Let the donor beware: A federal lawsuit alleges four cancer charities have scammed consumers out of more than $187 million.
The Federal Trade Commission and attorneys general in all 50 states and the District of Columbia announced Tuesday they have filed a lawsuit against the Cancer Fund of America, Children's Cancer Fund of America, Cancer Support Services and the Breast Cancer Society alleging they violated federal and state regulations. All four charities are run by members of the same family or their close business associates, as detailed in the 2013 "America's Worst Charities" joint report from the Tampa Bay Times and the Center for Investigative Reporting.
"The defendants' egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement. "The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers."
Children's Cancer Fund of America and the Breast Cancer Society have entered into a settlement agreement and will be dissolved. Three of the groups' executives—Rose Perkins, president and director of the Children's Cancer Fund of America, James Reynolds II, executive director and former president of the Breast Cancer Society and Kyle Effler, chief financial officer of Cancer Fund of America and Cancer Support Services and former president of Cancer Support Services—have also agreed to settle charges against them. They will be banned from fundraising, charity management and oversight of charitable assets. Judgments against the groups and their executives total $137 million—which will be redirected to cancer patients. A lawsuit will proceed against Cancer Fund of America Inc., Cancer Support Services Inc. and their president, James Reynolds Sr.
Calls to the Cancer Fund of America and Children's Cancer Fund of America were not immediately returned. Phone lines listed for Cancer Support Services and The Breast Cancer Society appear to have been disconnected. The Breast Cancer Society's website has been replaced with a letter from executive director James T. Reynolds II to supporters. "While the organization, its officers and directors have not been found guilty of any allegations of wrongdoing, and the government has not proven otherwise," he said in the letter, "our board of directors has decided that it does not help those who we seek to serve, and those who remain in need, for us to engage in a highly publicized, expensive, and distracting legal battle around our fundraising practices."
Over the course of 2008 to 2012, the lawsuit claims, 85 percent of the more than $187 million the four groups raised went to professional fundraisers. Operators used much of the remaining donations to cover their salaries and personal expenses, including trips to Disney World, concert tickets and dating site memberships.
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Just 3 percent of the collective funds raised allegedly went to charitable purposes. According to a statement from the office of New York Attorney General Eric Schneiderman: "Among other things, the charities or their telemarketers allegedly falsely told donors that their contributions would be used to provide pain medication to children suffering from cancer, to transport patients to chemotherapy appointments, and to pay for hospice care for dying patients. None of these services are believed to have actually been provided."
The groups also allegedly used deceptive accounting schemes, improperly reporting more than $223 million in revenue and program spending over 2008 to 2012. Doing so made them appear to be larger organizations and operating more efficiently than they were.