Chuck Grassley” by Gage Skidmore

Yesterday, Senator Chuck Grassley sent a letter to the Senate Finance and Judicial Committees on the findings of his office’s investigation into the Wounded Warrior Project (WWP). The investigation has been ongoing for a little over a year.

WWP, as NPQ readers may remember, became embroiled in January 2016 in a scandal centered on the way money was being spent and accounted for in the organization. The board’s first response was to defend itself. It hired an independent reviewer and a PR firm (which was paid just under a half-million dollars) and terminated its two top executives, Steven Nardizzi and Al Giordano. Eventually, WWP hired its current executive, Michael S. Linnington, who has since cleaned house among administrative personnel and tightened up operations.

Grassley’s report makes it abundantly clear that he believes that the organization is in turnaround mode under its new CEO. (Though, Grassley wrote, it does merit continued monitoring.) The report places fault on the previous administration of the organization and the board—not for illegalities, but for a lack of proper stewardship of donor money and for overblowing the amount being spent on program services.

The WWP has repeatedly reported that it spent 80.6 percent of its donations on program services for veterans. After reviewing WWP’s IRS Form 990 and Consolidated Financial Statements, it became apparent that this percentage was inaccurately inflated by inappropriately categorizing certain services. For example, WWP’s 80.6 percent assertion includes tens of millions of dollars per year in donated media, such as free advertisements on television. These expenses are more appropriately categorized as fundraising solicitations for the organization. However, by including donated media in program expenses, WWP inaccurately reports that it spends a greater percentage of donor funds on program expenses that directly benefit veterans.

These inaccuracies add up to serious overstatements about WWP’s commitment to supporting veterans and understates the actual amount of money that WWP spends on program activities in pursuit of its mission.

In the end, this report comes to the conclusion that the real spending on program is more in the realm of 67.5 percent than the 80.6 percent claimed.

The report also faults the organization for not better supporting its rapid budget growth over the years with adequate policies:

WWP grew very quickly and initially failed to form an organizational structure to adequately manage that rapid growth. This lack of organization allowed for certain spending practices that broke faith with the donating public. Exorbitant plane ticket costs, expensive staff meetings, and excessive senior executive compensation were serious red flags.

We are not so sure this picture is entirely accurate. From our perspective, both components of the findings fit together under the organization’s lack of ethical construct and overemphasis on growth and accumulation. Overestimation of the programmatic value of its fundraising advertisements veiled this blind pursuit of growth from public eyes. A consultant counted lines of copy in a manner that was likely to overattribute fundraising costs as program costs—a practice that’s permissible but not always well regarded. Declarations to donors focused on the money being spent on long-term programs even as the mass of the sum went into a trust that spent nothing on vets, instead holding the funds indefinitely in a separate WWP-controlled 501(c)(3) for the stated purpose of eventual long-term support of veterans and their caregivers.

According to WWP advertisements, $65.4 million has been spent on long-term support programs. However, WWP has actually transferred $55.1 million to the trust—an amount from which not a penny has actually been spent, but rather is being held in reserve for future needs.

Again, these practices may not be criminal, but they do, as Grassley says, appear to break faith with donors and with the vets those donors believe they are helping. Further, the ways in which these sleights of hand were accomplished do not tell the story of an incompetent organization as much as a relatively savvy one, picking and choosing what it needed to be careful about (reporting, rather than actual spending) and generally lacking a mission-centering ethical compass.

Long story short: In our estimation, this was an organization in which corners were being cut to fit its narratives about itself. And the first place one would look to determine how such a culture is built and maintained is to its leadership. This brings us to that confidential review of the allegations being made in the press. Simpson Thacher & Bartlett performed the review, but the results were not available until now. It, too, is a bit confounding. After the firm reassures the board that many of the allegations made by the press were unjustified, it abruptly recommends terminating the executives.

As a result of our review, we propose several remedial recommendations. While we did not see evidence of any fraud, embezzlement, or misappropriation of funds, there is ample basis to terminate Messrs. Nardizzi and Giordano. Senior leaders, as ambassadors for the organization, serve as the cultural drivers and are responsible for setting the tone for the organization. The Board needs to have confidence in the ability of WWP’s senior leadership to perform these tasks, and during the course of our review, we encountered instances in which Messrs. Nardizzi and Giordano showed poor judgment and professionalism, particularly given WWP’s mission.

We could go on, but what would be the point? The report did not find that anyone stole money outright or that the salaries of the executives were overly high. It did find that this very large organization with enormous potential for good was being run in an off-balance, penny-ante way. At that scale, such lack of care constitutes a serious ethical deficit.

We have said it before and we will say it again: In the end, responsibility falls at the feet of the board, who even in this Senate report receive very little blame for a situation that cost the organization and America’s vets quite dearly in donor dollars. While matters moved quickly once the Simpson Thacher & Bartlett review was complete, in the eyes of the public, the damage had already been done.