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Leaders of the charity Help Hospitalized Veterans will pay back to the charity $2.5 million in restitution and $1 million in legal fees under a settlement reached with the California attorney general.
The agreement also forces the charity’s leaders to resign, including current president Mike Lynch and four of the five remaining members of the board of directors. Lynch and the others have agreed that they will not serve as a director, officer or trustee of any California charity for the rest of their lives.
Most of the restitution — $2 million — and the $1 million in legal fees come from the estate of HHV’s founder and former president, Roger Chapin, who died in August as the agreement was being finalized. He retired in 2009.
“Veterans face many challenges when they return home. It’s unconscionable that Help Hospitalized Veterans officials misused charitable money intended for those who served and have sacrificed for our country,” California Attorney General Kamala Harris said in a statement. “I am pleased this settlement forces these officials to resign, in addition to paying restitution.”
But an attorney for the charity sees the agreement as a “tremendous victory” for veterans and their families.
“The attorney general’s complaint and the subsequent litigation damaged HHV’s ability to help veterans,” Hugh Quinn said.
Quinn said the attorney general’s office has agreed to contact the Veterans Affairs Department to strongly encourage it to begin working with HHV as it had been doing before the complaint was filed.
“HHV is grateful for the attorney general’s understanding of the need to help our nation’s veterans and her willingness to quickly reach out to the VA so that [the work of HHV] can get back up to speed,” he said.
Since 1971, Help Hospitalized Veterans has provided more than 28 million therapeutic craft kits for hospitalized veteran and military patients worldwide.
The settlement does not constitute an admission or finding of any wrongdoing, fault, violation of law, or liability of any of the defendants.
Harris sued the charity’s leadership in August 2012, seeking the return of more than $4.3 million that was allegedly misused. Harris alleged that Chapin, the charity’s former president, received more than $2.3 million in excessive compensation over the last seven years of his tenure.
Prosecutors alleged that the board unlawfully approved retroactive salary increases for Chapin, “spiking” his salary for calculating his pension benefits — a lump sum of nearly $2 million when he left in 2009. The lawsuit also alleged the charity spent more than $80,000 for memberships at local golf clubs and bought a condominium in Virginia.
Board members Thomas Arnold, Robert Beckley, Gorham Black III and Leonard Rogers will pay $450,000 in restitution to the charity. Lynch has agreed to decrease his retirement benefit from the charity to no more than $160,000 a year. The lawsuit alleged he had received excessive compensation of more than $900,000.
The charity’s fundraising practices and expenditures were the subject of hearings by the House Oversight and Government Reform Committee in 2007. The nonprofit Charity Watch has consistently given HHV a grade of F for more than a decade because of its low percentage of revenue spent on actual program services for veterans.