The Federal Trade Commission and all 50 states on Tuesday accused four cancer charities of being “sham charities,” charging that the groups had deceived donors and spent more than $187 million in donations on personal expenses in one of the largest charity fraud cases ever.
In soliciting donations through telemarketing calls and direct mail, the FTC complaint says, the charities described specific uses for the money they solicited, such as transporting patients to and from chemotherapy or buying pain medicine for children.
“These were lies,” the complaint says, and the money went to the people running the charities for expenses such as gym memberships, college tuition and dating website subscriptions.
“Donations have enriched a small group of individuals,” the complaint adds.
The Tennessee-based charities — the Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America and the Breast Cancer Society — were created and controlled by the same network of people and led by James Reynolds Sr., the FTC says.
Together with attorneys general from all 50 states and the District of Columbia, the FTC filed suit against those organizations Monday in the U.S. District Court for Arizona, also naming Reynolds and some of his relatives and associates as defendants.
According to the complaint, Reynolds devised the fundraising scheme in 1987 and recruited his son, friends and members of his church congregation to participate in the years that followed. The FTC’s finding of $187 million in misspent donations reflects the charities’ activity from 2008 to 2012. In that time, the charities spent less than 3 percent of donations on cancer patients.
“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 complaint also accuses the organizations of falsifying financial documents, reporting inflated revenues and “gifts in kind” they claimed to distribute internationally.
Two of the charities, the Children’s Cancer Fund of America and the Breast Cancer Society, agreed to settle the charges before the complaint was filed Monday, according to the FTC. Those organizations will be dissolved.