Veterans Charity Claims Exoneration after Being Fined $2.5 Million

Tuesday, September 10, 2013

The charity Help Hospitalized Veterans (HHV) agreed to pay a $2.5 million fine and fire its board of directors, but to hear the charity tell the story, it was “exonerated of all charges” and will continue to carry on its good works.

“To say the least, I'm very happy that the attorney general agreed that HHV and its board of directors had done nothing wrong and that HHV should continue its work,” Hugh P. Quinn, the Temecula-based charity’s lead attorney, said in a press release.

That’s not exactly the way California Attorney General Kamala Harris characterized the settlement that, as usual, did not include an admission of wrongdoing. “It’s unconscionable that Help Hospitalized Veterans officials misused charitable money intended for those who served and have sacrificed for our country,” Harris said in her press release. “I am pleased this settlement forces these officials to resign, in addition to paying restitution.”

Harris sued the charity in August 2012, alleging that the board breached its fiduciary responsibility by “wasting its charitable assets on such things as golf memberships and a condominium for use by executives to fundraise, and authorized excessive compensation for the group’s former president, Roger Chapin, and its current president, Michael Lynch.” The complaint reportedly included accusations that the charity made false statements on tax filings and unlawfully diverted money to start another non-profit organization.

The American Institute of Philanthropy’s CharityWatch calculated that HHV, which pulled in $45 million in 2011, was spending only 35% of its revenues on programs to help veterans, compared to 65% for charities doing similar work. The attorney general said the real number was under 30%.

A CNN investigation found that most of the donations that trickled down to veterans was in the form of so-called “craft kits” for soldiers recovering in hospitals. They included instructions on how to make paper airplanes.

The charity will receive $2 million from the Chapin Trust and another $450,000 from the charity’s director and officer liability insurance policy on behalf of the defendant officers and directors. The state originally sought $4 million in restitution. Lynch and four board members named in the lawsuit will resign and will be “permanently barred from acting as an officer, director, fiduciary or trustee of any California charity.”

Chapin, the charity’s founder, retired in 2009 and died last month. He is in the CharityWatch Hall of Shame for his broad activities as a self-described “non-profit entrepreneur.” Chapin founded more than 30 charities and advocacy projects during a 44-year career for causes that include Alzheimer’s, cancer and veterans.    

–Ken Broder


To Learn More:

California Charity “Help Hospitalized Veterans” Pays $2.5 Million Fine (by David Fitzpatrick and Drew Griffin, CNN)

Vets Charity Accused of Illegal Accounting (by David Fitzpatrick and Drew Griffin, CNN)

Help Hospitalized Veterans Cleared Of Allegations (Press release from Help Hospitalized Veterans)

Attorney General Kamala D. Harris Announces New Leadership, Restitution for Help Hospitalized Veterans Charity (Office of the California Attorney General)

State Sues Major Charity to Protect Hospitalized Veterans from “Scam Artists” (by Ken Broder, AllGov California)

Leave a comment