Attorney General Sam Olens and Secretary of State Brian Kemp Join Federal, State Crackdown on Four Cancer Charities That Allegedly Bilked Over $187 Million from Consumers
Attorney General Sam Olens and Secretary of State Brian Kemp joined with the U.S. Federal Trade Commission and other state law enforcement officials in a complaint charging four sham cancer charities and their operators with bilking more than $187 million from consumers. The defendants told donors their money would help cancer patients, including children and women suffering from breast cancer, but the overwhelming majority of donations benefitted only the perpetrators, their families, friends and fundraisers.
Named in the federal court complaint are Cancer Fund of America Inc. (CFA), Cancer Support Services Inc. (CSS), their president, James Reynolds, Sr., and their chief financial officer and CSS’s former president, Kyle Effler; Children’s Cancer Fund of America Inc. (CCFOA) and its president and executive director, Rose Perkins; and The Breast Cancer Society Inc. (BCS) and its executive director and former president, James Reynolds II.
CCFOA and Perkins, BCS, Reynolds II and Effler have agreed to settle the charges against them. Under the proposed settlement orders, Effler, Perkins and Reynolds II will be banned from fundraising, charity management, and oversight of charitable assets, and CCFOA and BCS will be dissolved. Litigation will continue against CFA, CSS and James Reynolds Sr.
According to the complaint, the defendants used telemarketing calls, direct mail, websites, and materials distributed by the Combined Federal Campaign, which raises money from federal employees for non-profit organizations. They portrayed themselves as legitimate charities with substantial programs that provided direct support to cancer patients in the United States, such as pain medication, transportation to chemotherapy, and hospice care. In fact, the complaint alleges that these claims were deceptive and 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.”
According to the complaint, the defendants used the organizations for lucrative employment for family members and friends, and spent consumer donations on cars, trips, luxury cruises, college tuition, gym memberships, jet-ski outings, sporting events, concert tickets, and dating site memberships. They hired professional fundraisers who often received 85 percent or more of every donation.
“I am pleased to join this nationwide effort that has already resulted in shutting down multiple sham charities,” said Kemp. “The generous people of Georgia should be able to trust that their charitable donations are put to good use, and this effort helps that goal. Before making a donation, Georgians can visit the Charities Search Page on the Secretary of State’s website here to check if a charity is registered in Georgia and use other online resources such as BBB Wise Giving Alliance, Charities Watch or Charities Navigator to verify the effectiveness of a charity.”
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, defendants created the illusion that they were larger and more efficient with donors’ dollars than they actually were. Thirty-six states alleged that the defendants filed false and misleading financial statements with state charities regulators.
“Today, I am joining forces with federal and state partners to put an end to an egregious and extensive charity fraud scheme which claimed to assist children with cancer and breast cancer patients,” said Olens. “These so-called charities took advantage of the generosity of others to fund their lavish lifestyles. It is appalling that only 2.7 percent of the donations collected by these phony charities went to the intended charitable purpose."
In addition, the FTC and 36 states charged CFA, CCFOA and BCS with providing professional fundraisers with deceptive fundraising materials. The FTC and the attorneys general also charged the defendants with violating the FTC’s Telemarketing Sales Rule (TSR), CFA, CCFOA and BCS with assisting and facilitating in TSR violations, and CSS with making deceptive charitable solicitations.