Friday, August 10, 2012

Veterans Jobs Corps Bill, California sues veterans 'charity'

shinseki murray

Above is the Secretary of Veterans Affairs Eric Shinseki, Senator Patty Murray and workers (including veterans -- possibly all veterans, the VA didn't say) at the Port of Seattle Marine Maintenance Facility yesterday morning.  Senator Murray is the Chair of the Senate Veterans Affairs Committee and the event was to talk about S.3429 - the Veterans Jobs Corps bill.  This is the bill Senator Bill Nelson out of Florida introduced and that Senator Murray and Senator Chuck Schumer are co-sponsoring.

What would the bill do if enacted?

It calls for the VA to create a jobs corps for veterans that would provide employment opportunities "in conservation, resource management, and historic preservation projects on public lands and maintenance and improvement projects for cemeteries under the jurisdiction of the National Cemetery Administration; and as firefighters and law enforcement officers."  How will it be paid for?  The bill states, "There is available without further appropriations to the Secretary of Veterans Affairs to carry out this section, $1,000,000,000 for the period of fiscal years 2012 through 2017."  And where would the money go?  A limitation of "not more than five percent may be spent to administer the veterans job corps."

I was hoping we could grab the news coverage of it but there isn't any.  That's the Seattle Times, that's KOMO and all the Seattle stations (including the CW which is really just their CBS affiliate when it comes to news).  So the Secretary of the VA and the Chair of the Senate Veterans Affairs Committee join with veterans for a press conference in Seattle on a Thursday and no one in Seattle can cover it?  I'm scrolling through and I don't see any big event news wise -- a la "Big Fire at Old Mill!" -- that could have pulled all the focus.  Instead, looking at yesterday's coverage, it strikes me (non-Seattle resident) as a rather slow news day and I'm confused as to how the VA Secretary's visit would go uncovered?

Kamala Harris is the Attorney General in California.  Yesterday the AG Office noted that she "filed a civil lawsuit seeking the removal of officers and directors of Help Hospitalized Veterans, a California charity. The complaint alleges that those running the organization engaged in self-dealing, paid excessive executive compensation and engaged in fraudulent fundraising and other unlawful activities."  We'll note the press release in full in a moment.  I'm reading over the court filing right now [PDF format warning, here] and it notes spouses Roger and Elizabeth Chapin as well as Michael Lynch, Robert Beckley Jr., Thomas Arnold, Leonard Rogers, Gorham Black III, Robert Frank are those individuals named as defendants and Frank & Company P.C., Creative Direct Responses Inc. and Does 1 through 50 are among the entities named.

Tony Perry (Los Angeles Times) provides this background:

Help Hospitalized Veterans, established in 1968 to provide “gift packs” for service personnel in Vietnam, has long been criticized for the relatively small percentage of its funds that are used directly for support programs.
In 2011, the tax-exempt group reported revenue of $45 million, including $30 million in cash donations. But the watchdog group CharityWatch says only 35% went to programs for military personnel, compared with the 65% that many similar groups report.
Filings to the IRS and the attorney general’s office used “accounting tricks” to inflate the amount of money supposedly spent on military personnel, including arts and crafts kits for hospitalized veterans,  according to the lawsuit.

Ronald Grover (Reuters) notes the HHV head Roger Chapin "is also accused of diverting the charity's funds through a separate charity called Conquer Cancer and Alzheimer's Now. 
The former president was accused of paying himself more than $493,000 from the cancer charity. That charity received the money from American Target Advertising, a fund-raising firm run by conservative political fundraiser Richard Viguerie, who is not named in the suit."  And here's the press release from the California Attorney General's office in full:

Thursday, August 9, 2012
Contact: (415) 703-5837
RIVERSIDE -- Attorney General Kamala D. Harris yesterday filed a civil lawsuit seeking the removal of officers and directors of Help Hospitalized Veterans, a California charity. The complaint alleges that those running the organization engaged in self-dealing, paid excessive executive compensation and engaged in fraudulent fundraising and other unlawful activities.
The lawsuit also seeks to recover more than $4.3 million in funds improperly diverted from Help Hospitalized Veterans. Those funds were meant to support several programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. Instead, they were used to enrich the organization’s officers and fundraisers.
“The officers of Help Hospitalized Veterans improperly diverted money that hard-working and patriotic Americans donated to support injured vets,” said Attorney General Kamala D. Harris.  “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 lawsuit alleges 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 officers), and authorizing excessive executive compensation to the group’s former President (Roger Chapin) and its current President (Michael Lynch). 
The suit alleges Chapin received more than $2.3 million in excessive compensation during the final seven years of his tenure and excessive compensation to Lynch totaled over $900,000.  Chapin is additionally charged with self-dealing as a result of substantial diversions of the charity’s funds to entities in which he had a financial interest. Those diversions include loans Help Hospitalized Veterans made to a firm called American Target Advertising, which was making substantial payments to Chapin. American Target Advertising is a for-profit business (founded by Chapin’s close friend Richard Viguerie) that directs Help Hospitalized Veterans’ vast direct-mail fundraising operation.
The lawsuit further alleges that the nonprofit used increasingly-common accounting gimmicks to inflate the amount of income purportedly spent on providing veterans’ services while artificially minimizing the amount reportedly spent on fundraising. For example, Help Hospitalized Veterans’ use of one of these gimmicks resulted in decreasing its reported fundraising costs from 65 percent of total costs to less than 30 percent. As a result, the filings to both the IRS and the Attorney General’s office were substantially false. Donors and charity watchdog groups rely on both of those reported expenditure categories in evaluating a charity’s efficiency. 
Controversy around the performance of veteran’s charities like Help Hospitalized Veterans 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.   
The lawsuit seeks general and punitive damages, restitution, civil penalties and the removal of those officers and directors named in the lawsuit.
Named defendants in the lawsuit include: Help Hospitalized Veterans; its former president Roger Chapin (California); former employee Elizabeth Chapin (California); current president Michael Lynch (California); the following officers or directors of the charity: Robert Beckley, Jr. (Arizona), Thomas Arnold (Florida), Leonard Rogers (Florida), and Gorham Black (Florida); accountant Robert Frank and the company Frank & Company, PC (Virginia); and direct-mail professional fundraiser Creative Direct Response, Inc. (Maryland).
The Complaint alleges seven causes of action:  (1) breach of fiduciary duty (against Help Hospitalized Veterans directors and officers); (2) aiding and abetting a breach of fiduciary duty (against Frank and Frank & Co.); (3) engaging in self-dealing transactions in violation of Corporations Code section 5233 (against Chapin); (4) excessive executive compensation in violation of Corporations Code section 5235 (against Chapin and Lynch); (5) wrongful acquisition of property/unjust enrichment (against Chapin and his wife Elizabeth); (6) misrepresentations in solicitations to donors in violation of Government Code section 12599.6 (against Help Hospitalized Veterans, its directors and officers, and Creative Direct Response); and (7) unfair business practices (against all defendants other than Elizabeth Chapin and Creative Direct Response).
More than 2 million of the nation’s 22 million veterans live in California, the highest number for any state. Protecting these veterans, and active-duty military, from financial scams has been a priority for Attorney General Harris. This focus resulted from a survey of veterans who work in the Department of Justice that was undertaken to inform Department efforts on the matter.  Attorney General Harris and Holly Petraeus of the Consumer Financial Protection Bureau recently spoke at Travis Air Force Base to warn of financial scams that target military members.
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