Vermont joins FTC, states in charging four sham cancer charities with bilking $187 million from consumers

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Vermont joins FTC, states in charging four sham cancer charities with bilking $187 million from consumers

Tue, 05/19/2015 - 3:21pm -- tim

Attorney General Bill Sorrell, together with state law enforcement partners in every other state in the nation, the District of Columbia, and the Federal Trade Commission, has joined in filing a federal lawsuit in Arizona against four sham cancer charities and their operators, who allegedly scammed more than $187 million from consumers throughout the country. 

Monetary Judgments

While all the cases are not closed, those that have settled will ultimately pay only a fraction of the actual money raised (but not absolving them of it), but the plaintiffs will also get whatever the liquidation of assets returns.

SEE SETTLEMENT

In part, the 291-page settlement reads:

VI. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against BCS as follows: A. Judgment in the amount of sixty-five million five hundred sixty-four thousand three hundred sixty dollars ($65,564,360) is entered in favor of Plaintiffs against BCS, as equitable monetary relief. B. In partial satisfaction of this judgment, the BCS Receiver shall take the necessary steps to wind down the affairs of BCS and liquidate and distribute its assets in the manner set forth in the BCS Receivership Order, and deposit all remaining net assets to the short term court ordered trust fund (hereinafter “STCO Fund”) described in Section VII.D, below. Case 2:15-cv-00884-NVW Document 1 Filed 05/19/15 Page 9 of 64 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST BCS Page 10 of 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. Payments made by the BCS Receiver to the STCO Fund and to any approved qualified charity as authorized by the BCS Receivership Order shall be credited towards satisfaction of the judgment entered against it. VII. ADDITIONAL MONETARY PROVISIONS IT IS FURTHER ORDERED that: A. BCS relinquishes dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and the BCS Receivership Order, and may not seek the return of any assets. B. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the Plaintiffs, including in a proceeding to enforce their rights to any payment or monetary judgment pursuant to this Order, such as a nondischargeability complaint in any bankruptcy case. C. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Plaintiffs pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes. D. Payment to the Plaintiff States: 1. All money paid to the Plaintiff States pursuant to this Order shall be made by wire transfer to the Litigation Deposits Trust Fund (Fund Code “T-xx-909N”), an interest bearing trust fund held by the Hawaii Attorney General’s Office in trust for the Plaintiff States (“the short-term court ordered trust fund” or “STCO Fund”). 2. The STCO Fund shall be used to pay: (a) pursuant to cy pres, qualifying charitable organizations with charitable purposes substantially similar to the purposes for which BCS solicited funds, and (b) the Plaintiff States to reimburse costs of the investigation and to pay attorneys’ fees. When payment(s) from the STCO Fund are appropriate, the Plaintiff States shall submit to this Court a Motion and Proposed Order Case 2:15-cv-00884-NVW Document 1 Filed 05/19/15 Page 10 of 64 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST BCS Page 11 of 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 recommending cy pres recipients and the amounts to be paid to such recipients and/or the amounts to be paid to reimburse the Plaintiff States for their costs and attorneys’ fees. The Hawaii Attorney General shall distribute monies from the STCO Fund only as authorized and directed by this Court. BCS has no right to challenge any recommendations regarding monetary distributions made by the Plaintiff States. 

VII. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against Defendants as follows: A. Judgment in the amount of thirty million, seventy-nine thousand, eight hundred twenty-one dollars ($30,079,821) is entered in favor of Plaintiffs against CCFOA and Perkins, jointly and severally, as equitable monetary relief; B. Payments by CCFOA: 1. In partial satisfaction of this judgment, the CCFOA Receiver shall take the necessary steps to wind down the affairs of CCFOA and liquidate its assets in the manner set forth in the CCFOA Receivership Order, and deposit all net assets to the short term court ordered trust fund (hereinafter “STCO Fund”) described in Section VIII.E, below; 2. Payments made by the CCFOA Receiver to the STCO Fund on behalf of CCFOA shall be credited toward satisfaction of the judgment against CCFOA; C. Payments by Perkins: Case 2:15-cv-00884-NVW Document 3 Filed 05/19/15 Page 10 of 71 STIPULATION RE PERMANENT INJUNCTION AS TO CCFOA AND PERKINS Page 11 of 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1. The judgment shall be suspended as to Perkins, subject to Subsections VII.C.2 - 3, below. Plaintiffs’ agreement to the suspension of the judgment owed by Perkins is expressly premised upon the truthfulness, accuracy, and completeness of Perkins’ sworn financial statements and related documents submitted to Plaintiffs, namely, the Financial Statement of Individual, signed on March 16, 2015, including attachments; 2. The suspension of the judgment will be lifted as to Perkins if, upon motion by any Plaintiff, the Court finds that Perkins failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the representations made in her Financial Statement, identified above. If the suspension of the judgment is lifted pursuant to this provision, the judgment becomes immediately due in the amount specified in Subsection VII.A above as to Perkins (which the Parties stipulate for purposes only of this Section represents the consumer injury alleged in the Complaint for which Perkins is jointly and severally liable with CCFOA), less any payment previously made pursuant to this Section, plus interest computed from the date of entry of this Order. 3. The suspension of the judgment will be lifted as to Perkins if, upon motion by any Plaintiff State, the Court finds that Perkins has violated any provision of Section II, above, and a judgment in the amount set forth in Subsection VII.A above, less any prior payments by Perkins or CCFOA, becomes immediately due as to Perkins. The judgment amount shall be payable to the moving Plaintiff State, which shall use any money collected pursuant to the requirements of Section VIII.E.2, below.

VI. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against Effler as follows: A. Judgment in the amount of forty-one million one hundred fifty-two thousand two hundred thirty-one dollars ($41,152,231) is entered in favor of Plaintiffs against Effler, as equitable monetary relief; B. Effler shall pay sixty thousand dollars ($60,000) to the STCO Fund described in Section VII.E, below within seven (7) days of entry of the Order. Upon such Case 2:15-cv-00884-NVW Document 6 Filed 05/19/15 Page 9 of 69 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST EFFLER Page 10 of 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 payment, the remainder of the judgment shall be suspended as to Effler, subject to Section VI.C-E, below; C. Plaintiffs’ agreement to the suspension of the judgment owed by Effler is expressly premised upon the truthfulness, accuracy, and completeness of Effler’s sworn financial statements and related documents (collectively, “financial representations”) submitted to Plaintiffs, namely: 1. the Financial Statement of Individual, signed on December 4, 2014, including attachments; and 2. Effler’s representations, made through his counsel, in correspondence dated January 20, 2015; January 27, 2015; January 30, 2015; and February 24, 2015; D. The suspension of the judgment will be lifted as to Effler if, upon motion by any Plaintiff, the Court finds that Effler failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the financial representations submitted to Plaintiffs, identified above. If the suspension of the judgment is lifted pursuant to this provision, the judgment becomes immediately due in the amount specified in Section VI.A above as to Effler (which the Parties stipulate for purposes only of this Section represents the consumer injury that the Complaint alleges was caused by Cancer Support Services, Inc., and for which the Complaint alleges Effler, Cancer Fund of America, Inc., Cancer Support Services, Inc., and James Reynolds, Sr. are jointly and severally liable), less any payment previously made by Defendant Effler pursuant to this Section, or by Defendants Cancer Fund of America, Inc., Cancer Support Services, Inc., or James Reynolds, Sr., pursuant to any other order entered in connection with this matter, plus interest computed from the date of entry of this Order; and E. The suspension of the judgment will be lifted as to Effler if, upon motion by any Plaintiff State, the Court finds that Effler has violated any provision of Section I, above, and a judgment in the amount set forth in Section VI.A above, less any prior Case 2:15-cv-00884-NVW Document 6 Filed 05/19/15 Page 10 of 69 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST EFFLER Page 11 of 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 payments by Defendants Effler, Cancer Fund of America, Inc., Cancer Support Services, Inc., or James Reynolds, Sr., becomes immediately due as to Effler. The judgment amount shall be payable to the moving Plaintiff State, which shall use any money collected pursuant to the requirements of Section VII.E.2, below.

VI. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against Effler as follows: A. Judgment in the amount of forty-one million one hundred fifty-two thousand two hundred thirty-one dollars ($41,152,231) is entered in favor of Plaintiffs against Effler, as equitable monetary relief; B. Effler shall pay sixty thousand dollars ($60,000) to the STCO Fund described in Section VII.E, below within seven (7) days of entry of the Order. Upon such Case 2:15-cv-00884-NVW Document 6 Filed 05/19/15 Page 9 of 69 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST EFFLER Page 10 of 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 payment, the remainder of the judgment shall be suspended as to Effler, subject to Section VI.C-E, below; C. Plaintiffs’ agreement to the suspension of the judgment owed by Effler is expressly premised upon the truthfulness, accuracy, and completeness of Effler’s sworn financial statements and related documents (collectively, “financial representations”) submitted to Plaintiffs, namely: 1. the Financial Statement of Individual, signed on December 4, 2014, including attachments; and 2. Effler’s representations, made through his counsel, in correspondence dated January 20, 2015; January 27, 2015; January 30, 2015; and February 24, 2015; D. The suspension of the judgment will be lifted as to Effler if, upon motion by any Plaintiff, the Court finds that Effler failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the financial representations submitted to Plaintiffs, identified above. If the suspension of the judgment is lifted pursuant to this provision, the judgment becomes immediately due in the amount specified in Section VI.A above as to Effler (which the Parties stipulate for purposes only of this Section represents the consumer injury that the Complaint alleges was caused by Cancer Support Services, Inc., and for which the Complaint alleges Effler, Cancer Fund of America, Inc., Cancer Support Services, Inc., and James Reynolds, Sr. are jointly and severally liable), less any payment previously made by Defendant Effler pursuant to this Section, or by Defendants Cancer Fund of America, Inc., Cancer Support Services, Inc., or James Reynolds, Sr., pursuant to any other order entered in connection with this matter, plus interest computed from the date of entry of this Order; and E. The suspension of the judgment will be lifted as to Effler if, upon motion by any Plaintiff State, the Court finds that Effler has violated any provision of Section I, above, and a judgment in the amount set forth in Section VI.A above, less any prior Case 2:15-cv-00884-NVW Document 6 Filed 05/19/15 Page 10 of 69 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST EFFLER Page 11 of 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 payments by Defendants Effler, Cancer Fund of America, Inc., Cancer Support Services, Inc., or James Reynolds, Sr., becomes immediately due as to Effler. The judgment amount shall be payable to the moving Plaintiff State, which shall use any money collected pursuant to the requirements of Section VII.E.2, below.

VI. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against Reynolds, II as follows: A. Judgment in the amount of sixty-five million, five hundred sixty-four thousand, three hundred sixty dollars ($65,564,360) is entered in favor of Plaintiffs against Reynolds, II, as equitable monetary relief; B. Reynolds, II shall pay seventy-five thousand dollars ($75,000) to the STCO Fund described in Section VII.E, below, within seven (7) days of entry of the Order. Upon such payment, the remainder of the judgment shall be suspended as to Reynolds, II, subject to Section VI.C-E, below; C. Plaintiffs’ agreement to the suspension of the judgment owed by Reynolds, II is expressly premised upon the truthfulness, accuracy, and completeness of Reynolds, II’s sworn financial statements and related documents (collectively, “financial representations”) submitted to Plaintiffs, namely: 1. the Financial Statement of Individual, signed on April 15, 2015, including attachments; and 2. Reynolds, II’s representations, made through his counsel, in correspondence dated March 16, 2015, March 19, 2015, March 25, 2015, and April 16, 2015; D. The suspension of the judgment will be lifted as to Reynolds, II if, upon motion by any Plaintiff, the Court finds that Reynolds, II failed to disclose any material asset, materially misstated the value of any asset, or made any other material Case 2:15-cv-00884-NVW Document 5 Filed 05/19/15 Page 10 of 70 STIPULATION RE ORDER FOR PERMANENT INJUNCTION AGAINST REYNOLDS, II Page 11 of 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 misstatement or omission in his financial representations, identified above. If the suspension of the judgment is lifted pursuant to this provision, the judgment becomes immediately due in the amount specified in Section VI.A, above, as to Reynolds, II (which the Parties stipulate for purposes only of this Section represents the consumer injury alleged in the Complaint for which Reynolds, II is liable), less any payment previously made by Reynolds, II pursuant to this Section, or by Defendant The Breast Cancer Society, Inc. pursuant to any other order entered in connection with this matter, plus interest computed from the date of entry of this Order; and E. The suspension of the judgment will be lifted as to Reynolds, II if, upon motion by any Plaintiff State, the Court finds that Reynolds, II has violated any provision of Section I, above, and a judgment in the amount set forth in Section VI.A, above, less any prior payments by Defendant Reynolds, II or The Breast Cancer Society, Inc., becomes immediately due as to Reynolds, II. The judgment amount shall be payable to the moving Plaintiff State, which shall use any money collected pursuant to the requirements of Section VII.E.2, below. 

VI. MONETARY JUDGMENT IT IS FURTHER ORDERED that judgment is hereby entered against Reynolds, II as follows: A. Judgment in the amount of sixty-five million, five hundred sixty-four thousand, three hundred sixty dollars ($65,564,360) is entered in favor of Plaintiffs against Reynolds, II, as equitable monetary relief; B. Reynolds, II shall pay seventy-five thousand dollars ($75,000) to the STCO Fund described in Section VII.E, below, within seven (7) days of entry of the Order. Upon such payment, the remainder of the judgment shall be suspended as to Reynolds, II, subject to Section VI.C-E, below; C. Plaintiffs’ agreement to the suspension of the judgment owed by Reynolds, II is expressly premised upon the truthfulness, accuracy, and completeness of Reynolds, II’s sworn financial statements and related documents (collectively, “financial representations”) submitted to Plaintiffs, namely: 1. the Financial Statement of Individual, signed on April 15, 2015, including attachments; and 2. Reynolds, II’s representations, made through his counsel, in correspondence dated March 16, 2015, March 19, 2015, March 25, 2015, and April 16, 2015; D. The suspension of the judgment will be lifted as to Reynolds, II if, upon motion by any Plaintiff, the Court finds that Reynolds, II failed to disclose any material asset, materially misstated the value of any asset, or made any other material Case 2:15-cv-00884-NVW Document 5-1 Filed 05/19/15 Page 10 of 17 STIPULATED ORDER FOR PERMANENT INJUNCTION AGAINST REYNOLDS, II Page 11 of 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 misstatement or omission in his financial representations, identified above. If the suspension of the judgment is lifted pursuant to this provision, the judgment becomes immediately due in the amount specified in Section VI.A, above, as to Reynolds, II (which the Parties stipulate for purposes only of this Section represents the consumer injury alleged in the Complaint for which Reynolds, II is liable), less any payment previously made by Reynolds, II pursuant to this Section, or by Defendant The Breast Cancer Society, Inc. pursuant to any other order entered in connection with this matter, plus interest computed from the date of entry of this Order; and E. The suspension of the judgment will be lifted as to Reynolds, II if, upon motion by any Plaintiff State, the Court finds that Reynolds, II has violated any provision of Section I, above, and a judgment in the amount set forth in Section VI.A, above, less any prior payments by Defendant Reynolds, II or The Breast Cancer Society, Inc., becomes immediately due as to Reynolds, II. The judgment amount shall be payable to the moving Plaintiff State, which shall use any money collected pursuant to the requirements of Section VII.E.2, below.

The joint complaint alleges that the defendants—including Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services and the Breast Cancer Society—portrayed themselves to donors as legitimate charities with substantial nationwide programs whose primary purposes were to provide direct support to cancer patients, children with cancer, and breast cancer patients in the United States.

In fact, the complaint alleges, the overwhelming majority of consumers’ contributions benefitted only the perpetrators, their families and friends, and professional fundraisers, who often received 85% or more of every donation. Consumers’ donations were wasted and misused, cancer victims were not helped, and the representations that defendants were legitimate charities were false.

The complaint also alleges that Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America, and the Breast Cancer Society were sham 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 individual defendants allegedly hired family members and friends, whether qualified or not, and used the organizations to provide them with steady, lucrative employment. The sham charities spent more money on salaries than on the goods and services they provided to cancer patients.

In settlements filed concurrently with the complaint, five named defendants agreed to leave the charity business and to stop fundraising. Under the settlements, two of the sham charities, Children’s Cancer Fund of America and the Breast Cancer Society, will be closed and liquidated. Likewise, defendants Rose Perkins, James Reynolds, II, and Kyle Effler – former directors and executives in the sham charities – will be banned from fundraising, from managing a charity, and from oversight of charitable assets, and will have substantial judgments against them, measuring in the tens of millions of dollars.

The settlement agreements will not be final until approved by the Court. Litigation will proceed against Cancer Fund of America, Cancer Support Services, and James Reynolds, Sr.

Vermont AG: May 19, 2015