The Federal Trade Commission (FTC) filed a lawsuit on Tuesday against four cancer charities for scamming donors out of the majority of $187 million given in donations between 2008 and 2012.
Cancer Support Services, the Cancer Fund of America, the Breast Cancer Society, and the Children's Cancer Fund of America are accused of using emotional appeals to donate money to benefit cancer patients and then using the money for personal purchases, like Caribean cruises and shopping trips to Victoria's Secret.
The FTC complaint said the scheme was operated by a single family, with each charity run either by James T. Reynolds Sr., Rose Perkins (Reynolds' former wife) or James T. Reynolds II. (Reynolds' son).
The elder Reynolds first began the operation in 1987, when he founded the Cancer Fund of America. The enterprise eventually expanded to four individual "charities" over the next few years.
The FTC said Reynolds was joined by other people, including his son, friends and members of the local Mormon Church in Knoxville, Tennessee.
Director Jessica Rich of the FTC's Bureau of Consumer Protection called the scheme "egregious" and accused the defendants of depriving legitimate charities and cancer patients of crucial funds and support.
Reynolds and his co-accused allegedly used telemarketing strategies and online campaigns in order to solicit donations from people. They claimed that 100 percent of the money given by the donors would be used to pay for pain medication, hospice services and other care for cancer patients.
The complaint, however, revealed that cancer patients received less than five percent of each dollar donated to these charities. An "overwhelming majority" of the funds went to the organizers of the charities as well as their friends and fundraisers.
The charities also sent out letters to potential donors claiming that "one in eight women will be diagnosed with breast cancer in America." These letters would often include photographs of a balding woman, presumably because of chemotherapy. The sender would then make an appeal at the end of the letter, saying that no family could prepare for this type of "devastation."
Experts said these fraudulent organizations were able to operate without being discovered because the defendants took advantage of a new wave of charities that were formed in the last 15 years.
Technology has also made the creation of foundations easier, making it simpler to solicit money from people through telemarketing and different professional fundraisers.
As of Tuesday, most of the charities' official websites have been taken down, with the exception of the Breast Cancer Society. On its page, the group's executive director and Reynolds' son, James T. Reynolds II, posted a statement.
"Charities – including some of the world's best-known and reputable organizations – are increasingly facing the scrutiny of government regulators," the younger Reynolds wrote.
"Unfortunately, as our operations expanded – all with the goal of serving more patients – the threat of litigation from our government increased as well."
The FTC said two of the charities, the Breast Cancer Society and the Children's Cancer Fund of America, had agreed to settle the charges Monday, before the complaint was filed. These organizations will be dissolved.
The commission added that it will proceed with the litigation against Reynolds Sr. and the two remaining charities.
Reynolds Jr. has agreed to settle the charges. He will be banned from participating in any fundraising event, management of charities and overseeing charitable assets.
The FTC said recovering the full amount of the embezzled money will be difficult because the defendants' bank accounts contained insufficient funds. However, the government said funds collected through settlement will be donated to legitimate charities in different states.
Photo: Taber Andrew Bain | Flickr
