4 Cancer Charities Accused Of Swindling Donors Out Of $187 Million
Children’s Cancer Fund of America Inc. is one of four cancer charities charged with allegedly perpetrating a scheme to bilk consumers out of millions of dollars.
Federal regulators, state officials and prosecutors and law enforcement officers from all 50 states and the District of Columbia partnered today to charge four cancer charities and their operators for running a scheme that swindle consumers out of $187 million in charitable donations. Two of the charities have agreed to settle the charges and dissolve their businesses, while two other plan to fight the charges in court.
According to federal complaint [PDF], Cancer Fund of America, Inc. (CFA), Cancer Support Services Inc. (CSS), Children’s Cancer Fund of America Inc. (CCFOA) and The Breast Cancer Society Inc. (BCS), along with their operators, used telemarketing calls, websites, direct mail and materials distributed by the Combined Federal Campaign – which raises money from federal employees for non-profit organizations – to solicit donations from consumer in all 50 states and the District of Colombia.
The complaint purport that the deceptive scheme was set in motion by James Reynolds Sr. in 1987 and since then has regularly duped consumers into believing they supported a genuine charity.
The FTC provided a guide detailing the four charities’ purported scam. [Click to enlarge]
From 2008 to 2012, the organizations deceptively raised $187 million in donations by portraying themselves as legitimate charities and told prospective donors that funds would be used for help cancer patients by providing direct support and needed medical assistance.
“These were lies,” the complaint states. “Not one of the Defendants has operated a program that provides cancer patients with pain medication to alleviate their suffering, transports cancer patients to chemotherapy appointments, or pays for hospice care. Moreover, the vast majority of donors’ contributions have not directly assisted cancer patients in the United States or otherwise benefitted any charitable purpose.”
In reality, the FTC and state officials, claim the charities spent just 3% of the donations on actual cancer patients.
The rest of the money was spent on inflated salaries, cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting event and concert tickets, and dating site memberships for the company operators, their family members and friends.
According to the complaint, the charities “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation, with none of the financial and governance controls that any bona fide charity would have adopted.”
The organizations were more generous with friends’ and family members’ salaries than providing assistance to cancer patients.
Jessica Rich, director of consumer protection for the FTC, said during an announcement for the action that many of the organizations paid salaries nearly five times what actually provided in aid to patients.
In once case, the Children’s Cancer Fund of America executive director received a salary of $231,672 in 2012, while the charity only provided $45,026 in financial assistance to 723 recipients.
In addition to lining their own pockets, the charity operators allegedly padded the wallets of professional fundraiser who were hired and often received 85% or more of every donation.
To hide the high administrative and fundraising costs from donors and regulators, the complaint alleges the organizations falsely inflated their revenues by reporting in publicly filed financial documents more than $223 million donated “gifts in kind” distributed to international recipients.
Of the four charities targeted in the federal complaint, Children’s Cancer Fund of America and the Breast Cancer Society, along with several operators, have agreed to settle charges and the organizations will be dissolved.
The other two organization and their operators – including Reynolds – will face further litigation.
Rich said during a news conference that the action, which was officially filed on Monday, is the first taken by the FTC and all state attorneys general as one group.
Following the complaint announcement, the FTC provided consumers with a guide to view before giving to charity.
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