Luxury for Charity Officials, Budget Cuts for Wounded Vets

Jan. 17, 2008— -- Officials of a charity that has raised tens of millions of dollars to help wounded veterans have treated themselves to black-tie dinners, lavish travel and luxury suites at football games while cutting budgets for programs to help the vets, two top officials tell ABC News.

"I am outraged that money that was given in a sacred trust may have been spent in ways other than wisely for the service of veterans," said Henry Cook, national commander of the Military Order of the Purple Heart.

Cook and his top deputy, Joe Palyagi, say they decided to speak out after ABC News revealed their charity had been given an "F" by a charity watchdog group because only 32 percent of the money raised went to charity programs.

"Something has run amok in the process," said Palyagi.

Watch the "Good Morning America" report.

Money for the Military Order of the Purple Heart is actually raised and controlled by a sister organization, the Military Order of the Purple Heart Service Foundation, Inc.

The Foundation confirmed that it recently held a black-tie dinner for a retiring official at an estimated cost of $40,000.

At the same time, Cook says he was told to cut the budget for his service programs by at least $250,000.

"When they discuss their finances, they go into a closed session, and I am excluded," Cook says.

According to the American Institute of Philanthropy, the charity received an "F" grade because they spend so much to raise money and on their administrative costs and salaries.

"It's a rip-off to the donor; it's a disservice to the veterans they're supposed to be helping," said Daniel Borochoff, the president of the charity watchdog group.

"They just agreed to a campaign with a professional fundraisers to last through 2011 where they're willing to take only 16 percent of the proceeds," Borochoff said.

The executive director of the foundation, Richard H. Esau, Jr., acknowledged the new fundraising contract and told ABC News he planned to review it.