Special Edition-Nonprofit Imperative

Cancer Charities Fraud Charges After Years of Warnings …almost $200 Million

by Gary Snyder

Finally the regulators are starting to watch. The Federal Trade Commission and 58 law enforcement partners from every state and the District of Columbia have charged four sham cancer charities and their operators with bilking more than $187 million from consumers- a large portion of the funds going to personal use. The defendants told donors their money would help cancer patients, including children and women suffering from breast cancer, but the overwhelming majority of donations benefitted only the perpetrators, their families and friends, and fundraisers.

This is one of the largest actions brought to date by enforcers against charity fraud and it is the tip of the iceberg of a multitude of cancer charity frauds that are seemingly not investigated by regulators. 

Named in the federal court complaint are Cancer Fund of America, Inc. (CFA), Cancer Support Services Inc. (CSS), their president, James Reynolds, Sr., and their 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.

According to the complaint, the defendants used telemarketing calls, direct mail, websites, and materials distributed by the Combined Federal Campaign, which raises money from federal employees for non-profit organizations, to portray themselves as legitimate charities with substantial programs that provided direct support to cancer patients in the United States, such as providing patients with pain medication, transportation to chemotherapy, and hospice care. In fact, the complaint alleges that these claims were deceptive and 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.”

Also the complaint says the defendants used the organizations for lucrative employment for family members and friends, and spent consumer donations on cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting event and concert tickets, and dating site memberships. They hired professional fundraisers who often received 85 percent or more of every donation.

Cancer Fund of America and Children’s Cancer Fund of America both made the list of “America’s Worst Charities” compiled by the Tampa Bay Times and Center for Investigative Reporting.

We told you so...

Many cancer charity frauds were uncovered by the Chronicle of Philanthropy and Marie Claire Magazine and Nonprofit Imperative Newsletter

For almost a decade Nonprofit Imperative has warned its readers about the problems associated with cancer charities, particularly breast cancer.

A glimpse of the bogus reporting by cancer charities…

The Children’s Cancer Recovery Foundation, in Harrisburg, Pa., said it would lower its 2011 revenues by removing the value associated with the Gardasil HPV vaccine it received from World Help and then donated to a charity in Ghana.

Greg Anderson, the group’s founder, did not specify exactly how much the revenue would change, but the vaccine was valued at $4.1-million, which accounted for 34 percent of the group’s revenue.

Several years ago, the Christian relief charity World Help, which was ranked No. 77 on The Chronicle’s list of 400 charities that raise the most from private sources, lowered its 2011 revenue last month from the $239-million it reported to the Internal Revenue Service to just $17-million. It had overstated its 2011 revenues by 1,400 percent; nearly all of its revenue came from the value it estimated for the medications, food, and other supplies that it received from other charities to deliver overseas.

An examination by The Chronicle revealed that those other charities—Catholic Medical Mission Board, Cross International, and Direct Relief International—said they had not provided the roughly $350-million worth of medicines over three years to World Help, as listed in the Forest, Va., charity’s tax filings.

Breast Cancer Society (BCS) claims it raised $50 million in contributions in tax filings but when pressed by Marie Claire Magazine the founder said that it raised just $15 million in cash donations in 2009. The other $35 million represented his estimate of medications that the BCS accepted as gifts or bought at a major discount but then listed on its books as having much higher values. He says he gets the meds from other organizations, including the Ontario-based Universal Aide Society, which saw its Canadian charitable status revoked two years ago for malfeasance. In 2009, the leader collected a $223,276 salary.

Cancer charities misrepresent…

Cancer Fund of America is a controversial group. Both the Better Business Bureau and the nonprofit rating agency Charity Navigator have vilified it for giving less than a penny of every dollar raised to cancer patients. Charity Navigator once listed the Cancer Fund of America Support Services, as one of "10 Non-Profits That Make Ebenezer Proud." In a Georgia Governor's Office of Consumer Affairs document Cancer Fund was accused of making false and misleading claims in its mail solicitations, allegations that the Cancer Fund of America ultimately settled for $50,000

The United Cancer Council hired a fundraiser netting only $2 million out of the $28 million collected. 

The Making Memories Breast Cancer Foundation raised $1,159,654. Just under 12 percent, less than $137,000, went toward granting wishes for terminally ill breast cancer patients.

The American Cancer Society actually lost money on a program (in 2010), because the telemarketing firm got to keep 100 percent of the $5.3 million in funds it raised, plus $113,006 in fees from the society, government filings showed. No apologies from the agency.

They had more than 20,000 people who helped raise more than $2 million by participating in the national breast cancer organization’s, Y-Me, race and walk. Weeks later the Chicago-based nonprofit, which operated a nationwide hot line offering counseling to breast cancer patients, fired its staff, shut down its website address and closed its doors. A Y-Me volunteer and founder of the group’s signature fund-raising race, said “incompetence and mismanagement,” especially under previous leadership, led to Y-Me’s downfall.

The National Breast Cancer Foundation was a family affair. With collections of about $10 million, the founder takes home $200,000, her son $180,000, her husband and another son all share in the largess at the expense of those in need. It even endorses misleading jewelry. About 40% of its revenues were not spent toward its mission.

The Coalition Against Breast Cancer offers virtually nothing to patients after taking in millions. The Coalition is under investigation by New York Attorney General Eric Schneiderman. He called the charity a sham.

Charity Navigator ranks The Breast Cancer Relief Foundation and the John Wayne Cancer Institute with just one star, poorly performing organizations. United Breast Cancer Foundation, Walker Cancer Research Institute and the American Breast Cancer Foundation have zero (0) stars.

This still does not include some of the questionable practices at the stalwart breast cancer charity, Susan G. Komen.

It has been estimated that hundreds of millions of dollars are taken from those to which it was intended. Fewer than 50% of the Charity Navigator breast cancer charities have rated high for their commitment to Accountability and Transparency.

This snapshot chart of Michigan attorney general's data is representative of the magnitude of cancer charity fraud and mismanagement.

Charity

Gross Receipts

% to Charity

The Breast Cancer Charities of America, Inc.	$5,028,983	15.0%
The Breast Cancer Relief Foundation	$2,429,883	15.0%
The Breast Cancer Society, Inc.	$9,893,845	15.0%
Breast Cancer Survivors Foundation, Inc.	$2,272,942	10.0%
American Institute for Cancer Research	$837,249	21.4%
Cancer Fund of America	$2,525,271	19.1%
Memorial Sloan - Kettering    Cancer Center	$721,706	41.6%
Cancer Fund of America, Inc. Funds	$132,327 $2,525,271 $336,626 $543,097 $14,046	14.0% 19.1% 13.0% 11.0% 17.4%
Cancer Survivors' Fund	$1,093,608	10.0%
National Children Leukemia Foundation Inc	$54,199	15.0%
The National Children's Cancer Society, Inc.	$2,680,696	41.4%
National Foundation for Cancer Research	$176,296	20.8%
United Breast Cancer Foundation	$43,510	30.0%
United Breast Cancer Research Society, Inc.	$490,235	10.0%
Woman to Woman Breast Cancer Foundation, Inc.	$2,354,949 $1,534,151 $123,364	10.0% 10.0% 35.0%
Breast Cancer Charities of America	$2,765,940	15%
Breast Cancer Society	$9,893,845	15.0%
Cancer Recovery Foundation of America	$4,085,181	15.1%
Children with Hair Loss	$1,360,321	17.5%
Children's Cancer Fund of America	$1,955,979	19.4%
Prevent Cancer Foundation	$126,081	$0 0.0%
Mission of Hope Cancer Fund	$441,179	20.0%
Childhood Leukemia Foundation, Inc.	$403,687	13.0%

Observations on the Latest Charges

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

Virginia Attorney General Mark Herring said, “The allegations of fundraising for personal gain in the name of children with cancer and women battling breast cancer are simply shameful. This is the first time the FTC, all 50 states, and the District of Columbia have filed a joint enforcement action alleging deceptive solicitations by charities and I hope it serves as a strong warning for anyone trying to exploit the kindness and generosity of others.”

South Carolina Secretary of State Mark Hammond said, “When charities lie to donors, it is our duty to step in to protect them. 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.”

Exercise Due Diligence

Watch out before donating. Make sure that you are confident that the charity that you donate to is honest.

·      Go to GuideStar, if available; and review the charity’s IRS 990 form; look at other watchdog websites such as Charity Navigator.

·      Go to the charity’s website and scrutinize the annual report and try to see if there are conflicts of interest (such as family members on the board);

·      Check the financial statements both at GuideStar and at website;

·      Examine to see if programs are in sync with organization’s mission;

·      Ask if the agency has internal financial controls in place to avoid fraud and misapplication of funds.

·      Ensure that the charity is effectively governed; it is transparent, accountable and fiscally responsible

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)