SACRAMENTO, Calif. (Legal Newsline) - California Attorney General Kamala Harris last week filed a lawsuit seeking the removal of officers and directors of a state veterans charity.

The complaint, filed Thursday, alleges that those running Help Hospitalized Veterans engaged in self-dealing, paid excessive executive compensation and engaged in fraudulent fundraising and other unlawful activities.

Harris' suit seeks to recover more than $4.3 million in funds improperly diverted from the charity, which provides arts and crafts and other "therapeutic" kits to the state's more than 2 million veterans.

Those funds were meant to support several programs serving veterans and active-duty military, the attorney general said.

Instead, they were used to enrich the organization's officers and fundraisers, she said.

"The officers of Help Hospitalized Veterans improperly diverted money that hard-working and patriotic Americans donated to support injured vets," Harris said in a statement.

"We must protect veterans, active-duty military and donors from scam artists who see them as little more than prey for their financial frauds."

In particular, the suit alleges that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on things such as golf memberships and a condominium, and authorizing excessive executive compensation to the group's former president, Roger Chapin, and current president Michael Lynch.

According to the attorney general's suit, the nonprofit also used "accounting gimmicks" to inflate the amount of income purportedly spent on providing veterans' services while artificially minimizing the amount reportedly spent on fundraising.

Harris explained that donors and charity watchdog groups rely on the expenditure categories in evaluating a charity's efficiency.

The attorney general is seeking general and punitive damages, restitution, civil penalties and the removal of those officers and directors named in the lawsuit.

Those named defendants include: Help Hospitalized Veterans; Roger Chapin; former employee Elizabeth Chapin; Lynch; charity officers/directors Robert Beckley Jr., Thomas Arnold, Leonard Rogers and Gorham Black; accountant Robert Frank and the company Frank and Company PC; and direct-mail professional fundraiser Creative Direct Response Inc.

This isn't the first time the charity has come under scrutiny.

In 2007, the performance of the charity and others like it was brought to the public's attention by U.S. Rep. Henry A. Waxman, D-California.

Waxman, who was chairman of the House Oversight and Government Reform Committee Hearings at the time, held hearings into the charities' fundraising practices.

Roger Chapin testified in support of Help Hospitalized Veterans.

In response to Harris' suit, the charity posted the following statement on its website:

"While disappointed in the recent accusations leveled against the company, HHV looks forward to respond with facts and information that should change the current perception of HHV for those who are willing to listen," it wrote.

"In the end, you don't last for 40-plus years as a non-profit unless you're doing something right in helping the deserving veterans of this nation.

"HHV is extremely honored and humbled to be able to provide the kind of services, sponsorships, and donations that have helped our veterans, and looks forward to continuing to provide such services in the years to come."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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