Prominent cancer-related charities have been deceiving their donors about where their money is going, according to a new complaint submitted by the Federal Trade Commission (FTC) this week. Between 2008 and 2012, the Cancer Fund of America, along with other prominent charities, allegedly misspent nearly $200 million in donations they said would fund hospice care, transportation of cancer patients to and from chemotherapy sessions, and pain medication for children.
The FTC says that heads of the Knoxville, TN-based charity instead used the donation money to purchase meals at Hooters, lingerie at Victoria’s Secret, jet ski joy rides, car washes, and couple’s cruises to the Caribbean. The charging documents also outlined trips to amusement parks and payments of family members’ college tuition.
The lawsuit goes on to allege that the Cancer Fund of America carried out the scheme in conjunction with Cancer Support Services, Children’s Cancer Fund of America, and the Breast Cancer Society. Officials said once the quartet raised funds, they spent a significant amount of donations on subsequent fundraising efforts before doling out large salaries and generous bonuses to employees and family members. They concealed their wrongdoing by falsifying financial documents, reporting inflated revenues, overvaluing gift donations.
“Some charities use donations to send children with cancer to Disney World,” Mark Hammond, secretary of state for South Carolina told the New York Times. His office joined the investigation of the groups in 2012. “In this case, the Children’s Cancer Fund of America used donations to send themselves to Disney World.”
For some of the nonprofits involved, this investigation is a sequel to previous inquiries. The Tampa Bay Times and Center for Investigative Reporting placed the Cancer Fund of America second on its list of America’s worst charities, with rankings compiled the ranking based on cash paid to organizations within a 10-year timespan. Additionally, rating site Charity Navigator gave two of the organizations a low rating during the 2013 fiscal year. Three of the four charities also made the South Carolina Secretary of State’s “Scrooge List”, which shows organizations that spend little of its fundraising dollars on charitable programs.
Charity scams don’t always reach the magnitude of the case out of Knoxville. There isn’t much data about the number of people who fall victim to these deceptive practices, but the Better Business Bureau and FBI reportedly received 343,000 complaints about potential charity scams in 2013–5,000 of which they forwarded to law enforcement or prosecutors.
The FTC stresses that illegitimate organizations have a tendency to tug at heart strings with causes that may highly resonate with certain groups. Telemarketers often woo callers before raking in money, little of which directly goes to help troubled groups. Scam artists may fool donors by taking on the altered name of a reputable charitable organization. In the case of the Cancer Fund of America, finding a client base wasn’t too difficult, considering that victims likely counted among or know at least one of more than 13 million people currently dealing with a form of cancer in the United States.
Natural disasters have also proven as ideal opportunities for shady charities to deceive well-meaning donors. Prominent schemes include the 15 fake web Red Cross donation sites that popped up in 2005 at the height of the Hurricane Katrina relief efforts. Haiti earthquake charity scams also caught the FBI’s attention, with more than 170 complaints funneling in to the federal agency weeks after the 2010 catastrophe. Recently, the FBI issued a warning about scammers that would capitalize on the Nepal earthquake, using the 419 scam to trick people into divulging their personal information. Some attempted to do so through emails asking potential victims to enter their personal information to receive money via Western Union.
“Once the information is given, the next steps of collecting the relief fund are then sent. The potential victim is instructed to send a wire transfer fee via Western Union to receive the funds that have been promised to them. Sadly, this isn’t the case and victims are left with their money and sensitive data in the hands of scammers,” Luis Chapetti of Barracuda Labs, a group focusing on reducing cybersecurity crime, wrote in a blog post analyzing the attacks.
Even when leaders have set out to effect change, the potential for misuse of funds exists — particularly in the form of pouring money into administrative costs and advertising. For example, Yele, a charity ran by Haitian rapper Wyclef Jean, came under fire in 2012 for its misuse of donation dollars. Only $9 million of the $16 million raised actually funded relief projects in the aftermath of the Haiti earthquake. The rest went toward public relations campaigns and lavish flights to charity events for Lindsay Lohan, Matt Damon, and other celebrities.
Members of the FTC implore consumers to thoroughly research charities before donating to their causes and pay attention for signs of deception. An organization may be trying to scam donors if it doesn’t give detailed information about its identity, mission, costs, and how donation dollars will be used. Other red flags include a refusal to prove that contributions are tax deductible, the use of high pressure tactics, and the offering of sweepstakes winnings in exchange for a contribution — a practice that’s outlawed. The aforementioned Charity Navigator also serves as a resource in deciphering which organizations spend donations effectively.
In short, being precautious and vigilant may do more for donors than waiting on law enforcement and regulatory offices to investigate the matters. For federal investigators, the years-long process of getting all states on board proved essential before moving in on the Children’s Cancer Fund of America. With that support, the conspirators couldn’t open up shop across state lines and had little choice but to settle before the FTC filed the complaint.
However, making sure the nearly $200 million in donations make it into the hands of those who need it most will be another undertaking in itself, even with settlements going to legitimate organizations. The defendants’ bank accounts have insufficient funds.