Chief of Veterans Charities Grilled on Groups' Spending

By Philip Rucker
Washington Post Staff Writer
Friday, January 18, 2008

A congressional investigation yesterday uncovered new allegations of questionable spending practices at two veterans charities, including one that paid retired Army Gen. Tommy Franks $100,000 to appear in its solicitation letters using money the nonprofit raised to help soldiers returning from Iraq and Afghanistan.

At a raucous, three-hour hearing yesterday, House members questioned California entrepreneur Roger Chapin about his management of two charities. One charity, Help Hospitalized Veterans, spent hundreds of thousands of dollars in donations that were to help wounded soldiers on personal expenses for Chapin, executive director Mike Lynch and Richard A. Viguerie, to whom the charity has awarded millions of dollars in fundraising-consulting contracts, the hearing found.

The expenses included at least $340,000 in meals, hotels and entertainment; a $135,000 loan to Lynch for a divorce settlement with his former wife; a $17,000 country club membership; three airplane tickets to Hawaii; and a $1 million loan to Viguerie for a start-up initiative at his firm, several members of the committee said.

The second charity, the Coalition to Support America's Heroes, used Franks in its solicitation letters, the House Committee on Government Oversight and Reform found.

Rep. Henry A. Waxman (D-Calif.), chairman of the committee, said Help Hospitalized Veterans raised more than $168 million from 2004 to 2006. The charity spent a quarter of those donations on the veterans, with the rest going to direct-mail fundraising, salaries and other expenses, Waxman said.

Republicans and Democrats voiced outrage over what Waxman called "an intolerable fraud."

"Most of the millions they receive never reach veterans or their families," Waxman said. "Instead, the groups waste those contributions on bloated overhead costs and self-enrichment."

There are no laws that regulate how much charities spend on fundraising and overhead costs. There also are no requirements that nonprofit groups disclose such breakdowns in their solicitations. Several lawmakers signaled yesterday that they may introduce legislation aimed at helping donors better understand the finances of nonprofit groups.

Rep. Christopher Shays (R-Conn.) asked Chapin what would happen if his charities told donors how their donations were spent.

"If we disclose, which I'm more than happy to do, we'd all be out of business," Chapin said. "Nobody would donate. It would dry up."

Chapin said few people know how expensive fundraising can be.

"If I could do better, I would," Chapin said. "I've tried television, I've tried radio, I've tried foundations, I've tried corporations and the only thing that works is direct mail."

Waxman said Chapin evaded U.S. marshals trying to serve him with a subpoena to testify at a hearing in December, but has since cooperated by submitting internal records and sitting for a lengthy deposition last week.

Chapin's nonprofit groups are two of several veterans charities under scrutiny for their spending practices. The American Institute of Philanthropy, a leading watchdog group, has suggested that Chapin's groups are among 19 military-oriented charities that manage their resources poorly.

Some other veterans charities consistently received high marks from the institute and other watchdog groups.

The Washington Post previously documented the six-figure salary that Help Hospitalized Veterans pays Chapin, as well as more than $200 million it reported in federal tax filings to have spent on fundraising and public education campaigns from 1997 to 2005.

In one heated exchange yesterday, Rep. Elijah E. Cummings (D-Md.) questioned Chapin's compensation. In 2006, Chapin and his wife took home a combined $561,971 in salary, bonuses and pension contributions, the committee said.

"I've tried everything under the sun to lower our fundraising costs," Chapin said.

"How about reducing your salary?" Cummings said. "You appear to be doing quite well for yourself and your wife."

"By whose standards?" Chapin shouted back.

"The public thought this money was going to veterans, but instead it went to you and your wife," Cummings said. "This sounds like a great business for you and Mr. Viguerie, but a lousy deal for contributors and veterans."

As House members introduced the committee's findings, Chapin acknowledged them and offered impassioned defenses.

"Throughout my life I have endeavored to do well for my family while I try to do good for the world," said Chapin, 75.

Defending the millions of dollars his charity pays Viguerie's firm, Chapin said he does "the best I can."

Viguerie said direct-mail flyers, stickers and trinkets do "far more" than bring in donations, raising awareness of the problems some veterans face. He said that fundraising for a national charity is "an enormous operation." Mass-mailings are a costly way to raise money, considering high printing fees and postage as well as the limited yield on investment.

A committee member, Rep. Chris Cannon (R-Utah), expressed anger over his colleagues' harsh scrutiny of Chapin's charities.

"I am deeply concerned that we're whacking on groups that are supporting the military," Cannon said.

Rep. Diane Watson (D-Calif.) questioned expenses such as flights to Hawaii and the country club membership. Chapin said he later repaid the charity for the flights and said the golf club membership was a "perk" for board members.

Chapin then asked lawmakers about their own use of campaign funds, to which an angry Watson slammed her hand several times on the wooden dais.

"The commitment that you said you have made to veterans seems to be squandered," she said. "This is not a campaign. This is your organization that collects money to be able to give to veterans."

Diana Aviv, president of the Independent Sector, a national umbrella organization of nonprofit groups, said in an interview that donors have the right to "be ensured that the money will be used for the purposes intended."

Chapin said he did not see anything wrong with the Coalition to Support America's Heroes paying Franks $100,000. Chapin said the former Iraq war commander helped raise millions of dollars for the nonprofit group, which it otherwise might not have collected.

"I thought it was totally appropriate," Chapin said.

A spokesman for Franks said the retired general made several speeches for the charity in 2004 and 2005, as well as allowing his name to appear on direct mailings for about a year. He ended his support "when he learned that the percentage of money raised that was going to the troops was less than 85 percent, a figure which was then and remains today, his criteria for supporting charitable organizations," said retired Col. Michael Hayes, Franks's chief of staff.

Lynch told The Post this week that Help Hospitalized Veterans meets the Better Business Bureau's standards, but bureau President H. Art Taylor said yesterday that both Chapin charities do not.