SAN FRANCISCO -- A California veteran's charity that supplies arts and crafts to hospitalized servicemen and women agreed Friday to pay $2.45 million and purge its leadership to settle a lawsuit filed by the state alleging misuse of funds.

State Attorney General Kamala Harris filed the suit in Riverside County last year after Legislative hearings suggested leaders of the Temecula-based Help Hospitalized Veterans were paying executives too much and spending donated funds on golf membership, a condominium and other items, with little or no benefit to the charity's one function of assisting hospitalized veterans.

Harris said the estate of former group President Roger Chapin will pay back the charity $2 million in excessive salary he collected over several years. Chapin died in August.

In addition, a company that insured officers and directors also agreed to pay the charity $450,000.

Furthermore, Harris said the current president, Michael Lynch, and four board members will step down and all have agreed to be banned from ever serving a charity again in an executive capacity.

Lynch didn't return phone calls Friday.

"Veterans face many challenges when they return home – it's unconscionable that Help Hospitalized Veterans officials misused charitable money intended for those who served and have sacrificed for our country," Harris said.

Harris must also approve of all new board of director candidates.

The charity, commonly known as HHV, was launched in 1971 to serve hospitalized Vietnam War veterans.

Lawyers for the charity said they were gratified that the attorney general found fault mostly with Chapin rather than the organization itself.

"The attorney general's complaint and the subsequent litigation damaged HHV's ability to help veterans," lawyer Hugh Quinn said, adding that the charity was now focused on returning to its mission of helping veterans who are patients.

"As long as there's a need, HHV will be there and we're looking forward to reconnecting with veterans and their families and our supporters so that our work continues," he said.

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