NPQ received an infuriating press release from New York Attorney General Eric T. Schneiderman’s office on Friday. The release announced a $350,000 settlement with Dr. Yulius Poplyansky, president of the Breast Cancer Survivors Foundation (BCSF), who played a part in bilking donors to what they thought was a breast cancer charity out of millions. The infuriating part is that the alleged puppetmaster of the BCSF was a different man: Mark Gelvan, who not only has a long history of such activity but had 13 years ago been banned for life from such fundraising by the N.Y. AG’s office.
As readers may remember, Schneiderman has taken on some of the more challenging issues of New York’s nonprofit sector over the past few years, including an investigation of the Donald J. Trump Foundation. Doing so has been a big favor to New York’s nonprofits, as it draws a high-profile distinction for the public between legitimate and illegitimate activity in the sector. In this case, he has named his office’s attempt to pursue scam artists that make use of “shell” nonprofits “Operation Bottomfeeder,” rhetorically distancing bad actors from legitimate nonprofits.
Here is an excerpt from the statement we received:
NPQ has written before about the terrible persistence of some of these scam artists who specialize in fundraising on behalf of first responders, vets, children, and those with cancer—in other words, highly sympathetic subjects. For instance, from 2012 on we wrote about the Reynolds family, who built a multi-state empire on sham cancer charities. Those involved were finally brought to account in 2015 by a first-of-its-kind collaboration between charity regulators and the Federal Trade Commission (FTC). This egregious case was seen as an important development in creating a better system of national accountability.
The four cancer charities charged by the 50 states’ attorneys general and the Federal Trade Commission as a sham are all related. They are run by members of the same family—James Reynolds, Sr.; James Reynolds, Jr.; James Junior’s wife, Kristina Hixson; her mother, two sisters, and other near Hixson relations; Senior’s ex-wife Rose Perkins; and others. Two of the four charities are being dissolved due to the FTC complaint, and members of the family face fines in the tens of millions, though the structure of the proposed final order lets the Reynolds family off with much lower personal payments.
According to the FTC, the charities spent 97 percent of what they raised on fundraising and on the Reynolds family themselves, devoting only three percent to help cancer patients. All told, according to the government complaint, the charities walked off with as much as $187 million that should have been spent on cancer issues. The groups were “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation.”
“Bottomfeeders” is in some ways an apt term, but what these scam artists feed on is not trash but something much more valuable: people’s faith in the sector, and that harms the entire country and its confidence in nonprofits overall. Worst of all, it harms those who need legitimate charities to sustain over a difficult period.
Last year, we published an interview with Cindy Lott that discussed the shifting boundaries of nonprofit regulation enforcement. It described a strong movement toward more state-based activism in this realm across the country, even as the role of the IRS becomes more constrained.
Schneiderman is one of the country’s more activist attorneys general where charity regulation and enforcement are concerned, and we look forward to seeing if charges are now brought against Gelvan. But, in the long run, we appreciate the continued efforts from state charity offices in general and Schneiderman in particular—not just toward enforcement, but also toward informing the public that these kinds of bad actors are not at all the norm in this sector.