Paget Lions Club is being investigated by the Charities Commission over claims that thousands of dollars of scholarship money was misused, The Royal Gazette has learned.

Club President Arthur Tatem admitted that more than $10,000 from the scholarship fund was "loaned" to defray costs of a disastrous club raffle, which lost the organisation thousands of dollars.

The probe was launched after Sylvia Ferreira complained that she has spent six years trying to find out what happened to money given to the club for a scholarship in memory of her late husband, Joseph.

In correspondence seen by The Royal Gazette, the club offers contradictory figures about how much money was donated for the fund, and finally admits it cannot come up with an accurate number because the paperwork from 1996 - the year Mr. Ferreira died - has gone missing.

Mrs. Ferreira said she is angry about the way the matter has been handled and believes Bermudians should not trust the club because they can't be sure what happens to the money they donate.

Mr. Tatem said a scholarship fund was not set up in Mr. Ferreira's name specifically because the club decided all money would go into a general scholarship fund.

And he said money donated in memory of Mr. Ferreira - a former secretary and treasurer - had been used for scholarships.

But he admitted the Charities Commission is looking into the club taking money from the scholarship fund to bail out the loss-making raffle.

The club's financial statements for 1999, show it spent $40,000 on a VSB raffle and $12,150 on a Meyer raffle.

In a letter to Mrs Ferreira in February this year, Mr. Tatem wrote that a previous president had taken the accounts with him "and for some reason known only to himself had not returned them to the treasurer at the time". The president later died and the accounts were either "misplaced or lost".

He continued: "I said at our meeting that funds from the scholarship fund were used to defray the cost of our failed raffle and that the club had lost a great deal in this raffle, which you already knew.

"I told you that this money was borrowed and would be paid back with interest. We have already paid back $12,000. However, this is Paget Lions Club business and no concern of non-members of the club.

"I think that you are being unfair in continuing with this matter because, as I said, I am sorry that this had to happen and there is nothing more that I or anyone else at the club or outside can do."

Mrs. Ferreira told The Royal Gazette: "I asked the club how much money came in memory of my husband because I wanted to thank donors personally. This never happened.

"All I want to know is what happened to the funds. I've been fighting with them these past six years until last year when I finally went to the Registry General (which passed it to the Charities Commission).

"Several people from overseas made quite considerable donations because he was so well known.

"How can a charitable organisation say the paperwork got lost and they can't find any record of donations they took in at the time? It is ridiculous, I've never heard of such a thing.

"I have no idea to this day what happened to those funds submitted six years ago in lieu of flowers for my husband.

"I feel the community of Bermuda has a right to know what Paget Lions Club is doing. The community continue to donate money for a scholarship fund and that is not what they have been using it for.

"I feel we need to set a precedent so that other charities don't do the same thing and feel they can get away with it. We are talking about the community of Bermuda's funds."

Charities are supposed to submit annual reports, but Mrs Ferreira said the Registry General told her Paget Lions Club had not submitted any for five years.

Mr. Tatem told The Royal Gazette: "I don't think I can comment because it is with the Charities Commission now.

"Joe Ferreira built up one of the greatest Lions' clubs in Bermuda and she (Mrs. Ferreira) wants to bring it down.

"There is a Paget Lions Scholarship Fund per se. It started with the Leon Gibbons scholarship fund, and after considerable thought it was decided just to call it the Paget Lions Scholarship in memory of all those who died.

"When Joe Ferreira died, people donated money to the scholarship fund in his name, not to the Joe Ferreira Scholarship Fund. She didn't like the idea of dropping her husband's name. (The money) has been used for a scholarship, yes."

Referring to the club using scholarship fund money to cover losses made from a raffle, he added: "That was a loan from the scholarship fund that is being paid back.

"That was a loan of money taken to defray the costs of a failed raffle. It was borrowed from the fund and that money is being paid back quite quickly.

"It is a private concern and if it comes to anything with the Charities Commission, it will all come out if there is more to do. Whatever our penalties as such, if there are any, that will be up to them."

The Royal Gazette was unable to contact Charities Commission chairman Andre Heyliger for comment.

In an interview in 2000, Mr. Heyliger said the Charities Act may be tightened up to ensure the public has confidence that money is not being abused.

"We have discussed in general terms our ability to address the public's confidence that funds given for charitable purposes are appropriately used for charitable purposes," he said.