A Tennessee man and his family used much of the $187 million it collected for cancer patients to buy themselves cars, gym memberships and take luxury cruise vacations, pay for college tuition and employ family members with six-figure salaries, federal officials alleged Tuesday in one of the largest charity fraud cases ever, involving all 50 states.
The joint action by the Federal Trade Commission and the states contends James T. Reynolds Sr., his ex-wife and son raised the money through their various family-run charities: The Cancer Fund of America in Knoxville, Tenn., and its affiliated Cancer Support Services; The Breast Cancer Society in Mesa, Ariz.; and the Children’s Cancer Fund of America in Powell, Tenn.
The charities billed themselves as offering financial aid and other support to cancer patients, including pain medication and hospice care. But little money made it to cancer patients.
Violation notices and fines were issued in South Carolina to professional fundraisers seeking donations for the charities, the S.C. Secretary of State’s office said after the announcement. But that office did not respond to The State newspaper’s request for details such as the amount of the fines and other disciplinary actions. A spokeswoman said, however, that Cancer Support Services had twice been on the agency’s annual Scrooge list, followed by one appearance each by Cancer Fund of America and Children’s Cancer Fund in 2000 and 2008, respectively.
The Reynolds groups “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation” with none of the controls used by bona fide charities, the FTC said.
To hide their high administrative costs from donors and regulators, the groups filed public financial documents saying they had taken in more than $223 million “gifts in kind,” which would be distributed to international recipients. 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. According to the FTC, 36 states alleged that the defendants filed “false and misleading” financial statements with state charities.