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Officers of Southland veterans charity fined $2.5 million

California Atty. Gen. Kamala D. Harris has announced a settlement with a charitable organization whose executive officers she sued for improperly diverting funds intended to support programs serving veterans and active-duty service members.

The settlement requires that all directors and officers of the Help Hospitalized Veterans charity named as defendants to resign and pay $2.5 million in restitution. The principal officers were accused of spending most of the organization’s donations on fundraising and what the state called “excessive compensation" for its executives.

Under the settlement of a pending lawsuit, the group's president, Michael Lynch, will be permanently barred from acting as a key official at any any California charity. Four directors -- Thomas Arnold, Robert Beckley, Gorham L. Black III and Leonard Rogers -- will also be subject to bans.

"Veterans face many challenges when they return home -- it's unconscionable that Help Hospitalized Veterans officials misused charitable money intended for those who served and have sacrificed for our country," Harris said in a prepared statement.

In August, Harris filed a civil lawsuit against the Riverside County organization, alleging that donations had gone to lavish salaries and pensions, self-dealing business relationships and loans, and perks such as $80,000 in golf memberships and use of a condominium. 

The suit had originally requested the recovery of $4.3 million. 

In a statement, the charity called the settlement a victory because it "does not include any admission of guilt."

"I'm very happy that the attorney general agreed that HHV and its board of directors had done nothing wrong and that HHV should continue its work," said Hugh Quinn, the charity's attorney. 

Help Hospitalized Veterans, based in Winchester, was established in 1968 to provide gift packages for service personnel in Vietnam, and it has long been criticized for the relatively small share of funds used directly for support programs.

In 2011, the charity reported revenue of $45 million, but the watchdog CharityWatch said that only 35% went to programs for military personnel, compared with the 65% that many similar groups report.

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