Four years after Congress roundly criticized the Help Hospitalized Veterans (HHV) charity for wasteful and unethical use of funds, California Attorney General Kamala Harris has filed a civil lawsuit seeking $4.3 million from the Riverside County organization.

“We must protect veterans, active-duty military and donors from scam artists who see them as little more than prey for their financial frauds,” Harris said in a prepared statement.

HHV was founded in 1971 and operates programs in veterans hospitals that attempt to augment other services for wounded vets by providing therapeutic products, like arts and crafts kits.

The lawsuit alleges that the charity improperly used funds for high salaries, overly-generous pensions, golf memberships and other perks. The attorney general alleged that key members profited from loans and self-dealing business relationships, and that HHV used “accounting tricks” to make it appear it was using more money on its programs than it actually was.

The American Institute of Philanthropy’s CharityWatch calculated that HHV was spending only 35% of its revenues on programs to help veterans, compared to 65% for charities doing similar work. The attorney general said the real number was under 30%.

In addition to demanding the return of allegedly illegally diverted money, the lawsuit calls for several board members and officers to quit.  

The organization’s founder, Roger Chapin, is in the CharityWatch Hall of Shame for his broad activities as a self-described “non-profit entrepreneur.” Chapin has founded more than 30 charities and advocacy projects during a 44-year career for causes that include Alzheimer’s, cancer and veterans.

Chapin was subpoenaed by Congress in 2007 during its investigation of financial inefficiency among the nation's veterans charities after refusing to appear voluntarily. He made a return appearance the next year and was fierce in his defense, saying his critics were ignorant about the cost of fundraising.

One of those critics was Congressman Henry Waxman who told him during the hearings: “It’s unethical. It’s wrong. It’s really a fraud against Americans who agree to give you their hard-earned dollars.”

Chapin was unapologetic. “If I could do better, I would,” he said. “I’ve tried television, I’ve tried radio, I’ve tried foundations, and the only things that works is direct mail.”  

It worked well for Chapin, who retired from HHV in 2009 with a $1.9 million payout.   

The tax-exempt group reported revenues of nearly $33 million in the fiscal year ending July 2011, according to Charity Navigator, a respected charity-rating organization that gives HHV just one star out of five overall. It gives the charity two stars for transparency and accountability but zero stars for its finances. 

–Ken Broder

To Learn More:

California Sues Veterans Charity for Fraud, Self-Dealing (by Ronald Grover, Reuters)

State Attorney General Sues Wounded-Veterans Charity (by Tony Perry, Los Angeles Times)

Congressionally Scorned Charity Leader Receives $1.9 Million (American Institute of Philanthropy)