"Sham" cancer charities settle massive fraud case
NASHVILLE, Tenn.-- Two Tennessee-based cancer charities labeled "shams" by the Federal Trade Commission have settled a massive fraud case, along with their president, by agreeing to a $75.8 million judgment and the dissolution of the businesses.
The complaint filed last year accused James T. Reynolds Sr. and others of spending donations meant for cancer patients on six-figure salaries and luxury vacations. The FTC said it is the largest joint action ever undertaken by the FTC and state charity regulators.
Cancer Fund of America and Cancer Support Services spent less than 3 percent of contributions from individual donors on cash and goods sent to cancer patients and nonprofits in the United States, according to the FTC.
Much of what was sent to patients was virtually worthless. It consisted of boxes of "seemingly random items" that typically included Carnation Instant Breakfast drink, adult briefs and bed pads, sample-sized soaps, Little Debbie snack cakes and blank seasonal greeting cards, according to court documents. The items were mostly purchased from procurement agents, who sell overstocked, out-of-season and discontinued products to nonprofits at a small fraction of their retail value.
Cancer Fund of America (CFA), Cancer Support Services (CSS), Children's Cancer Fund of America (CCFOA) and The Breast Cancer Society (BCS) were all named in a federal lawsuit, the Federal Trade Commission and law enforcers from all 50 states said last May.
"Some said they would send children with cancer to Disney World. In this case, they used money to send themselves to Disney World," South Carolina Secretary of State Mark Hammond told a news conference last May.
Cancer Support Services also claimed to provide services to cancer patients, including hospice care, but actually existed solely to raise money for Cancer Fund of America, according to court documents.
The settlement with Reynolds and the two businesses was filed Wednesday in federal court in Arizona and must be signed by the judge before it takes effect.
FTC attorney Tracy Thorleifson said the agency does not yet know how much money the government will recover, but she said it "won't even be close" to the $75.8 million judgment, which reflects the amount of money the public donated to the two "sham charities" between 2008 and 2012.
Reynolds' assets to be sold include 50 collector beer steins, two 9 mm pistols, 15 framed art prints, five Remington statues and a pontoon boat. After Reynolds complies, the judgment against him will be suspended, provided his sworn financial statements are accurate.
As part of the settlement, Reynolds is banned from profiting from any charity fundraising in the future.
Reynolds' attorney did not return a phone call or email seeking comment.
Reynolds' son and ex-wife previously agreed to settlements involving two related charities. The former president of Cancer Support Services also settled earlier.
Together, the four charities raised more than $187 million between 2008 and 2012. Donor contributions financed personal loans; paid for trips to Las Vegas, New York and Disney World; and purchased cars, college tuition, gym memberships, Jet Ski outings, dating website subscriptions and luxury cruises.