Alabama Attorney General Luther Strange has joined other attorneys general across the country in a federal lawsuit against cheaters who operated four phony cancer charities. The group literally stole $187 million in donations. The operators portrayed the so-called charities as legitimate organizations that focused on supporting cancer patients. Instead, donations were wasted and misused, cancer patients were not helped, and the charities were illegitimate.
Donors were told that contributions would provide pain medication to children with cancer, help transport patients to chemotherapy appointments and pay for hospice care. Instead, the majority of the contributions – often at least 85 percent – went to the perpetrators, along with their families and friends. If that sort of thing does constitute criminal violations, the laws need to be changed.
The defendants hired family members and friends, spending more money on salaries than on goods and services for cancer patients. The attorneys general said they used donations to buy cruises, jet ski outings, concert tickets and memberships to dating sites and covered up the misuse by wrongful reporting on financial statements.
The complaint claims that 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.” Officials from all 50 states, Washington, D.C., and the Federal Trade Commission joined together to file the civil suit. The complaint names Cancer Fund of America Inc., Cancer Support Services Inc., and the president of these two corporations, James Reynolds Sr.; as well as the CFO of both and the former president of Cancer Support Services, Kyle Effler; Children’s Cancer Fund of America Inc., and its president and executive director, Rose Perkins; and The Breast Cancer Society Inc., and its executive director and former president, James Reynolds II.
The Defendants are charged with misrepresenting that contributions would be used for charitable purposes, misrepresenting specific program benefits, misrepresenting revenue and program expenses related to international gifts-in kind, and misrepresenting that the primary focus was to provide direct assistance to individuals in the U.S. Thirty-six states also charged defendants with making false and misleading filings with state charities regulators. Alabama Attorney General Luther Strange had this to say:
These aggressive enforcement actions are necessary to protect consumers, so that they may have confidence in donating to true and worthy charities. This case is a sad example, however, of how important it is to be aware of where your contributions are going and to research to ensure the integrity of charities.
There have been the following developments involving settlements that are related to the ongoing investigation:
Two corporations and three individuals have reached settlements in the lawsuit, while litigation is ongoing against the others. In their settlements, five Defendants agreed to leave the “charity business” and to stop fundraising. Children’s Cancer Fund of America and Rose Perkins agreed to entry of a judgment for $30,079,821, the amount donated between 2008 and 2012. The judgment against the organization will be partially satisfied by payment of the proceeds of the liquidation of all its assets by a receiver. Perkins will be banned from fundraising, from managing a charity, and from oversight of charitable assets.
Breast Cancer Society agreed to entry of a judgment for $65,564,360, the amount donated between 2008 and 2012. Breast Cancer Society also agreed to the appointment of a liquidating receiver who will close its operations and dissolve its corporate existence. James Reynolds II will be banned from fundraising, from managing a charity, and from oversight of charitable assets.
Finally, Kyle Effler agreed to a $41,152,231 judgment, the amount donated to Cancer Support Services between 2008 and 2012. Effler will be banned from fundraising, from managing a charity, and from oversight of charitable assets.
Litigation will proceed against Cancer Fund of America, Cancer Support Services, and James Reynolds, Sr. The civil action was filed in the U.S. District Court for the District of Arizona. The settlement agreements will not be final until approved by the court. I am not sure how much actual money will be received from the settlement.
The individuals who engaged in this massive fraud, using the fear of cancer and the desire of persons to contribute to the fight against the dreaded disease, should be ashamed of what they have done. Not only should they be ashamed, they should be prosecuted in the criminal courts to the fullest extent of the law. I would hope that criminal prosecutions would be more than just a possibility. If what these people did isn’t a crime, we need some changes in our laws dealing with this sort of thing.
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