Some Vets Money Managed - and Stolen by Scoundrels

They survived the Nazis, the Viet Cong and the Taliban. But hundreds of mentally disabled veterans suffered new wounds when the country they served put their checkbooks in the hands of scoundrels.

Gambling addicts, psychiatric cases and convicted criminals are among the thieves who have been handed control of disabled veterans' finances by the U.S. Department of Veterans Affairs, a Houston Chronicle/Hearst Newspapers investigation has found.

For decades, theft and fraud have plagued the fiduciary program, in which the VA appoints a family member or a stranger to manage money for veterans the government considers incapacitated. The magnitude and pace of those thefts has increased, despite VA promises of reform. Three of the largest scams - ranging from about $900,000 to $2 million - each persisted 10 years or more before being discovered.

In the past six years, the VA has removed 467 fiduciaries for misuse of funds, but only a fraction have faced criminal charges, according to the VA's Office of the Inspector General.

The government has never adequately tracked fiduciaries' thefts from disabled veterans. The inspector general's office says it conducted 315 fiduciary fraud investigations from October 1998 to March 2010, resulting in 132 arrests for thefts amounting to $7.4 million. But a Chronicle analysis of court records and documents obtained though the Freedom of Information Act show the thieves took more $14.7 million since 1998 - nearly twice the amounts reported to Congress.

VA spokesman Joshua Taylor says the program is being reorganized, and improvements are being ordered every year.

"VA has taken significant efforts to protect veterans and other beneficiaries in its fiduciary program," Taylor declared.

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Some Vets Money Managed - and Stolen - by Scoundrels