Research Institute Fund-Raising Thrives Despite Controversy

A cancer research charity whose financial practices have been challenged in three states grew dramatically last year, taking in nearly $10 million, which is more than twice the previous year’s tax-deductible donations.

The American Cancer Research Institute, based in Falls Church, Va., spent only about one of every six donated dollars on grants to researchers and others in the 12 months ending last Sept. 30, tax records show. In the previous year, the institute spent less than 11% of donations on research.

While the Supreme Court has struck down laws requiring that various ratios be used to establish how much charities can spend on fund-raising versus other programs, most health charities devote well over half their donations to program services, including research.

The institute spent less money on research both years than the federal and state governments lost because of tax-deductible gifts to the charity, IRS research data indicates.

The institute, in its name and its literature, focuses its appeals for money on researching the relationship between diet and cancer, which it contends gets little attention from other cancer charities or the federal government. One recent appeal said past donations had “enabled us to commit over $2.5 million to research into finding a way to prevent, control and cure cancer.”

The institute raised $9.6 million in the 12 months ending last Sept. 30, federal tax records show. This sum is more than twice the $3.7 million raised in 1983.

Recently the institute mailed out solicitations that bear a resemblance to the bills people routinely get for products and services.

Tens of thousands of forms bearing the institute’s name and labeled “1985 Annual Fund” were mailed, Roger Warin, a Washington, D.C., attorney who represents the institute, confirmed.

These bill-like forms specify a “payment requested by” date. One Westside resident received such a form with “SECOND NOTICE” stamped in red ink.

Charity officials in California, New York and Maine have investigated the charity’s finances, and have required it to make fuller disclosures about its handling of donations. The investigations were prompted by the relationship between the institute’s founders and the small share of donations devoted to research.

In its first full year of operation ending in September, 1983, the institute spent 25% of its donations on mail order and consulting services to two firms owned by its founders, Jerry C. Watson and Byron Chatsworth Hughey. In late 1983, the two men relinquished the power to appoint and remove institute directors.

Not All Standards Met

In fiscal 1984, the institute paid $469,000 to the Watson & Hughey Co. for fund-raising consultation services, a sum that Warin said reflects market rates for such work.

The National Charities Information Bureau and the Philanthropic Advisory Service of the Council of Better Business Bureaus--the two major national organizations that study charities--have both issued reports saying the institute does not meet all of their standards for charitable solicitations in large part because of its business relationship with its founders. Both charity watchdog organizations are currently revising their reports on the institute.

The institute claims in mailings to potential contributors that it devoted 57% of its 1984 revenues to “program services.”

This is because the institute counts “public education” about links between diet and cancer as one of its program services. The institute, like some other charities that depend heavily on mailed appeals for support, regards explanatory literature mailed with appeals for money as “public education,” according to Warin.

Warin said the institute has also gotten articles published in small- and medium-size newspapers about diet and cancer and it regards these articles as part of its public education effort. Some of the articles were written by Colin Campbell, a Cornell University professor of nutrition who serves as the institute’s science adviser, Warin added.