Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

The candidates and nonprofits

Posted by David Kassel on July 30, 2007

Nonprofits have come under increasing scrutiny in recent months for issues ranging from nonpayment of payroll taxes to a lack of financial transparency  to the simple fact of their increasing involvement in delivering federal and other governmental services.

Some of that scrutiny has lately been brought to bear on the connections that some politicians, particularly candidates for president, have with nonprofits.

In The Nonprofit Quarterly, Rick Cohen calls for higher standards of disclosure regarding nonprofit charities, particularly those charities that are connected to the candidates.  He writes:

Although it is difficult to imagine that the behavior of presidential candidates would be a role model … full disclosure of donors and expenditures of politicians’ charities should start with those established by or run by candidates, their family members, their aides, and their campaign staff.

Here are some thoughts on some nonprofit connections held by some of the major candidates for president:

John Edwards:

John Edwards’ connection with a Georgia-based nonprofit called The Center for Promise and Opportunity has generated a lot of scrutiny, starting with a June 22 article in The New York Times, which itself drew heavy criticism in the blogosphere.  The gist of the NYT piece was that Edwards established the nonprofit ostensibly to fight poverty, whereas in reality, he used it to finance his own travels and other political activity after his 2004 vice presidential campaign and before he announced his current campaign for the presidency. 

 The 2005 IRS tax filing for the Center for Promise and Opportunity doesn’t disclose the names of the donors of the $1.3 million in contributions it received, nor does it disclose the names of the consultants to which the Center paid $259,000.  The Center’s directors included members of Edwards’ political staff, including one who received more than $105,000 in compensation from the organization and another who received $70,000.

In the rebuttal to the piece noted above, Greg Sargent at TPM Cafe makes the valid point that the Times didn’t prove its assertion that Edwards used the nonprofit for political purposes and that it should have said only that the arrangement “raised questions” about whether that was its purpose.  The piece was “badly botched,” Sargent maintained.

Sargent’s criticism is fair, but the known facts about this nonprofit are still troubling.  Nearly 60 percent of the organization’s budget went to payments to employees and consultants.  And with the exception of the two directors, the recipients of those payments are not disclosed in the 2005 tax filing.  The stated purposes of the organization—which included “mobilizing young people to join the fight against poverty…” and “retreats and seminars with foreign policy experts to discuss Iraq, promotion of democracy and freedom throughout the world…”-are elastic and unfocused.  And the fact that Edwards himself, who founded the organization, isn’t listed as a director or anywhere else on the tax filing, simply invites suspicion.

Cohen maintains that “some of (Edwards’s) philanthropic connections are quite serious, positive, and heart-wrenching,” such as foundations and nonprofits that John and Elizabeth Edwards started in honor of their teenaged son, Wade, who died in a car accident.  Those organizations have provided scholarships and awards.

But as Cohen points out:

The Edwards 501(c)(3) nonprofit world, combined with his PAC and 527s, suggests that the candidate has a somewhat blurry conception of the distinctions between public charities and political tools. And this undermines the potentially noteworthy work of the foundations and charities he and his wife established in honor of his son.
Particularly disturbing about the Edwards scenario is his absolute unwillingness to reveal the names of donors. Politicians’ hiding donors and expenditures behind the confidentiality of the 501(c)(3) public charity status is an abuse of the public trust.

Let’s hope Edwards’ 2006 tax filing provides this needed disclosure.

Mitt Romney:

Mitt Romney may be a classic case of a politician trying to have it both ways with respect to 527s, a class of political nonprofit organizations set up to influence political elections.

527s remain largely unregulated by the 2002 McCain-Feingold campaign reform bill, which limited soft money spending by national political organizations.  Before he announced his intention to run for president, Romney, then governor of Massachusetts,  benefited from his chairmanship of the Republican Governor’s Association, a 527 organization, to run $900,000 in ads touting his accomplishments.  Ostensibly, these were ads in support of Kerry Healey to succeed him as Massachusetts governor, but as the GOP blog, GOPProgress, pointed out, Healey got significantly less face-time on the ads than Romney himself.

Romney has since gone on to attack 527s, in explaining his opposition to the McCain-Feingold campaign finance reform bill.  In an interview with The Washington Post, Romney criticized the legislation as having “made things worse, not better,” adding that, “the law that he (McCain) passed that is in place now in our country has created a circumstance where those 527s rule the day. That’s what he put in place.”

Hillary Clinton:

The biggest nonprofit-related controversy involving Hillary Clinton I could find in an Internet search stemmed from a front-page February 27 Washington Post article, which began breathlessly:  “Sen. Hillary Rodham Clinton and former president Bill Clinton have operated a family charity since 2001, but she failed to list it on annual Senate financial disclosure reports on five occasions.”

The article went on to note that the Clinton Family Foundation has “enabled the Clintons to write off more than $5 million from their taxable personal income since 2001, while dispensing $1.25 million in charitable contributions over that period.  Hillary Clinton’s office immediately amended her Senate ethics reports after receiving inquiries from the Post.

This article received scathing criticism in Media Matters, which noted that the Post piece fueled numerous right-wing attacks on Sen. Clinton, “including the distorted claim that she had been operating a ‘secret foundation that has allowed her and her husband to avoid paying taxes on more than $5 million.'”

The WaPo article was, indeed, a largely baseless attack on Sen. Clinton.  It focused on a technical violation of the disclosure requirements for members of Congress under the Ethics in Government Act; but it didn’t establish that Clinton would have had any motive to keep the foundation secret.  In fact, as the article noted, not only did Clinton immediately provide the disclosure on her ethics reports, but the Clintons had duly provided tax filings for the foundation to the IRS.

When reporting on potential violations of the law, journalists have an obligation to establish some basis for a person’s motive in doing so.  If the violation can’t be shown to be more than an oversight, it isn’t worth more than a paragraph in the political-roundup section of the paper.  The Post article did imply that the Clinton foundation provided less in charitable contributions than it should have.  But the piece provided little context for the amounts foundations should contribute. 

Rudy Giuliani:

Giuliani appears to have had at least one controversial relationship with the long-time head of a nonprofit, the Twin Towers Fund, that Giuliani set up in response to 9/11, according to Cohen at The Nonprofit Quarterly.

Long-time Giuliani confidant Bernard Kerik, who was vice chair of the nonprofit, was the subject of much controversy over his presidency of another nonprofit, the New York City Correction Foundation.  During Kerik’s watch, that foundation was looted of $137,000, Cohen noted.  Giuliani later cut his ties to Kerik in the wake of that and other “personal and marital” issues involving Kerik.  But Cohen contended that Giuliani exhibited “a blindness to predatory behavior by one (of his) closest friends and confidants.”  That was not a great sign, he said “for a White House occupant in charge of appointing board members for nonprofit and quasi-governmental boards, and for setting a tone of accountability for the nonprofit sector.”

Barack Obama:

Obama appears to be benefiting from at least one nonprofit established on his behalf, which is employing a careful interpretation of campaign finance laws to maximize contributions to his campaign. 

Vote Hope, a Political Action Committee, which seeks to tap voters who have already given the maximum of $2,300 directly to the candidate, has been formed to provide a projected $2 million to Obama to help him win California. 

While campaign finance law prohibits PACs from spending unlimited amounts of money to further a specific candidacy, the Vote Hope PAC isn’t directly connected with Obama.  According to The Boston Globe, the donations to the PAC are considered legal as long as individual donors to the PAC “don’t retain control over how the money is spent.”

Although he is not connected with the PAC, the arrangement nevertheless is forcing Obama to walk somewhat of a political tightrope, since he has also been critical of 527s and their soft money role in financing campaigns.  Obama, however, never directly headed a 527, as Romney did, and thus has somewhat more of a basis for his criticism.

John McCain:

McCain was, of course, one of the two principal sponsors of the 2002 McCain-Feingold campaign finance reform legislation, and has since spearheaded efforts to bring 527s to heel under it.   In February, he reintroduced legislation to end 527 donations and supported a suit filed in court in 2005 to force the FEC to regulate 527s. But as The Washington Post has reported (in a legitimate story this time), McCain is financing his current presidential campaign with the help of some of the same GOP “fundraising giants who created and flourished in the soft-money system.”

At least six of McCain’s first eight national finance co-chairmen have given or raised large donations for political parties or 527 groups, the Post reported.  In all, the finance co-chairs have given at least $13.5 million in soft money and 527 donations since the 1998 election.  The piece doesn’t show McCain to be a complete hypocrite, since he’s apparently not tapping into 527s directly. But it does effectively tarnish his reformer image.

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3 Responses to “The candidates and nonprofits”

  1. Anonymous said

    John Edwards does need to come clean regarding the Center for Promise and Opportunity. He’s made the mistake of letting it fester.

  2. […] David Kassel at the Accountable Strategies blog has a post that deserves careful reading and consideration. It’s not about FOIA but it is about FOIA’s broader goal of transparency. […]

  3. Anonymous said

    I AM VERY INTERESTED IN THE PHENOMENON OF BARACK OBAMA’S SMALL CONTRIBUTOR. UNLESS I HAVE IT WRONG, EACH PERSON ONLY HAS TO GIVE HIS NAME, ADDRESS, JOB, AND EMPLOYER. THEN HE SIGNS THAT HE COMPLIES WITH ALL THE CAMPAIGN RULES. THE CAMPAIGN SPECIFICALLY WROTE TO ME TO TELL ME THAT IT IS THE RESPONSIBILITY OF THE CONTRIBUTOR AND NOT THE CAMPAIGN IF THE PERSON VIOLATES THOSE RULES, ESPECIALLY THE ONE ON NO FOREIGN AGENTS.

    IT IS HARD FOR ME TO BELIEVE THAT ALL THE CONTRIBUTORS, ESPECIALLY ALL THE LITTLE CONTRIBUTORS ARE ALL LEGAL.

    IS ANYONE LOOKING AT THE DATA IN ANY WAY TO CHECK FOR ACCURACY? HOW COULD YOU CHECK THIS DATA HOLD THE CAMPAIGN ACCOUNTABLE FOR IT? THANKS

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