Ronald McDonald Says Fund Raiser Blew it

CHICAGO (CN) - A consulting firm cost the Ronald McDonald House $2.8 million by turning a raffle into a "complete failure," then broke its promise to repay $1.1 million, the charity claims in court.

Ronald McDonald House Charities of Chicagoland and Northwest Indiana sued Winning Charities Inc., its Illinois subsidiary, its president William Bayles, and the Charity Assurance Group, in Federal Court.

Ronald McDonald House, an arm of the hamburger chain, provides housing for families whose children are hospitalized.

Winning Charities Inc. (WCI), a charitable fund-raising consultant, claims on its website to have "led nearly every innovation in the charity raffle market over the last 25 years."

Ronald McDonald House claims that "in August, 2011 and February, 2012, WCI-Illinois and Ronald McDonald House entered into contracts through which WCI-Illinois was to raise funds for Ronald McDonald House through what defendants call a 'media intense charity raffle.'"

A media-intense raffle "is a sophisticated marketing campaign that creatively uses all major media forms to promote and position an outstanding not-for-profit in its market," WCI says on its website.

The complaint states: "Over the course of 2011 and 2012, Ronald McDonald House fronted its funds for the raffle, overseen by WCI-Illinois and likely the other defendants.

"The raffle was an utter and complete failure, resulting in a loss of approximately $2,800,000 to Ronald McDonald House."

The Ronald McDonald House began arbitration against Winning Charities, and reached a settlement agreement, in which Winning Charities agreed to pay $1.1 million to Ronald McDonald House over the course of a year, according to the complaint.

However, "On December 31, 2012, defendants' counsel initiated a call to Ronald McDonald House's counsel wherein defense counsel advised that defendants were unilaterally backing out of the contract, without legal justification. Indeed, one of defendants' counsel advised during the December 31 call that there is 'no doubt we had a deal,' or similar words to that effect," the complaint states.

"Thereafter, the defendants failed and refused to adhere to the contract, advising further through counsel that they repudiated the contract. The first two installments of the $1.1 million payment were due on January 4, 2013 and February 15, 2013 respectively, and defendants have paid neither installment to Ronald McDonald House (in addition to advising that they would not do so)." (Parentheses in complaint.)

In addition, the charity says, WCI president William Bayles "falsely stated that the defendants had the intent to adhere to the terms of the contract, even shaking hands with representatives of Ronald McDonald House at the conclusion of the meeting as a sign of the accord reached at the meeting. Bayles also represented to representatives of the Ronald McDonald House that defendants had the current intent to pay Ronald McDonald House $1,100,000, in installments. Bayles also represented to Ronald McDonald House that defendants could post their assets as collateral for the $1.1 million payment, and that defendants were free and clear to do so. Bayles also represented that defendants had current, accurate and certified financial statements to provide to Ronald McDonald House and would do so. All of the misrepresentations were false when Bayles made them, as indicated in part by defendants' counsel on the December 31 call."

Ronald McDonald House seeks damages for breach of contract, fraudulent misrepresentation, unjust enrichment and promissory fraud.

It is represented by Robert Lang with Thompson Coburn.

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