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A Tennessee family raised $187 million under the guise of “supporting” cancer patients. The Federal Trade Commission caught ’em red handed spending the donated money on cars, gym memberships, luxury cruise vacations, college tuition, and more, Yahoo! Finance reports.
James T. Reynolds Sr., his ex-wife, and son collected the donations through their own charities: The Cancer Fund of America, The Breast Cancer Society , and the Children’s Cancer Fund of America. The organizations hired telemarketers to solicit $20 donations from people across the country.
Donors were led to believe that the charities generously supported cancer patients who are in need of pain medication, transportation to chemotherapy sessions, and hospice care.
But according to the FTC, not much of the money actually reached cancer patients. The charity organizations operated as “personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation.”
And for those who are looking for a refund, tough luck. “The money is mostly gone,” said Jessica Rich, director of the FTC Bureau of Consumer Protection.
The litigation against the Reynolds is still on-going, but as part of a settlement agreement, they are currently barred running these charities.
The Breast Cancer Society, one of the shuttered charity organizations ran under Reynolds II, blamed increased government scrutiny for their downfall:
“While the organization, its officers and directors have not been found guilty of any allegations of wrongdoing, and the government has not proven otherwise, our 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,” according to the statement.
The organizations hid their high administration costs from benefactors and regulators, according to the complaint. The groups filed financial documents stating that they collected about $223 million “gifts in kind.” But, allegedly, that is all poppycock.
“Investigators say that number was inflated and helped to create the illusion that the groups were being more efficient with donated money than they actually were,” Yahoo! Finance said.
As per the FTC, 36 states claim that the defendants filed “false and misleading” financial statements with state charities.
The settlement agreement imposed heavy judgments on the family. Reynolds II, for instance, faced a $65.5 million judgment, which may be forgiven after paying $60,000.
“I hope it serves as a strong warning for anyone trying to exploit the kindness and generosity of others,” Virginia Attorney General Mark Herring said of the investigation.
The Washington Post lays out five reasons why it took so long for the government to catch on to the scam, including an overwhelming number of charities to oversee, the aggressive telemarketers that these charities used and people’s desire to help a good cause.
