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AC360 Special Report: The Battlefield at Home

Aired November 22, 2012 - 19:00   ET


VICTOR BLACKWELL, CNN ANCHOR: Good evening, I'm Victor Blackwell. Happy Thanksgiving. Here's what's happening.

Tonight, police in Israel say they've arrested a person in connection with yesterday's bus bombing in Tel Aviv that injured 24 people. We're told the suspect has ties to Hamas and detonated the bomb using a cell phone.

In Gaza City today, Palestinians celebrated the ceasefire that has held for more than 24 hours now. In a speech today, the leader of Hamas declared Israel had, quote, "raised the white flag." He also thanked Iran for its support during that eight day conflict.

And President Obama is spending a quiet Thanksgiving at the White House with his family and some friends. He spoke with ten members of the armed forces deployed in Afghanistan by phone to thank them for their service and wish them a happy Thanksgiving. The President also met with members of the Oregon State mens' basketball team. His brother-in-law coaches that team.

I'm Victor Blackwell. Up next, an AC 360 SPECIAL REPORT: THE BATTLEFIELD AT HOME.


ANDERSON COOPER, CNN HOST: Welcome to this 360 special report, "The Battlefield at Home." The challenges facing America's returning combat vets, including a tough economy, questionable charities and more. First, let's look at the charities, organizations promising to help wounded warriors, taking in tens of millions of dollars from well- meaning Americans.

What's happening to some of that money though? There are a lot of good charities out there, but after what we've found and what you'll see tonight, you may think twice the next time somebody asks you for a donation. And that is a shame, and that's why we're "Keeping Them Honest."

Starting with the group, the Disabled Veterans National Foundation, the DVNF. That's their seal you're looking at. According to their own tax filings they raised nearly $56 million in the past three years, a huge amount of money. Of that $56 million, we haven't been able to find even one dime that's gone directly to help disabled veterans.

Instead, the foundation sends tons of stuff, stuff they get for free, to veterans groups. Now the stuff they sent, it hasn't been even requested by these veterans groups. It's not even stuff the group can use, thousands of bags of coconut M&Ms, for example. The stuff the DVNF gets for free sits in boxes until the various veterans groups can figure out what to do with them.

What do you do with that, you know, 11,000 bags of M&Ms, hundreds of pairs of surplus Navy dress shoes this organization sent to a veterans group. The group that got the shoes actually tried to sell them at a yard sale to try to raise money for the things they actually needed.

CNN's Drew Griffin has tracked down the president of the DVNF to try to get some answers. Here's how that went.



WILKEWITZ: I really didn't think you'd do something like this. And we've agreed to talk to you and --

GRIFFIN: Nobody has agreed -- so here is the question.

WILKEWITZ: Question only in writing.


GRIFFIN: It's $64 million raised over three years and none of the money has gone to any veterans. Ma'am?

WILKEWITZ: Thank you so much.

COOPER: They haven't agreed to talk to him. He's been trying for years. Still no answer. And that's not all. The courts have been investigating the DVNF, we uncovered yet another charity that asks you to help veterans by opening your wallet but then uses only a very small percentage of it to actually help veterans. They call themselves the National Veterans Foundation but there's a connection to the DVNF.

They both use the same fundraising company and in both cases that's where the trail of your money seems to lead.

Drew Griffin is on that trail.

GRIFFIN (voice-over): The 27-year-old National Veterans Foundation would like you to believe it takes your money and puts it right back into its unique program, a national hotline to help veterans with anything. But CNN's investigation has found something the NVF likely doesn't want you to know. Most of your contributions went to pay the private fundraisers they hired.

DANIEL BOROCHOFF, CHARITYWATCH.ORG: Charity Watch gives the National Veterans Foundation an F grade. They're only spending 12 percent on charitable programs. And it's costing them $91 to raise $100.

GRIFFIN: Daniel Borochoff runs a non-profit charity watchdog group that grades charities based on those charities' own tax filings. Those filings show over the past three years the NVF has taken in $22.3 million in donations and paid out $18.2 million to its fundraisers Brickmill and the parent company Quadriga Art. But Borochoff says the filings also show a common tactic used by charities.

Part of the money paid Brickmill and Quadriga Art was designated in tax filings to pay for educational awareness promotional materials. Those solicitations for donations that tell you all about the struggles vets have and why you should donate? That's the educational awareness and promotion material.

BOROCHOFF: The accounting is somewhat confusing to the public and so they could get tricked if they look at these tax forms or look at these superficial reviews of charities on the Internet because what they're doing is they're calling that solicitation that makes you aware of the injured veteran a charitable program, but that's not what people want to pay for. People want to pay to offer substantial aid or assistance to injured veterans. And that's what's happened in this group.

GRIFFIN: The National Veterans Foundation is hotline is run out of fourth floor office in this building near Los Angeles's international airport. The group told us they wouldn't speak on camera. We decided to go see them anyway.

(On camera): Hey, Rich.




GRIFFIN: Just wanted to ask you one more time if we can chat.

UNIDENTIFIED MALE: As we said, we've told you, we've made our statements we've given you and we're not going to be doing any interview on camera.

GRIFFIN: So you won't tell me what you told me on the phone on camera? That you're disappointed in this Brickmill and Quadriga?

UNIDENTIFIED MALE: I believe if you read our statements it will cover everything that I've said and anything that you were -- any questions you have.

GRIFFIN: Well, it didn't. That's why I'm here. Can we take some --

UNIDENTIFIED MALE: We prefer not on this subject.

GRIFFIN (voice-over): Rich Rudnick is the operations director for NVF and over the phone told us the charity hired Brickmill and Quadriga Art in 2008 to start a new donations campaign. "We were told for two years it would be very expensive, then we'd be going into the black. That never happened," Rudnick told us over the phone. But in person, neither Rudnick nor its president, Shad Meshad, a man paid $121,000 a year, would tell us anything.

(On camera): Can we take some photos of the guys just answering the phone? This is -- I mean this is where the toll free line comes?

UNIDENTIFIED MALE: Yes, this is the toll free line but they are busy right now and we prefer not -- on this trip.

GRIFFIN: OK. All right. Well, listen, thanks a lot. And Shad -- he's not around?

UNIDENTIFIED MALE: He's not -- never here in the mornings. GRIFFIN (voice-over): Shortly after the door closed on our cameras, CNN received this statement from the National Veterans Foundation saying, "Knowing what NVF knows now, it would not have entered into a six-year contract with Quadriga and Brickmill."

The National Veterans Foundation says it's now trying to terminate that contract which doesn't end for another two years.

What does Quadriga Art say? Well, it did just what it was supposed to do, increasing the charity's donor base by 700,000 people. But even Quadriga Art admitted to CNN the fundraising efforts did not prove as financially viable as the client had hoped. Quadriga Art says it, too, now wants to end the contract.

And Despite Brickmill and its the parent company Quadriga Art getting paid more than $18 million, Quadriga Art says it actually lost money.

Daniel Borochoff says baloney.

BOROCHOFF: We really have to ask, why is this going on? What the point? Who's benefiting here other than the fundraising company?

COOPER: Drew Griffin joins me now, also Ken Berger, the president and CEO of Charity Navigator, a charity watchdog group.

I've got to say I just find this unbelievable.

And, Drew, I mean I applaud your reporting on this because this is outrageous. If people knew that these organizations -- first of all, that first organization has not sent any money directly to disabled veterans and this one -- how much did that guy say, 81 cents on the dollar, goes to the fundraising organization?

GRIFFIN: That's absolutely right. And that's what is heartbreaking here because behind all these donations are Americans who really want to help these veterans. That's why this is so disheartening. They're opening up their wallets, thinking they are doing good and putting money directly into the hands of a for-profit money that is making a killing off of this.

COOPER: And you go to that often, they have an American flag, they have a POW/MIA flag. I mean if they really cared about veterans, they should shut that organization down. If they're not happy with this contract that they stupidly signed with this fundraising company, shut it down. I mean how do they sleep at night? That -- I mean, I know you can't answer that question, but that's what I would like to know.

How do these people sleep at night? The kinds of contracts, Drew, signed by NVF and in the other instance, Disabled National Veterans Foundation, they're long, it seems like they're hard to break. So why did they go down that road? Is it simply to expand their mailing list? GRIFFIN: Here's what we've found out in our reporting. Some of Quadriga Art and Brickmill's contracts with really big charitable organizations are specifically detailed with money amounts included, all kind of contract obligations that both sides have to meet, very specific. These contracts with these two groups that we're talking about, they're rather loose, not too much specific. It seems like Quadriga Art is driving the legal paperwork here and these charities are simply -- I don't want to put words in their mouth, but they look to me like they've been duped.

COOPER: Ken, you monitor these charities. Do you agree that these are folks who've maybe been duped? Or -- I mean do you advise that charities sign these contracts with a marketing firm like Quadriga Art?

KEN BERGER, PRESIDENT AND CEO, CHARITY NAVIGATOR: We say avoid them like the plague. We see this happening over and over again.

COOPER: This is not a surprise to you.

BERGER: No. In fact, we have plenty of zero rated group, veterans, police, firefighters, the people who risk their lives in this country. And the charities that are associated with them, we see a preponderance of this in those kind of groups, that they sign these kind of contracts and whether it's consciously or whether that they're ignorant and they've made up of volunteers that are well intentioned, and they figure, well, even if it's 99 cents to raise a dollar, well, that's still a penny that I've --


COOPER: I mean, even if somebody is naive and -- well, I just wonder, I question how well intentioned anybody can be if they are spending 99 cents to raise $1. I mean that's just outrageous.

BERGER: It is. It's horrific. It's -- there's no excuse for it. And that's why our advice is to avoid these kind of arrangements like the plague. And if you're a donor, you should -- you should run with fear.

COOPER: How much should a charity be if their charity has a marketing firm? How much should they be paying out of $1 that they've raised?

BERGER: Well, we generally say 10 cents on a dollar is a reasonable amount. And the best charities, whether it's internal or through an external source, 10 cents on the dollar is what we see as the highest performance.

COOPER: I mean, look, there are so many good-hearted people. I mean the fact that DVNF was able to make $56 million over three years from people's donations show you how good-hearted and how much people want to help veterans. What should people look for before giving money? BERGER: Well, first thing is to make sure that the group is transparent. I mean one of the things right away we say is, if you contact a group, if you call a group and they refuse to talk to you, in any regard whether it's the media or an individual, be very afraid.

COOPER: I want to -- anybody out there who wants to give money should go to Charity Navigator and really just you'll get a sense of what other good groups that are out there that help vets or help police or firefighters or any other kind of charity.

BERGER: Absolutely. Yes.

COOPER: All right. Well, I appreciate, Ken, the work you're doing.

Drew, again, we're going to keep on this. I just it's unbelievable. It's mind-boggling to me.

Again, if you're looking for reputable veterans charities you can donate your money, go to our Web site,, or to We'll have a link to Charity Navigator on our Web site as well.

We should add that the National Veterans Foundation' contract with the fundraiser Quadriga Art, it ends next year and they say they do not plan on renewing it.

When our special report continues, a charity that gets at your purse strings by tugging at your heartstrings. After all, what could be more heart warming than reuniting combat vets and their service dogs. Well, there's a catch. A big one. And we'll tell you about it, next.


COOPER: "The Battlefield at Home," a 360 special report, continues. I want to introduce you now to a woman who's been making money by tugging at your heartstrings and playing to your patriotism. Her name is Terri Crisp. She runs a charity that claims to reunite military dogs with personnel they served with overseas.

And what could be more heartwarming and patriotic in than that? Well, she said the program called Baghdad pups and her charity SPCA International were all about helping the troops. This is what she told about her charity work.

TERRI CRISP, PROGRAM MANAGER, SPCA INTERNATIONAL: We've become real attached to the fact that military personnel love their animals and we want to do everything we can to keep them together.

COOPER: Sounds great. She sounds like a nice person, right? A noble thing to do, right? Well, that would be if in fact that is what Terri Crisp is doing. Instead, "Keeping Them Honest," Drew Griffin discovered that only a slim fraction of the $27 million she raised could even possibly have gone toward rescuing dogs.

GRIFFIN (voice-over): It is the televised appeal on CNN's HLN --

MEADE: So how is it that they fall through the cracks and get stranded there? That's unthinkable to me.

CRISP: It is unthinkable. And that's why SPCA International is making sure that these dogs don't get forgotten. And that they get brought home.

GRIFFIN: It turns out Ivy and Nugget were not abandoned. They were donated. Taken from their adoptive homes in Iraq, a military contractor tells CNN. After Terri Crisp asks for them. The military contractor, Reed Security, told CNN they had no idea Crisp would use Ivy and Nugget as fundraising tools in the United States.

For weeks, CNN has been trying to track down Crisp. First we were told by her spokesperson she was unavailable. This week, we drove to Crisp's rural home, down this dirt road in the foothills of California's Sierra Nevada, and found Crisp driving straight towards us.

(On camera): Miss Crisp, it's Drew Griffin with CNN. We'd sure like to talk to you.

(Voice-over): Terri Crisp, dog in hand, got out of her car and walked right up to our camera and acted like she was about to answer our questions.

CRISP: This is not the place to do an interview.

GRIFFIN (on camera): Well, what is the place to do an interview? Because we've been trying to get an interview with you for a long, long time. Specifically to ask you about Operation Baghdad Pups.

CRISP: Yes, Stephanie Scott, our director of communications, has communicated with you directly --

GRIFFIN: Yes, I understand that, but can you tell us why you came on CNN and basically lied to our viewers about Ivy and Nugget?

CRISP: You need to talk to Stephanie --

GRIFFIN: I -- I think you need to talk to our viewers and explain to us what Operation Baghdad Pups is all about because it appears to be just a fundraising effort for your lifestyle and Quadriga Art, quite frankly.

CRISP: Well, like I said, again, you just need to contact Stephanie. All of our interviews are coordinated through her. We've offered to do them with you.

GRIFFIN: You've been on our air, ma'am. You've told our viewers that Ivy and Nugget were abandoned military contract dogs which we've confirmed they were not. Basically lying to our viewers. And I know you got an outpouring of support and most likely money after that appearance. I mean our viewers feel like they -- and so do we, CNN feels like we were lied to.

Do you have any explanation for how that happened? CRISP: This, like I said, is not the time and place. We're happy to talk to you. Everything has to be coordinated through our director of communication.

GRIFFIN (voice-over): Crisp is part of SPCA International. A group raising millions of dollars with its sympathetic fundraising campaign called Baghdad Pups. According to these IRS tax filings, SPCA International has taken in more than $26 million in donations over the past three years, $23 million of that money has gone right into the coffers of the direct mail company Quadriga Art, not towards rescuing military dogs.

What has it done with the rest of the remaining $3 million? SPCA International says it rescued about 447 soldiers' pets from Iraq and Afghanistan. But Bob Ottenhoff, the president of the charity watchdog group Guide Star, says the numbers just don't seem to add up.

BOB OTTENHOFF, PRESIDENT, GUIDESTAR: I can't understand how to connect the dots between how much money is spent on fundraising to how much money is spent on programming and what the sources of those revenues are, and I also can't really measure the impact of this organization. What difference are they really making?

GRIFFIN: And this isn't the first time Terri Crisp has been at the center of a questionable charitable fundraising drive involving animals. In 2005, after Hurricane Katrina, she showed up on TV stations and networks, including CNN, claiming to be rescuing stranded animals as part of her animal rescue charity called Noah's Wish.

This is a former bookkeeper for Noah's Wish who wants to conceal her identity unrelated to her work at the charity. She says she watched soon after Katrina as the donations came pouring in.

UNIDENTIFIED FORMER BOOKKEEPER: There was cash. There were checks. There were cashier's checks. There were letters, heartbreaking letters, from kids, that instead of having birthday parties, they wanted all the money to go to Noah's Wish to help those poor little animals. On a given day we would have, oh, my gosh, easily, $20,000.

GRIFFIN (on camera): Wow.


GRIFFIN (voice-over): And, she says, suddenly Terri Crisp changed. Hiring her daughter and acting as if the money was hers to keep.

UNIDENTIFIED FORMER BOOKKEEPER: They did. They did. Terri at one time said that I've worked so hard for so many years doing animal rescue. I am entitled to this money.

GRIFFIN (on camera): Salaries?


GRIFFIN: For mom and daughter?


GRIFFIN (voice-over): The bookkeeper and others went to California's attorney general, which investigated. The Noah's Wish organization signed a settlement agreement with the state, agreeing to forfeit $4 million. And Terri Crisp was banned from being an officer or director of any charity for five years.

(On camera): Let me ask you about Noah's Wish which you're no longer with but I understand --

CRISP: And I can't talk about that either.

GRIFFIN (voice-over): Terri Crisp politely refused to talk about anything.

(On camera): When you were the director of Noah's Wish, did you pay yourself a six-figure salary, along with your daughter?

CRISP: I'm not going to talk about that.

GRIFFIN: You did, didn't you?

CRISP: I didn't pay -- I didn't set up my salary, it was done by the board of directors.

GRIFFIN (voice-over): Crisp maintains she is now just an employee of SPCA International, not a director, and by not talking, she's just following orders.

(On camera): So one -- I'll give you one more opportunity to explain why you came on CNN and basically lied about those two, quote/unquote, "military contract dogs."

CRISP: Well, like I said, we would be happy to do an interview, but we have procedures in place and everything has to go through Stephanie and we have been in communication with you. We've provided you with lots of information and you've taken a lot of that information and not reported it correctly.

GRIFFIN: Now's your chance, ma'am. Now is your chance.

CRISP: I would love to but I said, you know, I'm an employee of SPCA International --

GRIFFIN: How much do you make?

CRISP: Not a lot for what I do.

GRIFFIN: Well, can you give me a figure?

CRISP: No. I'm not going to reveal that. None of it. I can't answer any of your questions right now. Believe me, I would love to.

GRIFFIN: Drew Griffin, CNN, Placerville, California.

COOPER: Well, up next, we're going to follow the trail of money and coconut M&Ms to the source, and ask the supplier how he would thinks these are actually vets. We're "Keeping Them Honest."


COOPER: We're talking about the challenges in America's combat veterans face when they get home and some of the questionable charities raising money, they said to help. "Keeping Them Honest," thought it is an empty problem. Following the money and the donated goods. Remember those coconut M&Ms and those useless knickknacks we mentioned at the top? Well, the outfit that supplied them to the Disabled Veterans National Foundation also counts SPCA International as a client.

You heard about them a moment ago. When Drew Griffin paid them a visit, he found some items that could help vets. He also found a lot of useless so-called gifts in kind, including the candy that doesn't melt in your hand but might just leave a bitter taste in your mouth.

GRIFFIN (voice-over): Roy Tidwell runs Charity Services International. A for-profit warehouse and distribution center in Fort Mill, South Carolina.

ROY TIDWELL, PRESIDENT, CHARITY SERVICES INTERNATIONAL: We send out to hundreds of different organizations. We sent on behalf of our charities out to these organizations. We just handle the shipping.

GRIFFIN: Among his 50 clients are the SPCA International and the Disabled Veterans National Foundation. One supposedly helping pets. The other vets. And both, as we previously reported, taking in millions in donations while giving out almost nothing in cash.

What they do give away is stuff. Like this stuff J.D. Simpson showed us. The Disabled Veterans National Foundation sent his homeless veterans shelter in Alabama. He got hundreds of pairs of shiny Navy dress shoes. Some emergency blankets. Some broken furniture. And lots and lots of coconut M&Ms.

J.D. SIMPSON, SAINT BENEDICT'S VETERANS CENTER: Didn't have a lot of use for 11,520 bags of coconut M&Ms.

GRIFFIN: U.S. Vets, a charity in Prescott, Arizona, got an even stranger shipment from DVNF. Chefs coats and football pants.

TIDWELL: Makes a real -- GRIFFIN: Roy Tidwell says he arranged the shipments and insists both of these charities knew what he was sending and they wanted it.

(On camera): The group that got the chefs coat has no idea why they got chefs coat. Zero idea. And football pants?

TIDWELL: Well, they got them because --

GRIFFIN: You think there's a homeless veterans football team out there?


TIDWELL: Absolutely.

GRIFFIN: You do?

TIDWELL: Absolutely. There's 300-bed --


GRIFFIN: In Prescott, Arizona? What is it, a minor league of homeless veterans running around playing football?

TIDWELL: I don't doubt that homeless vets play football, basketball --

GRIFFIN: I'm sure you don't doubt it.


TIDWELL: Because you --

GRIFFIN: But if you know I've talked to those people. They said they didn't need this stuff.

TIDWELL: They didn't need it and they shouldn't have approved the inventory when they got it. It doesn't just show up.

GRIFFIN (voice-over): Actually, according to U.S. Vets, the vets group out in Arizona, those football pants and everything else did just show up.

"We did not request chefs coats, hats, football pants or anything from Charity Services International," the group tells CNN. And U.S. Vets says, "Officially requested DVNF and Charity Services International not to ship to us any more gifts in kind."

As for the coconut M&Ms, J.D. Simpson says he did get an e-mail that candy was on the way. He didn't think much of it. Until 11,000 bags. One-half ton of coconut M&Ms, arrived.

Chef coats and football pants and coconut M&Ms may be just about worthless to a bunch of homeless vets. But to the charities that sent them, they have real value. A value that seems incredibly inflated when they are written down on charity tax returns. Take the SPCA International. A group that's raised $27 million to supposedly help soldiers and their pets. The group's manager wouldn't tell us anything about the money.

CRISP: No, I'm not going to reveal that, none of it, I can't answer any of your questions right now. Believe me, I would love to.

GRIFFIN: But on its tax returns, we did learn about a certain shipment of animal medicines the SPCA International donated to an animal welfare group in Nepal. CNN was provided with the invoice. It shows an itemized list of drugs that the charity values at $816,000. A huge gift in kind. But when the gift arrived in Nepal, the charity receiving the drugs valued them for customs purposes at a mere $2500.

Tidwell arranged the shipment. (On camera): How can it be $816,000 here and $2500 there?

TIDWELL: The value that's placed on something according to law is placed according to the exit market. It would be what you would have to pay for it in the place that it's exiting. And the -- the fact that they might be able to purchase similar medicines made in a back room in Nepal for a far lower price doesn't change the value of the medicines that are U.S. produced.

GRIFFIN: But $816,000 versus $2500? That seems --

TIDWELL: Yes, that's outrageous.

GRIFFIN: Crazy, out of what.

(Voice-over): That didn't sound right. So we cross-checked the bill of lading against the International Drug Pricing guide which values drugs for nonprofit donation. According to our calculation, the charity in Nepal had it just about right. $2,600. Each pill worth less than 2 cents.

TIDWELL: How can I explain that? I can't. But I could -- I could go in and dig into it and try to explain it.

GRIFFIN: He never got back to us. But in an e-mail SPCA International told us it follows industry standards in accounting regulations in placing values on donated goods.

Lou Hingson, who runs a charity based in Pittsburgh called Brother's Brother, says he's seen many charities inflate values of gifts in kind. Why? To trick donors.

LUKE HINGSON, PRESIDENT, BROTHER'S BROTHER: That means that they can declare a lower overhead cost. They can claim more. That they're more effective to the public than the real dollars might indicate.

GRIFFIN: And here are the numbers. In its 2011 tax return, DVNF reported $29 million in cash donations, but also said it received, and then donated, nearly $9 million of gifts in kind. SPCA International received $14 million in cash donations and received and then shipped $5 million of gifts in kind. The only actual cash money involved in the gifts was the $500,000 Roy Tidwell was paid to arrange the shipment.

TIDWELL: It's a very simplistic answer to say, why don't they give away money?

GRIFFIN (on camera): But when they're collecting tens of millions of dollars of it, it seems to be a logical question.

TIDWELL: Well, my portion of it is getting goods to help people who are suffering. Goods that I can deliver for pennies on the dollar. And most places that get them are very appreciative.

GRIFFIN (voice-over): Even if it is 11,000 bags of coconut M&Ms. COOPER: Drew, it just defies logic to me that this guy can gone on the air, and say that he's providing a valuable service by shipping things like M&Ms to charities that clearly don't need or want them.

GRIFFIN: Doesn't make any sense to the state of South Carolina either, Anderson. And that's where Tidwell's company is based. The secretary of state's office is now investigating that business, specifically asking him to provide all the contracts that he has with these charities and spelling out what he's doing.

COOPER: Well, also because your reporting the Senate finance committee is actually opening an investigation into some of these charities, right?

GRIFFIN: Yes. And there's been a huge development there, it's focusing on the for-profit end of this, the fund-raising company connected with so many of these charities, quadriga art. We've told you about them before, the company that actually is making tens of millions of dollars in the charity business.

Well, the Senate Finance Committee which began looking into these charities after our reporting is expanding its investigation looking right at Quadriga Art.

Anderson, you know, that company has refused to talk to us. We've learned they're going to be called on to answer questions from the Senate investigators who want to know just what we all want to know -- how can so much money be donated and hardly any of it go to veterans, animals, or the people it was intended for?

COOPER: It's unbelievable. Drew, stick around.

Just ahead, what Drew found when he went looking for answers at a charity called Help Hospitalized Veterans. It claims its mission is to help sick and wounded warriors. But it's accused of misleading the IRS and donors -- where its funds actually go.


COOPER: A 360 special report, a battlefield at home is a window into how some charities are cashing in by exploiting the plight of veterans and those who wants to help them. The charity we're going to tell you about next does a good job raising money and great job paying the people thin.

As for actually helping the people, they're claiming to help America's Wounded Warriors. That's another question. Once again here's Drew Griffin:

GRIFFIN (voice-over): Help Hospitalized Veterans says it's all about raising the morale of our wounded and sick by handing out these craft kits in hospitals. Kits designed to challenge the mind and help pass the time while vets recover. But now California authorities are seeking to make their own recovery. The civil penalties of more than $4 million for misrepresentations in soliciting. California says this charity paid excessive salaries, perks and conducted illegal deals with donated money, all for the benefit of some board members and officers.

BRIAN NELSON, SPECIAL ASST. TO CALIFORNIA AG: It is a shell game. And what you -- I think what we've seen at the end of the day is that instead of focusing their intellectual efforts and energies and the energies of the corporation on getting money to help the folks who are in need of help, our injured veterans, instead they spend all of their energy, effort and time on these shell games to move money around in order to benefit themselves.

GRIFFIN: According to the charity's latest filings, the president of HHV, Michael Lynch, was paid a salary of $389,000, and that's just the start. In its complaint, California authorities say money donated for Hospitalized Veterans also paid for memberships in these two country clubs near Lynch's home. A cost of $80,000. Donated funds paid for this condominium near Washington, D.C., for the use of charity executives. According to the complaint, while Help Hospitalized Veterans has been raking in millions of dollars, 65 million in just the past two years, according to tax returns, the charity has misled the IRS and its donors about where the funds actually go. We know 44 million has gone to fundraising, the charity says it spent 16 million on these kits for veterans, but the California attorney general's office questions the charity's accounting.

NELSON: There have been a number of misstatements to the IRS and other -- regulators in order to suggest that the corporation is much more efficient than it in fact is.

GRIFFIN: And it's not the first time the allegations have been made. California Congressman Henry Waxman has been trying to sound the alarm on Help Hospitalized Veterans since 2008.

REP. HENRY WAXMAN (R), CALIFORNIA: As far as I'm concerned, they ought to be put in jail. It's so terrible what they're doing, using the plight of our veterans to make themselves rich, and playing upon the good, well-meaning Americans who want to help veterans and are willing to contribute to that kind of cause.

GRIFFIN: The state of California now wants all of the charity's board members fired, including the president Mike Lynch.

(On camera): Hello. Mr. Lynch.

GRIFFIN (voice-over): We approached Lynch at his rural home near his operation's headquarters. He told us we were the first to bring him the news of the California compliant and said he would have something to say the next day.

(On camera): All right, we'll see you tomorrow.


GRIFFIN (voice-over): In the morning, Mike Lynch was at his office, telling us as soon as he talks with his lawyers he'd be happy to answer questions.

(On camera): Mr. Lynch, Drew Griffin.


GRIFFIN: I'm sure you're aware of the serious charges being waged against you.

LYNCH: Not yet. I'm waiting to talk to the attorneys. So I haven't spoke to anybody about this.

GRIFFIN: Really?

LYNCH: So as I sit in as speak with Joe and them when they call me this morning, be happy to speak with you.

GRIFFIN (voice-over): Four hours later, Michael Lynch said this.

LYNCH: I have a statement that I have prepared. It says, "We hope that these unproven allegations will not diminish the more than 40 years of service HHV has provided to our nation's most valuable treasure, our veterans. HHV looks forward to the chance HHV looks forward to the chance to tell its story and hopes that this action will not impede its ability to provide vital support to hospitalized veterans nationwide." Thank you very much.

GRIFFIN (on camera): Well, what about -- I got to ask you about the money, though. I mean that doesn't answer any of the questions about the money that they're -- that's it? That's all you're -- you guys are going to say?


COOPER: Drew, so the California attorney general has filed a civil complaint against this group saying that the leaders in the charity engage in fraudulent fundraising and other unlawful activities. Have they responded to the complaint?

GRIFFIN: They have. Since walking away from us in his office, Michael Lynch and the other defendants in this complaint with the state of California have denied the allegations against them. The case moving through California's courts, and get this, Anderson, Help Hospitalized Veterans continues to accept donations.

COOPER: It's unbelievable. Drew, thanks.

"The Battlefield at Home" continues. Ahead, vets who've risked their lives for the country find themselves facing another battle on the home front. Their fight to get the disability benefits they say they're entitled to. Their doctors have vouched for them, the paperwork has been filed. So what's the holdup? Well, we're "Keeping Them Honest."


COOPER: Welcome back to "Battlefield at Home." We've been telling you in this special about charities accused of lining their own pockets at the expense of the veterans they purport to help. Well, now another "Keeping Them Honest" report about veterans having to fight for the disability benefits they say they're entitled to. They've risked their lives for their country but now find themselves doing battle with the very agency that's supposed to take care of them.

Here's Randi Kaye.

RANDI KAYE, CNN CORRESPONDENT (voice-over): Mike Rioux can't go to the grocery store without making a list even for just one item. He can't drive without gripping the steering wheel so hard his knuckles turn white. And he can't stand longer than 30 minutes because of severe back pain. This is Mike Rioux's life post-Afghanistan.

MIKE RIOUX, VETERAN: I need to discover who I am again. I'm not asking for help for the rest of my life. I want to feel like I matter.

KAYE: Mike's wife Maggie says her husband returned from war a shell of the man he once was. Gone was the fun loving, free-spirited, laid-back guy he used to be. War, she says, changed him. He still has ringing in the ears from explosions. He also suffers from vertigo, headaches and has terrible anxiety. We saw it firsthand during our interview. Mike was so anxious he could hardly sit still.

We met at Mike Rioux's mother's house near Phoenix, Arizona, where he, his wife and daughter have been living for the last year and a half. Maggie and their daughter share a bedroom, and Mike sleeps every night on the living room couch.

(On camera): What is it like for you at 51 to be sleeping on your mother's couch?

RIOUX: Ashamed. I feel low. I feel how can I support my family, let alone get them a house.

KAYE (voice-over): Mike doesn't have the money for a place of their own. He can't work. Fire fights and an IED blast in Afghanistan left him with a traumatic brain injury and post-traumatic stress disorder. Maggie isn't working either so she can look after him.

The money is running out, and they find themselves like hundreds of thousands of other veterans fighting a battle they never expected. One they frankly can't believe. They're fighting for benefits from the Department of Veterans Affairs.

RIOUX: I thought they were there to help us. You know, I -- if it wasn't for my wife, I'd be in the fetal position. I'd be curled up in a ball. I couldn't do it.

KAYE: Mike has been trying to get his disability claim processed for nearly two years. There has been lost paperwork, long wait times for appointments, and erroneous lab results. When Mike was prescribed some medication, it was for a bladder infection he didn't have.

(On camera): Mike first filed his claim in January 2011, right after he got back from Afghanistan. In August that same year, he learned his claim was finally in review. Then in December 2011 he was told to expect a decision by the end of the year. That deadline came and went.

(Voice-over): "Keeping Them Honest," we asked Veterans Affairs assistant Secretary Tommy Sowers why veterans who risked their lives for this country are waiting months, even years, for disability. Despite VA Secretary Eric Shinseki's promises for a quick turnaround on claims. (On camera): Secretary Shinseki said that his goal was to have claims resolved in no more than 125 days with 98 percent accuracy. Why hasn't that happened yet?

TOMMY SOWERS, DEPARTMENT OF VETERANS AFFAIRS: Well, again, this is -- this is a problem that has been decades in the -- in the making. We're transitioning from a paper-based system to an electronic system. And it's -- it is a huge amount -- it's a huge under taking and task.

KAYE: Is the current backlog of claims acceptable?

SOWERS: It is unacceptable, and we know that. We do.

KAYE (voice-over): Unacceptable, yet more than a year after Mike Rioux filed his claim, he was still waiting.

(On camera): We interviewed 16 other veterans for this story. All of them told us they waited many months to get a simple disability claim resolved. In some cases more than a year. Many of them also told us they weren't helped quickly enough with serious mental health issues related to PTSD. In one case, a veteran told us he'd called the VA suicide hotline and was told they would call him back. They never did.

(Voice-over): Right now, according to the VA, there are close to 900,000 claims pending. And of those 66 percent of them have been waiting longer than Secretary Shinseki's goal of 125 days. Worse, more than 228,000 claims have been pending one year or more. On average, the VA says veterans wait 256 days before their claim is resolved.

Paul Rieckhoff, the founder of Iraq and Afghanistan Veterans of America, says troops are tired of the rhetoric.

PAUL RIECKHOFF, IRAQ & AFGHANISTAN VETERANS OF AMERICA: There's a difference between the speak you get out of the bureaucrats in Washington and the reality of what you see on the ground. The guys and the gals on the ground don't care about how many bureaucrats there are, how many pilot studies there are, how much money is being spent. They care if they've gotten a decision back from the VA.

KAYE (on camera): There is a saying among veterans about the VA. You might have heard it. They say the VA's policy is delay, deny until we die. What is your response to that?

SOWERS: I would say that there are many veterans out there who love their VA care, that absolutely love it.

KAYE (voice-over): Assistant Secretary Sowers says the VA is on track to process one million claims this year and that it paid out nearly $5 billion in compensation last year. Adding to delays, the VA says many veterans are returning with severe and complex mental injuries and sometimes file incomplete paperwork. The backlog also increased when thousands of vets were finally allowed to file claims for Agent Orange and Gulf war syndrome. On June 27th this year, Mike finally got word his disability claim had been processed 18 months after he'd filed. But Mike was awarded only 40 percent disability, which works out to $659 a month. He got credit for his PTSD, but even though he'd been diagnosed with a mild traumatic brain injury by a doctor at the VA, he was dense denied coverage for it.

(On camera): But he has it, but it's zero.

(Voice-over): Like so many others, Mike and Maggie plan to appeal their disability rating, a process that could set them back another two years in getting their case resolved.

MAGGIE RIOUX, WIFE OF VETERAN: And he could have been killed. Every time I spoke to him on the phone, I thought this might be the last time I hear his voice. And our relationship has had to -- had to take a hit.

RIOUX: That's another dimension, yes, to our relationship.

M. RIOUX: You know, we -- I'm married to a different man now. I love him as much as I've always loved him, but he's different.

KAYE: Different in a way Maggie and Mike hope to make the VA understand. That $659 a month in disability certainly doesn't cover the price they've paid for war.

COOPER: And, Randi, what about Mike Rio and his wife Maggie, what's happened to them?

KAYE: Well, some good news actually for them and their case. Within days of our story airing, the VA actually turned around and awarded Mike full disability, and they are now working out details on how the family will receive more financial help.

What's more, though, is that some viewers who watched our story decided to personally help Mike and Maggie, and have offered them some small funds as well. So the couple is now beginning to process all of this and to try to find a house on their own.

COOPER: Well, we wish them the best. Randi, thanks. We'll be right back.


COOPER: That does it for this 360 special report, "The Battlefield at Home." Thanks for watching.