TACOMA — Three Washington American Legion members are suing more than a dozen people affiliated with the state chapter, alleging former officers paid themselves and others more than $417,000 in unauthorized bonuses over a period of at least seven years. The lawsuit also alleges the defendants hid the activity from Legion members and the public.
The lawsuit was filed on June 8, 2022 in Thurston County Superior Court by James Robinson, Michael Mattingly and Scott Smith, all members of the American Legion Department of Washington who claim to be in good standing with the Legion at the time. The three are suing as shareholders on the American Legion Department of Washington’s behalf due to an alleged breach of the Legion’s duty to address the alleged unauthorized payments.
Nineteen people are named as defendants, as is the American Legion Department of Washington Inc., and one to 50 unnamed defendants are expected to be named during discovery, according to Thurston County court filings.
The plaintiffs are requesting judgment against the defendants in an amount to be established at trial but no less than $417,127.63, treble damages under the Washington State Criminal Profiteering Act, and judgment against the defendants for plaintiff’s attorney fees and costs, “among other just and equitable relief the court deems proper,” according to the lawsuit.
Over the course of several years, the lawsuit alleges, Legion members were not allowed to inspect department books and financial records, despite concerns of malpractice and accounting irregularities. The lawsuit describes an alleged pattern of intimidation and retribution from upper management, including action to expel members who called for a comprehensive audit, as well as the revocation and canceling of their posts.
Attorneys representing the defendants did not respond to requests for comment from The News Tribune.
In a motion filed in December, the defendants said the complaint should be dismissed or the plaintiffs substituted because they “do not fairly and adequately represent the interests” of the Legion, owe the Legion money and “are using a derivation action format to try to recoup their own personal expenditure of attorney fees in an earlier case.”
That earlier case started in 2017.
After Robinson, Mattingly and Smith said they had been denied access to financial records from the American Legion Department of Washington for years, they sued the Legion in Thurston County Superior Court. They were granted the right to inspect some of the department’s financial books and records but were denied attorneys fees, according to court documents.
In 2018 the plaintiffs renewed their request for attorneys fees but were again denied “because the Department ha[d] proved it refused inspection of certain corporate records in good faith because it had a reasonable basis for doubt about the right of the Petitioners to inspect the records demanded,” according the 2018 Thurston County Superior Court order.
Between 2018 and 2021, Smith appealed his request for attorneys fees four more times in various state courts but was denied in each case, according to Washington court records.
The 2022 lawsuit is working its way through Thurston County court at the same time the Washington American Legion statewide chapter faces restructuring after it was suspended for “dysfunction.”
A June 10 National Executive Committee resolution that imposed the suspension stated that “at some indeterminate point in the past” the Washington department “did away with their constitution” and that lawsuits, “existing, occurring and nascent, have put an unbearable financial burden on the department.”
‘Budget discrepancies’ and ‘unauthorized payments’
Smith worked for 24 years as an in-depth auditor for the U.S. Department of Defense, according to a declaration he submitted to the Thurston County Superior Court in December. In the lawsuit Smith said he was terminated as chairperson of the state Legion’s Audit Commission when he heard about concerns of financial malpractice in 2017 and sent a letter to the Department Executive Committee recommending a comprehensive audit.
In June 2017 Smith, along with Robinson and Mattingly, sued the American Legion Department of Washington and won the right to inspect more department records relating to employee wages, salaries and benefits, according to court records.
Smith said that upon reviewing the documents he discovered over $417,000 in unauthorized payments made to certain employees of the state Legion spanning a period of at least seven years, according to the lawsuit.
Among those who allegedly paid themselves using member dues and donations raised “explicitly to help veterans in need” were the department’s adjutant/chief administrative officer Dale Davis and the department’s bookkeeper Ann Bowman, who are both named as defendants in the latest case, according to the lawsuit.
In a report sent to the department on Feb. 25, 2019, Smith outlined the payments, noting that none of the payments, “(which Defendants referred to in emails and correspondence as ‘bonuses’), were public, nor were they approved by the [Department Executive Committee],” according to the lawsuit.
In late April 2019, former commander Gary Roach, a defendant in the case, formed a special committee to investigate the claims in Smith’s report. On May 19, 2019, the Special Department Committee released findings that “revealed significant Department budget discrepancies in Headquarters salaries and bonuses” from 2010 through 2016, according to a copy of the report included in the lawsuit.
The Special Department Committee chronicled 1,018 unauthorized payments made by Davis and Bowman from 2010 to 2017. The payments totaled at least $417,127.63, according to the report.
On June 28, 2019, Department Finance Commission chairman Loren Sperry, also a defendant in the case, presented the Special Department Committee findings to the DEC, which did not contain any recommendations on which the DEC should act, according to the lawsuit.
Roach allegedly did not disclose the existence of the Special Department Committee nor its report to member delegates at the department convention held 19 days later, and his predecessor, commander Robert Clark, did not disclose report details nor allegations against Davis and Bowman at the DEC’s open Mid-Winter Conference in February 2020, the lawsuit said.
One week after the February conference, Clark allegedly held a special closed DEC meeting without notice (a rule of order violation), and a motion to “permanently disregard (or words to that effect)” the Special Committee report passed by a roll call vote of nine to eight, the lawsuit said.
“Shockingly, despite his obvious conflict of interest, Davis was allowed to vote on the motion. He voted in favor of disregarding the Department Report,” according to the lawsuit.
The plaintiffs allege Davis and Bowman “engaged in a pattern of criminal profiteering activity,” with Davis “as the conspirators’ leader,” violating the Washington State Criminal Profiteering Act and Washington’s first-degree theft statute, according to the lawsuit. No criminal charges have been forthcoming, Robinson told the News Tribune.
The plaintiffs also allege Davis and unnamed defendants engaged in acts of extortion by attempting to expel Robinson and others from their posts with the American Legion as retaliation for requesting to review the department’s financial records, according to the lawsuit.
Another letter sent by Davis and signed by other defendants that threatened legal action against “any DEC member who acted on the Report’s findings” might also be classified as extortion and fall under the Criminal Profiteering Act, according to the lawsuit.
Smith told the News Tribune on Friday they filed the 2017 and 2022 lawsuits on the behalf of the Washington American Legion to get back the money allegedly stolen.
“This is money that should have been focused on veterans,” he said. “I’m not alleging in any way that the salaries that the people at headquarters got were unreasonable, that’s not my decision. But it wasn’t their decision to set their own salaries. It was up to the board of directors to set the priorities. And once this happens, I’m sorry, but if you did wrong, there needs to be recompense. And that’s what I think has happened, and that’s what I’m pushing for.”
WA Legion moves to dismiss claims
In a motion filed in Thurston Court Superior Court on Dec. 7, 2022, the defendants and the American Legion Department of Washington argued the June complaint should be dismissed or the parties should be substituted. The motion contends the plaintiffs “do not fairly and adequately represent the interests” of the Legion, owe the Legion money, “are not of suitable moral character” to represent the Legion and “have undertaken intimidating, personally motivated antagonistic behaviors toward Legion leadership in the past.”
The motion cites examples of Legion posts that rejected taking legal action against the state department in 2011, when Robinson started rallying Department membership to join a class action lawsuit alleging financial mismanagement of the Legion. Some Legion post officials warned Robinson that a lawsuit could harm future Legion programs, “telling evidence that these plaintiffs do not represent the interests of the membership,” said the motion against the plaintiffs.
The motion argues the plaintiffs also “do not fairly and adequately represent those values of the membership,” as Robinson was suspended from the practice of law in the state of Washington, has been the subject of criminal charges for harassment, trespass and assault, as well as created hateful and offensive memes. The motion cites Mattingly’s prior bankruptcy attempts and Smith’s authoring of reports on the financial allegations as other examples of behavior that should disqualify them from acting on behalf of their fellow Legionnaires.
Robinson told the News Tribune Friday the defendants have no basis to dismiss the lawsuit, and he “fairly well expected them to throw the proverbial whatever at the wall and see if it stuck.” Mattingly could not be reached for comment from the News Tribune.
Smith said authoring the financial reports was part of his job as an auditor, not something that should disqualify him from this case. In his career Smith received a Presidential Letter of Commendation from Ronald Reagan and two letters of commendation from the U.S. Department of Justice for investigating fraud, in one case leading a team of auditors in a multi-year investigation of Boeing resulting in the recovery of $75 million for U.S. taxpayers, according to the lawsuit.
Washington American Legion representatives argue the plaintiffs’ complaint should also be dismissed because Robinson, Mattingly and Smith “seek vindication of their own alleged ‘mistreatment’” and “are using a derivative action format to try to recoup their own personal expenditure of attorney fees in an earlier case,” and therefore cannot fairly and adequately represent other shareholders.
In a response to the motion on Dec. 20, 2022, Smith said the Legion’s declaration is “rife with error, misstatement, misattribution and misinterpretation,” in a declaration filed in Thurston County Court. Smith wrote, “the most rudimentary review of existing Department records shows the debts were paid.”
Further pleadings in the case are scheduled later this month.