Calif. sues major veterans charity for millions, alleges fraud and self-dealing

California's attorney general sued a major veterans charity on Thursday, accusing the officers and directors of engaging in self-dealing and fraudulent fundraising, and paying excessive compensation.

The suit seeks to remove the officers and recover $4.3 million that it claims was improperly diverted from Help Hospitalized Veterans. The charity in Winchester, Calif., was founded in 1971 to provide therapeutic arts and craft activities for patients receiving care in Veterans Affairs hospitals, military hospitals and state veterans homes, according to its website.


"What makes this case so egregious is our military servicemen and women are willing to sacrifice their lives for our country and for us as Americans, and when they are in need of help and support we should give it to them and not manipulate charitable people and then personally profit from them," state Attorney General Kamala D. Harris told The Associated Press.

The charity raised more than $108 million in contributions over the last three years, it said in tax filings and on its website, with 33.8 percent going toward its programs. The suit alleges that it filed "false and misleading" tax returns that inflated program expenses and reduced its actual fundraising costs to "less than 30 percent."

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Based on its reported fundraising, Help Hospitalized Veterans ranks among the top 1 percent of charities in the United States. The group once was endorsed by retired Gen. Tommy Franks, who later distanced himself from the charity.

At the same time, it has ranked for more than a decade at the bottom of lists by watchdog groups that rate nonprofit organizations based on their financial management and abilities to use most of their donations toward their causes. CharityWatch says about 35 percent of Help Hospitalized Veterans' funds go toward programs to aid veterans. The recommended standard is about 65 percent.

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The California lawsuit said the charity's president, Michael Lynch, received excessive compensation of $900,000.

The complaint said that former president Roger Chapin, who during a 2008 U.S. congressional hearing about his management of the charity called himself the "the most honest person in this room," retired the following year with a nearly $2 million pension plan. The suit alleges that the group's board members retroactively spiked Chapin's earnings to justify the inflated amount for his retirement.

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Chapin is also accused of diverting the charity's funds through a separate charity called Conquer Cancer and Alzheimer's Now.

Chapin was accused of paying himself more than $493,000 from the cancer charity. That charity received the money from American Target Advertising, a fund-raising firm run by conservative political fundraiser Richard Viguerie, who is not named in the suit.

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'It's surprising it's taken this long'
Viguerie, who is identified in the suit as Chapin's long-time friend, is said to have deposited funds into the account of Conquer Cancer and Alzheimer's Now from $800,000 that Help Hospitalized Veterans had lent ATA and was not repaid.

"It's surprising it's taken this long for something to happen with all the serious problems that were brought up in the (2008 congressional) hearing," said Daniel Borochoff of CharityWatch, which monitors the financial records of nonprofit groups. "What's more, this information did not filter down to donors."

But he added: "Mr. Chapin spun a complex web to confuse well-intentioned donors and make it difficult for regulators to untangle."

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Calls to Help Hospitalized Veterans and Lynch's office were not returned. Viguerie did not immediately respond to phone and email messages seeking comment. Reuters was unable to contact Chapin on Thursday evening.

Borochoff said the complaint sends a strong message to unscrupulous charities.

"It's about $2 billion that is raised on behalf of veterans charity, and unfortunately a lot of that's being wasted and not being used to help our veterans," Borochoff said. "It's really ludicrous what's going on. It's out of control, there's such great waste. It's a national disgrace that people are allowed to exploit veterans for their own personal financial benefit, or benefit of their company."

More Southern California coverage from NBCLosAngeles.com

According to Charity Navigator, a third of the 50 military veterans charities it evaluates rate poorly and 20 percent either got a zero for their financial management or a "donor advisory" tag, which indicates the organizations are being investigated by authorities.

That compares to 2 percent for other kinds of charities, said Ken Berger, the president of the Washington-based group that evaluates 5,500 charities.

Reuters and The Associated Press contributed to this report.

 

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It is always about the money. Too much money from all of these fund raisers whether is for veterans, police, or fire departments goes into the wrong pockets. I don't contribute at all to fund raisers, I instead donate directly.

    Reply#159 - Fri Aug 10, 2012 2:49 PM EDT

    All charitys should have at least 90% of their monies going to the charities and only 10% for overhead anything more than that and they are milking the chariety and in it for the money.

    who can justify a $2 million pension ? our presidents don't get that.....

    • 2 votes
    Reply#160 - Fri Aug 10, 2012 2:53 PM EDT

    Nor does this one deserve a pension at all.

      #160.1 - Mon Aug 13, 2012 9:37 AM EDT
      Reply

      There is so much untrust in this country & it starts right at the top with government officials in charge of fund raising. Even religious scandals back in the 1970's got exposed, using God's money for an air - conditioned dog house. Everybody is ripping each other off. Doesn't matter who you are or what you represent, where there is money there is crooks. Wonder how some people became rich? They mis- named Wall Street should be Swindle Avenue & " In God We Trust " don't mean a thing anymore. A very big countrywide cover all charity organization with a good reputation called " The United Way " did this same thing some 20 years ago by those in charge of the money. It shocked everyone that this happened to such a great cause. I would hang these kinds of people, better yet stand them up without a blindfold in front of a Firing Squad of 12 Snipers. Their day will come in HELL. Crooks are all over in this country of moral decline. I want to see what their punishment will be or will they get a bonus in pay for doing bad like Wall Street does. Take out of one pocket & put into the other. Who do you Trust? Get a good dog, they won't let you down. These people have no conscience. They will only look at it & say it was just money, but if one of their children lost an arm or a leg in war it may change their whole outlook. I doubt if they even personally know any vets. Semper Fi Brothers.

      • 1 vote
      Reply#161 - Fri Aug 10, 2012 2:57 PM EDT

      any charitable organisation that has ceo's making more than 40k or more does not deserve a dime...this is because they are suppose to be for charity... not their pocketbook...the money people donate to these organisations are suppose to help the disabled or disadvantiaged...not some bloke who is trying to get rich from the organisation...and working for a charitable organisation should not be a living...should be only funded by voluntaries services...

      • 2 votes
      Reply#162 - Fri Aug 10, 2012 3:04 PM EDT

      I am One of the 7% of Americans that served both in combat and peacetime, I called Wounded Warriors Project for help they pretty much blew me off! They didn't want nothing to do with a disabled veteran! Maybe they should be investigated too,it's sad that these people make a good living off of soldiers that put their life on the line to defend the very freedoms they enjoy it's just SAD!

      • 2 votes
      Reply#163 - Fri Aug 10, 2012 3:08 PM EDT

      As a DAV, I am always appreciative of what ever charitable measures that the American public bestows. I will give freely to the guys standing outside our local supermarkets and shopping establishments that are collecting for Vets programs, because I know most of these gents from my trips to the local VA hospital. As far as "big name" charities, I got burned by the Red Cross and the United Way for years before I retired from my civilian jobs. My employer was always "working us over" to obtain 100% participation as "continued fair share givers"... In all due respects, however, I think that the Co. I worked for was also taken in by the money-makers..!

      I wish I would have known so many years before, as I would have been far happier to have given it directly to the local VA programs, rather than the crooked bastards that "oversaw" these major charities. Crooks are crooks, some wear masks, some wear neckties, some are in politics.... God Bless and Help America.

        Reply#164 - Fri Aug 10, 2012 3:26 PM EDT

        These are the current stats on the Red Cross usage of donations. Although they have their critics, it is a very functional organization. They are there when the government refuse to take actions. They are also known to assist military and veterans during crisis.

        Financial Performance Metrics

        Program Expenses
        92.2%

        Administrative Expenses
        4.0%

        Fundraising Expenses
        3.7%

        Fundraising Efficiency
        $0.12

        Primary Revenue Growth
        3.1%

        Program Expenses Growth
        -1.4%

        Working Capital Ratio (years)
        0.44

        T

        • 1 vote
        #164.1 - Fri Aug 10, 2012 3:46 PM EDT
        Reply

        From Mad Men,

        Asked of Don Draper character--"How do you sleep at night?"

        Reply by Don Draper (Michael Lynch and Roger Chapin)--"On a bed of money."

        • 1 vote
        Reply#165 - Fri Aug 10, 2012 3:59 PM EDT

        This is absolutely disgusting. I hope the state wins and sends the money where it's supposed to go, the veterans.

          Reply#166 - Fri Aug 10, 2012 4:09 PM EDT

          I recommend helping out groups small, local and known to people when people ask me who I trust for charities at my Animal Law and/or estate planning seminars. I am starting my own non-profit now, probably calling it LEGAL TLC. It will be small, transparent, controllable, I have fed and state law licenses I wouldn't jeopardize for anything (esp after going to law school late in life after seeing horrible things and feeling helpless), I have been proven to have done this for decades, I've been written up in the papers, and for some reason, maybe because of the work I am doing with lawmakers, network TV started calling asking about stories (incl Service Animal problems, Pet Custody), etc.. Not bragging because heck, I can call the local stations until I am blue in the face to come to things like a protest at a pet store loaded with blood on its hands-nothing. But then a big network show will call (couldn't ethically bring the client on that they demanded, they wanted "semi-light" so my other suggestions were ng, even though I had a U.S. Congressman, other legislators, and even judges who called in a domestic violence/animal abuse coalition, etc. -lock em up before they move on to humans-they WILL. We'll come up with something for them but the nighttime reporter has less of a need for "semi-light" so we will see. The focus is on getting the legislative changes and public education needed to help animals and disabled folks with Service Animals. Maybe get more people to realize animal abuse leads to violence against humans almost 100% of the time (e.g. 85% for certain crims up to 100% for serial killers). So, even if you don't care about critters and like your veal, at least care about all these people who would not have been killed if someone stopped the perps sooner (incl little kids). The point is, people know what is going on in something like this. See what you can find near you and how open to conversation they are, for you to come over and meet them, see the place....

            Reply#167 - Fri Aug 10, 2012 4:34 PM EDT

            Carol Ryder: I had no idea how diverse this conversation would become. Kudos for your work with service dogs.

            I have always felt that pet custody should be decided based on "who picks up the poops". :) I read all the time that violent criminals have a history of critter abuse. I am in 100% agreement this should be dealt with on a much higher basis than a fine.

            Serial killers and violent criminals (rape is a violent crime) is about picking on a victim the perp views as defenseless over which he can have total power.

            Sounds exactly like what animal abusers are about.

            I encourage you to go for it. Hope to see your name in lights.

            Gotta tell ya' though, I get the feeling some animal rights people would like to outlaw the slaughter of animals for consumption.

            Makes me very nervous that I may have to turn to eating animal rights activists.

              #167.1 - Fri Aug 10, 2012 10:16 PM EDT
              Reply

              These charitys should be run by veterens people who would never disgrace themselvs for their own greed. People who do crap like this should be whiped and hung by their balls!! I know anytime someone has access to large amounts of money it seems it always turns out like this. There has to be a way to safeguard against this! For God sake are there no honest people left in this world?? God help us and especialy help the service members that deserve the funds!!

              • 1 vote
              Reply#168 - Fri Aug 10, 2012 4:45 PM EDT

              Maybe they should sign a agreement that if they are caught stealing they go to jail no trial straight to jail

                Reply#169 - Fri Aug 10, 2012 4:50 PM EDT

                Set up the stocks in front of the V.A. hospital and lock them in for a week.

                  Reply#170 - Fri Aug 10, 2012 4:53 PM EDT

                  Speaking of fraudulent charities, whatever happened to the Virginia Attorney General's investigation of the U.S. Navy Veterans Association (USNVA)? I first reported that organization to the state's Department of Agriculture and Consumer Services in 2007. In my opinion, that office basically gave me lip service and did little to investigate the organization. I had to make inquiries on my own that resulted in a lengthy letter from its alleged USNVA legal office that I was slandering a very worthwhile organization. I turned the letter and other communications over to the Better Business Bureau, Wise Giving Alliance, which put the group on their poor performance listing.

                  On February 23, 2011, ("Virginia suspects fraud by charity purporting to benefit Navy veterans", by Rosalind S. Helderman, Washington Post Staff Writer, B01) The Washington Post reported that the USNVA was collecting charitable donations under false pretenses. The Virginia Consumer Affairs, according to the article, turned the case over to, the Virginia Attorney General Ken Cuccinelli II (R) for possible criminal prosecution. In a direct quote from that article, "The group was run by a man who contributed heavily to political candidates across the country, including donations totaling $55,000 to Cuccinelli's 2009 campaign." (for Attorney General). According to the article, once the USNVA was exposed, Attorney General Cuccinelli II agreed to donate the money to legal charities.

                  After that, I have not seen or heard a word about the Association or the investigation in The Washington Post - or in any other news media. The USNVA was suspected of "...running a scam operation."

                    Reply#171 - Fri Aug 10, 2012 5:36 PM EDT

                    HAROLD.............................

                    Whatever you and whoever else did, it worked.

                    They have lost their status with the VA and Charitable Institution status and investigations revealed that every thing they did and claimed was fraudulent.

                    Just google United States Navy Veterans Association, look at wikipedia.....that's the quickest.

                    Good job, dude

                    United States Navy Veterans Association - Wikipedia, the free ... The United States Navy Veterans Association (USNVA) was a tax-exempt Veterans Organization that claimed to have a national headquarters in Washington, ... en.wikipedia.org/wiki/United_States_Navy_Veterans_Association

                      #171.1 - Fri Aug 10, 2012 10:30 PM EDT
                      Reply

                      These disgusting parasites are the lowest scum on earth. How dare they use the sacrifice of true heros to stuff their bank accounts with funds donated by good-hearted people? Every cent they have and every piece of property they own should be confiscated and given to honest charitable organizations. And, in addition, these scum should be put in jail for a lengthy time. And, at least two of these guys are "conservatives"? Wow! What does that say about their values? They stink more than piles of feces. As a veteran, I am so disgusted that there is no way to describe exactly what should be done.

                        Reply#172 - Fri Aug 10, 2012 7:22 PM EDT

                        If the accusations are proven, these people rank slightly above pedophiles. An appropriate sanction would be the removal of two limbs by IUD, and then commitment to a public welfare nursing home for the rest of their lives.

                        Sorry, @!$%# like this just pisses me off.

                          Reply#173 - Fri Aug 10, 2012 7:35 PM EDT

                          Two weeks in the public stocks.

                          No need to be shy.

                            #173.1 - Fri Aug 10, 2012 10:30 PM EDT
                            Reply

                            Everywhere I go now they are collecting money for some organiztion. The supermarket, the drugstore, mail solicitation, phone, e-mail. I cannot even tell what is legitimate. After hearing these stories It makes me so leery. You want your maoney to go to the veterans or the victims. This is a disgrace & I do not know how these people live with themselves. Wish the government would investigate them. If found fraudulent prosecute them!

                              Reply#174 - Fri Aug 10, 2012 8:27 PM EDT

                              If convicted the sentence should be drafted into the Army with six weeks of basic training and immediate service in Afghanistan until such time as they are unfit for service or cessation of hostilities, whichever comes first.

                                Reply#175 - Fri Aug 10, 2012 9:30 PM EDT

                                And if they get the money, an open and public accounting of where it goes should be available to all.

                                Since they are recovering the money in the name of the veterans, it should go to the veterans, and the lawyers should do this pro bono.

                                  Reply#176 - Fri Aug 10, 2012 9:37 PM EDT

                                  "The recommended standard is about 65 percent."

                                  This is something Congress needs to address and make it 80-95% MANDATORY be spent on the people the charity is supposed to help. But good luck getting RepukliCONs to do ANYTHING to help ANYONE except the rich.

                                    Reply#177 - Sat Aug 11, 2012 12:05 AM EDT

                                    I am a disabled Marine veteran and I never give to any of these BS charities. They are all a big scam and when a vet goes to one for help they are turned away. Someone needs to investigate Wounded Warriors and Semper Fi Fund they are scams as well. If you want to donate give to a vet directly.

                                    • 1 vote
                                    Reply#178 - Sat Aug 11, 2012 3:42 AM EDT

                                    Why no stories on MSN about lawsuit filed against Janet Napolitano for sexual discrimination against men?

                                    • 1 vote
                                    Reply#179 - Sat Aug 11, 2012 11:34 AM EDT

                                    Any money california gets they will keep.
                                    With a 16 billion dollar deficit they will begin suing illegal lemonaide stands eventually.

                                      Reply#180 - Sat Aug 11, 2012 4:34 PM EDT

                                      All these so-called Veterans Charities' are SCAMS and BS Groups. Even the charities such as the VFW, DAV and the American Legion need to be watched closely for signs of corruption. They are always looking around for $$$$ then turning around and kissing Republican Ass. Remember how they screwed John Kerry?

                                      After returning home from Viet Nam I went to University on the GI Bill and damn near starved to dealth even with 2 part time jobs. I then organized a Vets Club on campus to help Veterans coming back from the war. We needed a raise our monthly stipend($90.00) for food, rent, books and tuition. Congress said NO! And all the vets charities refused to help us, they were to busy drinking and fighting WW2 in their heards

                                      After that lesson we learned to ignore all these so-called vets charities and go radical. That worked.

                                        Reply#181 - Sat Aug 11, 2012 7:17 PM EDT

                                        "The business of America is business". Never think that it is anything different. You see someone on the street that looks like he or she could use a meal, buy them one. Give the person your coat or a blanket. Anyone who is stupid enough to think that the U.S. is a "Christian" nation needs mental help. Mitt Romney is running on a platform based upon his success at making money and not because of his Christian charity. Charities are about money and nothing more. Wake up saps and see America as it really is. As to helping Vets, sorry Vets you spent those years in the service of your country and now you are seeing reality. Nobody gives a damn. Spoken from a Vet.

                                          Reply#182 - Sat Aug 11, 2012 8:25 PM EDT

                                          Why should others make a profit at the expense of victims?

                                            Reply#183 - Mon Aug 13, 2012 5:54 PM EDT
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