FTC: Sham Cancer Charities Bilked Donors Out of $187 million

FTC: Sham Cancer Charities Bilked Donors Out of $187 million Photo (cc) by Mike Miley

In what could be one of the largest charity fraud cases ever, the Federal Trade Commission accused four cancer charities run by a Tennessee family of bilking Americans out of $187 million in donations, the majority of which the family used on lavish gifts for themselves.

The FTC joined with all 50 states and the District of Columbia in accusing James T. Reynolds Sr., his ex-wife Rose Perkins, his son James Reynolds II, and longtime associate Kyle Effler, of collecting the money through their charities — Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America and The Breast Cancer Society — then using it to buy themselves cars, luxury vacations, sports tickets, college tuition, concert tickets, and dating site memberships, as well as providing lucrative employment for family members and friends.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement:

The defendants’ egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support. The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers.

According to the FTC, consumers were told that their donations would be used to help cancer patients with pain medication, transportation to medical appointments and hospice care.

The complaint accuses the charities of operating 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 charities also allegedly falsified financial documents with inflated revenues and “gifts in kind.”

Virginia Attorney General Mark Herring said in a statement:

The allegations of fundraising for personal gain in the name of children with cancer and women battling breast cancer are simply shameful. This is the first time the FTC, all 50 states, and the District of Columbia have filed a joint enforcement action alleging deceptive solicitations by charities and I hope it serves as a strong warning for anyone trying to exploit the kindness and generosity of others

The FTC said the Children’s Cancer Fund of American and The Breast Cancer Society agreed to settle the charges against them before the complaint was filed. The organizations will be dissolved. The Breast Cancer Society’s webpage includes a letter from James Reynolds II, which reads in part:

Charities – including some of the world’s best-known and reputable organizations – are increasingly facing the scrutiny of government regulators in the U.S. The Breast Cancer Society (TBCS) is no exception. Unfortunately, as our operations expanded – all with the goal of serving more patients – the threat of litigation from our government increased as well.

While the organization, its officers and directors have not been found guilty of any allegations of wrongdoing, and the government has not proven otherwise, 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.

Before you donate money to a charity, check out the FTC’s tips on how to avoid Charity Scams.

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