4 cancer charities in TN accused of scamming $187M from consumers

4 cancer charities in TN accused of scamming $187M from consumers (Image 1)

KNOXVILLE (WATE) – A lawsuit has been filed against four Tennessee non-profits, alleging they scammed more than $187 million from people around the country.

Tennessee Secretary of State Tre Hargett made the announcement Tuesday, filed against Cancer Fund of America, 2901 Breezewood Lane in Knoxville; Children’s Cancer Fund of America, 2317 West Emory Road in Powell; Cancer Support Services and The Breast Cancer Society. The lawsuit claims the non-profits portrayed themselves to donors as legitimate charities.

The suit also names James Reynolds Sr., president of Cancer Fund of America and Cancer Support Services; Kyle Effler, the CFO of both of those groups and the former president of Cancer Support Services; Rose Perkins, president and executive director of Children’s Cancer Fund of America; and James Reynolds II, executive director and former president of The Breast Cancer Society.

The federal lawsuit claims the non-profits used 85 percent or more of ever donation to pay themselves, their family or their friends. “Sometimes they would even use it to fund lavish trips to Disney World instead of supporting patients they claim to help,” said Hargett.

Telemarketers, according to the lawsuit, often told donors that their contributions would be used to provide pain medication to children suffering from cancer, transport cancer patients to chemotherapy appointments, and pay for hospice care for cancer patients. However, the lawsuit claims the defendants did not operate programs that provided these services.

A federal court complaint alleges those in charge of each group hired family members and friends, whether they were qualified or not, to provide them with steady, lucrative employment. The groups allegedly spent more on salaries than on the cancer patients they claimed to be serving.

The defendants also allegedly spent donations on things like cruises, jet ski outings, concert tickets and dating site memberships.

In the eight-count complaint, the FTC and all 50 separate states charged the charities with misrepresenting contributions that would be used for charitable purposes, misrepresented specific program benefits, misrepresenting revenue and program expenses and misrepresenting that the focus of their reported programs was to provide direct assistance to individuals in the United States. Thirty-six states also charged defendants with making false and misleading filings with state charities regulators.

The FTC and 36 states charged Cancer Fund, Children’s Cancer Fund, and the Breast Cancer Society with providing their professional fundraisers with deceptive fundraising materials and thus the means and instrumentalities of deception. Finally, the FTC and the plaintiff attorneys general, including the Attorney General of the District of Columbia, charged defendants with violating the FTC’s Telemarketing Sales Rule.

Settlements call for two charities to be dissolved, three people banned from operating charitiesSettlements were also filed with five of the defendants. As part of the settlements, Children’s Cancer Fund of America and Rose Perkins agreed to a judgment of $30,079,821, the amount donated to the group between 2008 and 2012. The charity will also be dissolved and Perkins will be suspended and banned from fundraising, managing a charity or overseeing charitable assets.

Breast Cancer Society agreed to a judgment of $65,564,360, the amount donated between 2008 and 2012. A liquidating receiver will be appointed to close the charity’s operations, liquidate its assets and dissolve its corporate existence. The group’s Hope Supply Warehouse program will be allowed to be spun off to a legitimate, qualified charity. Reynolds II also agreed to a $65,564,360 judgment, but it will be suspended due to his inability to pay, upon payment of $75,000. He, too, will be banned from fundraising, from managing a charity and from overseeing charitable assets.

Effler agreed to a $41,152,231 judgment, the amount that consumers donated to Cancer Support Services between 2008 and 2012. It will be suspended following payment of $60,000. Effler is also banned form fundraising, from managing a charity and from overseeing charitable assets.

Litigation will continue against Cancer Fund of America, Cancer Support Services and James Reynolds Sr.

People with questions about a charity or professional solicitor operating in the state of Tennessee should contact our Division of Charitable Solicitations and Gaming by calling (615) 741-2555 or going to sos.tn.gov/charitable. 

Copyright 2015 WATE. All rights reserved. 

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