FTC, States Settle Claims Against Sham Charities; Sham Charities to Dissolve, and President Banned From Charitable Activities
Two nationwide organizations purporting to be cancer charities will be dissolved, and their president is banned from profiting from any charity fundraising in the future, under a settlement with the Federal Trade Commission, all 50 states and the District of Columbia.
Cancer Fund of America Inc. (CFA), Cancer Support Services Inc. (CSS) and their leader, James Reynolds, Sr., agreed to settle charges that CFA and CSS claimed to help cancer patients, but instead, spent the overwhelming majority of donations on their operators, families and friends, and fundraisers.
The agencies’ complaint, filed in May 2015, targeted four purported non-profits, which the Commission alleged were sham charities, run by Reynolds and his family members that allegedly bilked more than $187 million from donors. CFA and CSS were responsible for more than $75 million of that amount. The other two alleged sham charities settled in May 2015. The settlement announced today concludes the largest joint enforcement action ever undertaken by the FTC and state charity regulators.
When: Monday, October 17, 2016
Please join state charity regulators and members of the nonprofit community for NASCO’s annual conference. This is unique conference provides attendees with the opportunity to learn about the latest trends in state charity regulation, to hear from distinguished nonprofit leaders and experts, and to participate in discussions to strengthen the charitable sector. Please check the NASCO website regularly for additional information.
Texas Attorney General Files Suit Against Nonprofit Managers Due to $1.4 Million in Charitable Fund Losses
Texas Attorney General Ken Paxton has filed suit against the former directors and officers of a financially distressed nonprofit for allegedly mismanaging donations, failing to sufficiently operate as a charitable entity, and for breaches of fiduciary duties. A copy of the complaint is linked below.
New York Appellate Court Affirms Ruling Against Fraudulent Charities and Their Professional Fundraiser
The New York Supreme Court Appellate Division upheld lower court decisions against fraudulent charities and their professional fundraisers. The Court held that the State of New York may bring fraud actions against charitable fundraisers and that the multimillion dollar damages award against the defendants was proper. Copies of the decisions are posted below.
New York Attorney General Schneiderman Announces $1 Million Settlement with Officials of So-Called Children’s Leukemia Foundation and Their Auditor
Attorney General Eric T. Schneiderman today announced that his office has reached a settlement agreement resolving a lawsuit brought against the Brooklyn-based National Children’s Leukemia Foundation (“NCLF”), its founder and leader Zvi Shor, its president Yehuda Gutwein, the founder’s son, Shlomo Shor, and its auditor, Shlomo Donn. The Attorney General had filed a nine-count petition to shut down NCLF in July 2015 in Kings County Supreme Court.
Through this settlement, NCLF will be permanently closed, its former officers barred from serving as fiduciaries of any New York charity, with nation-wide bans for the founder and his son. The former officers will also be barred from soliciting funds on behalf of any charity. The Attorney General will also recover $380,000 dollars, most of which will be directed to charities helping children with leukemia. Shor, age 64 and a resident of Brooklyn, New York, forfeited claims to an additional $612,844 in back-pay, in addition to a claim to a life-time pension and other benefits. NCLF’s former accountant and auditor must report the identities of any non-profit clients to the Attorney General’s Charities Bureau for the next three years. The settlement is subject to approval by the court.
The Texas Attorney General announced a settlement in an enforcement action against Veterans Support Organization (VSO) and its four principals. Under the agreed final judgment and permanent injunction, the defendants must cease engaging in unlawful charitable contributions in Texas, and must dissolve VSO as a charitable organization in Texas.
The press release and Agreed Final Judgment and Permanent Injunction can be found below: