A settlement calling for $2.5 million in restitution has been reached in a lawsuit that California Attorney General Kamala Harris had brought against a French Valley-based charity.
The agreement reached in People v. Help Hospitalized Veterans also calls for the resignation of its president and board of directors, according to a news release issued Friday by the Attorney General’s office.
In August 2012, the attorney general sued the charity’s executive officers and directors for allegedly improperly diverting funds intended to support programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. It was alleged that the executives used these funds to pay for fundraising and excessive compensation.
“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,” Harris stated in Friday’s news release. “I am pleased this settlement forces these officials to resign, in addition to paying restitution.”
Much of the restitution—$2 million—will come from the trust account of former HHV president and founder, Roger Chapin, who died in August. He was in his early 80s.
The lawsuit alleged that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on such things as golf memberships and a condominium for use by executives to fund raise, and authorized excessive compensation for Chapin, and its current president, Michael Lynch.
Help Hospitalized Veterans will also receive $450,000 from its charity director and officers’ liability insurance policy, on behalf of the defendant officers and directors.
Other board of directors named in the lawsuit were Thomas Arnold of Florida; Gorham Black of Florida; Robert Beckley Jr. of Arizona; and Robert Frank, head of Frank & Co. in Virginia.
There were no criminal charges brought against Lynch or the other directors.
However, Lynch has agreed to retire from his position as president of HHV and resign from the board. Also, after a transition period, he and the four directors will be permanently barred from acting as an officer, director, fiduciary or trustee of any California charity, according to Harris.
“The directors will resign on a rolling basis, to facilitate an orderly transition to new management. New board members will be subject to the approval of the Attorney General’s office,” the news release stated.
The scrutiny surrounding veteran’s charities such as HHV was brought to the public’s attention in 2007 by Rep. Henry A. Waxman who, as Chairman of the House Oversight and Government Reform Committee Hearings, held hearings into their fundraising practices and overhead.
At the center of one of those proceedings was Chapin, according to an article published in January 2008 by Forbes.
After having founded the organization in 1971, Chapin retired in 2009.
HHV, which currently bases its operations out of a warehouse at 36585 Penfield Lane in the French Valley area of Winchester, issued a statement Friday regarding the settlement, saying it planned to “continue helping veterans reclaim their lives.”
“The attorney general’s complaint and the subsequent litigation damaged HHV’s ability to help veterans,” HHV’s lead attorney, Hugh Quinn, said in the statement. “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.”
Quinn, a senior partner at Alexandria, Va.-based Fluet Huber + Hoang law firm, went on to say the agreement exonerated HHV and “was a tremendous victory for veterans and their families.”
Quinn said that the California attorney general’s office has agreed to contact the U.S. Department of Veterans Affairs to strongly encourage it to begin working with HHV as it had been doing before the complaint was filed.
“The attorney general realizes the damage her complaint against HHV did and seems eager to rectify the situation,” he said. “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 its work can get back up to speed.”
According to Quinn, the agreement with the attorney general does not include any admission of guilt or finding of any wrongdoing, fault, violation of law, or liability by HHV.
“HHV will now move on with its primary mission of helping veterans who are patients,” Quinn said. “As long as there’s a need, HHV will be there and we’re looking forward to reconnecting with veterans and their families and our supporters so that our work continues.”
In November 2012, HHV announced that as one of its outreaches, it had begun giving computer systems to wounded veterans.