Two sham charities that nationally raised tens of millions of dollars for cancer victims but instead used much of it to fuel the lifestyles of their founders have settled a lawsuit brought by the Federal Trade Commission and state attorneys general.
The Cancer Fund of America and Cancer Support Services, and founder James Reynolds Sr. and his son James Reynolds II, agreed to pay nearly $76 million and turn their businesses over to court-appointed receivers, according to a joint announcement made early Wednesday by secretaries of state across the country.
The groups were based in Tennessee but raised money across the country.
The money is a small portion of the $187 million the Reynolds and the groups allegedly collected from unsuspecting consumers between 2008 and 2012, according to the lawsuit filed in May 2015 in U.S. District Court in Arizona.
The money was used for a variety of personal expenses including trips to Disneyland, luxury cars, boats and cruises. About three cents of every dollar actually was used to help cancer patients, officials said.
Before the complaint was filed, . The Breast Cancer Society agreed to pay more than $65.5 million and a receiver was appointed to liquidate their assets and remunerate victims.
It’s unclear how much of the $131.5 million in total settlements from the cancer case will end up in Colorado or its residents.
“The mountains of evidence that my staff helped to sift through clearly indicated that these were sham charities characterized by nepotism and the most cynical exploitation of grieving survivors, struggling caregivers and concerned citizens who wanted to make a meaningful contribution to the fight against cancer,” Colorado Secretary of State Wayne Williams said in a statement. “Anyone whose family or friends have been affected by cancer — and sadly that includes most of us — will share my sense of determination to act against these fraudsters who plucked at our heartstrings and took our money but had no purpose in mind for these funds other than self-enrichment.”
Attorney General Cynthia Coffman said she’s pressing for legislative changes in Colorado to ensure violators can more easily be investigated and prosecuted.
“Because of the harm these criminals do to both legitimate charities and to those in need, I am advocating for changes to Colorado’s Charitable Solicitations Act this session,” she said, noting House Bill 1129 would stiffen penalties as well.
The federal lawsuit accused the groups of falsifying financial documents in order to cover up their misdeeds. In several cases the groups allegedly fixed company ledgers by overvaluing donations to cancer patients on items such as plastic cutlery and snack treats.
Although the groups told potential donors that 100 percent of all funds went to help cancer victims, the reality was hardly any of it did, instead showering workers and their friends with enormous salaries and other perks.
The complaint lays out lavishness such as subscriptions to dating websites, purchases at restaurants such as Hooters and lingerie from Victoria’s Secret. There was spending on college tuition for families, a boat, jet-ski rides and personal cruises to island destinations in the Caribbean.
Prosecutors alleged that Reynolds expanded his enterprise from its inception in 1987 to include his son, their friends and members of their Mormon Church congregation in Knoxville, Tenn.
The settlement comes a month after the companies agreed in federal court to a court-appointed receiver.
David Migoya: 303-954-1506, dmigoya@denverpost.com or @davidmigoya
