Audit cites problems at Veterans Initiative

An audit report released Monday cited serious financial and operational problems involving a nonprofit organization’s handling of federal grant money flowing through its social service centers in Inglewood and Long Beach.

A Washington-based agency conducted the audit of the United States Veterans Initiative and questioned about $500,000 of the $5.36 million in costs claimed by the group from Sept. 1, 2003, through Aug. 31, 2006.

“There can be no better use of federal funds than for helping our veterans in need,” said Gerald Walpin, inspector general for the Corp. for National and Community Service, in a statement issued by the agency. “But that good purpose is no excuse for misusing such funds and thus depriving veterans of money allocated to benefit them.”

The audit also said about $250,000 in federal education awards were improperly given to members of the AmeriCorps service program.

The Veterans Initiative’s acting chief executive, Dwight Radcliff, took exception to Walpin’s assertions.

“The implication of fraud or wrongdoing insults us,” he said. “At the end of the day there will be no incidences of misuse or fraud.”

The audit said that of particular concern were “a number of less-than-arms-length transactions” between the nonprofit Veterans Initiative and its for-profit venture partner, Cantwell-Anderson, a real estate firm headed by developer Thomas F. Cantwell.

It also faulted the Veterans Initiative’s business structure, a complex network of private companies and nonprofit organizations co-founded 14 years ago by Cantwell and other developers.

The Veterans Initiative grew out of a consent decree arranged by federal Judge Harry Pregerson to compensate for the destruction of homes when the 105 Freeway was built. Pregerson, 84, is a Marine Corps veteran who was seriously wounded on Okinawa during World War II and, like Cantwell, has been a longtime advocate of veterans’ interests.

Pregerson, a judge with the U.S. 9th Circuit Court of Appeals, helped shepherd the Veterans Initiative into existence but is not involved in its operation. He is not mentioned in the audit.

The report also cited numerous deficiencies, including living allowances claimed for members for whom no records exist. Although it did not specify the amounts, the audit also cited personal expenses of the group’s former executive director, Stephani Hardy, including her home cable television service, charged to the federal grant.

The audit also said that Hardy, who announced her resignation a week ago, and Cantwell are engaged.

Hardy could not be reached for comment, but Cantwell said, “There seems to be some interest in trying to crucify what has been a remarkably successful program for homeless veterans, and I just don’t understand it.” As for the audit’s mention of his relationship with Hardy, he said, “The question of a ‘less-than-arms length transaction’ is highly theoretical.”

The Veterans Initiative, headquartered in Inglewood, provides assistance to thousands of homeless veterans in Nevada, Arizona, Texas, Hawaii, New York, the District of Columbia and California.

More than 1,000 veterans are served daily at Westside Residence Hall, a transitional housing and employment center in Inglewood, and at Villages at Cabrillo, a similar 26-acre facility in Long Beach.

Greg Wales, 61, a jobless Vietnam veteran who had been living in his car for months, is among the beneficiaries of the services at the Villages.

“It’s a shock,” he said. “I can’t believe this place is having audit problems. They’ve been very good to people like me. Anything we need -- food, clothing, a suit to wear to a job interview, tools for a job -- they get it for us.”

Even before the audit was launched, Veterans Initiative officials said they decided to streamline their confusing business model, which makes it hard to tell where the nonprofit ends and private enterprises begin.

For example, Century Housing owns the Veterans Initiative’s properties. But rent is paid through Cantwell-Anderson and its subsidiary, Cloudbreak Development LLC, an affiliate of Transition Point. Then there is U.S. Vets, a collaboration between Veterans Initiative and Cloudbreak.

The Veterans Initiative and Cantwell’s companies share the same Internet website and office location, the audit said, and minutes of the Veterans Initiative’s board of director meetings reflect Cantwell’s dominant role over the nonprofit organization.

“It’s not a mess, but it is confusing,” said Steve Peck, director of community development at the Villages.

Now, the Veterans Initiative plans to sever its ties with Cantwell-Anderson.

“We cannot have the collaboration anymore, because it’s under too much scrutiny and taking up too much of our staff time,” Radcliff said.

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louis.sahagun@latimes.com