Mississippi has joined with the other 49 states and the District of Columbia in charging four national cancer charities with defrauding consumers of more than $187 million.
The action, announced in a Tuesday news conference, is one of the most sweeping charity-fraud enforcement actions ever announced. The complaint was filed in a U.S. District Court in Arizona. And several settlements were filed concurrently with the complaint in which defendants agreed to pay a combined more than $135 million with another more than $100 million suspended if penalties are paid.
The organizations included: Cancer Fund of America Inc.; Cancer Support Services Inc., Children’s Cancer Fund of America Inc. and The Breast Cancer Society Inc. Officials also singled out several individuals associated with each of the four organizations.
The organizations and key officials are accused of preying on the sympathies of potential donors to raise money to help cancer patients, but instead using most of the money to benefit charity staff, families and friends, and fundraisers.
“Defendants, four sham charities and the individuals who run them, have engaged in a massive, nationwide fraud, telling generous Americans that their contributions will help people suffering from cancer, but instead, spending the overwhelming majority of donated funds supporting the Individual Defendants, their families and friends, and their fundraisers,” wrote the officials in the scathing introduction of their court case.
“Mississippians are the most generous in the nation,” Mississippi Secretary of State Delbert Hosemann said in response to the filing. “We deserve to have our contributions utilized correctly by any entity who is representing themselves as a charity.”
Noted Virginia Attorney General Mark Herring in a news release: “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.”
According to the FTC, the defendants used telemarketing calls, direct mail, websites and materials distributed by the Combined Federal Campaign, which raises money from federal employees for nonprofit organizations, to portray themselves as legitimate charities with substantial programs that provided direct support to cancer patients in the United States, such as pain medication, transportation to chemotherapy and hospice care. In fact, the complaint alleges 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.”
The organizations are accused of providing “lucrative employment for family members and friends,” as well as spending donations on cars, trips, cruises, college tuition, gym memberships and other perks. Professional fundraisers were said to have kept as much as 85 cents on the donated dollar, and to have used deceptive fundraising materials provided by the organizations, running afoul of several laws that regulate fundraising and telemarketing activities.
“When charities lie to donors, it is our duty to step in to protect them,” South Carolina Secretary of State Mark Hammond said in the news release. “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.”
The proposed final orders include a variety of penalties, including steep fines, liquidation of assets and bans against the individuals’ future association with charity organizations. In some cases, some operations will be spun off to existing charitable organizations.
“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,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in the news release.
For more on the action, including an informative infographic, visit http://www.ftc.gov.