After taking part in the largest joint enforcement action in federal history, Attorney General Cynthia Coffman is suggested changes that will strengthen state laws against charities who commit fraud.
Part of an action by the The Federal Trade Commission and charity regulators from all 50 states, the collective group obtained an injunction that dissolves two nationwide fake cancer charities and bans their president from all future nonprofit work, according to the Colorado attorney general’s office.
Cancer Fund of America Inc and Cancer Support Services are accused of fraudulently raising more than $187 million with only 3-cents of every dollar going to cancer patients and survivors. James Reynolds led the two groups, along with two more charities that are in receivership and will be shut down when assets are liquidated.
“This is about as bad as it gets,” said Colorado Attorney General Cynthia H. Coffman. “This extended family of crooks promised to help those struggling to overcome a catastrophic illness — but instead pocketed six figure salaries. Though we will probably never recover the millions in stolen donations or in levied fines, we have been successful in shutting them down and preventing their theft of any more money from generous Coloradans.”
Reynolds and his family solicited donations by promising contributions would pay for expensive cancer treatments, hospice care and other services, the new release said. Instead, the family allegedly used the money for luxury cars, boats, plane tickets, cruises and a family trip to Disneyland. The states also accused Reynolds of faulty record-keeping, making fake donations and publishing false statements.
It’s the first time the federal government and all 50 states have mounted a nationwide action against a fraudulent charity. The complaint, filed in May 2015, targeted four charities run by Reynolds and his family members that bilked more than $187 million from donors. CFA and CSS were responsible for more than $75 million of that amount.
The settlement order imposes a judgment on CFA, CSS and Reynolds for $75.8 million. CFA and CSS will be shut down and their assets liquidated. Reynolds is permanently banned from charity fundraising and nonprofit work and from serving as a charity’s director or trustee or otherwise managing charitable assets.
Other defendants in this case were: CFA’s and CSS’s chief financial officer and CSS’s former president, Kyle Effler; Children’s Cancer Fund of America Inc. and its president and executive director, Rose Perkins; and The Breast Cancer Society Inc. and its executive director and former president, James Reynolds II. Under settlement orders, Effler, Perkins and Reynolds II are banned from fundraising, charity management and oversight of charitable assets. CCFOA and BCS are in receivership and will be dissolved after their assets are liquidated.
“Coloradans have big hearts and open up their wallets to help others in need,” Coffman said. “It is extremely important that their generosity not be taken advantage of by con artists posing as charities. 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.”
If signed into law, HB 1129 would strengthen the ability of the attorney general’s office to bring enforcement actions against charities and third-party-paid solicitors who commit fraud through the following:
- Creating enhanced penalties for charitable fraud,
- Holding charities accountable when they knew or should have known that their paid solicitors were committing fraud, and
- Clarifying it is charitable fraud to intentionally misrepresent or mislead with regard to a membership-based nonprofit, like law enforcement associations, in the course of soliciting charitable donations.