SAN DIEGO -- Help Hospitalized Veterans is no stranger to controversy.
The California-based charity came under scrutiny four years ago, when its founder and then-president was hauled before Congress to answer tough questions about his management of millions of dollars in private donations. Roger Chapin vehemently defended his actions, and his group went on to raise millions more to support its mission of providing arts and craft kits to homebound and hospitalized veterans.
Now the organization is in trouble again in a case that watchdog groups say highlights the lack of oversight for the growing number of charities that have cropped up in recent years to help troops returning from war.
California's Attorney General Kamala Harris told The Associated Press on Thursday that her office is suing the charity based in Winchester, over alleged violations of state codes.
Chapin and his successor, Michael Lynch, grossly overpaid themselves with the consent of several board members, prosecutors say. The organization's directors spent lavishly on perks, such as $80,000 in golf memberships for board members, according to the complaint filed in Riverside County Superior Court.
Help Hospitalized Veterans reported annual revenue in 2011 was $41 million, including $30 million in cash donations.
"What makes this case so egregious is our military servicemen and women are willing to sacrifice their lives for our country and for us as Americans, and when they are in need of help and support we should give it to them and not manipulate charitable people and then personally profit from them," Harris said.
Chapin and others named in the complaint could not be reached for comment Thursday. The law firm representing Help Hospitalized Veterans did not immediately respond to a request by the AP for comment.
Help Hospitalized Veterans ranks among the top 1 percent of charities in the nation for the amount of funds it reports raising annually. Prosecutors say the group has reported more than $436 million in revenue since 2001. The group once was endorsed by retired Gen. Tommy Franks, who later distanced himself from the charity.
At the same time, it has ranked for more than a decade at the bottom of lists by watchdog groups that rate nonprofit organizations based on their financial management and abilities to use most of their donations toward their causes. CharityWatch says about 35 percent of Help Hospitalized Veterans' funds go toward programs to aid veterans. The recommended standard is about 65 percent.
During the 2008 congressional hearing, Chapin called himself the "the most honest person in this room." A year later, he retired with a nearly $2 million pension plan after the group's board members retroactively spiked his earnings to justify the inflated amount for his retirement, according to the complaint filed by California's Attorney General's office.
"It's surprising it's taken this long for something to happen with all the serious problems that were brought up in the (2008) hearing," said Daniel Borochoff of CharityWatch, which monitors the financial records of nonprofit groups. "What's more, this information did not filter down to donors."
But he added: "Mr. Chapin spun a complex web to confuse well-intentioned donors and make it difficult for regulators to untangle."
Harris said she made going after those who exploit veterans a top priority when she took office in 2011. Her investigators spent the past year building what she called a complicated case.
Help Hospitalized Veterans is one of more than two dozen organizations started by Chapin. Prosecutors said the group's board authorized loans and grants to Chapin's other organizations.
State officials are seeking the ouster of the current president and several board members. They also want at least $4.3 million that prosecutors say was squandered to be returned to a trust for the charity.
Harris said the action will allow the organization to do the work it was intended to do and help more veterans.
According to its website, the mission of Help Hospitalized Veterans is to support recreational and occupational therapies for homebound and hospitalized veterans, mostly by donating arts and crafts kits to help them with their recovery by stimulating their minds and using their motor skills. It also employs "Craft Care Specialists" who help veterans select and complete their craft kits.
Borochoff said the complaint sends a strong message to unscrupulous charities.
"It's about $2 billion that is raised on behalf of veterans charity, and unfortunately a lot of that's being wasted and not being used to help our veterans," Borochoff said. "It's really ludicrous what's going on. It's out of control, there's such great waste. It's a national disgrace that people are allowed to exploit veterans for their own personal financial benefit, or benefit of their company."
According to Charity Navigator, a third of the 50 military veterans charities it evaluates rate poorly and 20 percent either got a zero for their financial management or a "donor advisory" tag, which indicates the organizations are being investigated by authorities.
That compares to 2 percent for other kinds of charities, said Ken Berger, the president of the Washington-based group that evaluates 5,500 charities.