Federal investigators say that a Tennessee man and his family used much of the $187 million they raised for cancer patients to buy cars, luxury cruises, pay for college tuition and employ family members with six-figure salaries.
The joint complaint alleges that the Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America, and The Breast Cancer Society are sham charities created by James Reynolds Sr. and his extended family and friends primarily for their own benefit.
Two of the four charities — Children’s Cancer Fund of America and The Breast Cancer Society — have agreed to dissolve under proposed settlements also filed on Monday.
According to the complaint, the defendants used telemarketing calls, direct mail, and websites to portray the organizations as legitimate charities that provided direct support to cancer patients by providing pain medication, transportation to chemotherapy, hospice care, or other services. However, the complaint alleges that the majority of donations were used primarily to benefit the people who ran the charities, their family and friends, and their fundraisers (not cancer patients).
“At every turn, the individuals behind this scheme put themselves and their money ahead of the cancer patients they claimed to help,” Attorney General DeWine said. “Using cancer patients as a stepping stone to build a personal fortune is just terrible. It’s also a reminder that just because a charity sounds well-meaning doesn’t mean that it is.”
The defendants allegedly used the organizations as sources of lucrative employment for family members and friends, and spent consumer donations on cars, trips, luxury cruises, college tuition, gym memberships, jet-ski outings, dating site memberships, and sporting event and concert tickets. They hired professional fundraisers who often received 85 percent or more of every donation.
The complaint alleges that 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. In fact, the defendants were merely pass-through agents for such goods. By reporting the inflated “gift in kind” donations, they created the illusion that they were larger and more efficient with donors’ dollars than they actually were.
In the complaint, filed with the U.S. District Court for the District of Arizona, the FTC and the states charge the defendants with misrepresenting how contributions would be used; misrepresenting specific program benefits; misrepresenting revenue and program expenses related to international gifts-in-kind; and misrepresenting that the primary focus of their reported programs was to provide direct assistance to individuals in the United States.
Five of the eight defendants named in the complaint have agreed to settlements, which have been submitted to the court for approval.
Under the proposed settlements, Children’s Cancer Fund of America and The Breast Cancer Society will dissolve and their assets will be liquidated.
Additionally, the following three individual defendants have agreed not to hold a position in any charity in the future: Kyle Effler, the former president of Cancer Support Services; Rose Perkins, the president and executive director of Children’s Cancer Fund of America; and James Reynolds II, executive director and former president of The Breast Cancer Society.
The settlements will not be final until they are approved by the court, and litigation will proceed against Cancer Fund of America, Cancer Support Services (which allegedly operates as a common enterprise with Cancer Fund of America), and James Reynolds Sr.
In Ohio, most charitable organizations and professional solicitors that raise money in the state must file annual informational returns or financial reports with the Ohio Attorney General’s Office. The Attorney General’s Charitable Law Section is empowered to investigate alleged fraud and take legal action to stop the misuse of charitable donations.