Family spent $187M raised by bogus cancer charities: feds
A Tennessee man and his family used most of the nearly $200 million they raised — ostensibly for cancer patients — to spoil themselves with new cars, gym memberships, college tuition, six-figure salaries and luxury vacations, federal officials alleged Tuesday.
In a sweeping joint action, attorneys general from all 50 states have banded together with the Federal Trade Commission to sue four allegedly phony cancer charities based in Arizona and Tennessee, charging they ripped off more than $187 million from people who thought the proceeds would go to provide pain medication, hospice care and research.
Since 2008, nearly $3 million of the unsuspecting donations came from the state of New York, according to Attorney General Eric Schneiderman.
The family-run charities include The Cancer Fund of America in Knoxville, Tennessee, and its affiliated Cancer Support Services, The Breast Cancer Society in Mesa, Arizona, and the Children’s Cancer Fund of America in Powell, Tennessee.
James T. Reynolds Sr., his ex-wife Rose Perkins and son James T. Reynolds II were all in charge of the organizations, along with family friend Kyle Effler, the feds say.
Two of the groups, Children’s Cancer Fund of America and The Breast Cancer Society, have entered into settlement agreements, along with Perkins, Effler and Reynolds II. The case is proceeding against the remaining defendants.
The settlement agreements include judgments of $137 million and require that CFA and BCS be shuttered and their leaders prohibited from ever working in the not-for-profit industry, federal officials said.
“Bogus charitable fundraising in the name of helping cancer patients is as immoral as it is illegal,” Schneiderman said in a statement. “Today, we join with our law enforcement colleagues from across the nation to combat charity fraud of the most cynical kind. These organizations claimed to be helping children with cancer and breast cancer patients, while they were instead allegedly raising funds for their own enrichment — including in one case to fund a family trip to Disney World.”
According to the complaint, instead of giving the donations they received to patients in need, Reynolds and his family chose to use their organizations to operate as “personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation.”
Between 2008 and 2012, of the more than $187 million raised, 85 percent went to professional fundraisers. From the little remaining funds, the charities’ operators paid themselves, hired their friends and family to help run their sham operations, and spent donations on a Caribbean cruise, jet ski outings, concert tickets and dating site memberships.
In order to portray themselves as legitimate charities, the defendants used telemarketing calls, direct mail, websites, and materials distributed by the Combined Federal Campaign, which raises money from federal employees for nonprofit organizations, to provide direct support to cancer patients across the US.
In addition, in the attempt to hide their high administrative and fundraising costs from donors and regulators, the defendants falsely inflated their revenues by reporting their numbers in publicly filed documents at more than $223 million in donated “gifts in kind” — which they claimed were distributed internationally. By doing this, Reynolds and his family ultimately created the illusion that they were bringing in much more money and that they were using it very efficiently.
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