Herring announces distribution of recovered funds to cancer centers
Attorney General Mark Herring announced that $2.5 million will be distributed to cancer centers across the country as a result of a multistate lawsuit brought against sham cancer charities.
The $2.5 million was recovered through settlements of a landmark lawsuit that Attorney General Herring filed along with all 50 states, the District of Columbia and the Federal Trade Commission (FTC) against four affiliated sham charities – Cancer Fund of America, Inc., The Breast Cancer Society, Inc., Cancer Support Services, Inc., and Children’s Cancer Fund of America – and their founder James Reynolds, Sr. and other individuals.
Additionally, the people responsible for fronting the sham charities have been banned from any charity or fundraising activities for the rest of their lives. This was one of the largest charity fraud actions ever brought by enforcers, and the Virginia Office of Attorney General has served on the Executive Committee for this multistate action.
“False charities that solicit funds from folks who want to help cancer patients are disgraceful and need to be held accountable,” said Attorney General Herring. “I am glad that we were able to shut down these fraudulent operations and recover money that will now actually go towards helping cancer patients as the donors intended. This unprecedented case should serve as a strong warning to those would take advantage of Virginians’ generosity and I want to thank my team for their hard work and cooperation with our law enforcement partners.”
The distribution of funds marks the conclusion of the lawsuit, which was filed in the U.S. District Court for the District of Arizona in May 2015. The suit was the first time that all 50 States, the District of Columbia, and the FTC joined together to shut down sham charities.
The complaint alleged that the so-called charities, led by Reynolds and his family members, bilked the public out of more than $187 million dollars between 2008 and 2012. The defendants used telemarketing calls, direct mail, and websites 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. But these claims were deceptive and, as alleged in the complaint, 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.” Of the money collected, only about 3% was directed to cancer patients in the United States and most of it was either paid to professional fundraisers or squandered by the defendants.
Cancer Fund of America also claimed to supply patients with pain medications and transportation to chemotherapy treatments, when it provided no such services. The charities also participated in a “gift-in-kind” program in which they sent drugs that had nothing to do with cancer to other countries. The complaint alleged that the purpose of this program was to make the organizations appear larger than they were and to hide their high fundraising costs.
The complaint also alleged that 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.
The money will be transferred to Rockefeller Philanthropy Advisors (RPA) who, under a services agreement with the plaintiffs, will distribute the funds to select health and medical programs targeting breast and pediatric cancer. Eligibility will be determined through an invitation-only application process, and is limited to NCI-designated Cancer Care Centers, a designation bestowed by the National Cancer Institute on institutions and programs recognized for their scientific leadership, resources, and the depth and breadth of their research. RPA CEO Melissa Berman noted, “We are pleased to be part of this landmark process of ensuring that the philanthropic intent of donors is coming to fruition, despite the conduct of bad actors.” RPA will ensure that the funding will serve patients in all 50 states, and will monitor, ensure compliance and provide detailed reporting for all grants awarded.
As NCI-designated Cancer Centers, both Massey Cancer Center at Virginia Commonwealth University and the University of Virginia Cancer Center will be eligible to apply for funds.
Overall, Attorney General Herring’s Consumer Protection Section has recovered more than $301 million in relief for consumers and payments from violators. The Section has transferred more than $33 million to the Commonwealth’s General Fund, and following a major reorganization and enhancement in 2016 the Section has been even more effective in fighting for Virginia consumers.