The owners of a charity solicitation company allegedly raised $45.5 million to purportedly fight breast cancer by providing low cost or free breast cancer screenings, but instead used 99.7 percent of the funds to pay themselves and vendors, according to a settlement proposal announced by the Federal Trade Commission (FTC) and nineteen states, including Connecticut.
Kars-R-Us, which solicits donated vehicles to fund charitable causes, raised $45.5 million between 2017 and 2022 from 84,000 individuals who donated their vehicles. The organization advertised on television and radio and indicated the funds would go to the United Breast Cancer Foundation (UBCF) to “save lives” through low cost or free screenings.
In reality, the FTC alleges, owners Michael Irwin and Lisa Frank used $34.9 million to pay “Kars, its operators, and its vendors.” The remaining funds were sent to UBCF and “were largely used for other purposes, including generous compensation for UBCF’s CEO,” according to a press release from Connecticut Attorney General William Tong.
“Kars-R-Us ran a shameful scam to enrich its operators by preying on the generosity of donors who believed they were saving lives through breast cancer screenings,” Tong said. “In coordination with our state and federal law enforcement partners, we will not tolerate deceit and misuse of charitable funds.”
2022 Tax filings by UBCF show Kars-R-Us raised $9.8 million in donations but retained $6.9 million, with UBCF getting the remaining $2.8 million. The tax filing lists Kars-R-Us as a paid contractor with a little more than $6 million in compensation. Filings for 2021 show much of the same, with $14.7 million being raised and $9.1 million retained by Kars-R-Us.
In 2022, the UBCF reported $57 million in total revenue and $41.2 million in expenses, including $28.3 million in grants. Total salaries were nearly $1.4 million, with Executive Director and President Audrey Stephanie Mastroianni receiving $610,375 in salary and compensation from other organizations. Kars-R-Us, which operates under the website Donate2Charity, lists itself as a professional fundraiser on social media and had no similar online documents.
“In reality, only a tiny fraction of donated money went to provide free or low-cost breast cancer screenings for individuals, and UBCF can point to no individual whose life was saved as a result of donations,” the FTC wrote in its complaint. “Instead, unbeknownst to the donors, most of their money went to pay Defendants and their vendors, and the substantially smaller amount that went to UBCF was used largely for other purposes, including generous compensation to UBCF’s CEO.”
Under the terms of the proposed settlement, Kars R Us co-owner Michael Irwin is banned permanently from fundraising directly or indirectly and from making any misrepresentations in the marketing of a product or service; Lisa Frank and Kars employees are prohibited from making any misrepresentations associated with fundraising or marketing.
Kars R Us and its owners were also fined $3.8 million, which is “partially suspended” due to their inability to pay; if they are found to have lied to the FTC and states, however, they will be required to make the payment immediately.
“When people donate their hard-earned money, they hold a reasonable expectation that money will be used for its intended purpose. In this case, generous donors thought they were helping families affected by breast cancer, an issue that is deeply personal to many people, only to find out that was not the case,” said Department of Consumer Protection Commissioner Bryan T. Cafferelli. “Exploiting the generosity of people who are just trying to help is shameful. We take these scams seriously.”
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