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Thursday, March 28, 2024 | Back issues
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N.Y. Calls Leukemia Foundation a Sham

(CN) - A children's leukemia charity must be dissolved for devoting less than 1 percent of its revenue to cancer patients, the state of New York argues.

New York, through Attorney General Eric Schneiderman, sued the National Children's Leukemia Foundation Inc., its founder and former president Zvi Shor aka Steve Shor aka Demetrie Bennett, and his successor Yehuda Gutwein in Kings County Supreme Court on July 20. Shor's son Shlomo Shor and Gutwein's accountant Shlomo Donn are also named as defendants in the lawsuit.

Shor says he founded NCLF after the death of his son from leukemia in 1991, according to the complaint. Though he resigned as president in May 2010 after being questioned about a 1999 felony bank fraud conviction,"Shor continued to control NCLF and its operations by arranging for Gutwein to assume the title of president without the title's authority," the complaint states.

Since at least 2009, the charity has "used false and misleading materials to solicit and collect millions of dollars from individuals and businesses all over the country, including New York," the state claims.

"The organization has also submitted false reports to the [attorney general]'s Charities Bureau. These reports made NCLF appear to be a large and effective organization, run in compliance with New York law; in truth, it was essentially a one-man operation run by Shor, NCLF's founder, from his Brooklyn basement, with the other three respondents rubber-stamping Shor's decisions," the lawsuit states.

In just four years - from April 2009 through March 2013 - the nonprofit raised about $13 million. But "most of this money came through professional fundraisers to which NCLF paid exorbitant fees - as much as 85 percent of the money raised," the complaint states. The foundation also falsely reported much of those costs as "public education" and "outreach" in its IRS filings, according to the lawsuit.

The charity spent less than 1 percent of its revenue on direct assistance to cancer patients, and at most 6 percent on its charitable programs, New York claims. It allegedly suspended activities in 2014 in response to the attorney general's investigation.

The foundation's website, brochures and telemarketers allegedly falsely advertised a number of programs, including a 'Make a Dream Come True' program, bone marrow donor matching, umbilical cord blood banking, and a cancer research center. But it did not fulfill any wishes through its program, had no bone marrow donor database or blood bank, and the research center did not exist, the attorney general claims.

The state says Shor collected almost $600,000 in salary from 2009 to 2013, along with rent for his basement, partial utility bill payments, cars, gas money and car insurance. He also took $612,000 in deferred salary, lifetime medical insurance and a pension, according to the lawsuit.

New York alleges violations of its executive law, its Not-for-Profit Corporation Law and the state's Estates, Powers & Trusts Law. The 40-page complaint also claims fraud, false filings, breach of fiduciary duty and wrongful distribution, and seeks to dissolve the foundation.

In an email to CNN, Shor denied the allegations, claiming his charity has helped many families.

"We are being used as an 'example' due to the telemarketing fundraising laws and fundraising market over which we have no control," he said.

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