Survey of first day reporting on major FTC enforcement action

Here is a collection of the articles I found the day the FTC and all state Attorneys General took enforcement action against a group of four charities:

Update: A quote in the Chronicle of Philanthropy article provides a massive warning to the nonprofit community:

Hugh Jones, a charity regulator in Hawaii, said to his knowledge “this is the first time state charity regulators have aggressively pursued the deceptive use of gifts in kind.”

While this case looks to be extraordinarily extreme, there are a variety of issues that the FTC and every AG has now declared to be the fraud category. Anyone who has been paying attention knows the issues under discussion are not limited to these four charities. 

It isn’t too late to clean up policies, valuations, and modify some past filings.

Let those with ears to hear, hear.

FTC litigation

FTC press release which lists the names of the charities and key executives:

Named in the federal court complaint are Cancer Fund of America, Inc. (CFA), Cancer Support Services Inc. (CSS), their president, James Reynolds, Sr., and their chief financial officer and CSS’s former president, Kyle Effler; Children’s Cancer Fund of America Inc. (CCFOA) and its president and executive director, Rose Perkins; and The Breast Cancer Society Inc. (BCS) and its executive director and former president, James Reynolds II.

The complaint can be found here. Based on my first glance, GIK issues enter into the case quite heavily. Variance power, valuation, AWP, and daisy chain all look like issues.

I’ll make a wild guess that references to a med that cannot be sold in the US is mebendazole. I noticed a couple of references to paying a handling fee in return for booking the value of the entire shipment.

Please check out pages 58 to 71 to start looking at the GIK issues.

Also, one for-profit player provided most of the GIK.

The notations at the top of the page tell me this is from the PACER system. When I get a chance, I’ll check out the other documents there.

News reports

New York Times – Rebecca R. Ruiz – 4 Cancer Charities are Accused of Fraud – Article summarizes the complaint indicates $187M was raised over the course of four years of which under 90% was spent for telemarketers and employment of key executives and their families.

New to Seattle – William P. Barrett – Fraudulent cancer charities plaguing Seattle get nailed – Mr. Barrett provides a good background on the accounting issues involved, which are focused on valuation of GIK and variance authority, or lack thereof.

He also mentions that the two charities which did not settle, Cancer Fund of America and Cancer Support Services, are in litigation with their insurance carriers over whether the insurers will cover legal costs. Mr. Barrett reports the insurers claim they don’t need to pay out on the D&O and corporate liability policies. The reason is the insurers claim misrepresentation when the policies were underwritten.

Chronicle of philanthropy – Suzanne Perry and Megan O’Neil – 4 Cancer Charities Charged in Fraud CaseUpdate – Article says the investigation by the AGs has been running for about 5 years.

Charity Watch — FTC, D.C. and all 50 States Take Action Against F Rated Cancer Charities

Tampa Bay Times – Susan Taylor Martin – Here’s where Cancer Fund of America donations went wild dying kids got Little Debbie snack cakes

CNN, AC360  – David Fitzpatrick and Drew Griffin – Government says four cancer charities are shams – Text and video report.

Wall Street Journal – Cameron McWhirter – Cancer Charities Called $187 Million ‘Sham’

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