"Fake" Cancer Charities Collect Millions
Attorney General Bondi Joins State and Federal Crack Down on Four Cancer Charities That Allegedly Bilked More Than $187 Million from Donors
TALLAHASSEE, Fla.—Attorney General Pam Bondi, together with state law enforcement partners from across the country and the Federal Trade Commission, have jointly sued four phony cancer charities and their operators in federal court for allegedly scamming more than $187 million from donors. Two of the corporations and three individuals have agreed to pre-suit judgments against them totaling nearly $137 million. The defendants allegedly told donors their money would help cancer patients, including women suffering from breast cancer and children, but the overwhelming majority of donations benefitted only the defendants, their families and friends, and certain fundraisers. “To prey on the good intentions of generous people wishing to help those suffering from cancer is utterly disgraceful and will not be tolerated in Florida. The millions of dollars in donations these individuals took from well-meaning donors could have been used to fund cancer research and comfort those suffering from this terrible disease. Instead, these shameless defendants personally profited from these donations,” said Attorney General Bondi. “Thanks to strong partnerships with the FTC and other state attorneys general, this scheme has been stopped.” The joint complaint alleges that the defendants—including Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services and The Breast Cancer Society—portrayed themselves as legitimate charities with substantial nationwide programs that had the primary purpose of providing direct support to cancer patients. According to the complaint, the defendants hired family members and friends, whether qualified or not, and used the organizations to provide them with steady, lucrative employment. The complaint alleges that the sham charities spent more money on salaries than on the goods and services they provided to cancer patients. Donations were also used to pay for cruises, jet ski outings, concert tickets, and dating site memberships—actions that were made possible by corporate boards that rubber-stamped the defendants’ purchases. To hide their high administrative and fundraising costs from donors and regulators, the complaint alleges that the defendants wrongly reported in their financial statements certain gifts-in-kind (GIK) as donated revenue and program services. Through this accounting scheme, these corporate defendants claimed to have received more than $223 million in donated GIK goods, and then reported distributing these goods to international recipients. In fact, the complaint alleges that these defendants were merely pass-through agents, did not own the GIK as they claimed, and should not have reported it as donated revenue or program expenses. By reporting this GIK, these defendants created the illusion that they were much larger and much more efficient with donors’ dollars than they actually were. Based on these allegations, the complaint alleges that the defendants violated state and federal laws, including the Florida Unfair and Deceptive Trade Practices Act, by misrepresenting that contributions donated by consumers would be used for charitable purposes, misrepresenting the specific program benefits resulting from the donations, misrepresenting revenue and program expenses related to international GIK, and misrepresenting that the primary focus of their reported programs was to provide direct assistance to individuals in the United States.
Additional allegations against the defendants include: Allegations by thirty-six states, including Florida, that the defendants made false and misleading filings with state charities regulators; allegations by the FTC and 36 states, including Florida, that the Cancer Fund, Children’s Cancer Fund, and the Breast Cancer Society supplied their professional fundraisers with the deceptive fundraising materials which constituted the means and instrumentalities of the alleged deception; and allegations that the defendants violated the FTC’s Telemarketing Sales Rule. Filed concurrently with the complaint are settlements with two corporations and three individuals. The five settling defendants include Breast Cancer Society, Children’s Cancer Fund of America, Kyle Effler, Rose Perkins and James Reynolds II. Children’s Cancer Fund of America and Breast Cancer Society agreed to judgments of just over $30 million and $65 million respectively, the amounts consumers donated to each charity between 2008 and 2012. The judgments will be partially satisfied by payments from the liquidation of each entity’s assets. Judgments were entered and suspended against the three individuals after limited payments, due to their limited ability to pay, but each of the individuals has been permanently banned from conducting fundraising, managing a charity, and overseeing charitable assets. The action was filed in the U.S. District Court for the District of Arizona. The settlement agreements will not be final until approved by the Court. The lawsuit will continue against the remaining three non-settling defendants: Cancer Fund of America, Cancer Support Services, and James Reynolds, Sr.