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Major Cancer Charities Shut Down Amid $187 Million Donation Scam

Luxury cruises, dating site memberships, and Victoria’s Secret lingerie are among items bought by charity operators with donated money meant for cancer patients.

by Liz Fields
May 20 2015, 9:40pm

Photo via Getty

The Breast Cancer Society (BCS) and Children's Cancer Fund of America (CCFOA) will shut down after a federal investigation into the operations of four major cancer charities found organizers pilfered more than $187 million from donors to spend in part on luxury cruises, dating site memberships, and Victoria's Secret lingerie, among other trappings.

The Federal Trade Commission (FTC), all 50 states, and Washington DC teamed up to file a joint complaint that names Arizona-based BCS, Tennessee-based CCFOA, the Cancer Fund of America (CFA), and the Cancer Support Services (CSS), which also operate in Tennessee.

Between 2008 and 2012, the charities allegedly took millions in donations to purportedly spend on cancer treatment, but almost none of the money actually went to the patients, according to the federal complaint.

"The defendants' egregious scheme effectively deprived legitimate cancer charities and cancer patients of much-needed funds and support," Director of the FTC's Bureau of Consumer Protection, Jessica Rich, said in a statement. "The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers."

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The complaint states that 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."

Instead of providing chemotherapy for children or pain medication for women with breast cancer, for example, the charity operators instead spent the money — acquired via professional fundraisers — on cars, college tuition, gym memberships, jetski outings, and tickets to sports events and concerts.

The rest was misused or wasted, the FTC alleges, with the fundraisers in turn often taking 85 percent or more from each donation, the complaint says. Most of the funds were spent on employee compensation and fundraising expenses, authorities said.

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CFA and CSS are run by the organizations' president, James Reynolds, Sr., who is also named in the complaint. His son, James Reynolds, Jr., who was BCS's executive director, was also listed in the document, as was their chief financial officer and CSS former president, Kyle Effler, and CCFOA President Rose Perkins, who is also Reynolds Sr.'s ex-wife.

Under a settlement reached between prosecutors, BCS and CCFOA will be dissolved, and Effler, Perkins and Reynolds Jr. have agreed to cease any type of fundraising, charity management, and oversight of charitable assets, authorities said.

CCFOA and Perkins has been ordered to pay back more than $30 million in donations received between 2008-12, which will be partially recouped from liquidating the company's assets. BCS and Reynolds Jr. have been ordered to pay $65.6 million but the arrangement with Reynolds Jr. will be satisfied after he pays $75,000.

James Reynolds Sr, CFA, and CSS have reportedly opted to continue to fight the charges in court.

The charities and operators have been the target of several media reports in the last few years, including a join media investigation by CNN and the Tampa Bay Times' Center for Investigative Reporting, which tied BCS to a network of charities run by Reynolds Sr. that allegedly used more than $8 million to pay employee salaries — a figure 13 times the amount received by patients in cash.

Reynolds Jr. made some $300,000 from his work with the charity in 2011 alone, the investigation found.

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On BCS's website, Reynolds Jr. wrote a statement outlining the reasons the charity accepted the settlement, saying the "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."

VICE News has not been able to reach any of the charity operators named in the complaint. CCFOA's website appears to have been taken offline already, while CFA's website claims to be "in maintenance mode," and CSS's website is "temporarily unavailable."

"When charities lie to donors, it is our duty to step in to protect them," South Carolina Secretary of State Mark Hammond said in a statement. "At the same time, however, this historic action should remind everyone to be vigilant when giving to charity."

"This case is an unfortunate example of why I always tell my constituents to give from the heart, but give smart," he said.

Follow Liz Fields on Twitter: @lianzifields