Misuse of Funds? French Valley Nonprofit Responds to Allegations

A French Valley-based nonprofit that provides rehabilitation services to former and active-duty military personnel issued a statement today saying there is no foundation for the state's claims that the organization has misused funds.

"While disappointed in the recent accusations leveled against the company, Help Hospitalized Veterans looks forward to respond(ing) with facts and information that should change the current perception of HHV for those who are willing to listen," said HHV spokesman Hugh Quinn. "In the end, you don't last for 40-plus years as a nonprofit unless you're doing something right in helping the deserving veterans of this nation."

California Attorney General Kamala Harris that HHV executives have overpaid themselves and tried to conceal how much money is spent on leisure rather than veterans' programs.

HHV, founded in 1971, receives no taxpayer funding, relying on private contributions and grants. It 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, according to Quinn.

Current HHV President Michael Lynch and the nonprofit's former president, Roger Chapin, are named as defendants in the lawsuit.

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

The AG's office alleges 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 2002, Chapin received "retroactive salary increases" to inflate his retirement plan, according to the lawsuit.

In its civil complaint, the government lists multiple alleged breaches of fiduciary duty, including instances in which Chapin made loans from HHV accounts to cover start-up expenses for other nonprofit organizations, primarily Salute America's Heroes.

The suit also alleges charitable donations were spent on a condominium, excessive travel and golf memberships.

According to the lawsuit, the total funding loss to HHV from alleged improper expenditures was $4.3 million -- which the state seeks to recover from the defendants.

In addition to Chapin, his wife, Elizabeth, -- both of San Diego County - - and Lynch, the following other officers and directors are accused of wrongdoing:

-- Thomas Arnold of Florida;

-- Gorham Black of Florida;

-- Robert Beckley Jr. of Arizona; and

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

Allegations include self-dealing, wrongful acquisition of property and misrepresentations in solicitations to donors.

According to the government, the defendants used "gimmicks" to make it appear HHV was spending less than one-third of its annual budget on fundraising activities, while the actual figure was closer to 65 percent.

Quinn said HHV is committed to assisting veterans "recuperate from their maladies and injuries" and vowed that the nonprofit's staff would continue its work.

"HHV is extremely honored and humbled to be able to provide the kind of services, sponsorships and donations that have helped our veterans, and looks forward to continuing to provide such services in the years to come," Quinn said.

"Help Hospitalized Veterans shares and supports the California Attorney General's stated focus of making our veterans a priority, which is why for the past four decades, HHV has been dedicated to providing important goods and services to veterans nationwide," he said.