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Documents: Kurt Busch's ex-girlfriend used veterans charity as bank

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OTL: Armed Forces Foundation finances questioned (4:33)

Patricia Driscoll, former girlfriend of Kurt Busch, has turbocharged the Armed Forces Foundation's finances the past 10 years, but an Outside the Lines investigation has found significant questionable practices. (4:33)

WASHINGTON -- A group of Armed Forces Foundation co-workers is trying to finalize plans for an event honoring troops at The Venetian on the Las Vegas Strip when an email from Patricia Driscoll arrives. She is already out West and wants her then-7-year-old son to join her. Which one of them would be so kind as to pick him up from school and fly with him cross-country to Vegas?

At least one co-worker questions the request, but Driscoll is insistent: "He is a good kid that has a bag full of toys and games to play ... IF this is such an issue then Josh please get one of the other staffers to bring [him] out to Vegas. If you are questioned [by airport security], the answer is simple. This is my bosses [sic] child and I am bringing him to her."

A separate email string -- without Driscoll included -- begins, this one about the notion that the nonprofit foundation might, again, be paying for the youngster's airfare.

Writes one staffer: "That is unacceptable. We cannot pay for his travel. Period."

Another chimes in: "I'm sure donors would love to know that fact ... Not a good trend if there was ever an external audit."

Driscoll, the subject of these March 2012 office darts, is the former girlfriend of NASCAR driver Kurt Busch. The couple, already prominent figures within the racing community, made headlines last year when Driscoll accused Busch of strangling her and smashing her head into a wall during an argument. Before the allegation, Busch was most well-known for his temper tantrums and a 2004 Sprint Cup championship; Driscoll was recognized as president of the Armed Forces Foundation, a charity aligned with NASCAR and various sports-related entities that aims to help veterans in need.

In 2001, the Armed Forces Foundation was a small, all-volunteer operation focused mostly on lining up fishing trips for wounded soldiers and generated about $100,000 in donations. Through Washington connections, Driscoll became a member of the foundation's board that year before becoming executive director two years later. Using bulldog tenacity and an eagerness to schmooze politicians and corporate titans, she turbocharged the charity to where it generated more than $13 million in revenue in 2013, eventually setting up its headquarters in a row house she co-owns a few blocks from the U.S. Capitol.

But an Outside the Lines investigation has found several questionable practices under her direction in the past decade:

• Documents show the Armed Forces Foundation has, in effect, been repeatedly used as a bank to lend money for or pay various personal expenses, including bills for a private company Driscoll owns. In one example, the foundation credit card was used to pay a bill that included what appear to be Driscoll's personal state and federal taxes. In another, the foundation was effectively used as a lender, advancing money for Busch to buy $22,438 in Moroccan rugs.

• The nonprofit's federal tax filings and audit reports in some instances fail to match, resulting in unexplained discrepancies about the amount of cash on hand, the mismatches totaling in the hundreds of thousands of dollars.

• Until May 4, the foundation paid Driscoll and another person $96,000 in annual rent for its headquarters -- a building they co-owned -- which is operating in apparent violation of Washington residency guidelines. This month, Driscoll's partner sold his half-share of the building to the foundation for more than $600,000.

• The foundation claims it spends 95 cents of every dollar raised on directly supporting service members and their families, but analysis of documents shows the figure is closer to 72 cents.

Further, Outside the Lines has learned, on Thursday morning a representative of a former foundation employee contacted the FBI in Washington, alleging that Driscoll broke laws while running the foundation. In addition to providing the FBI documents in support of the claims, the former employee plans to file a federal whistleblower complaint against Driscoll with the Internal Revenue Service, said an attorney with knowledge of the matter. The attorney said the documents, many of which Outside the Lines reviewed, could lead to charges of embezzlement and tax fraud.

Driscoll, whom Busch referred to in court testimony as a trained assassin, declined comment through Dan Hill, a Washington crisis-communications specialist the foundation hired. Hugh Webster, a foundation board member who is general counsel and a finance committee member, said it would be "inconceivable" that Driscoll paid any personal bills with foundation funds or used it as a lender. In interviews, he staunchly defended Driscoll, the foundation and its fiscal oversight practices. In a statement, he said:

"Our board, as well as our executive and finance committees, put in place internal controls with consultation with our outside accountants and auditors, to uphold in every way our responsibility to the organization, its donors and partners, and most importantly the veterans and their families we serve. Furthermore, in accordance with our policies and procedures, an outside audit firm reviews our accounting to ensure full compliance. We are confident in our systems and controls, even as we seek to constantly improve, which is inherent in the culture of any good organization."

But the documents that are planned to be given the FBI, said the attorney close to matter, reveal not only tax paperwork discrepancies but also personal expense issues: The foundation wrote a $15,000 check toward Driscoll's legal fees in a child custody case; it paid $6,315.22 for an infrared security camera shipped to her Maryland residence; and it picked up the tab for personal expenses on vacations to Paris and Morocco. Alongside Driscoll's $171,027 foundation salary, the source said, she received substantial bonuses for fundraising -- none of which was declared on the foundation's tax filings or audit reports reviewed by Outside the Lines.

In addition, the attorney said, records show that, for 17 months in a 19-month stretch in 2012-13, the foundation paid the credit card bill of Driscoll's private security business -- Frontline Defense Systems. The FDS charges totaled more than $130,000 and included massage treatments, personal medical expenses, toy store purchases and grocery bills, among others. In one set of transactions in 2013, Driscoll used a Frontline Defense credit card on a Moroccan vacation with Busch to buy two rugs, a credit card purchase she later paid for by using the Armed Forces Foundation credit card. Later, Busch's private company wrote a check to the Armed Forces Foundation for the same amount of money spent on the rugs. The attorney familiar with the case said no indication of repayment or indebtedness on Driscoll's part exists, but noted it is illegal for a nonprofit to lend money to its officers or directors.

"The wounded warrior community ought to be outraged," said the attorney, who is close to the whistleblower. "She has stolen from funds intended for the wounded to buy fancy dresses, dinners, first-class airplane rides for her son."

Webster can't fathom any of that happening: "Most, if not all the allegations have no basis," he said. It is "absolutely false that AFF funds have been used for any personal expenses of Patricia." If the foundation credit card has ever been used for non-foundation-related expenses, he said, the foundation had been immediately reimbursed. Also, he said that Driscoll never received any bonuses or compensation beyond her annual salary.

Busch declined comment. The FBI in Washington had no immediate comment.

Spending practices questions raised previously

The Armed Forces Foundation markets itself as a charity that stages events to benefit wounded warriors and their families, from hosting concerts, golf outings and dinners to providing post-traumatic stress disorder education and any number of life-enhancing activities. Under Driscoll's direction, the marquee annual fundraiser and social gathering has been the Congressional Gala -- a D.C. tribute each spring emceed by "Fox & Friends" co-host Brian Kilmeade that brings together politicians, military leaders, government officials, athletes and wounded vets. Celebrity sightings have featured the likes of comedian Ron White and country music artist Justin Moore, actress Melissa Fitzgerald and actor Frankie Muniz, as well as retired Washington Capitals star Rod Langway and Fox Sports football analysts and Hall of Famers Terry Bradshaw, Howie Long and Michael Strahan.

Like any charity or foundation, the Armed Forces Foundation is valued based upon cash donations and what it receives in in-kind or noncash donations, such as donated food for an event or free publicity from an advertising firm or the discounted use of a banquet hall. The Armed Forces Foundation in recent years has listed on federal documents up to $19.5 million in annual revenue. A 2013 audit report listed $678,690 in cash assets with revenue of $13 million.

According to its latest tax filing, from 2013, the AFF gave $276,215 in cash grants to 192 veterans -- about $1,438 each. The grants made to wounded warriors are the largest direct cash contributions made by the foundation, with the bulk of remaining funds and in-kind revenues earmarked for an assortment of social and recreational events and educational programs.

A good bit of the noncash support has come from sports-related entities. Fox Sports and the Speed Channel were in foundation books for $1.3 million in 2013, as well as ESPN for $320,000. Perhaps the largest contributor, though, at almost $1.7 million, is the Sheldon Adelson-led Las Vegas Sands Corp., whose property, The Venetian, has hosted major Armed Forces Foundation events for troops and family members. On the smaller side of contributions, the foundation has received tickets to bring soldiers to Washington-area pro sports events.

In the past four years, the foundation leaned on no athlete harder than Busch, the former Sprint Cup champion, whom Driscoll described as a "celebrity ambassador." Ties between entities associated with the couple are evident throughout several years of federal tax documents, beginning in 2011, when the foundation listed separate, unexplained noncash donations of $9,100 and $207,000 from Kurt Busch Inc. -- the NASCAR driver's North Carolina-based business.

A year later, tax filings show Busch's charitable foundation issued just two cash grants overall -- one of them for $21,279 to the Armed Forces Foundation. In 2013, Driscoll's foundation made a $10,000 "family assistance" donation to Busch's charitable nonprofit even though, according to that organization's records, Busch's foundation didn't have such a program and didn't issue any grants in all of 2013. No tax filings from Busch's foundation covering the past two years could be found on charity-document clearinghouse guidestar.org.

The ties between entities also include the apparent use of Busch's private jet. In 2013, the Driscoll-led foundation reported noncash donations linked to aircraft use, including a $450,000 contribution identified solely as "Airplane" as well as $510,600 designated as "Kurt Busch Plan [sic] Usage." Busch's executive assistant, Kristy Cloutier, testified during the couple's domestic violence hearing that Busch's private jet was used on race weekends to fly Driscoll's son to Maryland on Monday mornings in time for the beginning of school.

Cloutier didn't respond to multiple messages left by Outside the Lines, but, according to a report on the racing site KickinTheTires.net, the groups wanted to list the airplane usage as a tax exemption. Driscoll stated in an email that Cloutier had sought a "tax letter from AFF for all of the airplane usage," noting the foundation had "calculated it and put it in our in-kind contribution." A source close to Busch, however, told Outside the Lines that his corporation had not listed the airplane usage as a donation on tax filings.

The racing community also has been an active participant with the Armed Forces Foundation, with NASCAR providing tickets to races so wounded soldiers could be brought to tracks and meet race teams. Noncash donations have also been credited from race teams that bore an AFF sticker.

Former Armed Forces Foundation board chairman Maj. Gen. Randall West, who served nearly a decade on the board through 2012, said the Outside the Lines findings don't mesh with what he observed: "I never encountered anything irregular. There was nothing that I would think was improper that was done by the foundation during the time I was on the board."

The foundation has operated in good standing with certain charity evaluators, including Charity Navigator, which gives it a four-star score of 90.53 -- higher than some other military-related organizations. But oversight issues at the foundation have not gone unnoticed. In the most recent review by the BBB Wise Giving Alliance, the alliance failed to give the foundation certification after it failed to meet five of the watchdog agency's 20 standards.

An example of the multiple irregularities and oversight issues found by Outside the Lines in the foundation's tax filings and audited reports: end-of-year cash on the 2011 audit report is listed as $570,507, yet the beginning-of-year cash is $390,164 on the 2012 report -- a $180,000 unexplained discrepancy.

Nor are the foundation's official annual audit report and IRS 990 tax filings always aligned. In 2012, for example, the audit report lists $19,504,453 in revenue while the same year's IRS 990 form identifies total revenue "per audited financial statements" as $20,508,458.

"Child labor laws alone would get you for that if he actually volunteered that many hours for that many trips. This is not a case you want to take to Tax Court and attempt to win."

Former foundation accountant

Webster, the foundation finance committee member, said at least some of the discrepancies can be blamed on the foundation's former auditor, who no longer works with the foundation. "... There is no missing money. ... Our auditors have gone back and had to fix some reporting discrepancies in a couple of past reports. I ... am assured those are all up to date now and it has been corrected."

If corrections have been made, they are not readily apparent in tax filings and audit reports.

"I don't know why those numbers would be different," said Bennett Weiner, chief operating officer of the Arlington, Virginia-based BBB Wise Giving Alliance. "They really should be the same. And if they have been restated, they need to say why. You have to start [the new year] with the same amount of money."

Driscoll, according to documents obtained by Outside the Lines, had been made aware of some of the foundation's financial documentation issues.

Carole Wiedorfer, an accountant hired to work on the foundation's federal taxes, sent an email in 2012 to Driscoll questioning some of the goings-on between the foundation and her private company, Frontline Defense Systems. She noted that the foundation paid her private company's credit card bills: "What is that about? AFF should definitely not be paying any of FDS' bills for any reason. What am I missing here?"

Webster, in interviews, didn't initially recall issues having been raised by her. But upon review Thursday said he had found the email. He said that no wrongdoing was found and that "there were no specifics or documentation to this effect provided by her. We [the Finance Committee] nevertheless looked into it, and found no basis for the accusation."

Wiedorfer, who is no longer retained by the foundation, also warned Driscoll about writing off her son's travel airfare as a foundation expense, challenging Driscoll's rationale that the then 7-year-old worked as a foundation volunteer: "Child labor laws alone would get you for that if he actually volunteered that many hours for that many trips. This is not a case you want to take to Tax Court and attempt to win."

Wiedorfer declined comment when reached by Outside the Lines.

Residences in Maryland and Washington

Driscoll, who grew up in El Paso, Texas, and left home at 17, followed her first husband to the Baltimore area. There, she found sales jobs before making the rounds in Washington trying to be a lobbyist and working the socialite circuit in the late 1990s. She lives now in Lilburn Mansion, a restored 20-room Gothic stone historic property sitting on 7 acres in Ellicott City, Maryland, about 60 miles north of the Capitol. Built in the 1850s, the mansion had earned a following as a haunted house before being purchased in 2007 by Driscoll and her then-husband for $1.39 million.

Driscoll's salary at the foundation has ranged from $104,715 in 2009 to $194,010 in 2012 to $171,027 in 2013, according to tax records. Webster said Thursday that he was unaware of what her current salary is. Frontline Defense Systems had a string of government contracts through 2009, which paid Driscoll's firm well: For 2010, her accountant listed pretax withdrawals from Frontline totaling $184,000.

But sources told Outside the Lines that Frontline has not produced significant revenue in recent years. The Federal Procurement Data System as well the U.S. Customs and Border Protection don't list any major government contracts with Frontline since 2011.

Driscoll's financial situation became part of the January domestic violence hearing against Busch. (A Delaware family court commissioner issued a detailed opinion Feb. 20 saying that Busch had committed an act of domestic violence against Driscoll, but charges against him were dismissed by the Delaware Department of Justice due to a lack of evidence.)

Records obtained by Outside the Lines show Driscoll last year took out a loan on the Ellicott City property for more than $1.27 million. The loan was secured by Dos Toros Properties, a North Carolina-based limited liability company formed by Busch and Driscoll months earlier. Both Driscoll and Busch signed as guarantors, although the deed remains in Driscoll's name. The monthly loan payment totals $10,829.90.

Rusty Hardin, Busch's attorney, questioned in court whether Driscoll had the financial capital to secure a loan without the NASCAR driver's guarantee. Driscoll told the court: "I pay all my bills. I always have, and not with the support of Mr. Busch. ... He lived there for four years in my mansion, and I paid for all of it."

Driscoll, who testified she lives at the Maryland mansion, also said in court that she owned a "million-dollar building" on Capitol Hill, likely a reference to the narrow, yellow two-story brick residence housing the charitable foundation and her private business. Records indicate she and former business partner Jon "Kip" Hunter purchased the building a decade ago for $810,000, at the time carrying a $648,000 business loan. On May 4, he sold his half-share of the building to the Armed Forces Foundation for more than $600,000. Webster, the foundation counsel, declined to discuss details but said that an independent assessment of the property had been completed and that he had no concerns about the transaction.

Before the sale, the latest Armed Forces Foundation tax filings show that it had paid $96,000 in annual rent to Driscoll and Hunter. Out front, there is no signage alerting veterans to it being AFF or Frontline headquarters. The building is supposed to be restricted by district law to residential use; however, Driscoll secured home-occupation permits for the foundation and for her private business after she purchased it. Still, the district requires that the building serve as the owner's principal residence, that no more than a quarter of the space be used for the in-home business and that no more than one nonresident be employed on site. (The Foundation, according to its federal tax records, employs 21 people. None appear to reside there.) Webster said he was unaware of any potential residency issues with the headquarters building and how it was being used.

High number of volunteer hours in documents

Not only is Driscoll the face of the Armed Forces Foundation and its highest-paid employee but ex-staffers in interviews with Outside the Lines portray her as a leader in phantom volunteer hours logged in federal tax forms by the nonprofit. During a five-year period, according to spreadsheets maintained by the foundation and obtained by Outside the Lines, Driscoll was credited with a volunteer in-kind value totaling nearly $1.7 million. According to records, she averaged 25 volunteer hours a week, while at the same time was a paid Armed Forces Foundation employee and head of her private company. The in-kind or noncash value of $252 an hour attributed to her was nearly five times what she earned in her paid position.

Inflating donated time values is not illegal, but tax experts said it raises potential questions about other internal practices.

"It sounds like they are trying everything they can think of to make the organization appear bigger and more active than it is," said Marc Owens, a Washington tax attorney and onetime director of the IRS' Exempt Organization Division.

Spreadsheets indicate AFF board member Tris Barry volunteered exactly 370 hours in each of three consecutive years at a rate AFF calculated, for in-kind contribution purposes, at $132.27 an hour. Then-board chairman Maj. Gen. West hit three straight years of 520 hours at a rate AFF designated at $250 an hour. Further, the routine hourly total for fellow board member and legal counsel Webster was 325 hours at an AFF-calculated rate of $235 per hour, and ex-board member Beverly Young was a consistent 960 hours at $175 per hour.

"I can honestly tell you I know nothing about that," Young, wife of late Rep. Bill Young, R-Fla., told Outside the Lines. "Any volunteer work I did from the beginning of the [Gulf] War and on was on behalf of my husband. ... It was never documented. I would assume that if billed at $175 an hour, I should have approved that or at least known about it. I do not."

At least three NASCAR race teams (Team Penske, Richard Childress Racing and Roush Fenway Racing), multiple NASCAR employees and even celebrity Hilary Duff also are in the books as hourly volunteers. The actress/singer is down for 200-plus volunteer hours in consecutive years at a rate AFF calculated, for in-kind contribution purposes, at $400 an hour, joined by her mother as well as her then acting coach/manager -- the trio combined on AFF books for 1,400 hours and about $500,000 in-kind value.

At times, the foundation's noncash value of donated time has exceeded $2.5 million annually.

Webster, who is paid by the foundation, said that the foundation's volunteer numbers and data "don't shock" him but that he was unaware of specifics.

Young says her late husband, former chairman of the House Committee on Appropriations, didn't like what he had heard of the foundation. She said he had his staff write a letter removing her from the board, adding, "He didn't want my name being drug through what he suspected was going to be coming." Young left the board in 2012. She remained close to Driscoll, who publicly referred to her as "mom," until she accused Busch of domestic violence, accusations which Young ultimately said she did not believe.

Former Rep. Duncan Hunter Sr., R-Calif., an AFF founder and later board chairman, told Outside the Lines he reviewed every program and sent an email in 2011 to the board and Driscoll suggesting the foundation had become top-heavy and recommended -- though "not in a meat cleaver fashion" -- it spend less on salaries and administrative costs.

Former staffers told Outside the Lines that Driscoll didn't take kindly to the recommendations. Hunter left the board in 2012.

"Before we started this thing, there wasn't a foundation in D.C. doing what we were doing, which was defraying costs for the families coming in and doing a number of events," said Hunter, former chairman of the House Armed Services Committee. "We founded that Armed Forces Foundation as a totally voluntary-run operation, which is the kind that I like, where folks don't get paid. And it got bigger. And we took on employees, and Patricia gets a salary, and she has a salaried staff. And my review of the program was simply we needed a ratio of more benefits going out and less money being spent in Washington, at the headquarters basically.

"Patricia assured me that she was trying to -- or working on trying to -- make things more efficient and scrubbing costs and things."

Based on 2013 IRS tax filings, foundation staff salaries now top $1.1 million -- a 42 percent spike from the prior year. There are 21 employees listed.

Reimbursing foundation might not be enough

An adviser to the whistleblower said the complaint will be exhaustive.

Driscoll's attorneys sent letters this year to several former foundation staffers reminding them of nondisclosure agreements they signed when they left the foundation. Three times in the past few months, her attorneys wrote to ESPN about the Outside the Lines investigation, including once alleging that Busch, or someone closely associated with him, was a source and therefore he was in violation of the protective order against him.

The whistleblower statute, however, offers protection against retaliation as well as the threat of a lawsuit for violating a confidentiality agreement. An IRS program also provides a monetary reward if it recovers unreported or underreported taxes.

Even if Driscoll or her private company later reimbursed the charitable foundation, industry sources said, the actions run counter to federal nonprofit guidelines. And tax experts contacted by Outside the Lines said that a tax-exempt charity is not allowed to function as a bank or lender, particularly not to its executive officers or directors -- its assets are not to be used for activities outside of its stated purpose.

"If these amounts that are paid for personal expenses are not reported as personal income on [tax forms], they constitute what is called an 'excess benefit transaction,' which can trigger an excise tax and also potentially jeopardize the tax-exempt status of the organization if the amounts are sufficiently large," said Owens, the former IRS administrator. "It is basically taking charitable money and putting it in the pocket of the person that is running the show."

ESPN senior writer Seth Wickersham and researcher Anthony Olivieri contributed to this report.