GAINESVILLE, Fla. — The board of Wounded Warrior Project has fired its top two executives, aiming "to help restore trust in the organization" that began as a shoestring charity providing goodie bags to hospitalized soldiers and became an $800 million fundraising phenomenon.
Chief executive officer Steve Nardizzi and chief operating officer Al Giordano are out as the board cracks down on employee expenses and strengthens controls that have not kept pace with the group's rapid growth, according to a statement released late Thursday by a public relations firm specializing in crisis management.
The Wounded Warrior Project's directors said they hired outside legal counsel and forensic accounting consultants to conduct an independent review of the Jacksonville-based organization's records and interview current and former employees after CBS News and The New York Times reported in January about allegedly wasteful spending within the charity.
According to those reports, Wounded Warrior Project spends 40 to 50 percent of its money on overhead — including extravagant parties and last-minute, business-class air travel — while other veterans charities spend as little as 10 to 15 percent. Former employees accused the organization of profiting off the veterans; one said the project's spending is equivalent to "what the military calls fraud, waste and abuse."
A widely cited example was the group's 2014 staff meeting in Colorado, where Nardizzi rappelled from the tower of a 5-star hotel into a crowd of employees. The public relations firm, Abernathy MacGregor, said the meeting cost about $970,000, and "such events will be curtailed in the future."
The firm also pushed back against the criticism, saying the group's most recent audited financial statement shows 81 percent of donations were spent on "programming," not fundraising. The statement didn't provide details, but cited a "joint allocation" accounting rule that enables non-profits to classify fundraising as a service to clients as long as the event or material also is "educational" and includes a "call to action" beyond simply appealing for donations.
Invoking that rule, the nonprofit reported to the Internal Revenue Service that about 94 percent of the $26 million spent on conferences and events between October 1, 2013 and September 30, 2014, "was associated with program services delivered to Wounded Warriors and their families," the statement said.
According to the IRS reports, the charity took in $800 milliion over the last six years, while also paying some of the highest salaries, to many more people, than some other big nonprofits.
For the year ending in September 2014, Nardizzi earned $496,415 and Giordano $397,329, while at least 10 others took in more than $160,000 each. Compensation accounted for $32 million, or 13 percent, of the group's $248 million in spending that year.
The $26 million spent on meetings and conferences that year represented 10 percent of its budget, while 76 percent, or $189,558,100, went to veterans programs, the IRS filings said.
Charity watchdogs would consider that a respectable, though not overwhelming, share. However, almost $41 million of that programming amount was claimed as the "educational" component of fundraising requests; without it, programming accounted for only 60 percent of the budget. Charitywatch.org says its analysis concluded that Wounded Warriors spent just 54 percent on programs rather than overhead, for a C rating.
Other aspects of the group's finances that appear in its IRS Form 990 filings also raise questions.
In the year ending in September 2014, the charity paid $240,000 to Constellations Group LTD to contact potential donors in person. Wounded Warriors Project ended up getting nothing, though $23,000 was raised.
Also, the group has built up a seeming war chest in reserves worth $248 million, mainly held in investments. Charity watchdogs say it's OK to keep a rainy-day fund, but groups should strive to spend as much as possible on their mission.
To move forward with the changes, the board decided to remove Nardizzi and Giordano and create an Office of the CEO to oversee the nonprofit on an interim basis, led by board chairman Anthony Odierno.
Calls and messages sent to Nardizzi were not answered Thursday, and a message The Associated Press left at Giordano's home was not returned.
The organization was started in 2003 by John Melia, a former Marine who was injured in a helicopter crash in Somalia, to provide backpacks containing items like underwear, telephone cards and CD players for soldiers who may arrive at U.S. hospitals with just the clothes they're wearing.
"It is now time to put the organization's focus directly back on the men and women who have so bravely fought for our country and who need our support," Odierno said in the statement.
Contributors include Associated Press Writer Jeff Donn in Boston.