In its pitch to donors, Cancer Fund of America touted “direct patient aid” as one of the many ways it helped tens of thousands of Americans struggling with deadly disease.
But instead of medical treatment or financial help, patients got boxes of sample-size soap, seasonal greeting cards and Little Debbie snack cakes.
Meanwhile, the family behind Cancer Fund built a network of “sham charities” that were designed to enrich their officers at the expense of sick women and children, a complaint filed today by the Federal Trade Commission and the attorneys general of all 50 states alleges.
According to the complaint, donations intended for the sick paid for “extravagant insider benefits,’’ including cars, college tuition, gym memberships, concert tickets, a Caribbean cruise and trips to Las Vegas and Disney World.
Named in the complaint are Cancer Fund and two affiliated charities, the Breast Cancer Society and Children’s Cancer Fund of America. Combined, those charities raised $180 million over four years, yet spent almost 90 percent of the contributions on for-profit telemarketers and the “steady lucrative employment’’ of Cancer Fund founder James Reynolds Sr., his ex-wife, his son and dozens of members of their extended family.
Details in the complaint mirror what the Tampa Bay Times and The Center for Investigative Reporting uncovered in a yearlong investigation published in 2013. Their report ranked Cancer Fund of America as No. 2 of America’s 50 Worst Charities.
Florida Attorney General Pam Bondi is among the plaintiffs. A spokesman on Monday declined to comment ahead of an FTC press conference scheduled today in Washington.
FTC officials said Children’s Cancer Fund, led by Reynolds’ ex-wife, Rose Perkins, and the Breast Cancer Society, led by his son, James Reynolds II, have agreed to shut down and pay a total of $900,000 to be divided among the states to cover investigative costs and to help cancer patients.
As part of that settlement, Perkins and Reynolds II will be barred from operating a nonprofit and from soliciting contributions. Neither could be reached for comment.
Given all the money that went to fundraising and personal profit, federal officials said it’s not surprising that the charities had so little left to pay in settlement.
“We allege that these entities raised millions of dollars but that a larger percentage of that went to the for-profit telemarketers and very little, a paltry amount, went to the beneficiaries they claim,” said Charles Harwood, regional director of the FTC’s Seattle office, which led the investigation.
Not included in the settlement and still in business are the original organization, the Tennessee-based Cancer Fund of America, and its telemarketing arm, Cancer Support Services of Dearborn, Michigan.
The elder Reynolds, who is president of both organizations, did not respond to calls and an email seeking comment.
A former Army medic without a college degree, Reynolds worked his way up to head the Knoxville, Tennessee, chapter of the prestigious American Cancer Society before being fired for, among other things, sloppy bookkeeping. He founded Cancer Fund in the mid-1980s, and his family began spinning off new cancer charities, each with a relative or close associate in control.
The charities had something else in common. While recognized by the IRS as nonprofit groups, they have spent the vast majority of donations on for-profit solicitation companies, primarily the telemarketers who generated the donations.
“The corporate defendants 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,” the federal complaint says.
Among the allegations:
- At Cancer Fund of America, the elder Reynolds employed at least 12 members of his extended family, regardless of where in the country they lived. When his son Michael moved to Montana, Cancer Fund opened a “chapter’’ there to keep him on the payroll. The chapter was not successful and later closed.
- At Children’s Cancer Fund, Perkins hired 11 friends and relatives, including her two daughters and her sister. Between 2008 and 2012, the charity paid those employees more than twice what it provided in financial assistance to young cancer patients. Twice a year, Perkins doled out across-the-board bonuses of up to 10 percent of salary, regardless of employee performance.
- At the Breast Cancer Society, Reynolds II promoted his wife, Kristina, to the new, second-in-command and unadvertised position of operations and public relations manager. She hired several of her relatives, including her two sisters and her mother, a caterer who was put to work writing grants. The Arizona-based society also opened a branch in Pennsylvania near the home of its then-board chairman, who hired his wife and mother-in-law to work there.
- All three cancer charities allowed employees to use corporate credit cards for personal expenses and did not require payment until the end of each year, effectively giving them interest-free loans. Credit cards were used to buy food, gas, movie tickets, Jet Ski rentals, video games, meals at Hooters and items at Victoria’s Secret – “all ultimately paid for by donors,” the complaint says.
According to the FTC, telemarketers who raised funds for the charities made pitches that were intended to “tug at donors’ heart strings and open their wallets,” with little concern for accuracy.
Cancer Fund approved one script saying it never wanted to have to tell a family that it couldn’t provide a wig for a child with hair loss because fundraising goals had fallen short. In fact, the fund did not have a program to provide wigs for children undergoing chemotherapy.
Another script, used by telemarketers for Children’s Cancer Fund, claimed that the organization helps kids with hospice needs, medical supplies and pain medication – all “completely false,” the complaint says.
And in touting the purported good works of the Breast Cancer Society, telemarketers said contributions supported its Hope Supply Program, which that provided thousands of cancer patients access to local warehouses where they could get baby and women’s clothing, toiletries and other items free of charge.
In fact, the complaint says, access was severely limited because there were only three warehouses – in Arizona, Pennsylvania and Arkansas. Between 2009 and 2012, fewer than 500 people “shopped” at the stores.