A.G. Schneiderman Announces Lawsuit Filed By 50 States & Federal Trade Commission Against Four Related Cancer Charities For Allegedly Bilking $187 Million From Donors Nationwide

An Estimated 3% Of Funds Raised Allegedly Went To Charitable Purpose; Some Funds Used To Pay For Dating Site Subscriptions And Vacations For Charities’ Operators; Settlements With Two Of The Four Cancer Charities Also Announced

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office, along with all 49 other states, the District of Columbia, and the U.S. Federal Trade Commission, has filed a lawsuit against four allegedly phony cancer charities -- the Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services, and The Breast Cancer Society. The suit, filed in U.S. District Court in Arizona, alleges that the organizations and their operators scammed more than $187 million from unsuspecting donors across the country – including nearly $3 million in New York State since 2008. Of the defendants named in the lawsuit, two organizations – Children’s Cancer Fund of America and The Breast Cancer Society – and three individuals, have entered into settlement agreements. Litigation is proceeding against the remaining defendants -- Cancer Fund of America, Cancer Support Services, and James Reynolds Sr. The proposed settlement agreements include judgments of $137 million and require that those two charities be shuttered and their leaders prohibited from working in the not-for-profit industry.

“Bogus charitable fundraising in the name of helping cancer patients is as immoral as it is illegal,” said Attorney General Schneiderman. “Today, we join with our law enforcement colleagues from across the nation to combat charity fraud of the most cynical kind. These organizations claimed to be helping children with cancer and breast cancer patients, while they were instead allegedly raising funds for their own enrichment – including in one case to fund a family trip to Disney World. We will continue to protect the great work our honest charities perform, and stop those who seek to cheat the system.”

The joint complaint is an unprecedented 50 state and federal effort. It alleges that the defendants – based in Arizona and Tennessee – portrayed themselves as legitimate charities with substantial programs that directly supported cancer patients in the United States. Among other things, the charities or their telemarketers allegedly falsely told donors that their contributions would be used to provide pain medication to children suffering from cancer, to transport patients to chemotherapy appointments, and to pay for hospice care for dying patients. None of these services are believed to have actually been provided.

“Cancer is a debilitating disease that impacts millions of Americans and their families every year,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The defendants’ egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support. 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.”

In fact, between 2008 and 2012, of the more than $187 million raised, approximately 85% went to professional fundraisers, the lawsuit alleges. From the little remaining funds, the charities’ operators paid themselves, hired their friends and family to help run their sham operations, and spent charitable donations on a Caribbean cruise, trips to Disney World, jet ski outings, concert tickets, and dating site memberships. The complaint alleges that the defendants directed only 3% of the funds they raised to the charitable purposes donors intended them for.

The Cancer Fund of America is accused of claiming to provide “life-saving items” to cancer patients while actually providing items such as instant breakfast drinks, DVDs, sample size toiletries, and snack cakes. The organization also claimed to provide medical equipment and supplies while apparently only providing a small number of latex gloves and bed pads.

The complaint alleges that the defendants violated the Federal Trade Commission Act, the federal Telemarketing Sales Rule, and each of the states’ laws on charitable solicitation and reporting, including the laws of New York State.

The court filings also allege that Cancer Fund, Children’s Cancer Fund, and Breast Cancer Society each participated in a deceptive “gifts-in-kind” accounting scheme to make their organizations appear larger and more efficient than they actually were. In this scheme, the organizations functioned as middlemen for shipments of pharmaceuticals and other goods (known as “gifts-in-kind”) to developing countries. Even though the organizations were just pass-throughs, and the drugs had nothing to do with their missions of helping cancer patients in the U.S., the organizations booked the supposed value of the drugs in their financial reports. Through this scheme, collectively from 2008 through 2012, Defendants improperly reported over $223 million in revenue and program spending.

Michael Clark, president of the Nonprofit Coordinating Committee of New York, Inc.,said, “Charitable organizations must not serve as personal piggy banks for the individuals who run them. The New York State Legislature recently passed a law tightening rules against self-dealing, and the allegations in this case appear to be an important example of why the law is so critically important.”

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 charitiesnys.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  www.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.
  • 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.

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.