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Here’s why CVS was sued over fundraising fraud at checkout

Point-of-sale donations in stores can be confusing. Here’s what consumers need to know.

A pedestrian walks into a CVS Pharmacy in Washington, DC, on Nov. 2, 2022.BRENDAN SMIALOWSKI/AFP via Getty Images

WOONSOCKET, R.I. — Thousands of people have expressed outrage after news of a lawsuit that accuses CVS Health Corporation of fundraising fraud spread on social media, prompting questions about point-of-sale donations collected by corporations.

In May, a New York resident filed a class-action complaint accusing CVS of deceptive fundraising in a campaign it held for the American Diabetes Association. Prior to each customer’s transaction, a checkout screen prompts the customer with several options for pre-selected dollar amounts, as well as an opt-out option, allowing donations to the ADA.

The plaintiff alleges CVS did not forward donations to the ADA, but instead applied the donations toward a legally binding $10 million obligation CVS made to the diabetes association.

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Here’s what you need to know about this latest lawsuit involving CVS Health and their fundraising for the American Diabetes Association.

When did the fundraising partnership begin and what do we know about it?

CVS, which is based in Woonsocket, sent a press release in November 2021 that fueled much of the confusion over its partnership with the American Diabetes Association.

In the news release, which is posted on both CVS’s and the diabetes association’s websites, CVS said it “has committed $10 million over three years to support people in preventing and managing diabetes with increased awareness, knowledge, and action to improve health through Project Power.” Project Power offers free lifestyle change programs with people with type 2 diabetes.

The press release also said CVS “will also host an in-store fundraising campaign at all CVS Pharmacy locations nationwide during American Diabetes Month.”

Lawyers for CVS are now saying these two statements refer to the same thing. Executives at both CVS and the American Diabetes Association signed a corporate sponsorship agreement, which was later amended, and both versions were included in legal filings to the courts.

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So is CVS providing a corporate gift on top of a point-of-sale fundraiser? Or are customers “subsidizing” a financial commitment CVS already made?

Edward L. Powers, a lawyer for CVS, filed a motion to dismiss the case in November. He wrote that after three years of fundraising, CVS would make up the difference between the cumulative customer donations and the $10 million they had committed.

When asked why the November 2021 press release seemed to promote two separate actions — a $10 million commitment, and a point-of-sale fundraiser — CVS spokesman Mike DeAngelis declined to comment.

“As this involves ongoing litigation we don’t have additional comment beyond our previous statement,” he said.

Part of the lawsuit complains that customers did not know they were “subsidizing” a commitment previously made. It also said CVS falsely “implied” that its $10 million commitment was “separate, apart, and independent of campaign donations.”

In the motion to dismiss, CVS said the press release is “irrelevant because the fraud allegations are based solely upon the checkout message to customers soliciting ADA donations.” The motion claims the suit does not allege that customers relied on the press release in making their donations.

Did CVS ever specifically say that it was not also providing a separate, $10 million gift to the American Diabetes Association?

No. It would only be clear if a consumer accessed the corporate sponsorship agreement.

What does the corporate sponsorship agreement between CVS and the American Diabetes Association say?

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In the first filing, signed on April 13, 2021, CVS agreed to offer its customers opportunities to make a donation to the American Diabetes Association. CVS committed to raising a minimum of $10,000, and said it for the terms of their agreement. CVS would make annual payments of funds during each calendar year of this agreement by Dec. 31, beginning in 2021.

If the funds raised through Dec. 31, 2023 total less than $10 million, the agreement said CVS would either put up the difference or would extend the campaign through April 2024. If the point-of-sale fundraiser has not raised $10 million by April 2024, then the company would pay the difference.

“Any amounts raised over $10,000,000 minimum will be donated to the ADA as well,” the agreement says.

What change was made when they amended the corporate sponsorship agreement?

On Oct. 28, 2021, the agreement was amended. The amended agreement included the following paragraph:

“The company may direct any funds raised in excess of $10 [million] to support other initiatives at [CVS’s] discretion, so long as such other initiatives advance the ADA’s mission,” read the amendment. “Such direction shall be provided in writing by the company to the ADA and shall be subject to the approval of the ADA, such approval not to be unreasonably withheld.”

Has the American Diabetes Association received any donations from CVS customers?

Yes, but it’s unclear how much.

In a statement to the Globe on Tuesday, Chuck Henderson, the CEO of the ADA, said the association is receiving the proceeds from the CVS “pin-pad donation campaign as planned.”

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Rebecca Fisher, a spokeswoman for the ADA, did not respond to questions from the Globe asking if CVS has given $10 million (or a portion of that $10 million commitment) as a corporate gift. Fisher also did not respond to questions related to the total amounts the association has received through the point-of-sale campaigns so far.

What are CVS executives saying about the lawsuit?

In his motion to dismiss the case, Powers challenged the plaintiff and his lawyer on their interpretation of the alleged $10 million “debt.”

“Obviously, upon signing, CVS did not assume an unconditional $10 million debt to the ADA,” the motion stated.

On Monday, DeAngelis wrote in an email to the Globe that the claims asserted in this suit “lack merit” and that the plaintiff was “inaccurate” about the company’s description of its campaign and intent.

Has the American Diabetes Association been accused of any wrongdoing?

No.

Why does a for-profit corporations like CVS do any fundraising for causes or nonprofits?

CVS Health, like many corporations, has partnerships with certain nonprofits and causes. Some of these organizations, such as the American Cancer Society and Alzheimer Association, have also received donations from in-store fundraising.

Many retail stores have started point-of-sale fundraising campaigns in recent years. In 2018, more than $486 million was raised for nonprofits at just 79 of the largest point-of-sale charity checkout campaigns.

Can stores like CVS write off on their taxes customer donations that are made at checkout?

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No. Stores cannot write off a customer’s donation made at the time of a sale because they do not count as the company’s income. But if a store donates a certain portion of its proceeds to charity, then that store could write it off as a donation. Customers can write off their own donations on their own taxes.

A corporation is “not ripping you off in order to lower its own taxes by asking you to round up,” Renu Zaretsky of the Urban-Brookings Tax Policy Center told the Associated Press.


Alexa Gagosz can be reached at alexa.gagosz@globe.com. Follow her on Twitter @alexagagosz and on Instagram @AlexaGagosz.