FTC: Family raised $187M for cancer, spent it on themselves

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Millions of dollars that generous donors thought was going to support cancer patients was spent on just about everything but.

Four charities are now at the center of a federal lawsuit, saying that much of the $187 million they collected was spent on salaries, cars, gym memberships, luxury cruise vacations, and college tuition.

It’s a one of the largest charity fraud cases ever involving all 50 states, and it’s a family affair.

The lawsuit filed by the Federal Trade Commission and all 50 states said James T. Reynolds Sr., his ex-wife and son raised the money through their various charities: 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.

North Carolina Attorney General Roy Cooper said nearly 85 percent of the money these charities collected never benefited cancer patients.

“Donations should go to help people in need, not line fundraisers’ pockets,” Cooper said. “When contributions to charity are wasted and misused, people in need suffer and consumers lose confidence in helping others. We’re cracking down to protect consumers from fraudulent charities and restore their trust in legitimate ones.”

North Carolina Secretary of State Elaine Marshall added that, “State government regulators and our federal partners are sending the message to those trying to rip-off the giving public that we can find you, shut you down, and take you to court.”

The charities hired solicitors to collect donations from people across the country, telling consumers that they provided financial aid and supplies, including pain medication and transportation to chemotherapy visits and hospice care.

You can hear examples of those calls in the video player above.

“These things simply weren’t provided,” said Cooper.

Instead, the complaint said the charities sent random gift boxes full of things like adult underwear, batteries, disposable plates, blank seasonal greeting cards, iPod nano covers, gift wrap, sample-sized soaps and Little Debbie snacks.

“CFA did not consult with medical professionals about the relative need or usefulness to cancer patients of any of the items provided to individuals,” the lawsuit states.

Attorneys say the charities didn’t have a single health care professional or cancer specialist on staff.

WNCN Investigates pulled tax records to find out how much the charity operators were making.

James Reynolds Sr. made $247,995 from Cancer Fund of America. His other charity, Cancer Support Services also gave CFA a $1.5 million grant.

See his tax filings here

Rose Perkins brought in $185,598 from Children’s Cancer Fund of America. She is Reynolds’ ex-wife.

See her tax filings here

Reynolds’ son James Reynolds Jr. started up the Breast Cancer Society Inc. His salary was $294,875. But he also hired his wife Kristina Reynolds, who made an additional $129,773.

See their tax filings here

None of the groups returned phone calls and emails asking for comment.

In settlements filed along with the complaint, two of the four corporate defendants and three of the four individual defendants have agreed to leave the charity business and stop fundraising. They have also agreed to judgments totaling $137 million nationally, with any money collected from the judgments slated to go to legitimate national cancer charities to help cancer patients, as donors originally intended.

Children’s Cancer Fund and The Breast Cancer Society will be dissolved and Perkins and Reynolds Jr. are banned from operating charities, overseeing charitable assets, and fundraising.

Children’s Cancer Fund of America and Rose Perkins agreed to a judgment for $30,079,821, the amount that consumers donated between 2008 and 2012. The judgment will be partially paid by liquidating Children’s Cancer Fund’s assets.

The Breast Cancer Society agreed to a judgment for $65,564,360, the amount consumers donated to it between 2008 and 2012, and its assets liquidated to pay the judgment. Its Hope Supply Warehouse program may be spun off to a legitimate charity, subject to court approval.

Reynolds, II agreed to a $65,564,360 judgment, suspended when he pays $75,000 because financial information indicates he is unable to pay more.

Effler, former Cancer Support Services president and CFO of Cancer Fund, agreed to a judgment for $41,152,231, the amount that consumers donated to Cancer Support Services between 2008 and 2012. That judgment will be suspended once he pays $60,000 because financial information indicates he is unable to pay more.

Each charity website has been taken down.

The Breast Cancer Society site has a note from James Reynolds Jr. saying in part:

“While the organization, its officers and directors have not been found guilty of any allegations of wrongdoing, 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 complaint, the organizations hid their high administration costs from donors and regulators. The groups filed public financial documents that read they had taken in more than $223 million “gifts in kind,” which would be distributed to international recipients.

Investigators said that number was inflated and helped to create the illusion that the groups were being more efficient with donated money than they actually were.

Cooper said the charities collected more than $1 million from North Carolina donors.

Consumers filed a total of 85 complaints against the defendants with Cooper’s Consumer Protection Division, mostly for the charity’s telemarketing calls to raise donations.

Cooper’s office got 21 complaints about Cancer Fund of America, all but one about its telemarketing calls; two complaints about Cancer Support, including one about telemarketing; 61 complaints about The Breast Cancer Society, all but two about telemarketing; and one complaint about Children’s Cancer Fund of America, for its telemarketing.

“Give generously to help others if you are able to, but make sure your money will be used as you intend,” Cooper said. “Before you give, do your homework so your donation can do the most good possible.”

Cooper says state law requires a solicitor, if they’re asked, to tell anyone they call how much money actually goes to the charity.

Cooper’s office offers tips on how to check out a charity and avoid charity scams at www.ncdoj.gov. North Carolina consumers who spot a potential charity scam can file a complaint with Attorney General’s Consumer Protection Division online at ncdoj.gov or call1-877-5-NO-SCAM toll-free within state.

People with questions about individual charities or charitable solicitation activities in general can call the Secretary of State’s Office, Charitable Solicitation Licensing (CSL) Division at 1-888-830-4989 (toll-free in North Carolina) or 1-919-807-2214 or visit CSL online.

Copyright 2015 WNCN. All rights reserved.

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