Lawsuit: Network of Cancer Nonprofits Swindled Donors

On May 19, the Federal Trade Commission and the attorneys general of all U.S. states announced a lawsuit against four nonprofits. The lawsuit alleges that the organizations scammed donors of $187 million while ostensibly raising money for cancer patients. The groups include The Children’s Cancer Fund of America, The Breast Cancer Society, The Cancer Fund of America, and Cancer Support Services. The administrative staff of each organization consists of members from the same family or their close associates.

Following the announcement, phones for two of the organizations  – Cancer Support Services and The Breast Cancer Society – had been disconnected.

A handful of ranking administrative staff from the four charities have signed settlements that bar them from future fundraising activities. Children’s Cancer Fund of America President and Director Rose Perkins, Breast Cancer Society Executive Director James Reynolds II, and Cancer Fund of America Chief Financial Officer Kyle Effler are banned from managing charities or charitable assets, and are responsible for $137 million in payments that will go toward cancer patients. The settlements will also dissolve both the Children’s Cancer Fund of America and the Breast Cancer Society.

According to Jessica Rich from the Federal Trade Commission’s Bureau of Consumer Protection, the deceitful activities of the four organizations not only hoodwinked donors, but also negatively impacted genuine nonprofits:

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.

No one in the groups’ leadership has publicly admitted to the alleged offenses. The Breast Cancer Society’s website now consists exclusively of a letter from Executive Director James T. Reynolds II claiming innocence and blaming government regulation for the organization’s closure:

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 wrong doing, 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.

According to the lawsuits, just three percent of donations raised collectively among the four organizations between 2008 and 2012 were used for charitable ends. Some funding was misused for personal ends, spent on fees for personal accounts on dating websites and trips to Disney World.

A joint report released by the Center for Investigative Journalism and the Tampa Bay Times details the Reynolds’ family and its extensive empire of nonprofits, delving into the network’s nefarious practices. According to the report, the family paid a dozen executive salaries to family and close associates.  In 2011, the interlocking network of nonprofits paid out $8 million in salaries, about 13 times more than the amount spent it on patients. The Cancer Fund of America purportedly spent less than 1 percent of the $34 million it raised over five years on patients.

The organizations in the Reynolds network routinely mischaracterized their operations. For instance, one of the group’s care packages labeled as “urgent pain medication” typically carried over-the-counter ibuprofen. Several programs the charities claimed to to have run in their fundraising efforts – including one to drive patients to chemotherapy – were completely fictional.

Taken together, the charities’ track record paints a damning picture. Over a decade, the biggest winners from the groups’ operations were contract fundraising companies – which made $0.80 on the dollar, totaling for $80.4 million – and the family members, who collectively raked in over $5 million.

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