The Supreme Court agreed yesterday to consider whether Maryland's law regulating fund-raising by charities restricts constitutional guarantees of free speech.
The justices will review an August decision by the Maryland Court of Appeals that the registration requirements of the law, which limits charities' administrative costs, constitute a "prior restraint" on free speech in violation of the First Amendment.
Maryland's legislature passed the law in 1976 after newspaper stories about a multimillion dollar charity business run by the Pallottine Fathers, a Baltimore-based Catholic religious charity. The Pallottines raised extensive amounts of money through direct mail appeals for the supposed benefit of overseas missions, but pumped much of that money into real estate investments benefiting Maryland political figures. Then-governor Marvin Mandel, for example, obtained a $54,000 loan from the Pallottines to help finance his divorce.
The Rev. Guido John Carcich, a priest who ran the fund-raising operation, pleaded guilty to criminal charges that he misused more than $2 million in Pallottine funds.
Among the most important provisions of the 1976 law was a 25 percent limitation on the amount a charity can spend to raise funds. As an enforcement mechanism, the law required disclosure of financial arrangements to the Maryland Secretary of State, registration, and state approval of fund-raising activities.
After a challenge by the Joseph H. Munson Co., Inc., a professional fund-raising firm, the state's highest court ruled that the state's power under the law to approve or disapprove solicitations was tantamount to the power to approve or disapprove speech. Charitable solicitation was held to be protected by the First Amendment in a Supreme Court ruling two years ago that struck down a Schaumburg, Ill., charity law.
Maryland Attorney General Stephen H. Sachs appealed the ruling to the Supreme Court, arguing that the state's highest court misinterpreted both the law and the Schaumburg decision.
Sachs told the justices that a decision striking down the Maryland law could jeopardize charities regulations across the country.