As scripted, the pitch was meant to tug at their emotions — and their wallets.

Kids with cancer need your help. Money from caring people like you will be used to send puzzles, books, games and stuffed animals to these young cancer victims in hospitals.

If the paid telemarketer with O'ahu-based LJM Productions stuck to the script, that was the basic approach used to raise money from Hawai'i residents for Childrens Cancer Assistance Network, a charity based in Washington state.

It apparently worked.

In 2005, the company collected nearly $15,000 for Childrens Cancer, according to documents filed with the state attorney general's office. But after the charity paid LJM its previously agreed-upon cut, the nonprofit was left with only $2,361 — or 16 percent.

Not even that much went to the kids.

The charity, after paying management and fundraising costs, spent only 7 percent of its budget that year on the services that directly benefited the ill children, according to its tax returns.

Bottom line: Only $168 of the nearly $15,000 collected from Hawai'i residents — or the equivalent of 1 cent on the dollar — went to arrange sending puzzles, books and games to the kids, according to the ratios reported in the government records.

And 2005 wasn't an anomaly.

Last year and part of this year, LJM raised more than $100,000 from Hawai'i residents for the cancer charity, a veterans foundation and a disabled firefighters organization, all Mainland groups. But those organizations, based on their contracts with the fundraiser, got only 16 percent to 17 percent of the money, according to the records.

PENNIES ON THE DOLLAR

The LJM cases highlight what is a common problem when charities turn to professional, for-profit fundraisers to mine the phone lines.

The charities often get less than half the money raised and sometimes just pennies on the dollar.

While industry officials say a minority of charities in Hawai'i use paid telemarketers, the practice is common enough that many residents can relate to being interrupted while watching television, eating a meal, reading, taking a nap or talking with family or friends.

Watchdog groups blast paid telemarketing, calling the practice an inefficient, deceptive way to raise money.

They say the charities, which typically approve or even write the scripted phone pitches, are misleading donors into thinking their contributions are paying mostly for good deeds, not enriching for-profit companies.

"You're pulling the wool over their eyes," said Daniel Borochoff, president of the American Institute of Philanthropy in Chicago. "Why would anyone give money if so little actually goes to help?"

Groups such as the institute and the Better Business Bureau say charities generally should receive at least 65 percent of money collected in any kind of fundraising campaign. Anything below that, they say, should raise red flags and prompt donors to ask questions.

LJM didn't respond to a certified letter and multiple phone messages seeking comment. An executive with Childrens Cancer would not comment, saying he didn't give interviews.

But officials with other charities that use different telemarketers and get better percentages say the practice is vital to their fundraising.

Johnny Kai, executive director of Music Foundation of Hawai'i, which received 25 percent of the more than $74,000 that Hawai'i Promotions raised on its behalf in 2006 and the first half of 2007, said critics of telemarketing are "looking at it the wrong way."

Because the foundation used to rely mostly on large donors, the Internal Revenue Service told Kai's group it needed more broad-based community support, including small donations, to maintain its tax-exempt status, according to Kai. Telemarketing was the most effective way to get the smaller donations, he added.

Carl Oshiro, past president of the Rotary Club of Pearl Harbor, likewise said telemarketing was a key fundraising tool for his group.

The Pearl Harbor club received $17,981, or 30 percent, of nearly $60,000 raised on its behalf by Exclusive Promotions in the first seven months of 2006, the company reported to the state.

Exclusive Promotions organized a live show featuring dancers from various Pacific islands, then solicited donations via telephone, inviting donors to the free event. It typically makes thousands of calls for such events.

The company raised $59,937 in the Pearl Harbor campaign, but about $5,000 of that went to the cost of staging the show, while another $30,500 was spent by the fundraiser on rent, telephone, postage, payroll and printing expenses, state records show. That left just more than $24,000. Of that, the charity received $17,981 — more than 70 percent of the net — and Exclusive Promotions got $6,277, according to the documents.

Oshiro said it would be very difficult for his volunteer organization to raise that kind of money on its own, and stressed that all the proceeds go back to the community, primarily through college scholarships. The club also hosts a senior luncheon and a literacy program.

Besides those benefits, mentally handicapped people and elderly residents are brought to the show for their enjoyment, Oshiro said.

The Pearl Harbor club has raised money in this fashion for at least five years, Oshiro said.

"It's worked out well for us," he said. "We look at it in terms of how much revenue is coming in. As long as it's positive, it's good."

LOW RISK FOR CHARITIES

Telemarketers also say deals like that are good for the charities because the nonprofits bear essentially no risk, even if an event loses money.

"The only risk they have is their name," said an Exclusive Promotions official. "That's why they use us. We have the liability."

But watchdog groups say the money donated for such campaigns could be going to charities that are much more efficient with fundraising, resulting in more dollars going to actual charitable services. That's important, they say, because the pool of money donated to charities generally doesn't change much from year to year.

"In these types of situations, well-intentioned donors are misled into believing that their money is going to a worthy cause, yet it is actually the for-profit telemarketer who is the main beneficiary," said Sandra Miniutti, marketing vice president for Charity Navigator, a New Jersey-based evaluator of charities. "When donors learn the truth, they end up mistrusting all charities and thus these inefficient fundraising tactics are damaging to the entire nonprofit sector."

No reliable statistics are kept on how many local charities use professional fundraisers. But those in the industry say only a minority do, mostly because of the high cost.

"We always try to use as much money as possible on actual services," said Connie Mitchell, executive director of the Institute for Human Services, explaining why her nonprofit doesn't use telemarketers.

BEHIND THE NUMBERS

Several charities that have used telemarketers the past few years, including the Hawai'i Jaycees and Special Olympics Hawai'i, didn't respond to multiple requests for comment.

In deals with separate fundraisers, the Jaycees received 30 percent of nearly $160,000 raised on its behalf from August 2005 through November 2006, while Special Olympics got 47 percent of nearly $329,000 raised in 2006, according to state records.

Under the state's charitable solicitation law, professional fundraisers are required to register with the state and report how much they raise on behalf of their clients, including what percentages the companies retain.

The attorney general's office reports those figures on its Web site at http://hawaii.gov/ag/charities/quicklinks/financial_reports/.

For the one-year period through June 30, fundraisers reported raising more than $167 million on behalf of about 200 charities, according to the AG's data. The site doesn't distinguish between money raised here or elsewhere, so it's not clear how much of that was from Hawai'i residents.

Of the $167 million raised, roughly half went to the charities.

The individual deals varied widely, with some charities getting nothing — some lost money — and a handful getting more than 80 percent.

The charitable solicitation law was strengthened several years ago at the request of the AG's office, which took over enforcement responsibility in 2005. Since then, the office has nailed several fundraisers for violating the law.

In a 2005 case, the state collected $18,000 in fines after Bryan Henry, who did business as Island Printing & Publishing, admitted misrepresenting to potential donors that the charity for which his company was soliciting, Law Enforcement Officers Association of Hawai'i, was endorsed by Lt. Gov. James "Duke" Aiona, according to the attorney general's office. Henry also admitted, among other violations, that he allowed solicitors to use fictional names with donors, the attorney general's office said.

Henry's license eventually was revoked.

Since the law took effect in July 2007, the attorney general's office has collected more than $22,000 in fines from solicitors.

While using professional telemarketers is considered controversial by some, more local charities are considering going that route, especially as the competition for donor dollars has become more intense.

A dramatic increase in the number of charities locally and nationally in recent years has meant more groups scrambling to raise money.

Helping Hands Hawai'i, which shied away from telemarketers in the past, had been rethinking that position earlier this year as it looked for ways to expand its donor base. But the nonprofit recently decided against going that route.

DISCLOSURE NEEDED

Brian Schatz, executive director of the charity, said there are good, reputable telemarketers, and his organization had been considering one that charged a flat fee per completed call. But Helping Hands ultimately was uncomfortable hiring a telemarketer to do fundraising, he said.

Charities that use telemarketers charging unusually high rates should disclose that when soliciting money, Schatz said. "You owe it to donors to tell them upfront if an unusual percentage of money is going to anything other than the charity."

Because of a U.S. Supreme Court ruling that turned on free-speech rights, states can't require telemarketers to automatically tell would-be donors what percentage of their contributions will go to the charity. But if a donor asks, the telemarketer is required to answer questions truthfully.

No matter how much goes to the charity, using a telemarketer comes with some risk — not just the monetary kind.

Charities risk raising the ire of the very people they are trying to win over.

Many residents say they don't like being called at home by solicitors of any kind.

Terry Day of Manoa said she gets five or six calls a week, maybe more.

"I hang up on them," she said. "It's very irritating."

Reach Rob Perez at rperez@honoluluadvertiser.com.