a failure to disclose a material fact. C.R.S (1)(g). The solicitation activities of HSUS are charitable fraud because they are a misrepresentation by fraudulent representation and HSUS fails to disclose a material fact. HSUS uses the false pretense of rescuing, sheltering, and caring for pets to obtain money and fails to disclose the material facts to potential donors that it is not affiliated with local pet shelters, that it does not operate any pet shelters, and that only 1% of contributions are given to pet shelters. This letter details HSUS s violations of the Colorado Charitable Solicitation Act based on the information available to the Center for Consumer Freedom. The Colorado Secretary of State has statutory authority to demand review of all charitable solicitation advertisement and fundraising appeals that HSUS used in Colorado, which would define HSUS s entire scope of Colorado Charitable Solicitation Act violations. 1 Deceptive Fundraising Practices of the Humane Society of the United States, HumaneWatch.org, June 2015, attached as Error! Reference source not found..

3 Page 3 II. Illegal HSUS Charitable Solicitations HSUS raises over $100 million a year from public charitable donations through the use of deceptive advertising. The HSUS fundraising appeals are a clear bait and switch tactic; preying on Colorado citizens willingness to help rescue, shelter and care for abused, neglected and homeless puppies, kittens, dogs and cats. In fact, HSUS has itself reported that it has given less than 1% of its annual budget to help local shelters. 2 More recently, in 2013 HSUS raised $130 million in revenues based primarily on shelter dog and cat rescue solicitations but gave less than $10,000 to help local pet shelters in 29 states. In Colorado, HSUS gave just.019% of its annual revenues to Colorado shelters in Further, HSUS provides no ancillary support to Colorado shelters, HSUS is not affiliated with a single Colorado humane society and does not run a single Colorado pet shelter of its own. HSUS raises charitable contributions in Colorado based on sheltered pet solicitations but spends less than.019% of its revenues on that charitable purpose. This is the precise activity the Colorado Charitable Solicitation Act is intended to prohibit. HSUS would likely respond that more than 1% of its revenues is spent on pet shelter related issues despite what HSUS has submitted to the Internal Revenue Service through annual tax filings. Even using HSUS's own escalated financial data demonstrates an enormous disparity between what HSUS represents the contributions are used for in solicitations and what HSUS represents the contributions are actually used for. As evidence, the HSUS CEO has represented that 20 percent of their overall spending is on pet issues. 4 A review of HSUS overall charitable solicitation campaign by a reasonable donor would leave that donor with the belief that this number is far, far higher. Even taking HSUS at its unverified word that 20% of expenditures go toward pet issues, it is hardly a defense that the organization is purportedly spending one-fifth of its contributions on the purpose for which almost all charitable contributions were solicited. The following HSUS solicitations demonstrate violations of the Colorado Solicitation Act. Specifically, the these solicitations are: 1) clear misrepresentations of contribution purpose under C.R.S (1)(i); and 2) misrepresentations by fraudulent representation and failure to disclose a material fact under C.R.S (1)(g). A. Television Advertisement Violations The Campaign Media Analysis Group (CMAG) reviewed all television advertisements aired by HSUS from January 2009 to September 2011 and found that HSUS ran a total of 21,205 advertisement spots with an estimated value of $11.25 million. Of the 28 different advertisements airing over 20,000 times, more than 85% of the animals in the advertisements are dogs, cats, puppies and kittens, with many shown inside cages or looking abused or neglected, 2 HSUS 2009 and 2010 tax returns attached as Error! Reference source not found.. 3 An interactrive website detailing HSUS shelter spending in Colorado and other states is available at: 4

4 Page 4 creating the unequivocal perception to their targeted audience that contributions would be used to rescue, shelter, and care for these pets. The following advertisements were broadcast in Colorado during 2014 as part of a national broadcast campaign. They are examples HSUS s primary emphasis on dogs and cats, and pet rescue, shelter, and care through broadcast charitable solicitations. 1. Advertisement titled: HSUS I Support 40. Over half of the time in this advertisement, images shown are of dogs and a dog with a rescue worker. Voiceover includes only one mention of a specific type of animal: there s just so much sadness, and I m thinking, What if that was my dog? 5 2. Advertisement titled: Why Do they Kick Me. Appeal directs potential donors to visit a website called RescueAnimalsNow.org, which takes them to the HSUS donation webpage. Advertisement features approximately 69 seconds of images of dogs and cats, with 29 seconds of other animals. Voiceover asks potential donors to rescue these innocent animals and give them the love and care they deserve. 6 5 Video HSUS I Support 40 attached as Error! Reference source not found., Screen shot at 00:20. 6 Video Why Do They Kick Me attached as Error! Reference source not found., Screen shot at 00:43.

5 Page 5 3. Advertisement titled: Mikhail 60. This advertisement presents the story of one dog that could be rescued. For the duration of the advertisement, donors see primarily images of one severely neglected dog. The advertisement also includes a few seconds of images of a cat and five seconds of farm animal images. 7 These commercials offer just a few examples of HSUS s practice of soliciting charitable donations to rescue and shelter pets when, in fact, less than 1% of HSUS s budget actually serves that purpose. These commercials do not have a limited reach in Colorado. The Campaign Media Analysis Group (CMAG) reported that HSUS ran $11.25 million in commercials during a 20- month time period. 8 Most of these commercial campaigns ran on a national scale which included 7 Video Mikhail 60 attached as Error! Reference source not found., Screenshot at 00:04. 8 CMAG Report demonstrates that HSUS ran a total of 21,205 ads from January 2009 to September CMAG HSUS Report attached as Error! Reference source not found..

6 Page 6 the Colorado broadcasting market. These advertisements are clear misrepresentations of contribution purpose that constitute a violation of the Colorado Charitable Solicitation Act, C.R.S (1)(i). B. Direct Mail Violations HSUS direct mail solicitations are equally misleading with an overwhelming focus on saving and caring for sheltered pets such as dog and cats. In fact, over 80% of animal references in HSUS s direct mail campaign are to dogs and cats. Again, this representation is in direct conflict with the fact that only 1% of HSUS s budget is going to local shelters to save, care for or support sheltered animals such as dogs and cats. The following statements included in HSUS s direct mail solicitations are clear examples of misrepresentations under the Colorado Charitable Solicitation Act: 1. Statement Example 1: To continue and expand all of this lifesaving work that will save the lives of dogs, cats, puppies, kittens, and all other defenseless animals in 2014 we need you. Your HSUS membership gift of $5, $8, $12 or even $25 will help keep these animals alive, healthy, and cared for. I want to make sure that you understand whatever you can send will be used to protect animals from senseless suffering and death Statement Example 2: Your generous gift today will help us support local animal shelters around the country in towns like yours by helping them improve their programs and services Statement Example 3: In a list of specific activities where HSUS is dedicated to stepping up efforts (implying that these are the three top priorities of HSUS), the second bullet point of three is to Assist local shelters save lives through pet adoptions, and spay and neuter programs Statement Example 4: Perhaps your renewal will go towards purchasing a pet carrier, collars, leashes, food and water bowls, and to provide immediate shelter for animals displaced by floods, fires, or other emergencies followed by three other possibilities of uses for contributions, all related to rescuing animals Mailer Member attached as Error! Reference source not found.. 10 Mailer Socks attached as Error! Reference source not found.. 11 Mailer Calendar attached as Error! Reference source not found.. 12 Mailer 2010 Renewal Coupons attached as Error! Reference source not found..

7 Page 7 5. Statement Example 5: Letter concludes with this appeal: So please send your best member gift of $15, $25, $50 or as much as you can give to protect and save precious puppies and kittens lives. 13 These HSUS mailers clearly and directly communicate that contributions will be used to care for and support sheltered animals, especially dogs and cats. Further, the imagery in all of the direct mail pieces strongly suggests to donors that the organization is dedicated to saving and caring for sheltered pets and the donation will serve that objective. Almost every mailing includes images of only dogs and/or cats in the letter, in supplemental materials, on the envelope, and on gift items. A Colorado donor who made a charitable contribution based on the representations made in the solicitation is defrauded by the fact that less than 1% of their donation actually goes to pet shelters. These direct mail solicitations are misrepresentations of contribution purpose and constitute clear violations of the Colorado Charitable Solicitation Act. C. Disclaimer Violations The fact that HSUS has spent only 1% of its annual budget on purposes for which charitable contributions are raised is one set of HSUS violations under the Colorado Charitable Solicitation Act. HSUS s decision not to disclose these facts is clearly a failure to disclose a material fact under the Colorado Solicitation Act, C.R.S (1)(g), and is a separate and distinct set of HSUS violations. At an absolute minimum, all HSUS solicitations should have included a disclaimer informing consumers how their contributions are actually spent. This is especially true if 99% of contributions are spent in a manner that has little or no association with what is represented through the contribution solicitation. While such a disclaimer would not cure the misrepresentation made by HSUS, it would at least provide Colorado donors with a degree of truth to base an informed decision whether or not to contribute to HSUS. HSUS s failure to disclose materials facts is a separate violation under C.R.S (1)(g). HSUS recognized this as a significant problem in 2011 and began to include a disclaimer stating that HSUS is not affiliated with local pet shelters in select television advertisement solicitations. Curiously, HSUS only included the disclaimer in select solicitations and did not include it in any advertisements in which the potential donor could study the disclaimer, such as direct mail or telemarketing solicitations. HSUS included the disclaimer in solicitations where it could hide it in extremely fine print and flash it quickly on the screen. The following are examples of the small font size disclaimers that were included for a portion of the television advertisements aired in Colorado. The disclaimers are difficult to read in the examples we have access to, although every other significant part of the text is readable. 13 Mailer 2010 Tote attached as Error! Reference source not found..

8 Page 8 Significantly, there were still no disclaimers on a number of the 2014 television advertisements that were reviewed. 1. Advertisement titled: HSUS Mikhail 60. The disclaimer is beneath the phone number, and was on screen for 18 seconds Advertisement titled: Why Do They Kick Me. The virtually unreadable disclaimer was on screen for 13 seconds. 15 HSUS frequently and effectively uses stories and images of abused, rescued or homeless dogs and cats in its solicitations to evoke compassion and motivate donors to contribute. These 14 Video HSUS Mikhail 60 attached as Error! Reference source not found., Screen shot at 00: Video Why Do They Kick Me attached as Error! Reference source not found., Screen shot at 1:17.

9 Page 9 solicitation tactics represent to donors that their contributions will be used to help rescue, shelter and care for pets. The failure by HSUS to even inform potential donors, through truthful campaigns or effective disclaimers, that their contributions will almost entirely be used for other purposes is charitable fraud by misrepresentation and failure to disclose a material fact. As part of an investigation of HSUS by Oklahoma s Attorney General, HSUS documents were released which show that HSUS knows that its donors are confused and think their money is going to help pets. 16 However, despite this knowledge, HSUS refuses to include a proper disclaimer in its fundraising appeals. D. Colorado Fundraising Fee Violations HSUS Colorado Charitable Solicitation Act filings demonstrate another layer of fraud and deception. Certain financial data related to HSUS s telemarketing campaigns are publicly disclosed because HSUS utilized paid solicitors. Under Colorado law, solicitation reports are required to be filed before and after paid solicitors conduct charitable solicitation campaigns. C.R.S These reports require disclosure of the percentage of gross proceeds intended to go to the charity, and the percentage intended to go to the paid solicitor. In at least one case in Colorado where HSUS used paid solicitors to run a telemarketing campaign, the telemarketing materials intentionally mislead potential donors about the percentage of their donation that would go to the charity. The solicitation notice filed in 2013 for a telemarketing campaign conducted by Donor Care Solicitor Inc. on behalf of HSUS declared that 99% of the gross revenue was expected to go to the paid solicitor. 17 Although Donor Care Solicitor, Inc. filed this Solicitation Notice and therefore knew the exact intended distribution of campaign funds, the telemarketing script instructed solicitors to say the following if asked about the campaign revenue: Trying to estimate what percentage the charity might receive based off our flat fee is difficult since I don t know all the information about how the Humane Society of the United States budgets fundraising costs, but it could be approximately 40%-50% over two years. 18 The latest report related to this Solicitation Notice shows that HSUS actually lost money on this Colorado fundraising campaign and reported net proceeds to the charity of negative 63%. 19 That means that individuals in Colorado were baited into making a charitable contribution to save animals when in reality not a penny of their contributions went to the charity or to help animals in any way, much less to rescue, shelter, and care for pets. 16 Hall Partners survey report showing knowledge of solicitation misconceptions attached as Error! Reference source not found.. 17 Colorado Solicitation Notice attached as Error! Reference source not found.. 18 HSUS Telemarketing script, attached as Error! Reference source not found.. 19 Colorado Campaign Report Attached as Exhibit 15).

10 Page 10 Another HSUS solicitation notice filed in Colorado in 2014 showed that 98% of contributions from a separate telemarketing campaign were never intended to go to the charity and, in fact, the final report showed that only 1% of proceeds actually went to HSUS with the remaining 99% going to the paid solicitor. 20 There are six more recent HSUS solicitation campaigns in Colorado. The Solicitation Notices in all of the planned campaigns in Colorado show that HSUS intends 90%-99% of the gross proceeds to go to the paid solicitor, not to the charity. 21 HSUS s fraudulent telemarketing scheme is widespread even though the Colorado filings may demonstrate the most egregious illegal acts. In North Carolina, state records show that HSUS is expected to receive 2% of the gross revenue for a campaign that used the same script suggesting that 40%-50% of the proceeds would go to HSUS. In another script, solicitors were instructed to say that it is our best estimate that HSUS will receive at least 50% of the funds raised on this campaign, even though the report filed with the North Carolina Secretary of State estimated that 0.05% of the gross revenue would go to HSUS. According to the Pennies for Charity report published by the New York Attorney General, HSUS had a similar arrangement with Share Group, another telemarketing company. Only 10.7% of the $16.8 million in fundraising proceeds from the Share Group telemarketing campaigns went to HSUS, while Share Group collected about 89%. These alarmingly high fundraising expenses are an independent basis for a state investigation of HSUS under the Colorado Charitable Solicitation Act. HSUS is representing to Colorado donors that their charitable contribution will be used for programs that help pets, but these campaign proceeds are actually intended to be used almost entirely to pay professional fundraisers. These telemarketing solicitations violate the Colorado Charitable Solicitation Act, Sections (1)(i) and C.R.S (1)(g), because they both misrepresent contribution purpose and misrepresent by fraudulent representation. III. Harm to Colorado In passing the Colorado Charitable Solicitation Act, the Colorado General Assembly found its provisions necessary to protect the public s interest in making informed choices as to which charitable causes should be supported and, in appreciation of the many public benefits of charities, recognized that charitable donations are a direct result of public trust in charities. C.R.S The Colorado Charitable Solicitation Act violations committed by HSUS harm individual donors and pet shelter charities that provide the types of rescue, shelter and care programs that donors actually intend to support. In addition, the misrepresentations and fraud by HSUS undermine the public trust in charitable giving. 20 Colorado Solicitation Notice and Campaign Report attached as Error! Reference source not found.). 21 Colorado Solicitation Notices attached as Error! Reference source not found..

11 Page 11 Colorado donors are harmed because the misrepresentations and fraud by HSUS prevent them from making informed choices about supporting HSUS. Donors contribute to HSUS based on representations made in their solicitations, and they are led to believe that HSUS is using some significant amount of donated funds to provide rescue, shelter, and care for abused, neglected and homeless pets. In addition, actual pet shelters in Colorado are harmed as they are deprived of resources from donors who have been misled to believe that their contributions to HSUS will largely be used to benefit local pet rescue and shelter organizations. The Colorado General Assembly recognized that such legitimate charities are harmed by such fraud because the money available for contributions continually is being siphoned off by fraudulent charities, and the goodwill and confidence of contributors continually is being undermined by the practices of unscrupulous solicitors. Id. Animal shelters around the country have changed their names to discontinue use of the words humane society in an attempt to avoid confusion created by HSUS misrepresentations. Local shelters simply cannot compete for donors with HSUS, which spends $40-50 million a year on its misleading advertising, especially because HSUS donors think they are helping local shelters with their HSUS contributions. The Colorado Charitable Solicitation Act charges the Colorado Secretary of State with ensuring that donors can make informed choices about charitable giving based upon truthful representations by the charities seeking to receive contributions and to protect legitimate charities from the harm caused by charitable fraud. Deceptive fundraising practices undermine the goodwill and confidence of contributors and harm individual donors, pet shelter charities and the public trust. IV. Conclusion HSUS s misinformation campaign has been so effective that it has actually formed public opinion about what HSUS is and how HSUS spends donor contributions. A public poll from 2012 shows that 71% of Americans believe that HSUS is an umbrella group for pet shelters and 68% believe HSUS spends most of its money funding local pet shelters. 22 A March 2015 poll of 1,051 HSUS supporters found that almost 90% were unaware that HSUS gives just 1% of its budget to local pet shelters and 75% said that they were less likely to give to HSUS after learning that HSUS gives just 1% of its budget to pet shelters. 23 HSUS s fundraising scheme appears to be founded on the historical propagandist technique that if you repeat a lie often enough, people will believe it. HSUS has violated numerous provisions of the Colorado Solicitation Act (and the Colorado Consumer Protection Act) through its false solicitation campaign. An investigation of HSUS pursuant to C.R.S will likely expand the scope of violations. However, at a polling results from Humane Society Survey attached as Error! Reference source not found polling results reported by Humane Watch attached as Error! Reference source not found..

12 Page 12 minimum, and solely on the limited information available to the public, HSUS s fundraising activities form at least two basis of Colorado Solicitation Act violations: 1) HSUS misrepresents in Colorado television advertisements, direct mailings, and telemarketer solicitations that contributions to HSUS will be used for the purpose of rescuing, sheltering, and caring for abused, neglected and homeless pets, while HSUS actually uses 99% of these contributions for other purposes. This is charitable fraud as a misrepresentation of contribution purpose and is a violation of the Colorado Charitable Solicitation Act, C.R.S (1)(g). 2) HSUS obtains money by means of a false pretense and fails to disclose the material fact to potential donors that only 1% of contributions actually go to the charitable set forth in the solicitation. This is charitable fraud as a misrepresentation by fraudulent representation and failure to disclose a material fact. The Colorado Solicitation Act exists to protect Colorado s charitable donors, legitimate charities, and the public trust. The facts set forth in this letter demonstrate a basis for the Colorado Secretary of State, or your designee, to initiate an investigation into the Colorado fundraising activities by HSUS pursuant to C.R.S Thank you for your attention to this serious matter. Sincerely, cc: Colorado Attorney General Cynthia Coffman Jonathan M. Anderson Encl. Exhibits _6