Hawaii joined 49 other states, the District of Columbia and the Federal Trade Commission in a federal lawsuit against a mainland family who misused much of the $187 million they collected in donations through their four cancer charities, according to the state Attorney General’s Office.
The lawsuit was filed "against four bogus charities pretending to raise money for cancer awareness," said state Attorney General Doug Chin at a news conference announcing the lawsuit on Tuesday. "These organizations masqueraded as cancer-related charities and deceived donors to cancer victims out of almost $187 million between 2008 and 2012."
He said any money the state recovers will be donated to bona fide charities that assist cancer patients.
Hugh Jones, supervising deputy attorney general of the Tax and Charities Division, said James Reynolds Sr. and his son James Reynolds II raised the money through their charities: Cancer Fund of America, Cancer Support Services, Children’s Cancer Fund of America, and the Breast Cancer Society.
The younger Reynolds agreed to a settlement, along with the Children’s Cancer Fund of America and the Breast Cancer Society, he said. Reynolds will be banned from fundraising.
The lawsuit, which was filed Monday in federal District Court in Arizona, will continue against the elder Reynolds, Cancer Fund of America, and Cancer Support Services.
Jones said charity executives used the donated money for lavish salaries for themselves and family members, cars, luxury cruises, college tuition, gym memberships, jet ski outings, tickets to sporting events, dating websites and cell phone apps.
About 85 percent of the donations received went to a telemarketing company, and only 3 percent went to charities.
The charities also claimed on federal tax forms to have received and donated $233 million in gifts-in-kind donations to create the illusion that they were operating efficiently and to cover up high fundraising costs and low program services, Jones said.
Jones said two charities — Breast Cancer Society and Cancer Support Services — have been registered with the state Attorney General’s Office for years and were actively soliciting in Hawaii. But the dollar loss for Hawaii residents was not immediately known.
Authorities said these types of scams lead to a drop in consumer confidence in charities.
Gregory Dunn, president and chief executive officer of Hawaii’s Better Business Bureau, said it was heartbreaking to learn that Hawaii donors were "bilked out of their hard-earned dollars by a couple bad actors who are giving the charity sector a very bad name."
Dunn said the BBB, which accredits charities, had an alert on its website about the charities before the lawsuit and that there were concerns about the charities were touched off when the nonprofits refused to provide financial information to the BBB.
Another red flag was high-pressure sales tactics by telemarketers, authorities said, such as asking for payment without providing an in-depth explanation of how the money would be used.
Dunn said people should look at different sources of information about charities before donating, such as give.org and bbb.org/hawaii. If there are still questions, call the BBB.
Stephen Levins, the executive director of the state Office of Consumer Protection, said the settlement stops fraudsters who were preying on the vulnerabilities of people with friends or family members affected by cancer.
He said the lawsuit also "puts people on notice."
"If someone is really being persistent and nagging you … the best thing to do is wait, do a little research and don’t give up your hard-earned money to some scammer," Levins said.
Levins warned about charities that call out of the blue and about "copycat" charities that may be using names similar to another charities.
Dunn said donors should be skeptical of any nonprofit that spends more than 35 percent of its contributions on fundraising. Financial breakdowns can be found in a charity’s Form 990 on the IRS website.
Jones said the Attorney General’s Office will unveil a fundraiser information page in the next few weeks, allowing people to check a fundraiser and learn more about their clients and how much they will receive from donations.