posted on: Thursday, March 30, 2006

What’s the value of corporate philanthropy? We know that lots of corporations now require their philanthropic giving to have a positive impact on their bottom lines. The notion is “strategic philanthropy”, defined as “Corporate philanthropy that serves the interests of the corporation” (http://www.wordspy.com/words/strategicphilanthropy.asp).

Here’s a recent example of relevance to NCRP’s work. In 2005, NCRP published a study looking at the strategic philanthropy of the Wal-Mart Corporation and the Walton family members who own the retail behemoth (The Waltons and Wal-Mart: Self-Interested Philanthropy, available at www.ncrp.org). Here’s a great example straight from the pages of the national newspapers:

Wal-Mart wants to go into retail banking and has filed an application with the Federal Deposit Insurance Corporation (FDIC). Lining up against Wal-Mart’s application have been numerous community organizations that were distressed by Wal-Mart’s initial desire to get an exemption for its bank from the Community Reinvestment Act requirements for bank investments in low-income areas, a request Wal-Mart has since dropped as a concession to its opponents, though the opposition to the Wal-Mart application hasn’t ceased.

Offering to weigh in in favor of Wal-Mart’s bank application? The Salvation Army. Yep, according to the director of national community relations for the huge nonprofit, the Salvation Army plans to be a “character witness for Wal-Mart and their (sic) support for communities”, citing among other things Wal-Mart’s support for the Sallies’ Red Kettle Christmas Campaign in addition to Wal-Mart’s charitable work in the wake of Hurricane Katrina (“A Show of Hands on Wal-Mart,” New York Times, http://www.nytimes.com/2006/03/24/business/24bank.html?ex=1144386000&en=882ac2c4b1134d9d&ei=5070&emc=eta1, March 24, 2006).
Maybe that’s a thank you for Wal-Mart’s rushing in to offer support to the bell-ringers when the Target company decided not to give the red kettles charitable solicitation rights at their stores over other charities (Rick Cohen, “Target vs. Salvation Army: It’s About More than Just Bell-Ringers”, The NonProfit Times, February 1, 2005, available at http://www.ncrp.org/downloads/NCRPinTheNews/AR-020105-The%20NonProfitTimes-Target_vs_Salvation_Army.RC.pdf). There you have it, a case study of the corporate bottom line benefits of strategic philanthropy.

posted on: Wednesday, March 29, 2006

The story of Project Homestead continues to play out with plots and subplots worthy of a TV drama. In an earlier blog (March 22, 2006), we wrote about Homestead’s collapse and the inability of the DA to find anything expressly illegal amidst a sea of unethical behavior (“sea” is appropriate, since the ED and others of the organization had taken numerous Caribbean cruises on the nonprofit’s tab, an odd expenditure for a nonprofit low-income housing builder in Greensboro, North Carolina).

Now bobbing up in the water is word of a report on Project Homestead prepared by the State Bureau of Investigation, the North Carolina equivalent of the FBI, which was the basis of the DA’s conclusion that nothing was worth prosecuting. As Greensboro News & Record columnist Edward Cone points out (“Give Us All the Facts on Project Homestead”, News & Record, March 26, 2006), the unprosecutable but unethical expenditures included not only the cruises, but purchases of jewelry and guns on the Project Homestead credit cards.

Previous news coverage of Project Homestead indicated that the city’s multi-year failure to look into Project Homestead’s dubious programs and expenditures resulted in part from the ED’s political pressures. Having committed suicide, the ED isn’t in a position to throw any more political weight around. Nonetheless, the political leadership of the city seems to be of two or more minds about digging into Homestead’s expenditures and getting restitution of the public and tax exempt funds that were so egregiously misspent.

City Council member Tom Phillips decided to question why and how the SBI report on Project Homestead could be released and made public, perhaps with redactions of city government employees’ names in the report “to protect them from possible retaliation.” Scheduled to raise the issue during the “council comments” portion of the City Council meeting, Phillips lost his chance because the “comments” section was cancelled as the meeting went too late (“Homestead: Request Will Have to Wait”, News & Record, March 23, 2006). What, were they going to miss the NCAA regionals? The newest episode of “The Sopranos” on HBO? What Simon Cowell might say about the contestants on “American Idol”?

Whatever, the next installment in the saga of getting to the unprosecutable but unethical saga of Project Homestead might happen at the next Council meeting scheduled for April 4th. And then again, it might not.

posted on: Wednesday, March 22, 2006

“The actions of a former low-income housing builder may be unethical, but there’s no evidence they were illegal,” according to the county district attorney. He was talking about a Greensboro, North Carolina nonprofit housing group with a history of luxury cruises, thousands of dollars of other dubious travel, and a variety of assorted “questionable expenses.” (“No Criminal Charges to Be Filed in Homestead Investigation,” Winston-Salem Journal, March 10, 2006).

When the likes of Rick Santorum disingenuously say that the problems of charitable accountability are simply a problem of enforcing the laws on the books, it’s not that easy. The laws might not be strong enough, and obviously the sector’s self-regulation is on the thin side.

With this organization, the signs of organizational dysfunction had been obvious for years. The current investigation began two years earlier, the result not surprisingly of press inquiries that led to a government audit of the $18 million the City of Greensboro had invested in the nonprofit’s affordable housing development activities.

Money that disappeared from the project included some $8 million owed to the nonprofit’s creditors. The nonprofit ultimately declared bankruptcy. The bankruptcy trustee remarkably seized the estate of the organization’s executive director, a charismatic faith-based leader, who had purchased the properties with funds misappropriated from the nonprofit he directed (“Homestead Bankruptcy Trustees Goes after Estate”, News & Record, January 13, 2005).

The DA found scads of challengeable expenditures, but the bad memories of the board members and the nearly scratch-pad quality of the organization’s financial records made employees’ use of the nonprofit’s credit cards for employees’ personal expenses, employees’ diversion of the nonprofit’s construction supplies for their homes, employees’ flipping (quickie purchase and sales) of the nonprofit’s homes for their own profiteering, and much more. The local paper helpfully printed records of the nonprofit’s credit card payments, with dozens of payments to cruise lines such as Carnival, and Royal Caribbean and hotel and casino expenses in Puerto Rico, the Bahamas, and elsewhere (“Homestead Raced Up Thousands in Travel”, News & Record, February 5, 2004.

Also included were payments by the nonprofit to Tom Joyner Enterprises, trying to link the failing nonprofit to Ton Joyner’s nationally syndicated radio show and foundation in the hope that the nonprofit might be able to find a “benefactor” to bail it out of its financial troubles. The nonprofit paid $20,000 to participate in one of Joyner's own fundraising cruises, a fundraiser Joyner holds to raise money for his eponymous foundation. The nonprofit’s CEO also tried to reach Oprah Winfrey with the same bailout agenda. Neither the Joyner nor Winfrey ploys worked.

Somehow the audits weren’t all that revealing. The CFO wasn’t talking either. He and two other employees had accepted a payment from the nonprofit’s insurance companies, Nationwide and Allstate, to settle litigation they filed charging the executive director with having pressured them to have sex (“Nonprofit Settles Cases Saying Minister Tried Forcing Sex”, Abuse Tracker, http://ncrnews.org/abuse2005archieves/008605.html, January 14, 2005). According to their attorneys, taking the payment from the insurance companies was preferable to lining up behind dozens of other creditors looking for payments from the bankrupt organization.

“A bitter pill to swallow” was the DA’s characterization of the inconclusive investigation (“No Charges in Homestead Investigation”, News &-Record, March 10, 2006). Nothing could be proven worth legal action, in part because the CEO kept nearly all the operations in his head—and he was dead.

On December 6, of 2003, the 44 year old CEO, also a minister of a local Baptist church, overdosed on a combination bupropion, an antidepressant better known by its trade names Wellbutrin, and cittalopram, advertised commercially as Celexa (“King’s Death Ruled Suicide, Official Says”, News & Record, February 20, 2004). The suddenly awakened board had forced the CEO to resign not long before, after the City and the DA dismissed his complaints that he was being picked on by being forced to accede to the audits and investigations (“King: Homestead Treated Unfairly”, News & Record, September 3, 2003). In the absence of reliable written records, trustworthy memories of board members, employees whose ability to speak had not been compromised, or auditors from the previous 12 years of the nonprofit’s operations able to produce basic information, the details went to the grave with the once powerful faith-based nonprofit director.

This is more than the personal tragedy of a faith-based leader, a man of power and influence who had been able to corral the likes of Maya Angelou to attend the 2002 opening of a Krispy Kreme store developed by the nonprofit, not to mention state and national politicians who came to the city looking for his support. It is a story of the multiple means by which one nonprofit was able to misuse and abuse several hundred thousand dollars of tax exempt money—charitable donations as well as government contract funds—and escape punishment not to mention required rectification.

In their opposition to strengthened government standards and oversight of nonprofits, nonprofit leaders suggest that the nonprofit sector itself can self-police just fine. In this case, dozens of nonprofits, foundations, and government agencies had the ability to call out this organization and expose its rather obvious wrongdoing. No one did until the local newspaper sniffed around and found enough to warrant a look, and that prompted the city to get off its haunches. There’s no evidence in the newspaper reports that the state’s attorney general or the Internal Revenue Service had taken action in the dozen years the organization took to go from inception to bankruptcy.

As the local DA noted, the story was not just a “bitter pill” for his investigators and litigators, but would in the end be a bitter pill for the taxpayer and the public.

Let’s all thank the National Federation of Independent Business for some refreshing candor. The senior VP of NFIB, Dan Danner, said that the lobbying reforms staggering through Congress won’t really affect the big lobbyists because of the charity loophole that NCRP has decried so often.
As Danner put it, “Between charitable events and fundraising events, there will be lots of ways to get in front of members [of Congress].” (Jeffrey H. Birnbaum, “Lobbyists Foresee Business as Usual: Post-Abramoff Rules Expected to Be Merely a Nuisance”, The Washington Post, March 19, 2006, http://www.washingtonpost.com/wp-dyn/content/article/2006/03/18/AR2006031801305.html?sub=AR).

Nice to know that there is some straight talk among lobbyists, notably the NFIB which has been indefatigable in its lobbying for the permanent repeal of the estate tax. You don’t need a lobbyist’s contribution to trigger the ethical problem. The fact that lawmakers can hide behind charities, and both lobbyists and the special interests they represent can contribute without public disclosure. As Hamlet said, ay, there’s the rub! It’s the charity loophole, protecting donors to public charities from having their identities and largesse revealed to the American taxpayer.

Charities and foundations established or controlled by lawmakers or by their campaign staff are ready made for special interests to use as camouflage for the buying and selling of access and influence. From the legislator’s perspective, the donors provide some cash that the legislator can disperse as philanthropy to interested parties in the manner of latter day Franklin and Eleanor Roosevelts.

For the special interests and lobbyists, their contributions are largely anonymous, protected from public disclosure by 501(c)(3) nonprofit rules. But they are certainly known to the lawmakers in question, and they get the bennies of having contributed to the lawmakers’ own charitable ATMs in return for some invaluable face time.

In the incredible shrinking lobby reform movement, virtually no one has focused on the charity loophole. As long as members of Congress get to play the role of penny ante philanthropists, we’ll continue to see the likes of DeLay, Frist, Stevens, Santorum, and others wrapping themselves in charitable togas as they collect dollars from the special interests.

There’s probably no way of stopping their ilk from posturing as philanthropists, but there is one way to make their special interest charity bake sale less conducive to lobbying abuses: Require full public disclosure the names of all donors, not just lobbyists, and the amounts they donate to the charities controlled by members of Congress or their campaign operatives. Disclosure doesn’t stop wrongdoing. But in this case, it would reveal to the American taxpayer how some powerful federal lawmakers use tax exempt charities as shills for special interest lobbying.

posted on: Wednesday, March 15, 2006

It’s hard to forget Jack Abramoff’s perfidious misuse of his purported foundation as camouflage for buying access with members of Congress for his lobbying clients. One of Abramoff’s more deceitful practices was taking ostensibly donations from Indian tribes and using them for purposes that the tribes could never have imagined and in some cases might have clearly opposed.

One scheme involved using the tribes’ contributions, ostensibly to promote their casino gambling interests, to fund the anti-gambling lobbying of the likes of former Christian Coalition activist Ralph Reed. At the center of this practice was the ubiquitous right wing political activist Grover Norquist and his ostensibly nonprofit organizations, Americans for Tax Reform and Americans for Tax Reform Foundation. We’ve written in the past about ATR and other allied nonprofits laundering money for special interests, many of them linked to players like Abramoff, but despite press coverage, ATR had gingerly sidestepped some of the condemnation earned by Abramoff’s Capital Athletic Foundation, Michael Scanlon’s American International Center, and Amy Ridenour’s National Center for Public Policy Research, nonprofits all.

Yesterday, March 14th, the focus turned to Grover himself. The indefatigable Citizens for Responsibility and Ethics in Washington (CREW) filed a formal complaint asking the Internal Revenue Service to investigate ATR’s questionable tax exempt activities. According to a Reuters news report (http://www.washingtonpost.com/wp-dyn/content/article/2006/03/14/AR2006031401143.html), CREW charged that ATR was laundering contributions from Indian tribes, including those that were Abramoff’s lobbying clients, and taking a cut from the deals which it used to support anti-gambling activities also linked to and supported by Abramoff. CREW’s claim is that this laundering of Indian tribes’ gambling funds for anti-gambling interests constituted taxable business income for ATR since it was unrelated to ATR’s official tax exempt mission and purposes.

The Norquist, Abramoff, and Reed nonprofit interactions are questionable regardless of one’s position for or against gambling. What is occurring in this ever-expanding web of Norquist-Abramoff linkages, and remember, as NCRP wrote in the past (in “Abramoff: Well-Connected to the Well-Heeled of the Right,” in the Fall 2004 issue of Responsive Philanthropy), their working connections go back to their youthful escapades as college Republican colleagues. The Abramoff-Norquist nonprofit spider web exemplifies the use and abuse of 501(c)(3) charities and foundations to circumvent lobbying and campaign finance regulations and oversight.

It is unclear to us whether IRS will pursue the CREW complaint about ATR with half the vigor of its investigation of Texans for Public Justice, whose IRS-worthy activities consisted of having questioned Tom DeLay’s campaign spending practices. Maybe there’s a potential difference because the CREW complaint comes from a small nonprofit and the TPJ complaint arose from a letter from DeLay’s colleague, Congressman Sam Johnson (R-TX) (http://www.statesman.com/news/content/news/stories/nation/02/27delay.html). NCRP has written that it was surprising that the IRS managed to miss years of Abramoff’s obvious charitable shenanigans (http://www.ncrp.org/press_room/index.asp?Article_Id=79). Here’s a chance to put the IRS on the right track by doing a thorough investigation of Norquist’s wayward nonprofit practices.

posted on: Friday, March 10, 2006

At yesterday’s White House conference on Faith-Based Initiatives, “Compassion in Action,” President George W. Bush pushed corporations and foundations to follow the government’s lead in funding faith-based organizations. In 2005, 11% of total social government grants went towards funding faith-based organizations, according to the president. Apparently separation of church and state no longer applies to the use of government tax dollars to fund religious missions.

At the same time that he stated the increase in funding to faith-based organizations, the president should have mentioned the cuts in social program funding for which any increase in grant dollars cannot compensate.

In the continuing effort to reduce the amount of taxes Americans have to pay, President Bush also suggested that senior citizens should be able to avoid paying taxes on retirement money by donating a portion of their retirement income to faith-based organizations.

“Our job in government is to promote programs that get results…. Government can pass laws and hand out money, but it cannot love,” he said to an audience of faith-based organizations that erupted with applause.

With ever-increasing tax breaks and social funding cuts, one has to wonder whether his government can do anything at all anymore.

posted on: Thursday, March 09, 2006

From the latest NonProfit Times:

“In 2004, foundations in the United States gave approximately $32 billion… That same year, Hispanics living in the United States sent more than $40 billion in remittances to support family and friends in their countries of origin.

“’Now that’s philanthropy, by any standard,’ said Orosz [Joel Orosz, professor of philanthropic studies at the Johnson Center at Grand Valley State University]. We don’t understand what’s making it tick, and exactly where those dollars are going and what it’s achieving in other countries. And that’s a hugely important issue that we’ve got to figure out and understand and give people credit for.”

Looks like Orosz needs a lesson in human labor as export, and how this philanthropy “ticks.” The issue of remittances, and contextualizing it in any dialogue of philanthropy, is problematic in many ways. Immigrants who remit do not see their actions as philanthropy; rather this money goes from family to family, for basic necessities like food, clothing, shelter, and education. In the Philippines for example, where a rough estimate of remittances ten years ago reached $6 billion (USD), remittances hardly find its way into NGOs or charities, and is quickly spent on basic day to day necessities of families.

Basically, the money is “achieving” a decent standard of living for families in countries, in South America and Asia, and other places, that are steeped in political unrest, economic instability, high rates of poverty, unemployment, illiteracy, and poor if not failing health and educational systems.

In other words, this generous $40 billion figure coming from the fastest growing minority population, is not a blanket indication of affluence much less knowledge of philanthropy or the charitable sector. On the other hand, this $40 billion is probably a low figure if you take into account the remittances not officially counted, such as those remitted by undocumenteds.

Philanthropic experts, such as Mr. Orosz, when looking at these figures, need to take a step back, and realize that this kind of giving does not come out of the kindness and generosity of affluent hearts. They partially come from the back-broken, overworked, underpaid, perhaps even most likely undocumented or trafficked. This kind of giving comes from the fields of Delano, California, the canneries of Alaska, the sweatshops in Chinatowns. And yet they still give billions of dollars to family members back home, because they know that living standards are even worse there.

These communities have much to overcome before even beginning to think about their “charitable giving” and its achievements and impact. The very communities in the U.S. from which the $40 billion to Hispanic countries and the $6 billion to the Philippines come are communities which lack the very basics of social services—affordable housing, language access, health care, educational opportunities, etc.

Considering that in 2003 the nation’s largest foundations only allocated 0.9 percent of their grant dollars to immigrant populations in the U.S., Mr. Orosz should be more concerned about how and why U.S. philanthropy fails to serve these populations, rather than trying to understand the hows and whys of their own giving.

posted on: Monday, March 06, 2006

Andrew Young recently announced he’ll be leading an effort to improve Wal-Mart’s reputation across the country (see Maria Saporta’s “Andrew Young Goes to Bat for Wal-Mart,” in the February 27, 2006 edition of the Atlanta Journal Constitution). Young—the former mayor of Atlanta and US Ambassador to the United Nations—is the chairperson of a new steering committee called Working Families for Wal-Mart, which Wal-Mart and its suppliers are financially supporting.

It’s an interesting choice for both Wal-Mart and Young, given Young’s progressive background, which includes currently serving as the chairperson of the Drum Major Institute, a progressive public policy organization, as well as his personal activism around economic and racial justice.

Instead of trying to sugarcoat Wal-Mart’s reputation, we hope Young will use his background and experience with low-income and minority communities to show Wal-Mart how its abysmal treatment of its workers impacts people on a daily basis. We also hope that Wal-Mart’s hiring of Young’s consulting firm, GoodWorks International, doesn’t distract him from the task at hand.