NY Sues to Shut Down 'Sham Charity'
Attorney General Eric Schneiderman's lawsuit aims to shut down the Long Island-based Coalition Against Breast Cancer (CABC), which Schneiderman says raised $9.1 million from the public over the past five years but spent hardly any of that money on breast cancer programs.
Instead, the lawsuit claims, CABC used the money it raised to pay excessive fundraiser fees, unwarranted salaries and benefits, and other perks. The lawsuit accuses CABC and its for-profit fundraiser, Campaign Center, of violating New York State's 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 in a statement. "Instead of benefiting breast cancer victims and their families, millions of dollars were misused for personal benefit."
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 CABC and Campaign Center, the attorney general's office charged, exploited national concern over breast cancer and told numerous lies about its activities and services to generate charitable contributions.
The CABC also promoted a non-existent relationship with Memorial Sloan-Kettering Cancer Center and promised donors their contributions would support breast cancer research, mammogram screenings, and forums for survivors and their families –- all of which was completely untrue.
According to the charges, the CABC was never affiliated with any cancer institution, and it spent less than one-half of one percent of the donations raised for mammograms or any other purpose related to breast cancer prevention or detection. In 2008, when the CABC raised more than $1.4 million from unsuspecting consumers, it spent only $374 on mammograms.
In the past three years, CABC used the more than $4 million it raised to fund mammograms for exactly 11 women. And during the past five years, CABC spent less than 4 percent of all donations on any of its purported charitable programs.
Campaign Center, which controlled CABC's fundraising operation, is owned by a longtime associate of CABC's founding director and retains 85 percent of the money it raises. The center allowed staffers to engage in the following fraudulent fundraising tactics:
- 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 had 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 also accuses CABC's directors of repeatedly failing to comply with their fiduciary duties while rewarding themselves richly by:
- Awarding unjustified salary and benefits, even though all worked full time or nearly 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.
- Making unlawful insider loans to two of the directors, including $105,000 to Smith and $50,000 to Koppelman.
- 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 lawsuit seeks to shut down CABC and hold the defendants accountable for their waste and misuse of CABC's charitable assets. Any donor who suspects they've been a victim of charitable solicitation fraud should contact the New York attorney general's office at www.charitiesnys.com or by calling (212) 416-8402.