SAN FRANCISCO – Attorney General Kamala D. Harris on Friday announced a settlement in People v. Help Hospitalized Veterans, et al that forces all Help Hospitalized Veterans officers and directors named as defendants to resign and requires payment of $2.5 million in restitution.

In August 2012, Attorney General Harris sued the charity’s executive officers and directors for improperly diverting funds intended to support programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. Executives used these funds to pay for fundraising and excessive compensation.

“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,” said Attorney General Harris. “I am pleased this settlement forces these officials to resign, in addition to paying restitution.”

The lawsuit alleged that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on such things as golf memberships and a condominium for use by executives to fundraise, and authorized excessive compensation for the group’s former president, Roger Chapin, and its current president, Michael Lynch.

Under the settlement, Help Hospitalized Veterans will receive $2 million from the Chapin Trust. Chapin passed away in August. Lynch will retire from his position as president of Help Hospitalized Veterans and resign from the board.

After a transition period, he and the four directors named in the suit – Thomas Arnold, Robert Beckley, Gorham L. Black III, and Leonard Rogers – will be permanently barred from acting as an officer, director, fiduciary or trustee of any California charity.

The directors will resign on a rolling basis, to facilitate an orderly transition to new management. New board members will be subject to the approval of the Attorney General’s Office.

In addition, the charity’s director and officer liability insurance policy will pay $450,000 to Help Hospitalized Veterans in restitution, on behalf of the defendant officers and directors.

Controversy around the performance of veteran’s charities like Help Hospitalized Veterans was brought to the public’s attention in 2007 by Rep. Henry A. Waxman who, as Chairman of the House Oversight and Government Reform Committee Hearings, held hearings into their fundraising practices and overhead.

A copy of the settlement document is avaiable at www.oag.ca.gov .