Two phony cancer charities that bilked more than $75 million from donors nationwide and spent most of the funds on personal expenses and fundraising will be liquidated, federal and state officials said Wednesday.
As part of the largest-ever U.S. charity enforcement action, Cancer Fund of America, Cancer Support Services and their leader, James Reynolds, agreed to settle allegations they were part of a “massive nationwide fraud” that falsely claimed to aid cancer patients, the Federal Trade Commission and regulators in all 50 states said.
The settlements also permanently bar Reynolds from charity fundraising and non-profit work.
The agreements came after similar settlements last year by The Breast Cancer Society and Children’s Cancer Fund of America, two related phony charities also targeted by federal and state regulators. In all, the four groups and allegedly took in more than $187 million by duping generous donors.
“The FTC and our state enforcement partners have ended a pernicious charity fraud that siphoned hundreds of millions of dollars away from well-meaning consumers, legitimate charities and people with cancer,” said Jessica Rich, director of the FTC Bureau of Consumer Protection.
A federal court complaint filed last year in Arizona alleged that the purported charities were scams that called, mailed and emailed fundraising material through the Combined Federal Campaign, a program that collects donations from federal workers for non-profit organizations.
The solicitations described specific assistance the organizations would provide to cancer sufferers and their families, regulators charged.
“These were lies,” the court complaint alleged. “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.”
Instead, “donations have enriched a small group of individuals related by familial and financial interests and the for-profit fundraisers they hired,” the complaint charged.
For instance, donor contributions allegedly funded a Carnival cruise in the Caribbean that was billed as a staff training function, college tuition payments, meals at Hooters and other restaurants, and cars for Reynolds and others, “despite no apparent need for business travel,” the complaint alleged.
All four groups functioned as personal “fiefdoms” where executives’ relatives routinely were given jobs through “rampant nepotism,” even if they lacked qualifications, the complaint charged.
Professional fundraisers hired to solicit donations allegedly were awarded contracts that promised them as much as 95% of every dollar raised — far higher than the percentage recommended by consumer and charity watchdog organizations.
The organizations allegedly hid their high fundraising and administrative costs from donors by using an accounting scheme that involved shipments of pharmaceuticals and gifts-in-kind to developing countries.
A FTC settlement order imposed a more than $75 million judgement against Reynolds and his affiliated groups. The order also requires him to transfer ownership of 15 framed art prints, five Remington statues, 50 collector beer steins and two 9 millimeter handguns, as well as turn over the proceeds after selling a pontoon boat.
Further execution of the monetary judgment against Reynolds will be suspended unless investigators determine that he misrepresented or hid his personal assets, according to a court stipulation.
“Sham charities betray the generosity of donors and do a disservice to the causes they claim to support,” said New York Attorney General Eric Schneiderman, one of the state law enforcement officials and regulators who investigated the groups.