ARLINGTON — The former executive director of People Helping Horses in Arlington has recently settled with the Washington State Attorney General’s Office after an investigation into the Snohomish County horse rescue’s management, and following the installation of new controls on the organization’s fundraising and financial practices, but the non-profit’s ousted leader still takes issue with the allegations levied against her.

A December 2011 tip from a concerned citizen led the Attorney General’s Office to look into People Helping Horses, which had raised more than $1 million the previous year, and its executive director at the time, Gretchen Salstrom. The Attorney General’s Office reported finding multiple violations of the state’s Consumer Protection Act, which bars misleading and deceptive business practices, as well as violations of the Charitable Solicitations Act, which governs the fundraising practices of non-profits.

“Gretchen Salstrom was helping herself to money intended to help horses,” said Washington State Attorney General Rob McKenna, whose office accused Salstrom of misusing charitable funds. “She used the group’s money to pay for her own horse and dog-breeding business, and used the non-profit’s credit and debit cards for questionable travel and entertainment expenses.”

“Once we discovered the inappropriate use of funds, we took action to correct the situation,” said Sue Moore, a member of the People Helping Horses Board of Directors. “The two newest Board members sought legal counsel to assure all actions were within the law. This is disappointing since it was not in alignment with our mission statement and not what the organization was created to do. It’s very, very sad.”

In a settlement sent for filing on Friday, Dec. 14, 2012, People Helping Horses has agreed to use solicited funds for the specific animals and programs mentioned in its appeals, and to audit its finances, while Salstrom has been barred from leading a Washington state non-profit for 10 years as part of her settlement with the Attorney General’s Office.

“In fundraising appeals, People Helping Horses said they offered a therapeutic riding program for kids with health challenges, even though they had terminated the program,” said state Assistant Attorney General Sarah Shifley, who handled the case. “They claimed they partnered with other horse education programs and schools. They said they checked up on horses after they were adopted from their shelter. None of that was true.”

Among other agreements in the settlement, a consent decree in Snohomish County Superior Court, People Helping Horses will:

• Not make misrepresentations to donors or potential donors.
• Hold donations in segregated accounts and apply such funds for purposes stated in fundraising appeals.
• Create and maintain records documenting the amount of restricted donations that it receives and how donations are used.
• Implement financial controls, including prohibiting staff members from using the organization’s financial resources for personal use.
• Obtain a financial audit by a certified public accountant every three years and provide it, upon request, to the Attorney General’s Office.
• Provide management training to its executive director and any other executive-level employees.
• Comply with all registration requirements of the Secretary of State’s Charity Program before soliciting and accepting donations.
• Not enter into any contract, lease or other business agreement with Salstrom.
• Not retain Salstrom in any capacity or place her on its Board of Directors.

While People Helping Horses is liable for $50,000 in penalties, which are suspended as long as the organization follows the details of the settlement, Salstrom will pay $5,000 in attorney’s fees and faces penalties of $25,000 per violation if she fails to follow the injunctive portions of a separate settlement entered with her individually.

For her part, Salstrom argued that more previous Board members of People Helping Horses should have been contacted by the Attorney General’s Office, “since all those funds were agreed upon by them,” and pinned the source of the initial complaints on “a disgruntled employee who rallied the troops” against her.

“The current Board members assured me that they’d keep the organization going, but they said it would just be easiest for the organization if I was gone from the public eye,” Salstrom said. “So I didn’t fight it. I just settled. There will always be people who don’t like me, but I stand 100 percent behind the work I did. We were audited every year by a CPA, and neither the CPA nor our original attorney found anything that concerned them. What a sad end to this organization’s great work.”

“We often use the old saying ‘buyer beware’ when it comes to businesses,” McKenna said. “But this settlement shows that the giver ought to beware, too.”

Before giving to a non-profit, McKenna recommends checking the Secretary of State’s Charities website, at www.secstate.wa.gov/charities, in order to learn more about how specific charities spend their money.