The 501 S(c)ene

The latest view on not-for-profit accounting issues

Cancer Charity Fraud Part I

Last Saturday while browsing the internet at a coffee shop, I came across any donor’s worst nightmare. According to the Federal Trade Commission (FTC), over the past eight years The Cancer Fund of America, The Cancer Support Services Inc., The Children’s Cancer Fund of America, Inc., and The Breast Cancer Society spent $187 million dollars of donations on cars, luxury cruises, Jet Ski outings, and sports and music events as well as dating site memberships and college tuition for family and friends. The complaint states that the Children’s Cancer Fund funded two all-expense paid trips to Disney World for board members, employees, and their families. The initial complaint was filed with the District Court of Arizona but all 50 states and D.C. joined the FTC in filing the charges, making it one of the largest charity fraud cases to date. All in all, the four charities spent an average of $0.03 on cancer patients for every dollar collected. The charities could face charges of more than $135 million; however, it is unlikely that any of the charities have enough assets to collect this amount.

The fraud appears to be an interfamily affair. James Reynolds Jr. is the Executive Director and Board President of The Breast Cancer Society. His father, James Reynolds Sr. is the CEO and Board President of the Cancer Fund of America and The Cancer Support Services. James Reynolds Sr.’s ex-wife, Rose Perkins, is the Executive Director and Board President of The Children’s Cancer Fund of America, Inc. James Reynolds Jr. and Rose Perkins have since settled the charges against them for $75,000. Both will be banned from fundraising, charity management, and oversight of charitable management for life. Litigation is ongoing for James Reynolds Sr. who has chosen to fight the charges.

It is hard to believe that any individual would be willing to steal $187 million from such an honorable cause like fighting cancer. Many questions ran through my head as I read the article. How did they cover this up? What could the auditor have done differently to discover the fraud? How can donors protect their contributions against fraud? How can charitable organizations prevent this from happening? Stay tuned as I attempt to answer these questions and others in future blog posts.

By David Woods