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Here's where Cancer Fund of America donations went while dying kids got Little Debbie snack cakes

In its pitch to donors, Cancer Fund of America touted "direct patient aid'' as one of the many ways it helped tens of thousands of Americans struggling with deadly disease.

But instead of medical treatment or financial help, patients got boxes of sample-size soap, seasonal greeting cards and Little Debbie Snack Cakes.

Meanwhile, the family behind Cancer Fund built a network of "sham charities'' that were designed to enrich officers at the expense of sick women and children, as alleged in a complaint filed Tuesday by the Federal Trade Commission, attorneys general and secretaries of state of all of 50 states.

According to the complaint, donations intended for the sick paid for "extravagant insider benefits,'' including cars, college tuition, gym memberships, concert tickets, a Caribbean cruise and trips to Las Vegas and other touristy locales.

"Some charities send children to Disney World,'' South Carolina Secretary of State Mark Hammond said at a Washington, D.C., news conference announcing the complaint. "These charities sent themselves to Disney World.''

Named in the complaint are Cancer Fund and two affiliated charities, Breast Cancer Society and Children's Cancer Fund of America. Combined, those charities raised $187 million over four years, yet spent almost 90 percent of the contributions on for-profit telemarketers and the "steady lucrative employment'' of Cancer Fund founder James Reynolds Sr., his ex-wife, his son and dozens of members of their extended family.

Details in the 148-page complaint mirror what the Tampa Bay Times and the Center for Investigative Reporting uncovered in a yearlong investigation published in 2013. Their report ranked Cancer Fund of America as No. 2 of America's 50 Worst Charities.

Among the plaintiffs is Florida Attorney General Pam Bondi.

Jessica Rich, head of the FTC's consumer protection bureau, hailed the filing as a historic moment' in which the FTC and all 50 states "have joined together to present a united front against charity fraud.''

Officials believe millions of people have given money to the cancer charities, with donations averaging about $20, Rich said.

In response to the complaint, Children's Cancer Fund, headed by Reynolds' ex-wife, Rose Perkins, and Breast Cancer Society, headed by his son, James, II, already have agreed to shut down.

A proposed order imposes $95 million in judgments against them, but in reality they will pay only about $1 million, to be divided among the states to cover investigative costs and to help cancer patients.

"Unfortunately, the money is almost gone,'' Rich said.

Perkins and Reynolds II also will be barred from operating a nonprofit and from soliciting contributions. Neither could be reached for comment.

Not included in the settlement and still in business are the original organization, the Tennessee-based Cancer Fund of America, and its telemarketing arm, Cancer Support Services of Dearborn, Mich.

The elder Reynolds, who is president of both organizations, did not respond to calls and an email seeking comment.

A former Army medic without a college degree, Reynolds worked his way up to head the Knoxville chapter of the prestigious American Cancer Society before being fired for, among other things, sloppy bookkeeping. He founded the Cancer Fund in the mid-1980s and his family began spinning off new cancer charities, each with a relative or close associate in control.

The charities had something else in common. While recognized by the IRS as nonprofit groups, they have spent the vast majority of donations on for-profit solicitation companies, primarily the telemarketers who generated the donations.

"The corporate defendants 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,'' the complaint says.

Among the allegations:

• At Cancer Fund of America, the elder Reynolds employed at least 12 members of his extended family regardless of where in the country they lived. When his son Michael moved to Montana, the Cancer Fund opened a "chapter'' there to keep him on the payroll. The chapter was not successful and later closed.

• At Children's Cancer Fund, Reynold's ex-wife, Perkins, hired 11 friends and relatives including her two daughters and her sister. Between 2008 and 2012, the charity paid those employees more than twice what it provided in financial assistance to young cancer patients. Twice a year, Perkins doled out across-the-board bonuses of up to 10 percent of salary, regardless of employee performance.

• At Breast Cancer Society, Reynolds II, promoted his wife, Kristina, to the new, second-in-command and unadvertised position of "operations and public relations manager.'' She hired several of her relatives including her two sisters and her mother, a caterer who was put to work writing grants. The Arizona-based society also opened a branch in Pennsylvania near the home of its then-board chairman, who hired his wife and mother-in-law to work there.

• All three cancer charities allowed employees to use corporate credit cards for personal expenses and did not require payment until the end of each year, effectively giving them interest-free loans. Credit cards were used to buy food, gas, movie tickets, Jet Ski rentals, video games, meals at Hooter's and purchases at Victoria's Secret — "all ultimately paid for by donors,'' the complaint says.

According to the FTC, telemarketers who raised funds for the charities made pitches that were intended to "tug at donors' heart strings and open their wallets,'' with little concern for accuracy.

The Cancer Fund approved one script saying it never wanted to have to tell a family that it couldn't provide a wig for a child with hair loss because fund-raising goals had fallen short. In fact, the fund did not have a program to provide wigs for children in chemotherapy.

Another script, used by telemarketers for the Children's Cancer Fund, claimed that the organization helps kids with hospice needs, medical supplies and pain medication — all "completely false,'' the complaint says.

And in touting the purported good works of the Breast Cancer Society, telemarketers said contributions supported a "Hope Supply Program" that provided thousands of cancer patients access to local warehouses where they could get baby and women's clothing, toiletries and other items free of charge.

In fact, the complaint says, access was severely limited because there were only three warehouses — in Arizona, Pennsylvania and Arkansas. Between 2009 and 2012, fewer than 500 people ever "shopped'' at the stores.

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 89-38642.

FTC complaint: sham charities, personal profit, rampant nepotism

Cancer Fund of America

Headquarters: Knoxville, Tenn.

President: James Reynolds Sr.

2013 compensation: $247,995

Family members hired include: Two sons, two daughters, former stepson, former stepdaughter, two former sons-in-law

Breast Cancer Society

Headquarters: Mesa, Arizona

President: James T. Reynolds II

2013 compensation: $294,875

Family members hired include: Wife (paid $100,528), wife's son, two sisters-in-law, mother-in-law

Children's Cancer Fund of America

Headquarters: Powell, Tenn.

President: Rose Perkins

2013 compensation: $185,598

Family members hired include: sister, two daughters, grandson, son-in-law, former son-in-law, daughter-in-law

Source: IRS

Here's where Cancer Fund of America donations went while dying kids got Little Debbie snack cakes 05/19/15 [Last modified: Tuesday, May 19, 2015 10:42pm]
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