A.G. Schneiderman Announces Settlement With Two Sham Cancer Charities That Bilked More Than $75 Million From Donors

NEW YORK – Attorney General Eric T. Schneiderman today joins the Federal Trade Commission (FTC), the other 49 states, and the District of Columbia in announcing the successful conclusion of the largest multistate charity fraud action to date. Two nationwide sham cancer charities are being dissolved and their president is banned from profiting from any charity fundraising in the future, pursuant to a settlement agreed to by the FTC, all 50 states, and the District of Columbia. 

Cancer Fund of America Inc. (CFA) and Cancer Support Services Inc. (CSS) and their leader, James Reynolds, Sr., agreed to settle charges that CFA and CSS claimed to help cancer patients, but instead, the overwhelming majority of donations benefitted the sham charity operators, their families and friends, and fundraisers.

“Sham charities betray the generosity of donors and do a disservice to the causes they claim to support,” said Attorney General Schneiderman. “We are proud to join with regulators across the country in this historic action. My office will continue to pursue those who take advantage of New Yorkers’ generosity and who tarnish the reputation of our charitable sector.”

The joint federal-state complaint, filed in May 2015, targeted four sham charities run by Reynolds and his family members that allegedly bilked more than $187 million from donors, including nearly $3 million in New York State since 2008. CFA and CSS were jointly responsible for more than $75 million of that amount. The other two sham charities settled in May 2015. Litigation proceeded against CFA, CSS, and Reynolds. The settlement announced today concludes that litigation, which was the largest joint enforcement action ever undertaken by the FTC and state charity regulators.

Under the settlement order, CFA and CSS will be permanently closed and their assets liquidated.  Reynolds is banned from profiting from charity fundraising and nonprofit work, and from serving as a charity’s director or trustee or otherwise managing charitable assets. He is also prohibited from making misrepresentations about goods or services, and violating the FTC’s Telemarketing Sales Rule and state laws.

The order imposes a judgment against CFA, CSS, and Reynolds, jointly and severally, of $75,825,653, the amount consumers donated to CFA and CSS between 2008 and 2012. The judgment against CFA and CSS will be partially satisfied via the liquidation of their assets by a court-appointed receiver. The judgment against Reynolds will be suspended upon surrender of certain artwork, two pistols, and sale of a pontoon boat. The full judgment will become due immediately if Reynolds is found to have misrepresented his financial condition.

The other defendants in the case were CFA’s and CSS’s 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. Under settlement orders, Effler, Perkins and Reynolds II were banned from fundraising, charity management, and oversight of charitable assets, and CCFOA and BCS will be dissolved after their assets are liquidated.

The order was entered by Judge Neil V. Wake of the U.S. District Court for the District of Arizona on March 30, 2016.

TIPS FOR CHARITABLE GIVING

• Confirm That the Charity is Registered With the Attorney General’s Office. Search the Attorney General’s Charities Bureau Registry at comto see if the charity is registered and has filed its financial reports with the Attorney General.
• Know Where Your Money Will Go. Research the charity – go to its website, check on Facebook and other social media, and do a search.  Find out from the charity what it will do with your money. Review the charity’s financial reports for information about how it spends donations. If you have been contacted by a telemarketer, review Pennies for Charity, the New York Attorney General’s annual report of telemarketing campaigns in New York, to see how much is spent on fundraising costs and how much has been kept by the charity. Pennies for Charity is available at  charitiesnys.com.
• Don’t Be Pressured by Telemarketers. If you receive a telephone call asking you to contribute to a charity, you have the right to hang up. Often the caller is a professional fundraiser who is being paid to call you. If you choose not to end the call, ask how much of your donation will go to charity and how much the telemarketer is being paid. Many telemarketers receive most of the money they raise. Be wary of claims such as “all proceeds will go to charity.” Telemarketers are required to respond truthfully to your questions. Don’t fall for pressure tactics such as repeated phone calls, or threats. These are signs that the organization may not be legitimate. While charities are not covered by the national Do Not Call registry, if a telemarketer calls on behalf of a charity, you may ask not to receive any more calls from, or on behalf of, that specific charity.  If a third-party telemarketer calls again on behalf of that charity, the telemarketer may be subject to a fine of up to $16,000.
• Ask for Written Materials. Always ask for information in writing – be wary if an organization will not provide information about charitable programs and finances upon request. Any legitimate organization will be happy to send you information.
• Be Wary of Deceptive Tactics and Emotional Appeals. Watch out for charities with names that resemble those of prominent or established organizations. Some charities use names similar to well-known charities in order to confuse donors. Be wary of emotional appeals that talk about problems but are vague on how donations will be spent. Also be careful about charities that are created immediately following a natural disaster or other current event.
• Never Give Cash. Give your contribution by check made payable to the charity.
• Watch Out for Fake Invoices.If you receive a document resembling an invoice or “overdue” statement for a pledge, read the information carefully and confirm that you’ve actually made the pledge to the organization.  This could be a scam.
• Don’t Disclose Personal Information. Never give your social security number or other personal information in response to a charitable solicitation. Never give out credit card information over the phone or to an organization you are not familiar with.
• You Have the Right to Say “No.” Remember you always have the right to say no to any charitable request.

New Yorkers who believe they have been contacted by a sham charity, or who receive harassing phone calls on behalf of a charity are urged to contact the Attorney General’s Charities Bureau by visiting www.CharitiesNYS.com, e-mailing charities.bureau@ag.ny.gov or by calling 212-416-8401.

The case is being handled by in Attorney General Schneiderman’s Office by Assistant Attorney General Yael Fuchs, of the Charities Bureau and Charities Bureau Enforcement Section Chief Sean Courtney. Senior Enforcement Counsel David E. Nachman also worked on the case. James Sheehan is the Charities Bureau Chief and Alvin Bragg is the Executive Deputy Attorney General for Social Justice.