Two Tennessee-based cancer charities labeled "shams" by the Federal Trade Commission have settled a massive fraud case, along with their president, by agreeing to a $75.8 million judgment and the dissolution of the businesses. But the government may never see much of that money.
The complaint filed last year accused James T. Reynolds Sr. and others of spending donations meant for cancer patients on six-figure salaries and luxury vacations. The FTC said it is the largest joint action ever undertaken by the FTC and state charity regulators.
FTC attorney Tracy Thorleifson said the agency does not yet know how much money the government will recover, but she said it "won't even be close" to the judgment, which reflects the amount of money the public donated to Cancer Fund of America and Cancer Support Services between 2008 and 2012.
According to court documents, Reynolds went on a spending spree after he was first advised of the complaint.
"Not only did he sell his house in the fall of 2014, in the months since he has run up tens of thousands of dollars of credit card debt and spent almost all his available cash. He has been on multiple cruises and traveled nationally and internationally, always paying the way for himself and companions. Cash withdrawals from his checking accounts and credit card purchases since January 2015 have exceeded $101,000, not including payments for rent, utilities, insurance, automobiles, boats, or tithes to religious institutions," court documents state.
The settlement with Reynolds and the two businesses was filed Wednesday in federal court in Arizona and must be signed by the judge before it takes effect.
According to the settlement, Reynolds' remaining assets to be sold include 50 collector beer steins, two 9 mm pistols, 15 framed art prints, five Remington statues and a pontoon boat. After Reynolds complies, the judgment against him will be suspended, provided his sworn financial statements are accurate.
Cancer Fund of America spent less than 3 percent of contributions from individual donors on cash and goods sent to cancer patients and nonprofits in the United States, according to the FTC.
Much of what was sent to patients was virtually worthless. It consisted of boxes of "seemingly random items" that typically included Carnation Instant Breakfast drink, adult briefs and bed pads, sample-sized soaps, Little Debbie snack cakes and blank seasonal greeting cards, according to court documents. The items were mostly purchased from procurement agents, who sell overstocked, out-of-season and discontinued products to nonprofits at a small fraction of their retail value.
Cancer Support Services claimed to provide services to cancer patients, including hospice care, but actually existed solely to raise money for Cancer Fund of America, according to court documents.
Money from the sale of Reynolds' assets and the liquidation of the two businesses will go to pay court costs. Any remaining money will go to pay the attorneys and to support cancer charities providing similar services to those Reynolds' businesses claimed to provide.
As part of the settlement, Reynolds is banned from profiting from any charity fundraising in the future.
Reynolds' attorney did not return a phone call or email seeking comment.
Reynolds' son and ex-wife previously agreed to settlements involving two related charities. The former president of Cancer Support Services also settled earlier.
Together, the four charities raised more than $187 million between 2008 and 2012. Donor contributions financed personal loans; paid for trips to Las Vegas, New York and Disney World; and purchased cars, college tuition, gym memberships, Jet Ski outings, dating website subscriptions and luxury cruises.
