British military charity Afghan Heroes was wound up for serious mismanagement after an investigation revealed injured soldiers received less than 3 per cent of the funds raised.
The charity was set up by Denise Harris and her husband Andrew after her son, Cpl Lee Scott, was killed in 2009 by an explosion while taking part in Operation Panther's Claw in Helmand Province, in south-west Afghanistan.
The charity was meant to help former army personnel who had served in Afghanistan, but an investigation discovered that only a small percentage of the millions generated actually went to help injured soldiers.
During 2012, Afghan Heroes received £548,440 ($752,031), and while it spent £516,288, only £15,153 went to help soldiers and their families.
The Charity Commission removed the aid group from its register after finding its former trustees responsible for misconduct and mismanagement.
In an official report, the watchdog said the former trustees failed to take reasonable care in managing the charity and its finances, and gained significant unauthorised private benefit from it.
It criticised the charity’s fundraising and the quality of the services it offered to veterans with complex needs.
“The charity’s two founding trustees were removed from their positions in 2015 due to their responsibility for the charity’s failings, resulting in their permanent disqualification from trusteeship and senior management in any charity,” it said.
“Both passed away while the investigation was under way.”
Denise died aged 54 in 2017 and three months later her husband Andrew died, aged 53.
The Commission’s investigation opened in 2013 after a detailed review of the charity’s financial accounts was prompted by complaints from the public and concerns being raised by some of the trustees about how the charity was being run.
The charity set up retreats for homeless veterans and envisaged a business model whereby the purchase and running of a network of pubs would financially support services for veterans.
The report found that the charity lost about £337,000 through poorly managed financial transactions, including £185,000 lost through loans to a trading subsidiary that purchased a lease for a pub in Ashcott that did not prove profitable.
The charity also lost £40,000 in loans to another trading subsidiary to refurbish a pub in Minehead, in which the charity had no legal interest. It later transpired that the premises could not be used to house veterans.
The trustees also failed to properly manage the charity's relationship with a fundraising company, Prize Promotions Limited, which raised about £3.5 million from the public, of which about 20 per cent was passed on to the charity, the rest being retained by PPL.
The report also revealed that four former trustees together received about £348,000 in unauthorised remuneration, the majority of which was received by the two removed trustees. This included direct payments to the trustees and transactions with companies in which they had a personal financial interest.
"The public rightly expects charities to make a real positive difference for the people they help or the cause they pursue," said Amy Spiller, head of investigations at the Charity Commission.
“Afghan Heroes launched with significant support and the goodwill of people in Somerset and around the country.
“Unfortunately, the trustees lacked the understanding or expertise required to run a charity effectively. They mismanaged the charity, including by receiving personal benefits they were not entitled to. They effectively caused the loss of very significant amounts of charitable funds that should have been spent to support veterans with complex needs.
“We understand why those who supported this charity feel angry and let down at the waste and incompetence presided over by the trustees.
“I hope others considering setting up a new charity learn from this case, and ensure they bring on board the expertise and competence required to run a charity lawfully and effectively.”