Rutledge Joins State and Federal Crackdown on Four Sham Cancer Charities
May 19, 2015
LITTLE ROCK – Arkansas Attorney General Leslie Rutledge today announced that she has joined with the U.S. Federal Trade Commission (FTC) and other state officials from across the country in a complaint charging four sham cancer charities and their operators with defrauding and stealing more than $187 million from consumers.
The so-called charities told donors their money would go to help cancer patients, including children and women suffering from breast cancer, but the overwhelming majority of the donations benefitted only the perpetrators, their families, friends and fundraisers.
“Anytime an Arkansan makes a donation to a cause, they should have full confidence that the money will be used for its intended purpose,” said Attorney General Rutledge. “Unfortunately, con artists have discovered that a quick and easy way to make money is by posing as charities. These four charities targeted donors in every state, and misrepresented the scope and nature of their charitable programs in order to benefit themselves and close friends.”
Named in the federal court complaint are Cancer Fund of America Inc., Children’s Cancer Fund of America Inc., Cancer Support Services Inc., The Breast Cancer Society Inc., James Reynolds Sr., Kyle Effler, Rose Perkins and James Reynolds Jr.
Children’s Cancer Fund of America, the Breast Cancer Society, Effler, Perkins and Reynolds, Jr. have agreed to settle the charges against them. Under the proposed settlement orders, the settling individual defendants will be banned from fundraising, charity management and oversight of charitable assets, and Children’s Cancer Fund of America and The Breast Cancer Society will be dissolved. Litigation will continue against Cancer Fund of America, Cancer Support Services and Reynolds Sr.
According to the complaint, the defendants made misleading and deceptive statements through telemarketing calls, direct mail and websites. The defendants portrayed themselves as legitimate charities with substantial programs providing direct support to cancer patients in the U.S. Defendants claimed to provide patients with pain medication, transportation to chemotherapy and hospice care. These claims were deceptive and according to the complaint, 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 complaint goes on to say that the defendants used the organizations for lucrative employment for family members and friends, as well as spent consumer donations on cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting and concert tickets and dating site memberships. The charities hired professional fundraisers, who often received 85 percent or more of every donation.
In order to hide their high administrative and fundraising costs from donors and regulators, the defendants falsely inflated their revenues by reporting in publicly filed financial documents over $223 million in donated “gifts in kind,” which they claimed to distribute to international recipients. However, the defendants were merely pass-through agents for such goods. By reporting the inflated “gift-in-kind” donations, the defendants created the illusion that they were larger and more efficient with donors’ dollars than they actually were. Arkansas and 35 other states alleged that the defendants filed false and misleading financial statements with state charities regulators.
In addition, the FTC, Arkansas and 35 other states have charged Cancer Fund of America Inc., Children’s Cancer Fund of America Inc. and The Breast Cancer Society Inc. with providing professional fundraisers with deceptive fundraising materials.