Keeping Them Honest: Calif. A.G. reaches settlement with charity

Over the past couple of years, CNN Investigative Correspondent Drew Griffin has been checking on charities that say they want to help those in need, but in reality spend most of their money elsewhere.  Tonight, the California Attorney General’s Office is announcing a big cash settlement from one of those charities.

It’s called Help Hospital Veterans, which claims to help America’s wounded warriors.  The charity says it helps raise the morale of hospitalized veterans, by giving them craft kits, designed to challenge their minds and help pass the time while they recover.  But last summer, California’s Attorney General’s Office filed civil penalties against Help Hospital Veterans, seeking more than $4 million for misrepresentation in soliciting.  The state says the charity paid excessive salaries, perks and conducted illegal deals with donated money, according to the complaint.

“It is a shell game,” Brian Nelson, Special Assistant to California’s Attorney General, told our Drew Griffin in August 2012.

According to one of the charity’s filings, the president of Help Hospital Veterans, Michael Lynch got a $389,000 salary and there’s more. In its complaint, California authorities said money donated to the charity also paid for  two country clubs near Lynch’s home. The price tag: $80,000.

Donated funds also paid for a condominium near Washington, D.C. for the use of charity executives. And according to the complaint, while Help Hospital Veterans raked in $65 million in two years, according to tax returns, the charity misled the IRS and its donors about where the funds actually go.  $44 million went to fundraising and the charity said it spent $16 million on those craft kits, but the California attorney general’s office questioned the charity’s accounting.

And that bring us today and the settlement. Watch Drew’s update for the latest developments.

Watch Drew's original investigation: