A.G. Schneiderman Sues Sham Charity That Misused Millions Raised To Fight Breast Cancer
A.G.’s Lawsuit Seeks To Shut Down “Coalition Against Breast Cancer”
Deceived Donors Gave $9 Million To Fight Disease; Nearly Every Dollar Diverted To Pay Insiders– Including Excessive Fundraising Fees, Salaries & Benefits Packages
Schneiderman: Charities Will Not Be Used As Personal Cash Machines, Those Who Exploit Sympathies Will Be Held Accountable
NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit to shut down a sham charity that fraudulently raised millions of dollars under the guise of fighting breast cancer, only to funnel the money to organization insiders and fundraisers.
The Long Island-based Coalition Against Breast Cancer (CABC) solicited $9.1 million from the public over the past five years, but spent virtually no money on the breast cancer programs it said it supported. Instead, the money was used to pay exorbitant fundraiser fees, unjustified salaries and benefits packages, and for other personal goods, including cell phones and home phones, and TV and internet services. The lawsuit charges both CABC and its for-profit fundraiser, Campaign Center, with violations of New York State not-for-profit and charitable solicitations laws.
“By using a charity as a personal cash machine, the Coalition Against Breast Cancer and Campaign Center shamelessly exploited New Yorkers’ natural sympathies and generosity,” Attorney General Schneiderman said. “Instead of benefiting breast cancer victims and their families, millions of dollars were misused for personal benefit. This type of scam will not be tolerated in New York, and my office will continue its work to stop charities fraud and hold those who commit it accountable.”
The Attorney General’s investigation revealed that CABC and its principal outside fundraiser, Campaign Center, exploited breast cancer as a national charitable cause and made false claims about the activities and services it provided. CABC’s website featured stock photos of children and mothers, played emotional music and asked donors to help achieve the “dream” of “eradicating breast cancer,” though the organization itself directed barely any of the funds it raised to that cause. It advertised a bogus relationship with Memorial Sloan-Kettering Cancer Center when no such affiliation existed. Donors were told their money would be used to fund breast cancer research, mammogram screenings through a mobile van, and support seminars and forums for survivors and their families – none of which was true.
In fact, the Attorney General’s investigation determined that CABC was not affiliated with any cancer institution, and spent virtually nothing on breast cancer programs. According to the lawsuit, CABC spent less than one-half of 1 percent of donations raised for mammograms or any other purpose related to breast cancer prevention or detection. In 2008, a year in which CABC raised more than $1.4 million from the public, it spent a mere $374 on mammograms. In the last three years, despite receiving more than $4 million, CABC funded mammograms for only 11 women. In total, over the past five years, CABC spent less than 4 percent of all donations on any of its alleged charitable programs – virtually none of which was authorized under the CABC’s certificate of incorporation.
Campaign Center is a company owned by a longtime associate of CABC’s founding director and controlled CABC’s fundraising operation. It retains 85 percent of the money it raises and allows staffers to engage in fraudulent fundraising tactics that maximize donations. For instance:
- Telemarketers provided misleading information about CABC, asserting it helped donors’ “local” community and that the services would assist those living in the same town as the donors;
- Campaign Center sent phony invoices to individuals claiming they agreed to pledge certain amounts, or that they owed money for a donation, when they did not;
- Some invoices were sent to individuals who never received a phone call, and to others who had already made a donation, but from whom Campaign Center wanted to elicit a duplicate pledge.
The lawsuit charges CABC, its directors Andrew Smith, Debra Koppelman and Patricia Scott, as well as Campaign Center and its owner, Garrett Morgan, with engaging in a scheme to defraud and violating New York State’s not-for-profit and charitable solicitation laws.
The Attorney General’s lawsuit also charges CABC's directors with numerous instances of the failing to comply with their fiduciary duties. The investigation uncovered the following evidence of CABC directors improperly using the organization for their own personal benefit:
- Awarding generous, unjustified salary and benefits packages, even though all worked full-time or near full-time elsewhere. Smith and Koppelman, who ran the operation out of Smith’s home, paid themselves more than $550,000 in combined salaries for 2005 through 2009, another $150,000 in retirement accounts, and dental and medical benefits that totaled at least $9,000 per year;
- Using CABC funds to pay for personal cell phones and home telephones, TV and internet services;
- Making unlawful insider loans to two of the directors, including $105,000 to Smith and $50,000 to Koppelman;
- Entering into insider transactions involving the sale to the organization of stock owned by Smith;
- Devising a scheme that allowed Smith to collect unemployment insurance after he was terminated by his full-time employer by falsely claiming he was no longer affiliated with CABC.
The Attorney General’s lawsuit seeks to shut down CABC and hold the defendants financially accountable for their waste and misappropriation of CABC’s charitable assets. The lawsuit was filed in New York Supreme Court in Suffolk County.
Any donor who suspects they have been a victim of charitable solicitation fraud should contact the Attorney General’s office at www.charitiesnys.com or by calling (212) 416-8402.
This case is being handled by Assistant Attorneys General Caroline Press and Alexandria Perrin, under the supervision of Charities Bureau Chief Jason Lilien.