Leukemia Charity Spent Less Than 1% of Donations on Patients, Suit Says

— -- A leukemia charity is under fire for allegedly "misleading" donors about how millions of dollars was being spent.

On Monday, New York Attorney General Eric Schneiderman and his office filed a lawsuit in state Supreme Court against the National Children's Leukemia Foundation as well as its founder, Steve Shor, who allegedly pocketed more than $1 million in salary and perks while running the Brooklyn-based charity out of the basement of his home.

In court documents, investigators accused the organization of using "false and misleading materials to solicit and collect millions of dollars from individuals and businesses all over the country" since at least 2009.

Schneiderman said despite what professional telemarketers told unsuspecting donors, the foundation did not have a bone marrow registry, an umbilical cord blood bank or a cancer research center and it had not fulfilled the wishes of sick children since 2009.

Of the nearly $13 million that the foundation raised between April 2009 and March 2013, court papers said, less than 1 percent of the monies was spent on young patients and "at most" 6 percent on its programs. In court papers, investigators accused the foundation of not being a "large and effective organization" as it presented itself to the office's Charities Bureau, but a "one-man operation .... with three respondents rubber-stamping Shor's decisions."

"If you're going to raise funds for children for what may be their last wish, you better make sure you provide it," said Jim Sheehan of the office's Charities Bureau.

Steve Shor, who started the foundation in 1991 following the death of his son due to leukemia, was paid nearly $600,000 from April 2009 to March 2013 in addition to the promise of a pension and lifetime medical insurance. State investigators said much of the money — "as much as 85 percent" — went to professional fundraisers.

Steve Shor, the founder and onetime president, was named in the petition along with Yehuda Gutwein, the accountant and auditor; Shlomo Shor, Steve Shor's son as well as the vice president and a director; and Shlomo Donn, who worked for Gutwein. Gutwein became president of the foundation in 2010.

Steve Shor told ABC News today that the attorney general's accusations have "little merit."

"Our small organization helped many families over the past 20 years," Steve Shor said in a statement. "I launched NCLF after the death of my teenage son to leukemia. I personally took no salary for over eight years. I wanted to help as many families as I could who had children suffering from cancer."

"We feel we are being used as an 'example' due to the telemarketing fundraising laws and fundraising market over which we have no control. Our fundraising contracts were all filed with the attorney general who has long known their terms. We expect to be vindicated in court when the full story is explained," Steve Shor said.