Four Cancer Charities Accused of Fraud
Civil suit alleges ‘sham charities’ took more than $187 million from donors
Tennessee Secretary of State Tre Hargett announces a federal lawsuit against four cancer charities on Tuesday in Knoxville, Tenn.PHOTO: MICHAEL PATRICK/KNOXVILLE NEWS SENTINEL/ASSOCIATED PRESS
The Federal Trade Commission, all 50 states and the District of Columbia have filed a civil suit against four connected cancer charities and four people running them, accusing them of bilking more than $187 million from donors from 2008 to 2012.
The Cancer Fund of America Inc., based in Knoxville, Tenn.; Cancer Support Services Inc., based in Washington; Children’s Cancer Fund of America Inc., based in Powell, Tenn.; and the Breast Cancer Society Inc. of Mesa, Ariz., were all described as “sham charities” in the 148-page civil complaint, filed Monday in the U.S. District Court in Phoenix.
The complaint named as defendants James Reynolds Sr., James Reynolds II, and Rose Perkins—who are related—as well as an associate, Kyle Effler. It stated the four “have engaged in a massive, nationwide fraud, telling generous Americans that their contributions will help people suffering from cancer, but instead, spending the overwhelming majority of donated funds supporting the Individual Defendants, their families and friends, and their fundraisers.”
Mr. Reynolds Sr., reached at his home in Knoxville, Tenn., said he was asked not to comment by his attorney, but he added, “I don’t feel I did anything wrong.”
Mr. Reynolds Sr.’s attorney didn’t return calls for comment. The other three defendants couldn’t be reached for comment.
The organizations raised money as charities, but were instead “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation,” according to the complaint.
The complaint states the group leaders spent money to hire family and friends and buy cars, trips, luxury cruises, college tuition and even dating site memberships.
According to the FTC, two of the charities, the Children’s Cancer Fund of America and the Breast Cancer Society, already have agreed to shut down to settle the complaint.
The website of the Breast Cancer Society has been replaced with a letter from James Reynolds II, the organization’s executive director, in which he defended the charity.
“While the organization, its officers and directors have not been found guilty of any allegations of wrongdoing, and the government has not proven otherwise, our board of directors has decided that it does not help those who we seek to serve, and those who remain in need, for us to engage in a highly publicized, expensive, and distracting legal battle around our fundraising practices,” the letter said.
Ms. Perkins, who is Mr. Reynolds Sr.’s ex-wife, Mr. Reynolds II and Mr. Effler also made agreements with the FTC and agreed to be banned from any fundraising or charity work in the future, according to the FTC. The agreements impose tens of millions in penalties on the charities and the individuals, but little money is expected to be recovered since most of it has been spent, an FTC spokesman said.
The civil suit continues against the remaining charities and Mr. Reynolds Sr.
The charity operation had been investigated by various media outlets in recent years. The Cancer Fund of America was investigated as part of a project by the Tampa Bay Times and others called “America’s Worst Charities,” which ranked the fund second worst.
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