Charity Used Bingo to Fund Its Payroll : Investigation: A Chatsworth organization that taught the disabled to ride horses is target of an inquiry by the state attorney general over violation of penal code.

The operators of a Chatsworth charity that for nearly two decades has helped disabled people learn to ride horses have acknowledged that they paid salaries using revenue from charity bingo games, which violates the California penal code.

The Institute of Equestrian Therapy, a tax-exempt nonprofit corporation, is the subject of a civil investigation by the state attorney general’s office and has stopped offering the riding classes amid financial difficulties and a bitter dispute between its two founders.

The problems came to light this month after the charity’s Board of Directors--despite the institute’s financial straits--approved a back payment of $72,000 to executive director and co-founder Jacques Fouchaux. The board also approved $13,000 in back pay for Gloria Hamblin, co-founder and program director.

Fouchaux said he will not keep the money but will use it to reactivate the charity in late January. Hamblin said she is willing to give up her back pay if doing so will help the charity survive.

Meanwhile, documents obtained by The Times and interviews with board members indicate that for several years the institute’s average annual payroll of about $100,000 was paid in part from charity bingo games conducted in Simi Valley.

Using bingo earnings to pay salaries is a misdemeanor carrying a fine of up to $10,000, said Peter Shack, a deputy attorney general in Sacramento.

Hamblin and Fouchaux both acknowledged that Simi Valley bingo revenue was used to pay salaries. They, and other organizers of the institute, say they were unaware there was anything illegal about the charity’s payroll practices.

But the payment scheme is just one of a complex array of problems faced by the institute, which has given hundreds of riding lessons a year to people with head injuries, autism, cerebral palsy and blindness.

Although Hamblin and Fouchaux have had many disputes over how to run the program and are now threatening to take legal action against each other, Hamblin said salaries did not become a sticking point until the charity ran out of money in 1990. Fouchaux continued to perform his duties without pay, and later, Hamblin said, she did likewise.

It was in June, 1990, that revenue from lucrative charity bingo games in Simi Valley were cut back by a new city ordinance reducing the number of bingo games that charities could hold from two a week to one. The change sent the institute into a downward spiral, according to Fouchaux and Hamblin.

In October, the board voted to sell the institute’s two-acre ranch in Chatsworth. Then, last month, a majority of the board approved the $72,000 in back pay to Fouchaux and the $13,000 to Hamblin.

The board also approved additional payment for Fouchaux of $3,000 a month from Oct. 31, 1992, through this year, according to minutes of the meeting provided by Hamblin and reports from board members.

The board did not take action to approve accrued back pay until after its funds had run out, an unusual course of action that may be subject to question under the state law governing nonprofit corporations, said Shack, the deputy attorney general.

Two board members--Hamblin and Thousand Oaks resident Greer Schell--opposed the board’s approval of the back pay and the continuing pay accruals. They argue that such financial obligations would absorb the profits from the sale of the ranch and gut the charity of its remaining assets.

The charity can expect to clear more than $100,000 from the ranch, reportedly worth more than $300,000, according to board members. Fouchaux said a buyer has been found who is willing to lease back the property to the institute for the riding lessons and that the ranch is in escrow.

Hamblin and Schell have since been ejected from the board by the other board members. They are trying to prevent the sale of the ranch, contending that Fouchaux, 65, plans to take the bulk of the proceeds and let the institute die.

In an interview last week, Fouchaux denied the claims that he is stripping the charity of its remaining assets, saying he plans to use his $72,000 in back pay to continue the institute’s charitable services.

“The institute is my creation, and I want to keep it running,” said Fouchaux, a former horse trainer from Tours, France.

Former board member Schell questioned whether Fouchaux can continue the institute without Hamblin, who had been teaching all the riding lessons until she was fired by the board.

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Fouchaux said the sale of the ranch is necessary to relieve the institute of the burden of mortgage payments of about $2,000 a month.

The issue of back pay emerged after the bingo revenue from Simi Valley diminished, and the institute could no longer funnel bingo funds into salaries. Simi Valley bingo records show that during peak years, 1988 and 1989, the institute was making more than $200,000 a year from the bingo games.

When asked about the payroll, Fouchaux acknowledged that Simi Valley bingo games were the chief source of funds for salaries for himself, his wife, Georgette, who was the institute’s bookkeeper until recently, and Hamblin.