On ‘Wounded Charity: Lessons From the Wounded Warrior Project Crisis’ with Author Doug White
When a PR crisis threatened to take down one of the nation’s most well-known veterans organizations, author Doug White investigated the ensuing Wounded Warrior Project scandal and found a web of false allegations.
The Wounded Warrior Project (WWP) was once one of the most respected and popular charities in the United States. However, following a 2016 CBS News report, the organization suffered a massive public relations disaster over accusations of lavish spending on parties, travel and hotels. WWP has worked ever since to change its image and organizational structure by firing its chief executive officer and chief operating officer.
In his new book Wounded Charity: Lessons from the Wounded Warrior Project Crisis, author, educator, and philanthropy expert Doug White examines the origins of the Wounded Warrior Project scandal and the ensuing fallout while also offering insight regarding the lessons that can be learned. Citizen Truth’s Will Bacha spoke with Doug White about the specific circumstances of the Wounded Warrior Project scandal, the way the world of charities operate, and how to decide whether a charity is worthy of your support. Enjoy the interview below.
WWP was heavily criticized for the amount of money spent on operating costs as opposed to program expenses. Is that a fair and realistic way of evaluating charities?
There is an understanding among the public that you want to use the money as productively as possible for the purposes that the charity is supporting. So, if you’re supporting children, you want most of the money to go to children, clearly. The problem is that the people who operate the charity, the people who are running it, the people who are employed at the charity are also working towards its goal. It isn’t just the money that is used to buy the food that goes into the child’s mouth, it’s the delivery system that supports that process. Without it, that food wouldn’t get to the children. And so, we have to understand basically that that overhead is really meant to promote the programming. And to take overhead and say that ‘this is a waste of money’ is a complete fallacy. It’s unfair to charities, it’s unfair to the cause, and really it’s self-destructive.
So much focus is put on “programming,” or how much money the organization is spending on actual initiatives fulfilling its basic mission, especially given the fact that financial information such as 990 forms – which non-profits must submit to the IRS – are widely available on the internet. However, as we can see from the WWP crisis, financial information is often not the best way to properly evaluate a charity. What are some ways to do this more effectively?
The question is, what does program mean? The way the IRS has created this form, the 990, it has three categories of expenditures: one is program, the other is overhead and administrative costs, and the other is fundraising. Over the last couple of decades, since these forms have been online, some people think that the more that goes to programming, the better. So, all charities should be spending as much money as possible on programming, is the thinking. I don’t think that’s a fair way of looking at it.
To be fair to the IRS, the 990 was never intended to be an evaluative tool…In the late 1990s, this information became available online, and so more and more people were able to see it. What grew out of this was the evaluation process, and that evaluation process is based solely on what is on the 990, which is not a good thing. So, the evaluators today are using information that was never intended to be used as an evaluative tool. I don’t think the answer can be solely, or even at all, in financial terms. It has to be in a narrative. And the question is, how can we best help our community? And every decision that is made has to be made with that question as its predecessor. How can we help our community best? Will this activity help our community?
You would not determine the value of your potential spouse or potential partner solely on the basis of their 1040. You would like to know if that person’s responsible, but there are so many other factors. Many of those factors aren’t quantifiable. The old adage of something that’s measurable is important or it’s important if it’s measurable can fall apart a little because some things just aren’t that quantifiable. So rather than impose a number like ten on the value of a charity, based on the numbers, I would like to see a system where it’s more interactive with the donor, or with the public where you can put in your value system. You can say this is important to me.
Certain parties claimed that WWP spent exorbitant amounts of money on lavish retreats and alcohol-saturated conferences at luxury resorts instead of using this money to help veterans. Can you explain the reasons these accusations were unfounded? What is a reasonable amount of money for charitable organizations to spend on team-building and leadership activities such as retreats and conferences?
While it is true that WWP’s spending on conferences and meetings for all programs had increased dramatically – in 2010 the amount was $1.7 million and by 2014 it was $26 million – the news stories were wildly misleading. Most of that money was actually spent on programs. In 2014, 94 percent of the $26 million conference budget went to program expenses.
Was a lot of alcohol consumed at these parties at WWP’s expense? Was there, as some claimed, a $2,500 bar tab? Hardly. WWP’s alcohol policy prohibited alcohol at program events and required staff members not to drink at program events. The policy also prohibited the organization from paying for alcohol at All-Hands events. Of $251,000 of expenses relating to the All Hands meetings charged to WWP credit cards in 2014 and 2015, a total of two alcoholic beverages were purchased and charged to WWP by employees – about $20. “Overall,” according to Al Giordano, WWP’s former COO, “alcohol was paid for by WWP in extremely limited situations, such as galas, fundraising events, and board meetings. Any improper purchases, such as the unauthorized purchase of alcohol, would be noted in an employee’s review and, depending on the severity of the infraction, could lead to his or her termination. How could it be otherwise? Excessive alcohol consumption is directly linked to suicide efforts, one of the biggest problems veterans face. Not only is a claim that WWP condoned alcohol consumption one of financial excess, it irresponsibly attacks efforts to realize the mission.
The New York Times reported, “Former workers recounted buying business-class seats and regularly jetting around the country for minor meetings.” But that was not true. WWP’s policy was and continues to be that, with some exceptions, no first-class travel is authorized. Almost all of the paid air travel was in economy class. During the years prior to 2016, less than 1 percent was booked for employee travel in business or first class. Of approximately 25,000 flights over the prior several years, 232 were taken in either business-class or first-class seats – and over half of those were free upgrades.
The broader accusations on spending – that it “skyrocketed since Steven Nardizzi took over as CEO in 2009,” that “Nardizzi doubled his spending on fundraising and increased it an average of 66 percent every year” when he was the CEO, and that WWP “spent more than $34 million on fundraising in 2014” – were isolated and inaccurate. Revenues increased by 66 percent annually, fundraising costs increased by 47 percent annually (not 66 percent), and programming expenses increased by 64 percent annually – but administrative costs, as a percentage of the budget, remained relatively flat.
According to Nardizzi and Giordano, neither ever received a complaint from an employee regarding how money was spent.
One problem people had with the Wounded Warrior Project was the reserve of 248 million they were wasting by “sitting on it.” Can you explain the importance of reserves for charitable organizations? Is this amount too large or typical?
The criticism of putting money aside for the future is folly. It’s short-sighted, it’s cutting off your nose to spite your face. That kind of criticism is ignorant criticism. One of the bigger programs that Wounded Warrior Project was going to put together was a long-term care trust. A separate 501c3, a separate organization. The idea was to build that into a billion-dollar trust. Why a billion dollars? Well, they had done a calculation based on actuarial tables, based on inflation, and based on the number of veterans that were coming home from these post 9/11 wars and saying if we’re going to do our job the best we can, and we’re going to fit into, not replace, but fit into what the Veteran’s Administration is doing, we’re going to need a billion dollars over the next several generations.
One of the major figures in this story is Richard Jones, a CBS executive who also happened to be on the board of the Wounded Warrior Project. He was in charge of the board’s audit committee and was in charge of the report that goes to the IRS. This connection is crucial to the story, as CBS News was the first major news outlet to run a story criticizing the organization which led to the ensuing Wounded Warrior Project scandal. This story set the tone for the coming crisis and scandal and was one of the major reasons that Giordano and Nardizzi were fired by the charity’s board of directors.
Can you tell me a little bit more about Richard Jones and the reasons he might have benefitted from the firing of Giordano and Nardizzi?
Here’s a guy in charge of making sure that all of the financial information being sent off to the IRS is correct who is also a senior executive at the news organization that is criticizing the money that is being spent at this organization. On top of that, during that first month, when another organization, Simpson Thatcher, was doing its investigation of the organization, he was involved in the interviewing process with employees. He’s helping investigate the evaluation of something he was in charge of.
Richard Jones also had a close relationship with the United States Department of Defense and was very involved with a charity called IVMF, the Institute for Veterans and Military Families.
Now IVMF had a very contentious relationship with the Wounded Warrior Project, and a lot of smaller charities did. The other issue is that he [Richard Jones] was in very close contact with the Department of Defense. In other words, he had good relationships with the military and the military didn’t like the television ads that Wounded Warrior Project was running.
In early 2016, New York Times Reporter Dave Philipps was working on a story about the Wounded Warrior Project which seemed like it would initially be a public interest piece discussing the work of this popular charity. However, everything changed when CBS News started researching its own story about the Wounded Warrior Project, one with a decidedly different tone. White believes that Richard Jones was at least partly responsible for encouraging CBS News to present this story to the public.
I feel Richard Jones wanted to come on to the board of Wounded Warrior Project to neutralize, to neuter WWP. I feel that. And I feel that when he heard about The New York Times piece he got CBS News interested in this story. After that, Dave Philipps changed his entire story because CBS came onto it. And what happened here is that Dave was doing a story without any real, immediate hook to it. But then CBS got wind of the story and so they wanted in on it. They started to move the speed up a lot. I feel that Dave felt pressured to get his story out, and when he found out what the CBS angle was he wanted to have as salacious an angle as possible because if he had only written what I told him, then it wouldn’t have been a very interesting story relative to a scandal. My view is that the timeframe for the story was put in place by Richard Jones, and this was a perfect opportunity to get rid of Steve and Al. It’s my opinion that Steve’s and Al’s, fates were written long before this came out. When this came out it gave the board the perfect opportunity to get rid of Steve and Al so that it could become the organization it is today and that is one that really kowtows to the defense department, does not put in those raw ads and basically looks at itself as an adjunct of the defense department.
White claims that the worst part about the defamatory accusations against the Wounded Warrior Project could not have been farther from the truth. Not only was Wounded Warrior Project heavily invested in the community of United States Military veterans and working efficiently to provide these individuals and families with necessary programs and assistance, it was doing so better than the majority of the charities in the United States.
Part of the irony of this whole story, this whole controversy of spending money, not being transparent, not showing impact… of all the charities in the United States, Wounded Warrior Project was doing all those things better than almost any other charity. The criticisms that they got were the exact opposite of what they were actually doing wrong. In fact, some of these people who are criticizing WWP, such as individuals from the Institute for Veterans and Military Families, are guilty of what they are accusing WWP of.
A key figure in the Wounded Charity story is Erick Millette. Millette is a veteran who sustained multiple physical injuries and PTSD during his combat tours in the Middle East. After becoming involved in the Wounded Warrior Project Millette swiftly rose through the ranks, becoming one of the organization’s top speakers and presenters. However, sometime in early 2016 Millette began to become dissatisfied with the organization and was featured heavily in the CBS News Special that ultimately brought about the downfall of Nardizzi and Giordano.
Did a lot of former employees, such as Erick Millette, have personal vendettas against WWP and want to take down the organization? Could you discuss this a little further?
He’s the one that kind of rounded up the sentiment against WWP among the disgruntled employees and former employees. And there was no indication as to why because he had been very successful and lauded within the organization. When I wrote to him [Erick Millette], he said he didn’t want to talk about the issue anymore, he didn’t want to talk about Wounded Warrior Project and he wanted to leave it all behind him. And the ironic part is that following week he was on TV talking about this whole issue.
Regarding Erick’s reasons for turning against Wounded Warrior Project, he [Erick Millette] came back from war with both PTSD and traumatic brain injury. I don’t believe that he’s in a good position to be criticized except that he put himself front and center of this story and CBS used him in a way that made it impossible to ignore what he said. And what he said is damning and untrue. But at the same time, I have a lot of sympathy for him because he did serve our country, he came back wounded and I can only imagine that something is going on in his head that’s just not adding up.
The problem is that CBS used him as almost their only resource on this story, that’s where part of the irresponsibility on CBS’s part comes into play because they should have thought that through. Quite frankly, when CBS got into it, and remember Richard Jones was a part of this equation, I think they were looking for a way to bring WWP down. Erick’s testimony really made the story salacious and it sounded believable. I don’t want to overstate any negativity on his part. The only reason I care about his anger at WWP is because he willingly went in front of a national news organization’s cameras to speak poorly about the organization. So that has to be addressed. And that’s what I did do. But I don’t want to impugn his character or even his motives. I think there could be some anger in him that I can’t explain but I don’t believe it was generated by WWP.
What can other charities learn from the way the Wounded Warrior Project scandal developed and how the organization handled their crisis?
In terms of the ways charities need to deal with situations like this, they need to have a battle plan in place, they need to have a public relations crisis plan in place because regardless of what kind of charity you are, you could get in the crosshairs of the media.
Now there’s an old adage that is true in life, but I hear it a lot in charities, that says that “You don’t want to make a decision that will look bad on the front page of The New York Times in the morning.” And you’ve got to stick by your guns, you’ve got to stick by your own principles when you make those decisions, and if it does look bad in The New York Times or any other media outlet, or any other public outlet you have to be prepared to explain it. And you can’t wait until the narrative is fully developed on the other side to begin explaining it. You have to tell your side of the story as quickly as possible.
This is exactly the opposite of what the Wounded Warrior Project did. Instead of being able to explain the context of pretty much every aspect of the charity to media outlets and the general public, Nardizzi and Giordano were shackled by WWP’s board, and as a result, lost the most in the resulting fallout.
In terms of publicity, you have to be out in front of it. Well, in this particular case, the opposite happened. The chairman of the board instructed Nardizzi not to say anything…
Because he wanted to explain his side of the story, right?
Absolutely, I mean Steve is a good spokesperson, he’s very smart, well-spoken, and he would have been able to explain this. And you know he wouldn’t have been lying, it wouldn’t have been a slick overview, it would have been a real explanation. But he wasn’t allowed to do that. And so, by not going out there and telling the world what the true story was, in the vacuum everybody else is buying up what CBS and the Times are saying. There was nothing else to buy up.
Was the Wounded Warrior Project unfairly targeted due to backlash against their brutally honest publicity campaigns depicting the horrifying reality of injured veterans?
The Defense Department wants readiness, military readiness, and that comes partly in the form of having new recruits. And it was said by someone who represented the Pentagon that the ads were a deterrent to that process. I looked into some of the numbers and found that not to be true. But I don’t know that we can calculate specifically or assign any one thing or another to those numbers staying the same. But I do believe, I do know, that the Defense Department was not happy with those ads. Today the new leadership, and I say this without condemning the leadership, is much more interested in pacifying the Defense Department than Steve and Al were. There is that nod to the Defense Department’s wishes, and I don’t believe that nod is consistent with the mission of WWP.
The many levels and facets of the Wounded Warrior Project scandal exemplify the complex nature of the way charitable organizations operate in the United States and the numerous outside pressures they place. In his new book, Wounded Charity: Lessons Learned from the Wounded Warrior Project Crisis, Doug White explores the complicated world of charitable giving from many different perspectives and offers both charities and potential donors invaluable information to assist in navigating the complex world of non-profit organizations.