GAINESVILLE, Fla. – Steve Nardizzi's entrepreneurial approach to charity work transformed the Wounded Warrior Project, which began as a shoestring effort to provide underwear and CD players to hospitalized soldiers, into an $800 million fundraising enterprise.
It also led to his downfall.
A lawyer by training who never served in the military, Nardizzi traded a career in the courts for one helping wounded veterans. He arrived at the Wounded Warrior Project in 2006 after nearly a decade at the Eastern Paralyzed Veterans Association and persuaded the board that they needed a new, more aggressive leadership style.
By 2010, Nardizzi replaced founder John Melia as CEO and catapulted the nonprofit into the top ranks of U.S. charities. His success led to lavish spending — the group's annual staff meeting in 2014 cost $970,000 — prompting complaints from employees, veterans and charity watchdogs about profiteering off veterans that emerged in reports by The New York Times and CBS News in January.
On Thursday, Nardizzi and chief operating officer Al Giordano were fired, the board said, as the organization cracks down on employee expenses and strengthens controls that have not kept pace with the rapid growth.
Melia, a former Marine, launched the group in 2003 after he was injured in a helicopter crash off Somalia and saw how wounded veterans were treated. His exit left him bitter; he said Nardizzi erased his contributions from the group's website. But he told The Associated Press on Friday that he has requested an "immediate" meeting with the board of directors and is open to leading the group again.
Board chairman Anthony Odierno, overseeing the charity on an interim basis, did not respond Friday to a request for comment. Neither did the fired executives, Nardizzi and Giordano. In the Thursday statement, Odierno said "it is now time to put the organization's focus directly back on the men and women who have so bravely fought for our country and who need our support."
The Wounded Warrior Project's directors fired the two executives after hiring outside legal counsel and forensic accounting consultants to conduct an independent review of the Jacksonville-based organization's records and interview current and former employees.
The reports by CBS News and The Times described extravagant parties and last-minute, business-class air travel; one former employee compared it to "what the military calls fraud, waste and abuse."
The group's 2014 meeting, at a five-star hotel where Nardizzi rappelled from a tower into a crowd of employees, was particularly costly. The board's statement — released late Thursday by the crisis management firm Abernathy MacGregor — said "such events will be curtailed in the future."
Nardizzi defended such spending while leading the charity. "An entrepreneurial spirit led to WWP's success," Nardizzi wrote Jan. 18 on his Facebook page.
"If nonprofits are going to be effective in their world-changing work (eliminating disease or eradicating poverty), they must be allowed to research, to advertise, and, most important, to fail — in the same way that corporations like Apple and Nike do. We need to embrace the notion that has long guided the for-profit world: think big, and often spend big, in order to succeed big," Nardizzi wrote.
Nardizzi certainly thought big: According to the Internal Revenue Service reports, the charity took in $800 million over the past six years, while also paying some of the highest salaries, to many more people, than other major nonprofits. Nardizzi earned $496,415 annually and Giordano $397,329, while at least 10 others took in more than $160,000 each for the year ending in September 2014, according to the nonprofit's Form 990 filings.
Compensation accounted for $32 million, or 13 percent of the group's spending that year. Meanwhile, the group's reserves rose to $248 million, mainly held in investments. Charity watchdogs say it's OK to keep a rainy day fund, but the money should go as much as possible to the mission.
Nardizzi's leadership drew fans. Tom Keller, a communications consultant on WWP projects, described Nardizzi as a "Powerhouse CEO" and a "superb leader" in a 2014 recommendation on LinkedIn.
Reached by phone Friday, Keller said he no longer feels the same way.
"I have associations with other veterans' organizations, and I just feel sick about the whole situation," Keller said. "My involvement with (Wounded Warrior Project) didn't last long after he came aboard. I know the truth will come out."
The nonprofit's Facebook page was filling with angry comments Friday by people rethinking whether they should donate again.
"Many donors have supported the WWP from its humble inception and have every right to be angry about the lack of stewardship shown by the immediate past leadership of WWP," Melia said in a statement. "The new leadership of the WWP must do everything in its power to restore its relationship and regain the trust of those it serves and its donors."
WWP said in response to the posts that it is proud of its programs and stands behind its fundraising.
The group's statement Thursday said its most recent audited financial statement shows 81 percent of donations were spent on "programming," not fundraising. The statement cited a "joint allocation" accounting rule that enables nonprofits to classify fundraising as a service to clients if the event or material also is "educational" and includes a "call to action" beyond simply appealing for money.
Invoking that rule, the nonprofit reported to the IRS that it spent $26 million, about 10 percent of its budget, on conferences and events between October 1, 2013, and September 30, 2014. The statement said about 94 percent of that "was associated with program services delivered to Wounded Warriors and their families."
The IRS filings said 76 percent of the budget, or $189,558,100, went to veterans programs — a share charity watchdogs would consider respectable. However, almost $41 million of that amount was claimed as the "educational" component of fundraising requests; without it, helping veterans accounted for just 60 percent of the budget.
Charitywatch.org says Wounded Warriors spent just 54 percent on programs rather than overhead, for a C rating.
"The board needs to look hard in the mirror and ask how things got so out of hand for so long," Dean Zerbe, a former senior counsel for the U.S. Senate finance committee who did extensive oversight of charities. "Every dollar that is spent by WWP on perks and parties is a dollar that isn't being spent to help a veteran or a veteran's family."