Editor's note: This article, originally published on April 22, was updated on April 25, 2014. The initial article had Ret. Staff Sgt. Dean Graham's name as Alex Graham. The article has been corrected.

Last week, President Barack Obama, Vice President Joe Biden, and Veterans Affairs Secretary Eric Shinseki welcomed wounded veterans to Soldier Ride, one in a series of cycling events that the Wounded Warrior Project organizes every year.

The White House rollout was one of 19 the Florida-based nonprofit plans to hold with amputee veterans, whom it equips with adaptive bicycles specially made to fit each veteran’s specific handicap.

The South Lawn kickoff on Thursday was the fifth for the Wounded Warrior Project and represents its ascension to a place in the national spotlight that other charities can only covet.

Left unmentioned at the media-friendly reception with the president was a lawsuit in the works against a disabled Indiana veteran who claims the Wounded Warrior Project didn’t do much for wounded vets with the more than $150 million in revenue it raised in 2012.

The defendant, Ret. Staff Sgt. Dean Graham — a veteran of combat operations in Iraq with diagnosed post-traumatic stress disorder — first criticized the charity in a blog post he made last year, with claims the Wounded Warrior Project spent little on wounded vets and paid senior execs lavish salaries. The post appeared on the now-defunct website for Help Indiana Vets, his own tax-exempt charity, which he says he had to shut down in the wake of the lawsuit.

That was a post heard around the world.

Graham’s claims quickly ricocheted around the Internet, with numerous blogs — including Veterans Today, a news website and benefits forum — publishing his article and amplifying a Google search that now pulls up 84,000 results for the phrase “Wounded Warrior Project scam.”

The charity subsequently filed charges against Graham in December that accused the vet of defamation and unfair business competition, alleging that his post confused donors and led to a $75,000 drop-off in contributions.

“I didn’t say anything false about them,” he maintained in an interview for IVN. “They want to send a message to every other person who wants to speak out against .”

Michelle Roberts, a spokesperson for the charity, said that Graham “had been saying things for quite some time. We ignored it until it got to a point where there was a final post... that was so egregiously false and defamatory that we began to get questions. It was creating confusion in the minds of the public.

“At that point we decided we couldn’t sit by and ignore it anymore,” she added.

IVN enlisted the help of three sources with years of experience in the nonprofit sector to conduct an in-depth review of the Wounded Warrior Project’s fundraising and expenditures over the time period in question. Two — including a former controller for the United Nations Foundation and distinguished Columbia University professor — went on the record.

 

A common claim that circulated in posts after Graham published his is that the Wounded Warrior Project spent just 3.5 percent of the whopping $154 million it raised on veteran programs and services in 2012.

Sources for IVN helped vet the tax filings to verify that this simply isn’t the case. The 3.5 percent comes from roughly $5.5 million the charity made in grants to nonprofits, but the bulk of its expenditures—more than $69 million—directly funded in-house programs and services in the course of that fiscal year.

Of the $69 million, the Wounded Warrior Project spent 27 percent on direct-assistance support that included representation for hard-to-get Veterans Affairs benefits, physical rehabilitation services, and combat stress recovery. Another 19 percent funded educational and vocational programs that the charity says helped vets acquire IT skills, enroll in college, and learn to navigate the workforce.

That year, the Wounded Warrior Project allocated the rest of the $69-million in-house budget for the Soldier Ride (8%), caregiver support (6%), backpacks for recovering veterans (3.5%), and in-hospital visits by other vets that it says cultivates a “hospital buddy” system (2%).

The value was less clear with $17.4 million the charity fronted for an alumni association and $1.1 million for another initiative that it said helped vets “communicate effectively.”

Taken together, that brings the total amount spent by the Wounded Warrior Project on programs and services to roughly $75 million. The expenditures amount to roughly 48 percent of more than $154 million in revenue it counted for the 2012 fiscal year.

With $95 million in program-related expenditures, that brings the total amount that the charity spent on services for vets during the 2012 fiscal year to roughly 61 percent — less than 73 percent it said went toward vet assistance but much closer to 58 percent, a number the Tampa Bay Times reported in an independent investigation last summer.

That beats the claim that the Wounded Warrior Project spent only a small amount on veteran programs.

But that doesn’t end the criticism. Some point to the money left over by the end of the fiscal year as evidence that the charity could be doing more for beneficiaries — and that it's using small donor contributions to put up lavish salaries and bonuses for senior executives.

 

Graham asked why the Wounded Warrior Project wound up with more than $90 million in net assets by the end of the 2012 fiscal year. The charity’s net assets in fact skyrocketed by nearly 200 percent from about $30 million in 2011, benefiting a restricted endowment.

By the same token, the vet said he financed his own charity with more than $27,000 in Veterans Affairs benefits and gave nearly all of it to the 50 Indiana-based veterans he claims he assisted. According to Graham, he provided cash assistance that came to include Wal-Mart and QuickPay gift cards and donations that he said helped struggling vets with rent.

“Everyone donates and thinks going to our wounded veterans, but when you have so much in net assets, it looks like they’re setting up an escrow account,” he told us.

Doug White, who teaches fundraising and board governance at Columbia University, dismisses the idea that charities should spend everything it brings in on beneficiaries.

“That’s a very bad idea,” he told us. “If the nonprofit doesn’t have the substructure to support its programs, then the programs will die.”

He went on to praise the charity’s 109-percent jump in revenue from 2011 to 2012, going so far as to bill it a “beacon of light” in a still-limping post-recession giving climate for nonprofits.

The Columbia University professor found it striking that the charity had so much in net assets on hand by the end of the 2012 fiscal year.

“It’s a great thing on the face of it,” he added.

Yet another accusation is that the nonprofit pays its executives salaries and bonuses that rival corporate sums. Records show that the Wounded Warrior Project paid 10 senior executives more than a combined $2 million in salaries, benefits, and incentive pay in 2012. Less than a fourth of it came out to $400,520 in bonuses for those officers.

CEO Steven Nardizzi walked away with $311,538, a third of it in bonus pay — an amount Charity Navigator says comes out to less than 1 percent of total operating expenses in 2012.

The base pay for the execs didn’t bother Calvin Harris, a certified public accountant and former United Nations Foundation controller, now president of Maryland-based Change Management. His own salary as onetime CFO for a vaccine-development nonprofit was roughly the same as the payout for the officer working in the same role for the Wounded Warrior Project.

What raised a flag for the consultant was the bonus pay, plus a $21-million payout to the charity’s 248-member staff — especially given that it paid more than $1 million to consult with a professional fundraising firm that year.

 

The Wounded Warrior Project justifies the compensation as equivalent to the salaries, benefits, and incentive pay comparable to what others receive for the same roles in the private sector, and all the more necessary to keep talent from shipping off.

But underlying all of that is a question that White calls the “holy grail” for nonprofits, businesses, and any service undertaking whatsoever: What’s the real impact for beneficiaries, and can it be broken down into hard, verifiable numbers for the public?

“When we talk about charities and how effective they are, we have to think really quantitatively,” he told us. “We have to question what we mean by effectiveness.”

The Wounded Warrior Project doesn’t doubt its effectiveness. The charity’s website lays claim to supporting 398 vets and their caregivers, placing 320 wounded veterans in jobs, and bringing out 156 vets to Soldier Rides in 2014.

For a nonprofit that Guidestar reports brought in close to $235 million in revenue in 2013, numbers like those seem curiously low. Still another question is raised by just how some of the services that it funded actually helped veterans recover from post-traumatic stress or rehabilitate from combat-related wounds.

Close to a fourth of the nonprofits that received $5.5 million in grants used theirs for recreational activities like amputee surfing, kayaking, fishing, and horse therapy. This follows lockstep behind $5.7 million for the Soldier Rides that netted so much publicity value at the White House South Lawn in April.

What’s unclear is what role, if any, cognitive therapy plays in activities like these likely to involve veterans with ongoing disabilities and therapy needs — a question made perhaps more urgent with a report by Forbes last year which found that approximately 22 vets commit suicide on average every day.

Asked whether recreational activities can benefit vets with debilitating disorders like PTSD, Carole Lieberman, a clinical faculty member with UCLA’s Neuropsychiatric Institute, says yes — but with a caveat.

“Sports and outdoors events—especially when they are enjoyed with other vets—can be very beneficial to mental health,” she said. “However, these cannot take the place of psychotherapy.”

To its credit, the Wounded Warrior Project appears to have spent a considerable amount of that $75 million from 2012 in direct program expenses on psychotherapy and rehabilitation services — roughly $20 million, in fact, according to our analysis.

It also made three grants with questionable impact for vets. This included $300,000 for a parade, $50,000 for a monument, and $25,000 for one nonprofit that forms said used the funds to “lobby and negotiate postal rates” for nonprofits.

Roberts didn't comment when asked how these expenses helped empower wounded veterans.

That latter lobbying expense is in addition to $1 million the organization reported spending to influence veteran-related legislation on Capitol Hill that fiscal year. The Wounded Warrior Project takes credit for several bills made law, including the Traumatic Servicemembers Group Life Insurance Act, which it says has paid service members more than $817 million in benefits since enactment in 2005.

Roberts told us the legislation was enacted to “bridge the gap” between the time when a vet suffers injury to the time benefits kick in — a hurdle for some who have to navigate the Department of Veterans Affairs’ eligibility criteria.

 

The Wounded Warrior Project certainly has the donor money — and connections — it needs to get a reception on the White House South Lawn every year.

It also doesn’t appear to be the nonprofit that critics — specifically those in the online vet community — say dupes donors into funneling money that never reaches wounded veterans. Charity Navigator gives it three stars out of four on its website. For their parts, our sources found much of what it says it does to be on par with what they’d expect from other large nonprofits.

That said, it was hard for us to get a grasp on the overall impact of the Wounded Warrior Project’s programs. Wounded vets continue to experience epidemic rates of suicide risk and homelessness, according to various reports, and it wasn’t clear whether millions of dollars added up to provide vets with lifesaving assistance.

Asked whether suing a wounded vet like Graham ultimately helped fulfill its mission — or hurt it — Roberts held to her statement that the Wounded Warrior Project needs to protect its reputation with donors. For his part, White said he agreed with their decision, calling it “weird” that one nonprofit like Help Indiana Vets would criticize another.

Even so, some wonder whether $75,000 in alleged losses — compared to $154 million in revenue captured in 2012 that rose to more than $200 million in 2013 — is enough to justify suing a wounded veteran with PTSD in the grand scheme of things.

But Lieberman thinks the question over nonprofit assistance itself is moot, given the enormous challenges that vets returning from combat operations face today. And we think she gives us the last word for this in-depth look at one of the nation’s largest veterans charities.

She says it’s the government that needs to be doing more for vets with ongoing problems, not charities — ironic for a White House that fronts the president and vice president for an appearance on the South Lawn.

“The government is not supporting vets with PTSD and other psychological problems well at all,” she told us, describing long waiting lists at understaffed hospitals like Walter Reed that are unable to keep up with demand for medical attention.

“Nonprofits are doing the best they can, but they form a patchwork quilt that cannot make up for the government’s failure,” she said. “It’s a disgrace.”

Photo Credit: Wounded Warrior Project