Drama over alleged unauthorized bonuses for past WA American Legion officers continues

The American Legion Department of Washington wants to settle a lawsuit brought by former members who claim past officers paid themselves and others more than $416,000 in unauthorized bonuses and hid that activity from members and the public, as previously reported by The News Tribune.

According to Thurston County court records, earlier this year a joint settlement offer of $400,000 was made to former Legion members James Robinson, Michael Mattingly and Scott Smith, who initiated the lawsuit on behalf of state members. The offer included $100,000 for their attorney fees.

Robinson, Mattingly and Smith rejected the settlement offer in February, but the American Legion Department of Washington accepted it on behalf of its general membership, which triggered a court review that is expected to be argued Sept. 20. The American Legion Department of Washington is both a plaintiff and a defendant in the case.

Eighteen former department officers are listed as defendants. Since the plaintiffs filed the lawsuits, some members have questioned their trust in the American Legion, some have left the organization due to infighting, and other department programs have been “hurt beyond repair in some cases and will never be the same,” according to court records.

According to a letter sent to Legion members last week that was shared with The News Tribune, members can submit input on the case by 5 p.m. Aug. 30.

First, some context

The American Legion Department of Washington is a nonprofit organization that offers services to veterans and their families across the state, as well as youth programming and sports. It has more than 150 posts across Washington, and its latest Form 990, filed with the IRS in 2021, listed 24,000 volunteers and 27 employees. According to court records there are about 16,590 current members of the American Legion Department of Washington.

Last year the state legion chapter was suspended for “dysfunction” and disbanded by the national chapter in a rare move after it was revealed leadership “did away with their constitution … at some indeterminate point in the past.”

Mark Seavey, who serves as the national legion’s chief legal officer, told The News Tribune in May that the state chapter is on track to getting its charter back. In July members voted on new department leaders, and Seavey said issues involving a constitution, which detailed fiduciary duties, rules and election procedures, have been “ironed out now.”

Seavey told The News Tribune the American Legion was not interested in holding individuals accountable or looking into what happened to result in the dysfunction. The focus instead is on moving forward and finding solutions, he said.

What’s fair? Conflicting settlements play out

On Feb. 2 the American Legion of Washington re-extended an offer of $400,000 to the plaintiffs in the ongoing case, with $100,000 for their attorney fees and $300,000 to be funneled through the plaintiffs to redeposit into Legion programs, according to court records.

In response, on Feb. 12 Robinson, Mattingly and Smith declined the offer and said they would be willing to settle for a lump sum of $600,000 in which the plaintiffs control 40% to be used to pay attorney fees and costs and the remainder would return to the Legion. The plaintiffs also requested each person named as a defendant to sign a covenant saying they would never again participate in Washington Legion leadership in any way, although they could serve in their local chapter. Other conditions included the dismissal of all existing litigation between the parties and the Department, as well as full releases of all claims by the parties.

On Feb. 15 the American Legion of Washington declined the counter offer, saying the federal charter of the American Legion and governing documents don’t allow for “the selective disenfranchisement of select members.”

According to a motion to approve the $400,00 settlement, submitted Feb. 22 by the defendants, Seavey accepted the settlement offer on behalf of the plaintiffs for the National American Legion.

Defendants argued in that motion that $416,127.63 of alleged unauthorized payments are past the date of recovery under the statute of limitations and are unlikely to be recovered. Defendants also said the high standard of proving “collusion” was not met in the case and said plaintiffs rejected a reasonable settlement due to “personal interests … different than the general membership,” including personal vendettas against some of the defendants and personal debts to recoup.

In a Feb. 27 brief opposing the motion to approve the settlement, Robinson, Mattingly and Smith said the settlement wasn’t fair to shareholders and the American Legion Department of Washington has yet to comply with turning over financial records which could reveal additional unauthorized payments. The Department also “offered no mechanism to prevent repetition of these actions,” they said in the brief.

Robinson, Mattingly and Smith also called the National Legion’s decision to accept the settlement as a plaintiff “ignore[s] the fact that the Department is also a Defendant in this matter” and “attempt[s] to use the settlement to avoid full disclosure of the Department’s records!”

In a reply to Robinson, Mattingly and Smith’s motion, the defendants said plaintiffs have access to all the primary financial records the department has and “have not supplemented their discovery to identify any new missing funds, nor asked for any depositions to-date.”

Although additional discovery might uncover more information, the defendants asked the court if there was enough evidence to evaluate the claim as part of a “good faith” analysis given the poor likelihood of recovering actual funds and tens of thousands of dollars it is costing the Legion to store past records, review legal documents and pay for legal representation. They said the Legion has no power to prevent individuals from running for office or serving in future leadership roles, but the Legion has been administratively suspended and leadership removed and “if these same defendants were re-elected in the future, it would be the memberships’ own determination that they are, in fact, well-suited to serve.”

In an interview with The News Tribune Tuesday, Smith said he was disappointed with the Legion’s choice to accept the $400,000 settlement and felt there has been no direct accountability for those involved with authorizing the alleged payments.

Seattle resident Michelle Kinnucan has been a member of the American Legion of Washington for 10 years. Kinnucan said she feels like the Legion hasn’t been transparent with members about the lawsuit and the allegations, which has led to people leaving the Legion and hindered members’ ability to make informed decisions.

“This lack of transparency over this lawsuit is such an offense, really, to what we claim to stand for,” she said. “The settlement offer announcement [sent to members Aug. 5], that is the first time I am aware of the department ever informing the membership [about this].”