[co-author: Stephanie Kozol]*
The Federal Trade Commission (FTC) and 20 states reached a settlement with Kars-R-Us.com, Inc. (Kars) and its operators, Michael Irwin and Lisa Frank, related to an alleged national charity fraud scheme.
According to the September 25 complaint,[1] Kars and its operators misrepresented how donors’ funds would be used in two ways. First, they retained more than $38 million that advertisements claimed would be donated to United Breast Cancer Foundation, Inc. (UBCF). Second, their solicitations included allegedly misleading messaging. For example, the complaint alleges that Kars crafted advertisements that UBCF provided free or low-cost breast screenings to help catch breast cancer early and save hundreds or thousands of lives. In reality, UBCF used only a fraction of donations to provide free and low-cost breast cancer screening services and most of the funds were used for other purposes.
The FTC brought the action pursuant to the FTC Act’s prohibition on unfair or deceptive acts or practices, and the states acted pursuant to consumer protection, business regulation, charitable solicitation, and/or charitable trust enforcement authority conferred by state-specific statutes or common law. The complaint’s two counts address the misrepresentation regarding the use of donors’ funds, and the failure to substantiate claims regarding UBCF’s practices.
The proposed settlement permanently bans Irwin from fundraising, and institutes ongoing restrictions to prevent Frank, Kars, and its employees from making misrepresentations while fundraising. If the proposed settlement is entered, a judgment in the amount of $3,882,091 will be entered against Kars, Irwin, and Frank, with $550,000 to be paid to a charity or charities whose mission or purpose is consistent with the purported mission of UBCF. Due to the defendants’ inability to pay, once the $550,000 is paid, the remainder of the judgment will be suspended.
This action not only highlights the reach of consumer protection law and continued state-federal cooperation in this arena, but also serves as a reminder that advertising claims regarding third parties, if unsubstantiated, can lead to liability. It is also notable that individual owners were held personally liable.
[1] Complaint and Stipulation as to Entry of Order for Permanent Injunction, Monetary Judgment, and Other Relief, Case No. 2:25-cv-09150 (C.D. Cal. Sept. 25, 2025) available at https://media.ark.org/ag/Kars-R-Us-Documents.pdf
*Senior Government Relations Manager
