In a major enforcement action, the Federal Trade Commission and 58 other law enforcement partners—representing every state and the District of Columbia—filed suit against four cancer charities and their operators for allegedly bilking more than $187 million from consumers.
Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America (CCFOA), and The Breast Cancer Society (BCS) promised donors that their donations would help cancer patients. Instead, the “overwhelming majority” of the money went into the pockets of the individuals operating the scam, along with their friends and families, the FTC said.
Using telemarketing calls, direct mail, and Web sites, the defendants portrayed their organizations as legitimate charities providing direct support to cancer patients in the form of pain medication, hospice care, and transportation to chemotherapy. In reality, they “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflict of interest, and excessive insider competition, with none of the financial and governance controls that any bona fide charity would have adopted,” according to the complaint.
The defendants spent donations on cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting event and concert tickets, and even dating site memberships, the FTC said. Professional fundraisers were hired that received up to 85% or more of every donation. The organizations also operated as lucrative employment for family members and friends.
To hide the high fundraising and administrative costs, the FTC alleged that the defendants falsely inflated their revenues by reporting in their publicly filed documents more than $223 million in donated “gifts in kind” they said were distributed to international recipients. But these falsely inflated donations—meant to convince donors and regulators that the operations were larger and more efficient than they really were—resulted in additional charges from 35 states that the defendants filed false and misleading financial statements.
“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 a statement. “The defendants took in millions of dollars in donations meant to help cancer patients, but spent it on themselves and their fundraisers. I’m pleased that the FTC and our state partners are acting to end this appalling scheme.”
The regulators charged the defendants with violating the FTC’s Telemarketing Sales Rule, providing professional fundraisers with deceptive fundraising materials, and making deceptive charitable solicitations.
Under proposed settlement orders, BCS and CCFOA will be dissolved and the related individuals banned from fundraising, charity management, and oversight of charitable assets. Monetary judgments would be suspended pending partial satisfaction via the liquidation of various assets. Litigation continues against the remaining defendants.
To read the complaint and the proposed consent orders in FTC v. Cancer Fund of America, Inc., click here.
Why it matters: The action is the largest brought to date by the Commission to combat charity fraud and the first brought by the FTC in conjunction with all 50 states and the District of Columbia. It sends a clear message from regulators nationwide that charity fraud will be taken seriously.