The settlements with the Children’s Cancer Fund of America, the Breast Cancer Society and the three executives will result in combined payments of approximately $914,000. It also permanently prevents the executives — Rose Perkins, Kyle Effler and Jim Reynolds II — from managing charitable assets in the future.
“Everyone has been affected by cancer in one way or another,” Attorney General Kane said. “That is what makes this so unfathomable. To take not only from hard-working Americans but sick women and children as well, that is something I will not stand for.”
The charities are part of a consortium that regulators called the Cancer Fund Group. They solicited millions to aid cancer victims, but less than five percent of donations went to aid those with cancer. The bulk of the donations were used for administrative and fundraising costs.
Investigators also allege those involved in these charities compensated and lent money to themselves, thereby using the donation money for vacations, cars, college tuition, gym memberships, jet ski outings, dating website subscriptions, luxury cruises and tickets to concerts and sporting events.
To hide their high administrative and fundraising costs from donors, the corporate defendants used an accounting scheme in which they inflated the value of donated materials that they shipped as gifts-in-kind to organizations in developing countries.
They also mailed care packages to cancer patients that were not beneficial. Those packages included instant breakfast drinks with low nutritional value, sundries and other low cost items.
The settlements will require payments of $389,500 from the insurers of the two charities and any proceeds from their liquidations. The settlements also call for a $75,000 payment from Reynolds and $60,000 from Effler.
The settlements followed a joint legal action filed by Pennsylvania, all 49 other states and the District of Columbia and the Federal Trade Commission and are subject to court approval. Non-settling defendants remain and have been sued in Federal District Court for the District of Arizona. They are Cancer Fund of America, Inc., Cancer Support Services, Inc., and James Reynolds, Sr.
A portion of any money collected through settlements or after trial will be granted to charities that have a proven track record of providing assistance to cancer patients. A portion will also be used to cover costs incurred by the investigating states.