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Veterans Charity Sued by State over Alleged Misuse of Funds

Thursday, August 9th, 2012
Issue 32, Volume 16.

WINCHESTER - Executives at a Winchester nonprofit organization that has provided rehabilitation kits to former and active-duty military personnel for more than four decades are being sued by the state for allegedly overpaying themselves and trying to hide how much money was spent on leisure rather than veterans' programs.

California Attorney General Kamala Harris Wednesday filed a lawsuit in Riverside against Help Hospitalized Veterans, naming its president, Michael Lynch, a former president, Roger Chapin, and other executives as defendants.

The civil action is based on alleged accounting irregularities and diversions of funds that directly benefited the organization's fiduciary officers but not the organization.

"The officers of Help Hospitalized Veterans improperly diverted money that hard-working and patriotic Americans donated to support injured vets," Harris said. "We must protect veterans, active-duty military and donors from scam artists who see them as little more than prey for their financial frauds."

Calls to the organization were not immediately returned.

Prosecutors allege Chapin received $2.3 million in excessive compensation during his last seven years at the helm, while Lynch has been paid $900,000 more than he was due. In its statement on the lawsuit, the Attorney General's Office did not detail how compensation formulas were established, or Advertisement
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what constitutes "excessive."

According to the Attorney General's Office, the total funding loss to the organization from alleged illegitimate expenditures was $4.3 million -- which the suit seeks to recover from the defendants.

In addition to Chapin, his wife, Elizabeth, and Lynch the following other officers and directors were accused in the suit of wrongdoing:

-- Thomas Arnold of Florida;

-- Gorham Black of Florida;

-- Robert Beckley Jr. of Arizona; and

-- Robert Frank, head of Frank & Company in Virginia.

The allegations include breach of fiduciary duty, self-dealing, wrongful acquisition of property and misrepresentations in solicitations to donors.

According to the Attorney General's Office, the defendants used "gimmicks" to make it appear Help Hospitalized Veterans was spending less than one-third of its annual budget on fundraising activities, while the actual figure was closer to 65 percent.

The suit alleges charitable donations were spent on a condominium and golf memberships.

Help Hospitalized Veterans, founded in 1971, receives no taxpayer funding, relying on private contributions and grants.

The nonprofit organization provides service members in rehab with latch- hook rugs, poster art, crafts and other items they can use for small self-help projects that add to productivity while making the process of recuperation less laborious.



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