Independent, 79-Page Report Rips Media, Board in Wounded Warrior Project Controversy

Just days after Wounded Warrior Project announced layoffs and a $100 million revenue drop, a comprehensive report found fault with the media, the charity's board of directors and virtually everyone else involved in the investigations into the organization's spending.

Doug White, former director of the masters of nonprofit management program at Columbia University and author of four books on nonprofits, spent months writing and researching the 79-page report independently and without compensation. Citing 63 sources and countless interviews, the report provides an exhaustive recounting of events and a thorough review of the media's reporting, the board's response and key sources' claims.

And it found flaws across the board.

In one section, White fact-checks 18 allegations that appeared in CBS News' and The New York Times' reporting, evaluating the accuracy of each and providing necessary context not supplied in the stories. These include:

• The New York Times reported that 18 former Wounded Warrior Project employees said they were fired for "minor missteps or perceived insubordination," and "at least half a dozen" former employees were fired for questioning the charity's spending or program effectiveness. White found that at least two former employees, Len Stachitis and Theresa Nichols, were part of a small, private Facebrook group for ex-Wounded Warrior Project employees. Erick Millette, the former employee whose testimony featured heavily in the media investigations, was part of this group. Records show that Stachitis and Nichols had each been fired from Wounded Warrior Project for misuse of donor dollars. Some former employees quoted in the New York Times story were fired for poor performance or ethical breaches.

• Daniel Borochoff, founder of CharityWatch, told CBS News that Wounded Warrior Project's $248 million surplus was a major concern. White countered that that surplus represented a year's worth of reserves, and that it is "standard practice for responsible organizations to set aside both restricted and unrestricted funds." He also noted that CharityWatch claims anything up to three years of reserves is reasonable, and CharityWatch and Charity Navigator each have in excess of one year of reserves, according to their most recent Form 990s.

• Former employees told CBS News and The New York Times that the organization spent wildly on air travel. White found that just 232 of 25,000 flights by Wounded Warrior Project staff, board members or warriors were business class or first class, and that half were the result of free seat upgrades.

In other sections, White raised several other issues with various elements of the stories:

• On Marcus Owens, former director of tax-exempt organizations for the IRS, who told CBS News correspondent Chip Reid his biggest concern with Wounded Warrior Project's Form 990 was that he "couldn't tell the number of people that were assisted":

Such information can be contained, although it almost never is, in a voluntary and supplemental narrative. Putting that aside, however, it’s important to remember that Reid asked Owens about his “biggest concern.” What was lost in what seemed to be feigned exasperation is that a formerly high-ranking IRS official—for 10 years Owens was the director of the IRS’s Exempt Organizations Division and works today at Loeb and Loeb, a Washington, D.C. law firm—could come up with nothing other than the absence of information relating to a question that is not asked on the 990. Nothing, apparently, was wrong with the information provided in response to the questions that are asked. Note that Owens didn’t mention joint cost allocation. Note, too, that he didn’t mention the amount spent on conferences.

• On Fisher House, one of the veterans charities used to highlight alleged inefficiencies at Wounded Warrior Project:

As for Fisher House, the other charity CBS News mentioned favorably, it too reports an unrealistically high fundraising efficiency—98 percent—and, although CBS News quoted criticisms of Steve Nardizzi’s salary of $496,415, running an organization with $248 million in expenses, the report did not note the $478,988 salary of the top executive at Fisher House, an organization with $41 million in expenses.

• On the timing of the stories:

While it appears that The New York Times and CBS News coordinated the timing of their stories, Dave Philipps, the reporter who wrote the Times story, says that was not the case. ... “I know to the news consumer it likely seemed like a coordinated one-two punch, but it was anything but.”

Still, it was Wounded Warrior Project's board that took the brunt of the criticism in the report. After the news stories broke, the board promised a "thorough financial and policy review." That review seemingly disproved many of the allegations made by CBS News and The New York Times, yet Wounded Warrior Project still fired CEO Steven Nardizzi and Chief Operating Officer Al Giordano just after it completed the review.

"When the stories broke, there was radio silence," White told us over the phone. "It's like they were on the other side of the moon. That was all board orchestrated. Neither Steve nor Al could defend himself, or explain himself. Then, they fire the guys. And the board comes up and says, 'Well, we did a report and everything's great. But we need new leadership.'"

White suggested that the board's slow response to the allegations and lack of support for the charity's leaders was more damaging than the actual news stories. He also said that, as part of his review, he sent 14 questions to each of the charity's board members. None responded, save one member who said he'd defer to the board chair.

"After an examination of the sequence of events and the evidence, it seems likely that the self-inflicted damage is more than the current board can handle," White concludes in the report. "As a result, its members might well consider a transition strategy to effectively replace itself. The honorable decision at this point would be for the board—the six members who were there when the firings took place: Roger Campbell, Justin Constantine, Richard Jones, Guy McMichael, Robert Nardelli and Anthony Odierno—to resign. This was not a senior staff problem. This was, and quite possibly still is, a board problem."

Many of the report's findings we've seen before, whether in Wounded Warrior Project's own review or in Charity Defense Council's report. But where those reviews were easy to dismiss over questions of objectivity—Charity Defense Council has ties to Nardizzi—White's is less so. Before launching his investigation, White had never spoken to Nardizzi or Giordano or had any involvement with Wounded Warrior Project.

It's possible that White, who has worked in and covered the nonprofit sector for decades, may be more apt to take a nonprofit's side over the media's, but that hardly seems the case. White's, it appears, is the most balanced and critical look yet at an issue that, clearly, warrants continued scrutiny from inside and outside the sector.

"Everyone has the right—obligation, even—to question how charities use their money, and the responses should be forthright and transparent," White writes in the report's introduction. "This report is not about protecting charity activity from criticism—it’s the opposite, actually—but to be effective, criticism needs to be fair and accurate, and it must be relevant to the issues attracting the criticism. Otherwise it is broad and cynical, and can’t stand up to the weight of discussion and analysis. That is why I wanted to look at what happened at Wounded Warrior Project."