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(hereinafter sometimes referred to as ADRFCO), a professional
organization of professional fundraising companies that provide
direct response consulting services to nonprofit organizations.
Herge attached to his expert report copies of 21 fundraising
agreements for various nonprofit organizations filed with
Virginia’s Office of Registrations, Division of Consumer Affairs.
Herge asked the Virginia Office of Registrations to provide him
with copies of all fundraising agreements filed with it by up to
10 to 12 professional fundraisers during a specified time period.
From the agreements thus provided, Herge selected agreements
which he believed were representative and typical of the
agreements similar to petitioner’s found in the market place.
These 21 fundraising agreements were entered into during the
period from 1984 through 1992. They involve various professional
fundraisers and client organizations. Nineteen of the 21 client
organizations involved in these agreements have been recognized
by respondent as being exempt from Federal income tax either
under section 501(c)(3), 501(c)(4), or 501(c)(5). Four of the 21
agreements essentially provide that the nonprofit organization
client is fully liable on a recourse basis for the fundraising
expenses. The remaining 17 agreements are essentially “no-risk”
contracts for the nonprofit organization. However, a few of the
essentially “no-risk” agreements require the nonprofit
organization client to either contribute a specified amount of
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