The American Kidney Fund has filed suit in Fairfax County against the estate of the executive director of the Bethesda-based charitable organization, who committed suicide in June, alleging that she "wrongfully diverted" more than $1.4 million into three bank accounts she kept secret from the fund.
Ellen Kay Hatch, 44, who had been executive director since 1974, was found with a gunshot wound to her chest June 29 in an empty Jacuzzi in her Herndon home, according to Fairfax County police. About a month earlier, she had been fired by the board of trustees of the fund, which had discovered the alleged misappropriation, the executive director of the fund said.
The American Kidney Fund has sued Hatch's estate and four of Hatch's daughters: Sherryl Sue Hatch, Donna Kay Hatch Kent, Carolyn Annette Hatch and Kathy Lynn Hatch. None of the daughters could be reached for comment. The suit against the daughters contends that they "conspired with Hatch to defraud" the American Kidney Fund.
The attorney for the daughters, Lawrence S. Hoffheimer, called the lawsuit against them "ludicrous." He added, "The daughters have nothing to do with this."
Wayne A. Gray, executive director of the kidney fund, said yesterday that Hatch solicited donations that were sent to a Dulles Airport post office box. He said the alleged misappropriations had gone on for "a couple of years."
"The American Kidney Fund name was used and mailings were sent out [by Hatch]," Gray said. "The fund gave no authority at all to that kind of operation."
He said that staffers at the kidney fund discovered the alleged misappropriation and reported it last spring to the board of trustees and Arthur Andersen & Co., the organization's accounting firm. The board confronted Hatch with the information in March and fired her in May after an audit, Gray said.
The attorney for Hatch's estate could not be reached for comment yesterday.
The kidney fund's 1984 annual report includes the results of an investigation into the alleged misappropriation, performed by Arthur Andersen & Co. Gray yesterday declined to release the report, but said it would be released by the end of the year. He said the organization had obtained extensions from various state regulatory agencies with which it is required to file its annual report.
The American Kidney Fund -- not to be confused with the larger, research-oriented National Kidney Foundation -- is a small, nonprofit organization that provides emergency financial aid to kidney patients and funds education and research projects. It was founded in 1971.
In 1983, the fund gave about $1.5 million of a $4.2 million budget directly to kidney patients, according to the fund's annual report. Most of the fund's money comes from direct-mail campaigns aimed at small donors. Few corporations are solicited, according to Gray.
Hatch was in charge of all fund-raising and grant programs for the American Kidney Fund, and managed all the organization's finances, according to documents filed in Fairfax County Circuit Court.
The fund's complaint also contends that Hatch set up three bank accounts into which she diverted "not less than" $1.42 million.
The accounts were kept secret from the kidney fund, according to the suit.
"The public was hurt and the fund was hurt," said Gray, who has been executive director since July. "We've been trying to put this organization back together. It's been just devastating."
The kidney fund's law suit against the four daughters alleges that Hatch gave them a house in Herndon in March 1985 "with the intent to . . . hinder and defraud" the kidney fund, which wanted to recover assets from Hatch.
The suit alleges that the daughters knew Hatch owed the kidney fund money "and conspired with Hatch to defraud" the fund.
According to the fund's complaint, the daughters then sold the house for $205,000 with the intent to defraud the kidney fund and prevent it from recovering the misappropriated funds.
"They [the funds from sale of property] don't belong to the kidney fund. The daughters have nothing to do with this," said Hoffheimer. " . . . The whole thing was tragic, and I think to go after the daughters is wrong. It's distressing." The lawsuit against the daughters asks that they return the proceeds of the house sale to the kidney fund.
The suit says the proceeds may have been "secreted by the daughters and . . . converted into other assets."
The suit further asks the court to grant a temporary injunction freezing the proceeds from the house sale.
Dr. James E. Patterson, who was president of the kidney fund board of trustees from 1980 to 1983 and still sits on the board, said yesterday that Hatch was a "good, hard worker who did so much for people."
Gray said the fact that Hatch "was well thought of within the non-profit community made [the alleged misappropriation] that much harder to believe."