Wounded Warrior Project Investigation: What CBS News Got Wrong

On Tuesday night and Wednesday morning, CBS News aired a two-part investigation (part one, part two) into the spending habits of Wounded Warrior Project, one of the largest and most visible veterans charities in the U.S. Citing tax documents and interviews with more than 40 former employees, the investigation found that the nonprofit spent $26 million on conferences, conventions and meetings in 2014—up from $1.7 million in 2010—and described the charity's spending as "out of control."

The report leans heavily on the account provided by Army Staff Sgt. Erick Millette, a veteran who suffered a brain injury and post traumatic stress disorder while serving in Iraq. After participating in Wounded Warrior Project's "Warriors Speak" program, Millette was hired as a public speaker for the charity, but quit after two years. "Their mission is to honor and empower wounded warriors, but what the public doesn't see is how they spend their money," he told CBS News.

Millette said that Wounded Warrior Project spent funds on mariachi bands, lavish hotels and $2,500 bar tabs while hosting massive staff events in the name of "team building." Other employees, who asked to remain anonymous, backed those claims, calling the charity's events "extremely extravagant."

"He rappelled down the side of a building at one of the all-hands events," one former employee said of Wounded Warrior Project CEO Steven Nardizzi. "He's come in on a Segway. He's come in on a horse."

And then there was CBS News' own assessment:

What caught our attention is how the Wounded Warrior Project spends donations compared to other long-respected charities.

For example, Disabled American Veterans Charitable Service Trust spends 96 percent of its budget on vets. Fisher House devotes 91 percent. But according to public records reported by Charity Navigator, the Wounded Warrior Project spends 60 percent on vets.

Where is the money going?

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It's a fair question to ask. Wounded Warrior Project has long been scrutinized for its spending habits, albeit in much smaller forums. Google "Wounded Warrior Project controversy" and you'll find plenty of articles, like this one, questioning the charity's actual contributions to veterans. Add in the recent allegations that Wounded Warrior Project is a bully in the nonprofit sector, and it becomes that much easier to question the charity's reputation.

But there are a few issues with the CBS report. For one, it references Charity Navigator's numbers as evidence of wrongdoing, but fails to provide context. The report correctly notes that Wounded Warrior Project spends 60 percent of its budget on vets, compared to 96 percent for Disabled American Veterans Charitable Service Trust and 91 percent for Fisher House—a significant difference at face value. But convert those percentages to dollar figures and they tell a different story:

In other words, Wounded Warrior Project spends three times more on veterans than those two organizations combined. Even if you factor out all other program expenses, Wounded Warrior Project still provided $42 million in grants and assistance to organizations and individuals in 2014, more than either Disabled American Veterans Charitable Service Trust or Fisher House spent on total program expenses. That's to say nothing of Wounded Warrior Project's enormous DRTV efforts, which are difficult to quantify in terms of pure impact, but have undoubtedly increased awareness for veterans issues. This kind of output requires enormous investments in fundraising, staffing and other areas—overhead expenses that are less "sexy" but no less necessary.

Donors might not like hearing that their money is being spent on day-to-day expenses rather than directly on veterans, but overhead is a necessity. "Here is what is so funny about this topic: If you didn’t have overhead, you wouldn’t have anything," said industry veteran Richard Perry in a recent blog post. "It is still mind-blowing to me to sit in a meeting with seemingly intelligent people and have them imply that overhead is bad. It must be pushed down to levels that make it impossible to run the organization and must be hidden in financial reports so ill-informed donors can’t find or discern where it is or how much it is. This is truly comical."

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Then there's the issue of the $26 million Wounded Warrior Project spent on conferences and meetings. That figure is almost indefensible if all of it went toward staff-only team-building events and office parties, but the charity lists $24.4 million of it as a program expense, $491,000 as a management expense and $1.2 million as a fundraising expense.

That could be a crafty way for Wounded Warrior Project to skirt the system in an attempt to inflate its program numbers, or it could be that some number of these events involved veterans. (Or, it could be both.) CBS News didn't specify, but one of its anonymous sources indicated that at least some of the events were for veterans, not just staff.

"I think they want to show warriors a good time," said the source. "I think they get these warriors to events, but where's the follow up?"

For what it's worth, Ryan Kules, director of alumni for Wounded Warrior Project, denied allegations that the charity spent $3 million on a four-day staff conference in Colorado, though he declined to provide CBS News with the actual amount.

Another issue with the investigation is this exchange, between CBS correspondent Chip Reid and Marc Owens, former director of tax-exempt organizations for the IRS:

"What was your biggest concern in reading these forms?" Reid asked [Owens], showing him the Wounded Warrior Project tax forms.

"That I couldn't tell the number of people that were assisted," Owens said. "I thought that was truly unusual."

"They do put some of those numbers on the website," Reid pointed out.

"Yes, they do," Owens responded.

But what's the difference?

"Form 990 is signed under the penalties of perjury," Owens said.

"You have to be careful on there," Reid said.

"That's right, you have to be certain," Owens said.

The implication here is that Wounded Warrior Project is not being entirely forthright in its reporting. But the charity has a four-star (96.00) accountability and transparency score from Charity Navigator, is fully accredited by the BBB Wise Giving Alliance, and meets transparency and governance standards at Charity Watch. More than anything, this highlights the problem with drawing conclusions based solely on tax documents.

The form 990 includes specific questions about a nonprofit's activities, and also a section that allows the organization to give explanations on those yes-or-no questions. As a publicly available document—and a legally binding one—it may not be the appropriate form for an organization to provide information on specific number of people served, as that information is often subjective. Many nonprofits would have difficulties accurately assessing and listing those numbers, so many of them don't. It's true that Wounded Warrior Project did not include this information, but neither did Disabled American Veterans Charitable Service Trust or Fisher House. The IRS approved their forms anyway.

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Finally, there's this quote from Erick Millette, the Army staff sergeant and former Wounded Warrior Project employee featured heavily in CBS News' reporting: "I began to see how an organization that rakes in hundreds of millions of dollars a year is not helping my brothers and my sisters. Or at least not all of them."

That last line is key. Wounded Warrior Project is huge, but it's unrealistic to expect the charity (or any charity) to provide assistance to every veteran in need. Could the charity be doing more? Maybe. As The New York Times points out, Wounded Warrior Project indeed spends far more on overhead than most other veterans charities. And with former and current employees lining up to file complaints about the organization's spending, it'd be foolish not to investigate further and push for greater accountability.

But Millette's stance diminishes the work the organization is doing—work that Millette has seen first-hand. “I don’t think I’d be sitting here having this conversation or be able to present my story, my troubles or how I overcame them without the Wounded Warrior Project,” he told CBS Boston in 2013. "I was one drink away and one bullet away from suicide just last November, and Wounded Warrior Project pulled me into their program and said 'you’re not alone, we’re going to take care of you.'"