State Attorney General cracks down on cancer charity scams

From a State Attorney General’s Office media release:

Attorney General Bob Ferguson on Tuesday joined with the U.S. Federal Trade Commission, and attorneys general of all 49 states and the District of Columbia in a complaint charging four sham cancer charities and their operators with bilking consumers out of some $187 million.

Of that, only $5 million, or 2.7 percent, was used for charitable purposes, according to a State Attorney General’s Office media release. From 2008-2012, the defendants told donors their money would help cancer patients — including children, and women suffering from breast cancer — but the overwhelming majority of donations benefitted only the perpetrators, their families and friends and fundraisers.

It is estimated that tens of thousands of Washingtonians donated approximately $2 million to the sham charities: Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services and the Breast Cancer Society.

“Making money off of cancer patients is charity fraud of the worst kind,” said Ferguson. “I will not tolerate scammers taking advantage of the good intentions of donors, and my office will hold them accountable.”

According to the complaint, the defendants used telemarketing calls, direct mail, websites and materials distributed by the Combined Federal Campaign — which raises money from federal employees for non-profit organizations — to portray themselves as legitimate charities with substantial programs that provided direct support to cancer patients in the United States, such as providing patients with pain medication, transportation to chemotherapy and hospice care.

The complaint alleges that these claims were deceptive and that the charities, “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation, with none of the financial and governance controls that any bona fide charity would have adopted.”

The complaint also alleges that the defendants used the charities for lucrative employment for family members and friends, and spent consumer donations on cars, trips, luxury cruises, college tuition, gym memberships, jet-ski outings, sporting event and concert tickets and dating site memberships. They also hired professional fundraisers who often received 85 percent or more of every donation.

The complaint further alleges that, to hide their high administrative and fundraising costs from donors and regulators, the defendants falsely inflated their revenues by reporting over $223 million in donated “gifts in kind,” which they claimed to distribute to international recipients. In fact, the defendants were merely pass-through agents for such goods. By reporting the inflated “gift in kind” donations, the defendants created the illusion that they were larger and more efficient with donors’ dollars than they actually were.

In addition the Cancer Fund, Children’s Cancer Fund, and the Breast Cancer Society were charged with providing professional fundraisers with deceptive fundraising materials and with violating the FTC’s Telemarketing Sales Rule.

Children’s Cancer Fund and the Breast Cancer Society have agreed to resolve the charges against them. Under the proposed agreement, these entities will be banned from fundraising, charity management, and oversight of charitable assets and the charities will be dissolved, with remaining funds going to legitimate cancer charities and to regulators for their costs in pursuing these schemes.

Litigation will continue against Cancer Fund of America and Cancer Support Services.

Tips for giving wisely to charities

If you decide to donate to a charity, research to make sure they are legitimate.

• Ask if the requester is a professional or paid solicitor.

• If the requester is a professional or paid solicitor, ask what percentage of your donation will actually go to the charitable organization, and how much the solicitor being paid.

• Don’t give in to high-pressure solicitations that demand an instant commitment.

• Check to see if the charity you are considering giving to is registered with the Washington Secretary of State at www.sos.wa.gov.

More information about charity laws in Washington state can be found on the AGO website at www.atg.wa.gov/charities.

File a complaint against a charity or fundraiser with the AGO by visiting www.atg.wa.gov and click the “Consumer Complaint” button, or call 1-800-551-4636 between 10 a.m. and 3 p.m., Monday through Friday.