Four cancer charities accused of fraud, misuse of donations

Four cancer charities, some that have been operating for nearly 30 years, have been charged with fraud for bilking more than $187 million from consumers.

The Federal Trade Commission and law enforcement agencies from every state and the District of Columbia filed a complaint in the U.S. District Court for the District of Arizona against four “sham charities” — the Cancer Fund of America Inc. (CFA), Cancer Support Services Inc. (CSS), the Children’s Cancer Fund of America Inc. (CCFOA) and the Breast Cancer Society Inc. (BCS), according to a press release from the Federal Trade Commission. Also named in the complaint were CFA and CSS president James Reynolds Sr. and chief financial officer Kyle Effler, as well as CCFOA president and executive director Rose Perkins and BCS executive director James Reynolds II.

The charities had claimed donations would help patients with cancer, including children and women with breast cancer; however, donated money primarily was used to benefit the perpetrators, families, friends and fundraisers, according to authorities.

Perkins, Reynolds II and Effler — who have agreed to settle the charges against them — will be banned from fundraising, charity management and oversight of charitable assets. Under the proposed settlement orders, CCFOA and BCS will be dissolved as charities.

The litigation will continue against Reynolds Sr. as well as CFA and CSS.

Reynolds Sr. — at the center of the alleged scam — started the CFA in 1987 and eventually expanded to include the other charities, which he allowed his son and friends to operate.

“Whenever charities lie to donors, it is our duty to protect them,” South Carolina Secretary of State Mark Hammond said in the press release. “At the same time, however, this historic action should remind everyone to be vigilant when giving to charity. This case is an unfortunate example of why I always tell my constituents to give from the heart, but give smart.”

According to the complaint, the charities spent millions of dollars in consumer donations on salaries for family members and friends, college tuition, luxury cruises, jet skiing, store purchases, subscriptions to dating web sites, and sporting event and concert tickets.

The complaint states 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 charities hid their activities by inflating revenues by more than $223 million in donations of “gifts in kind,” which they reported to have distributed to international recipients, according to the complaint.

Although the charities claimed to spend 100% of their proceeds on services for patients with cancer, the complaint concluded that “these were lies” and that the charities actually only spent approximately 3% of all donations on patients with cancer.

The proposed final orders against Perkins, Reynolds II, Effler, CCFOA and BCS total more than $136.6 million. All of the proposed judgments against the charities and their individual leaders are based on the amount consumers donated between 2008 and 2012. Full judgments will be due immediately if the individuals misrepresented their personal financial situation.