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Part 3: How one family turned your goodwill into their livelihood

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Cancer Fund of America, second on the Tampa Bay Times/CIR list of worst charities, is located in Knoxville, Tenn. Its founder, James T. Reynolds, and his family have spun off multiple cancer charities, including Cancer Support Services, Children’s Cancer Fund of America, Breast Cancer Society and American Association for Cancer Support.

Credit: Scott Keeler / Tampa Bay Times

Carol Smith still gets angry when she remembers the box that arrived by mail for her dying husband.

Cancer Fund of America sent it when he was diagnosed with lung cancer six years ago. Smith had called the charity for help.

“It was filled with paper plates, cups, napkins and kids’ toys,” the 67-year-old Knoxville, Tenn. resident said. “My husband looked like somebody slapped him in the face.

“I just threw it in the trash.”

Over the past decade, tens of thousands of people have donated nearly $100 million to Cancer Fund of America. In telephone calls and letters, the Tennessee-based charity touts the direct financial aid it gives to people like the Smiths.

But the real beneficiaries are not dying cancer patients and the families who have gone broke trying to save them.

While Cancer Fund provides care packages that contain shampoo and toothbrushes, the people in charge have personally made millions of dollars and used donations as venture capital to build a charity empire. Less than 2 cents of every dollar raised has gone to direct cash aid for patients or families, records show.

For years, Cancer Fund founder James T. Reynolds Sr. and his family have obscured that fact with accounting tricks, deceptive marketing campaigns and lies, the Tampa Bay Times and The Center for Investigative Reporting have found.

Stories about ripping people off in the name of a cause are as old as the concept of charity itself.

But the Reynolds family is something different.

After spending nearly 20 years building Cancer Fund, the family began spinning off new cancer charities, each with a similar mission and a relative or close associate in control.

The family has founded five cancer charities that pay executive salaries to nearly a dozen relatives.

During a yearlong investigation, the Times and CIR identified America’s 50 worst charities based on the money they divert from the needy by paying professional solicitation companies.

At least a dozen of these operators have built networks of multiple charities, some with interlocking boards or family connections.

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Cancer Fund of America President James Reynolds Sr. seen in 2009, examines boxes containing donated products to be distributed to cancer patients across the country.

Credit: Adam Brimer / Knoxville (Tenn.) News Sentinel

They include multimillion-dollar operations in Florida, Louisiana and Pennsylvania.

None is more brazen and incestuous than the Reynolds network.

To track the family connections, the Times and CIR reviewed thousands of pages of financial records and investigative documents from regulators in eight states, interviewed vendors and recipients and traced donations from the phone banks to their ultimate destination.

In the past three years alone, Cancer Fund and its associated charities raised $110 million. The charities paid more than $75 million of that to solicitors. Cancer Fund ranks second on the Times/CIR list of America's worst charities. (Florida’s Kids Wish Network placed first.)

Salaries in 2011 topped $8 million – 13 times more than patients received in cash. Nearly $1 million went to Reynolds family members.

The network’s programs are overstated at best. Some have been fabricated.

“Urgent pain medication” supposedly provided to critically ill cancer patients amounted to nothing more than over-the-counter ibuprofen, regulators determined. A program to drive patients to chemotherapy, touted by the charity in mailings, didn’t exist.

One Reynolds family charity, Breast Cancer Society, told the IRS it shipped $36 million worth of medical supplies overseas in 2011. But the two companies named as suppliers of the donated goods said they have no record of dealing with the group.

Over the past 20 years, Cancer Fund has run afoul of regulators in at least six states, paying $525,000 to settle charges that include lying to donors. It hasn’t slowed the network.

The fines amount to about one-third of 1 percent of the $177 million raised by Cancer Fund of America over the same period.

Since 2002, Cancer Fund has benefitted from a separate charity that claims to help patients but is nothing more than a boiler room operation. Hundreds of callers solicit donations, then send the cash to Cancer Fund to make its fundraising costs look lower.

Over the past several months, the Times and CIR repeatedly asked to interview Reynolds family members. Charity officials turned reporters away at one office in Knoxville. Approached by a reporter, Reynolds’ son drove off in a black pickup truck while flashing an obscene gesture.

Reynolds Sr. spoke briefly and asked that questions be submitted in writing.

“I’ve been in this 42 years, and I’ve learned you don’t do hardly anything with the media unless you run it through the attorneys,” Reynolds Sr. said.

In emails, the charities defended their programs.

Kristina Hixson is the spokeswoman for Breast Cancer Society and is married to its president, James Reynolds Jr.

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James Reynolds Jr. is the head of Breast Cancer Society, and his wife, Kristina Hixon, is its spokeswoman. The organization is part of a network of charities run by the Reynolds family or close associates.

Credit: Breast Cancer Society website screen shot

“We have made a difference in the lives of tens of thousands of men and women,” she said.

Carol Smith was one of those. After her husband’s bout with cancer, she was diagnosed with breast cancer. Smith knew Reynolds’ daughter, who arranged for Smith to receive an unusually large grant – $150 a month for a year – from the Breast Cancer Society.

Smith said she is grateful. But she said it’s wrong for charity operators to profit if the sick and dying get so little in comparison.

“You don’t make six figures a year off somebody’s misery,” Smith said.

Building the prototype

Jim Reynolds Sr. is a former Army medic with no college degree who worked his way up to lead the Knox County, Tenn. chapter of the prestigious American Cancer Society.

In 1984, after eight years with the charity, his boss told him to resign or be fired.

The organization accused Reynolds of sloppy bookkeeping, irregular hours and taking title to a 1968 Mustang meant to be auctioned for the charity.

After resigning, Reynolds started his own charity. He eventually settled on the name Cancer Fund of America, mimicking American Cancer Society. He even rented a mail drop that shared a similar Atlanta address.

Then he sent volunteers door-to-door soliciting donations at about the same time as the American Cancer Society’s neighborhood fund drive.

Officials at American Cancer Society in Tennessee complained to reporters at the time that Reynolds was confusing donors and draining money that might otherwise have gone to their charity.

Reynolds also turned to for-profit solicitation companies to drum up donations.

In its first year, Cancer Fund of America raised $7.7 million. Half went to its hired-gun fundraisers. Less than a dime of every dollar was spent on patient assistance, which took the form of supplies

as well as cash grants.

As Cancer Fund grew, its solicitors continued to tell the public that their donations would be used to provide “direct aid” to cancer victims. But that seldom meant paying patients' medical bills.

Instead, Reynolds persuaded businesses to donate everything from overruns on underwear to surplus screwdrivers. At his warehouse, the goods were repackaged and sent for free to individuals and other nonprofits throughout the eastern United States.

All Reynolds had to do was pay shipping costs – about $600,000 a year – and the rest of the millions raised for Cancer Fund could be spent paying his professional fundraisers and salaries for his extended family.

The IRS no longer requires charities to report salaries of employees who make less than $100,000 a year. But records from 2007, before the change, show a son, stepson, sister-in-law and son-in-law each made more than $75,000.

At the time, Cancer Fund also was making payments on six new cars, all Kias, for employees. The total cost for the cars peaked in 2007 at $40,000.

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James T. Reynolds Sr. the president and CEO of Knoxville, Tenn.-based charity Cancer Fund of America, owns a $500,000 home on Cherokee Lake, east of the city.

Credit: Scott Keeler / Tampa Bay Times

Today, at age 70, Reynolds pays himself $237,000 a year and still has at least three family members on Cancer Fund’s staff. He owns a half-million-dollar home on Cherokee Lake, about an hour outside Knoxville.

Cancer Fund’s tally over the past decade: family members $5 million; cancer patients $890,000.

The biggest winners were the fundraising companies. They earned more than 80 cents of every dollar donated for a total of $80.4 million.

A family affair

Reynolds’ original formula was so successful that family members began to replicate it.

Today there’s Cancer Support Services, Children’s Cancer Fund of America, Breast Cancer Society and American Association for Cancer Support, each run by a family member or close business associate.

The Reynolds charities also swap board members, with directors playing musical chairs on the various boards, sometimes serving on two at once. In several cases, an officer at one charity has a spouse on the board of another.

Reynolds’ estranged wife, Rose Perkins, makes $227,000 as head of Children’s Cancer Fund of America, about 15 minutes from Cancer Fund in the Knoxville suburb of Powell. She has hired a son-in-law to do her charity’s computer work.

Reynolds’ son James, head of Breast Cancer Society, earned six-figure salaries from two family charities in 2008. According to IRS filings, Reynolds Jr. worked 45 hours a week for his father’s charity in Tennessee while simultaneously putting in a 40-hour week at the breast cancer group in Arizona. He took home a combined $262,000 that year. In 2011, his total compensation was nearly $300,000.

Reynolds Sr. says he has no control over his relatives’ charity operations.

“Everyone thinks it’s Jim Reynolds’ mini-empire,” he said. “I have nothing to do with these other organizations.”

But over the years, Cancer Fund has helped the new ventures with startup capital. Instead of giving grants to existing organizations, Reynolds family members started their own charities and Cancer Fund gave them money.

Three of the spin-offs were launched with nearly $700,000 from Cancer Fund, according to IRS tax filings.

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Jula Connatser, left, president of the American Association for Cancer Support in Knoxville, Tenn. talks with Tampa Bay Times reporter Kris Hundley. Connatser previously worked at the Cancer Fund of America and is related to its founder through marriage.

Credit: Scott Keeler / Tampa Bay Times

Reynolds Sr.’s charity also paid the breast cancer group $100,000 in 2008 to do telemarketing, IRS records show.

When Perkins’ daughter-in-law, Jula Connatser, launched her charity in 2011, Cancer Fund gave her donated medical supplies and personal care items valued at $20,000 to pass along to patients. Connatser said her charity aims “to relieve the financial burden of cancer patients.”

The goal is nearly identical to that espoused by Reynolds Sr. when he started 30 years ago. But Connatser, who worked at Cancer Fund for four years before striking out on her own, promises to be different.

Of Cancer Fund she says, “Oh, they don’t give out money, honey.”

Interviewed recently in her Knoxville office, Connatser was busy repackaging stacks of donated DVDs – including “Land of the Lost” and “Mamma Mia!” – to ship to cancer patients around the country.

“They don’t get to go to movies,” she explained.

Disputed works

With little money making it to cancer patients, this is what passes for charity at Cancer Fund of America and the other charities run by Reynolds family members:

Vitamins and vinyl gloves.

Toothpaste and teddy bears.

Every year, truckloads of the stuff make their way across the country, boxed up in care packages for patients or for other charities that get the items to sick people.

In annual IRS tax filings, the charities list dozens of recipient hospices and service agencies across the country.

Many are thankful to get any help at all. But some of the recipients questioned the value Cancer Fund assigned to their donations.

In 2011 tax filings, Cancer Fund reported that it gave donated items worth $14,000 to Farragut Church of Christ in Knoxville. The boxes were filled with supplies for a mission trip to Ghana.

“The most I ever got was two cardboard boxes of stuff,” said David Gentry, the foreign mission leader at Farragut Church. “I walk through the Cancer Fund warehouse and pick up children’s cold medicine and toothbrushes and floss. It ain’t a big item.”

Several groups that Cancer Fund reported as recipients say they got nothing.

In 2011, Cancer Fund told the IRS it gave $20,000 of goods to the Martin-Tyrrell-Washington District Health Department in Plymouth, N.C.

“I have double checked with some of the staff and no one has ever heard of the Cancer Fund of America, nor have we ever received any supplies or donations from any group with ‘cancer’ in its name,” the agency’s health director, Kathleen DeVore Jones, wrote in an email. “And, by the way, we could sure use some donations!”

Cancer Fund officials said they have documentation of all shipments but declined to provide it.

Overseas donations

It’s even harder to track donated items when they are shipped overseas to be given out in developing nations.

Charities pay pennies on the dollar to procure these goods from third-party suppliers and then pay shipping costs. Several charities can claim credit for the same shipment of goods.

These arrangements are permitted under IRS rules. But they have been criticized by nonprofit experts who say the donations artificially inflate a charity’s balance sheet.

Although the donations are never physically held by the charities, they report their value as income, boosting revenues. That makes it look like charities spend more on programs and less on fundraising.

The added income can also make it easier to justify higher salaries.

The Reynolds family charities appear on paper to be generous providers of donated drugs and medical supplies to groups overseas.

In 2011 alone, five Reynolds charities claimed shipments valued at nearly $61 million to Africa and Central America.

Category: Forex

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