Federal, state officials charge that four cancer charities bilked $187 mllion from donors

ATLANTA — Georgia’s attorney general and secretary of state have joined with the Federal Trade Commission and officials with the 49 other states in a complaint against a quartet of cancer charities that government officials say spent the majority of the $187 million they raised to benefit themselves instead of cancer patients and their families.

“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,” Georgia Attorney General Sam Olens said in a statement Tuesday. “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.”

Defendants in the federal court complaint, Olens’ office said, 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.

“Cancer is a debilitating disease that impacts millions of Americans and their families every year. The defendants’ egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement Tuesday. “The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers. I’m pleased that the FTC and our state partners are acting to end this appalling scheme.”

Olens’ office said that CCFOA and Perkins, BCS, James 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, Olens’ office said, will continue against CFA, CSS and James Reynolds Sr.

According to the complaint, Olens’ office said, 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. The defendants portrayed themselves as legitimate charities with substantial programs that provided direct support to cancer patients in the U.S., such as pain medication, transportation to chemotherapy, and hospice care.

Instead, government officials content, the claims were deceptive and 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, Olens’ office said.

The complaint alleges that the high administrative and fundraising costs were hidden from donors and regulators by the defendants falsely inflating their revenues by reporting in publicly filed financial documents more than $223 million in donated “gifts in kind,” which they claimed to distribute to international recipients, Olens’ office said.

“Before making a donation, Georgians can visit the Charities Search Page on the Secretary of State’s website at http://sos.ga.gov/index.php/securities/registered_charities_search 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,” said Georgia Secretary of State Brian Kemp.