Cancer charities bilked donors for $187 mil, spent it on luxury for charity operators, their families and friends

Government regulators have cracked down on four cancer charities, accusing the Cancer Fund of America, Cancer Support Services, the Children's Cancer Fund of America, and the Breast Cancer Society of cheating donors out of $187 million.

The Federal Trade Commission (FTC), all 50 states, and the District of Columbia claim that the four foundations fraudulently told donors their money would help cancer patients. Instead, money from the donations overwhelmingly went into the pockets of charity operators, their families and friends, and professional fundraisers.

According to the complaint filed by authorities, 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 complaint further alleges that the charity executives employed family members and friends, and spent the donated funds on “cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting event and concert tickets, and dating site memberships.” Professional fundraisers hired by the charities often received 85 percent or more of every donation, the FTC said.

“Cancer is a debilitating disease that impacts millions of Americans and their families every year. The defendants’ egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

“The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers,” added Rich.

Two of the charities, Children's Cancer Fund of America (CCFOA) and the Breast Cancer Society (BCS), have agreed to settle with the government. Under the proposed settlement orders, their presidents and executive directors “will be banned from fundraising, charity management, and oversight of charitable assets, and CCFOA and BCS will be dissolved,” said the FTC.

Under the settlement, CCFOA will have to pay a $30 million fine, and the BCS will have to pay $65.5 million, corresponding to the amounts they collected from donors between 2008 and 2012. Litigation will continue against the Cancer Fund of America (CFA) and Cancer Support Services (CSS), and their president, James Reynolds Sr.

The explanation posted on the BCS homepage, signed by their executive director James T. Reynolds II, says that the organization and its officers “have not been found guilty of any allegations of wrong doing, and the government has not proven otherwise,” but that they had decided not to engage in a “highly publicized, expensive, and distracting legal battle around our fundraising practices.”

Virginia Attorney General Mark Herring explained that this was the first time the FTC, all 50 states and the District of Columbia have filed a joint complaint, adding he hoped this would serve as a “strong warning for anyone trying to exploit the kindness and generosity of others.”

“The allegations of fundraising for personal gain in the name of children with cancer and women battling breast cancer are simply shameful,” Herring said.

Infographic by FTC.gov

Thirty-five states are charging the charities with filing false financial statements with state regulators by reporting inflated “gift in kind” donations, to the tune of $223 million.

The FTC and 36 states are also going after CFA, CCFOA and BCS for providing professional fundraisers with “deceptive fundraising materials” and assisting and facilitating in violations of the FTC’s telemarketing sales rule (TSR). The CSS stands accused of “making deceptive charitable solicitations.”

Categories: