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Questions of Heritage.

$28 Million Sherwood Firm Rebuffs Allegations of Fraud as Telemarketing Practices Come Under Regulatory Scrutiny

SET BACK FROM THE road off one of Sherwood's main arteries sits Heritage Publishing Co., a privately owned business that has quietly carved a deep niche for itself in telemarketing by raising millions on behalf of charities.

Like its nondescript, five-story corporate headquarters on Wildwood Road, the company it houses is something of an enigma.

People who have worked there describe a corporate structure where secrets are closely guarded by a coterie of well-paid, fiercely loyal upper-management employees.

The guarded atmosphere extends to the building's exterior, where only an understated sign reveals the tenant. Even the company name -- Heritage Publishing -- throws the casual observer off, leading one to believe the company's livelihood is publishing.

But that's only one aspect of the business, with reported sales of $28 million.

Telemarketing is the lifeblood.

It is Heritage's telemarketing practices that have piqued the interest of the Federal Trade Commission and the state attorney general's office, both of which have inquiries in progress.

The FBI also is said to be poking around, but a Heritage spokesman says the company has no knowledge of that and the bureau, like other government agencies, doesn't acknowledge investigations until they are concluded.

What exactly sparked the simultaneous interest in Heritage is not clear. Heritage officials, however, believe disgruntled former employees are the impetus behind the inquiries.

The only thing that seems certain is that Heritage, founded by Leta Keenihan in 1958, is at a crossroads in its long history.

And hanging in the balance is the company's future.

With just over 900 employees, Heritage is the country's 23rd largest telemarketer, and is registered in 45 states. Because of its prominence, company Vice President John Braune says, it's not surprising that Heritage would be put under the microscope.

Not Talking

Amid the inquiries, numerous former employees declined interviews about Heritage, intimating they had been sworn to silence.

Several who discussed the company with a reporter requested anonymity, citing fears of reprisal.

But Randy Satterfield isn't afraid to talk.

On top of the official inquiries, the Little Rock lawyer has a federal lawsuit pending against Heritage and several company executives.

Satterfield represents American Cultural Traditions Inc. of Grand Prairie, Texas, a coalition of several charities that includes the Teen Suicide Prevention Task Force. Heritage collected more than $1 million for the task force every year from 1989-92, according to the suit.

"I'm frustrated to the point now that I don't know what else to do," says Satterfield, who is concerned the lawsuit is about to get mired in court-ordered arbitration.

"Arbitration is like death" for a party seeking redress, Satterfield says, bemoaning the lack of a discovery process that he feels is critical to resolving the differences between the two parties.

"I just want my client's money and their donor lists and we'll go home," he says.

Satterfield also is representing a second group--Child Protection Program in Dallas--in a separate arbitration proceeding over a contract dispute with Heritage.

The ACT suit alleges Heritage has engaged in a pattern of interstate racketeering activity by unlawfully obtaining money, trade secrets, donor lists and causing harm to the charity's reputation.

"It's a pattern, a way of business. It's not just an isolated instance," Satterfield contends.

In a recent interview at his law office, Satterfield produced a letter soliciting a donation from a group similar to the suicide prevention task force. It was addressed to a non-existent company and sent to the charity's address.

The bogus company was a "plant" from his client's original donor list. It was used to determine if Heritage was using a donor list to solicit on behalf of other, similar groups. The letter, Satterfield contends, is evidence that Heritage has used ACT's donor list to solicit for competing charities.

Other letters that found their way to ACT, independent of Heritage, complain about abusive, coercive telemarketing tactics by people calling on behalf of the charity. "Please take me off your mailing list," several indignant letters writers concluded.

"All of the allegations |in the lawsuit~ are certainly untrue," says Braune, vice president of marketing and client services at Heritage.

Braune says Heritage dropped ACT as a client because the relationship was not "mutually beneficial."

Beyond that, he prefers to let arbitration take its course.

Strong Relations

Although several charities are beginning to complain about Heritage's fund-raising practices, Heritage continues to land big-name clients. The company recently secured a contract with the national Mothers Against Drunk Driving organization, consisting of 300 chapters.

Braune counters the complaints of a few charities by pointing to Heritage's long relationships with the majority of its 120 non-profit clients.

"Out of those 120, 80 percent have been with us 10-15 years," he says. "We've got to be doing something right."

One satisfied client is Florida Special Olympics, which first hooked up with Heritage around 1980. Ken Magee, the group's executive director, says he has no complaints about Heritage's efforts on his group's behalf.

Magee declined to discuss what percentage of Heritage's fund-raising FSO usually receives, saying only, "It generates more money than we would be able to do by ourselves."

Anywhere between 10-45 percent of a fund-raiser's collections are returned to the non-profit groups. The percentage of funds charities will get depends on factors such as the contractual arrangement and whether Heritage contacts established or prospective donors.

It is thought federal authorities are taking a close look at how telemarketers, particularly Heritage, represent that information.

Braune acknowledges that a telemarketer's "disclosure" can be confusing.

Responding to a question about how much money raised will go to the charity, Braune gives this disclosure as an example: "Eighty-one percent of the money raised last year for Florida Special Olympics went to benefit athletes and programs in the state."

The cost of the telemarketing campaign is considered part of that "benefit," since it supposedly creates public awareness for the group.

Braune says a lack of guidelines for telemarketers has made disclosure a murky area.

Heritage maintains its eagerness to participate in any review of its practices in order to clarify future fund-raising guidelines.

Tough Times

It's not easy being a telemarketer these days.

The industry's reputation has taken a beating, largely because of heightened awareness of telephone scams often run by disreputable "boiler room" operations.

As a result, regulatory agencies are seeking to better monitor telemarketers. Pending federal legislation, for example, would give the FTC authority to combat "fraudulent, deceptive and abusive" telemarketing calls made across state lines.

Telemarketing's image problem eclipses its significance in the modern economy. According to industry literature, almost 4.5 million people make their living in telemarketing, generating more than $280 billion in goods and services.

But the American public at large still widely views telemarketing as a nuisance. Nine out of 10 adults dislike phone solicitations, according to a Target Marketing survey.

Braune says negative perceptions, the economic climate and increasing competition for dwindling charitable dollars are adversely impacting companies such as Heritage.

"These are tough financial times for the company," he acknowledges.

He notes, however, that Heritage has "been here 35 years and it's weathered storms before."

Heritage's First Lady

BACK IN 1958, WHEN MOST American women still aspired to be Harriet Nelson, Leta Keenihan was marching to a different drummer.

Known as "Lee" to friends and "Mrs. K" to employees, Keenihan is the founder, owner and president of Heritage Publishing Co.

Nearly a quarter-century before the term "telemarketing" was even coined, Keenihan had already discovered the moneymaking possibilities of the telephone.

A divorced mother of three at the time, she began selling advertising by phone for special-interest publications.

Her desire as a single mother to make a good living for her own children led her to create Arkansas' first corporate daycare in 1987 at Heritage's 152,000-SF complex.

By the late 1960s, Keenihan had branched into publishing some of the magazines for which she had sold ads, and her home-based venture became known as Heritage Publishing.

During that period she also married Walter Keenihan, a man whose experience in the printing business complemented his wife's marketing expertise.

By the late '80s, Heritage had further diversified and was blazing a trail in the emerging telemarketing industry.

In her late 60s now, Keenihan is still at the helm of her company. An intensely private woman who shuns publicity, she declined an interview request by Arkansas Business, though she allowed a company spokesman to field questions.

Keenihan's road to success has not been without adversity.

Over about a 13-year period, 1971-84, her business was damaged or destroyed three times by fires.

In 1985, Heritage sold its previous location, a building at Fourth and Poplar streets in North Little Rock that also housed the Checkmate Club, and bought its current building after plans to use it as a hospital were scuttled by the state.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article on Heritage Publishing Co. founder Leta Keenihan; investigation of Heritage Publishing Co.'s telemarketing practices
Author:Walters, Dixie
Publication:Arkansas Business
Date:May 31, 1993
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