| Writings on non-profits by: Rob Levine | <<< >>> | |
Reprinted with the permission of Minnesota Law & Politics
When Kenneth Starr took the podium at Orchestra Hall in downtown Minneapolis on November 11, 1999, he was the perfect symbol of his sponsor, the conservative Center of the American Experiment (CAE), a 10-year-old, tax-exempt think tank run by longtime Republican Mitch Pearlstein.
The occasion for Starr's visit was the Center's first-ever Fall Conservative Briefing. What made the event noteworthy was that the people and organizations who paid for the visit - and dozens of other similar public and private events with other prominent Republicans - are able to write off the donations from their taxable incomes, because, according to the Center, these events are both nonpartisan and educational to the general public.
Normally you'd think of a charity, which the Center claims it is, as something like the Red Cross, or Sharing & Caring Hands. So it may come as a shock to realize that the public is, in fact, subsidizing the politicking of these Republicans and their ideological allies to the tune of some $300,000 a year. That the Center does this politicking so blatantly is both a tax and media mystery.
A tax mystery because the Center seems in danger of violating Internal Revenue Service (IRS) regulations of charities regarding the prohibition against campaign intervention and rules against tax-exempt organizations providing a "private benefit" for some specified group (i.e. Republicans.)
A media mystery because the Center is so deftly able to generate news reports and free broadcast coverage, all without generating any interest in either its funding, institutional connections, or the overall content of their presentations. When you look at the stories published on or by the Center in the Star Tribune, for example, you see the CAE has penetrated nearly every section of the paper. Given the more than 300 stories and opinion pieces the Star Tribune has run on the Center, it is curious that not one word has ever been mentioned of its funding, even though much of it is now in the public record, except an early story noting that Pearlstein was "cagey" about revealing donors.
When Mitch Pearlstein launched the Center of the American Experiment in 1990, he set a lofty goal for his new organization, pledging that "The Center must resist any and all official ties with political parties and their inevitable intramural skirmishing. It must build and carefully guard a reputation for independence." He made this statement no doubt to confer an air of even-handedness to the Center, as well as to state its charitable intentions. For if the Center were to become too partisan those who give it money would not be able to write the donations off their taxable incomes, nor would the news media hold off the critical coverage usually given to political organizations.
Now, nearly 10 years later, there is ample history of the Center to render a judgement on whether it has maintained the promise Pearlstein made a decade ago. Has the Center remained independent, or has it become a quasi-Republican organization, merely the "Research arm of the state Republican Party," as has been alleged by former state DFL Chair Dick Senese?
The most important way to judge the Center is how the IRS views it, which turns out to be a complicated, yet understandable, proposition. One way of evaluating the Center is to look at other organizations that have lost their tax-exempt status in the recent years for being "Too Republican."
One of those was the now-defunct National Policy Forum (NPF), a think tank created by former GOP National Party Chair Haley Barbour in 1993 to develop policy ideas for the Republican Party. A number of Center-associated people were part of the NPF, including Pearlstein, Center Advisor Linda Chavez, U.S. Republican Senator Rod Grams, and Vin Weber, the former Republican Representative from southern Minnesota. Among other things, the NPF was accused of funneling a $2.2 million contribution from Hong Kong into Republican Congressional and Senate races late in the 1994 campaign.
In May 1997 the IRS denied the NPF its tax-exempt status. Less than a year later the NPF defaulted on half of a $1 million loan, and closed its doors.
A large number of coincidences, campaign contributions, employment patterns, and events that occurred between December 1996, and November 1998, involving Norm Coleman and three men who would successfully become the head of the Minnesota Republican Party - Chris Georgacas, William Cooper and Ron Eibensteiner - and other Center members, raises doubts about the Center's status as a non-partisan entity.
St. Paul Mayor Norm Coleman's relationship with the Center itself goes back at least to 1993, when he became friends with former Republican Congressman Vin Weber, a Senior Fellow and frequent speaker at the Center.
Behind the scenes, Coleman's conservative positions were attracting friendships with other high-powered Republicans associated with the Center. One was with GOP Party Chairman Chris Georgacas; another was with party financier William Cooper, CEO of TCF Bank, who is a member of the Center's Board of Directors, and a contributor to Norm Coleman, the Republican Party, and the Center. In the four years between 1992 and 1996, for example, Cooper gave the Center more than $56,000.
After Coleman's first meetings with Weber in 1993, he was invited to join the Center's Board of Advisors in 1995. That same year he appeared on a CAE stage with (now) fellow Republican, Senator Dave Durenberger, and by early '96 Coleman would be enraging his fellow DFLers by emceeing a CAE speech by Republican pundit and former Dan Quayle handler Bill Kristol.
Since then, members of the Center have been present at many important political events in Norm Coleman's life. Weber and Chris Georgacas, who would later head up the biggest project in the Center's history - the Minnesota Policy Blueprint - were the first Republicans to contact Coleman about his switching parties, in 1993. Peter Bell, a founder and Director of the Center, attended and spoke at Coleman's coming-out-as-a-Republican press conference in December of 1996. After that, political contributions from members of the CAE Board of Directors and their wives poured into Coleman coffers.
The turnaround is startling. Prior to Coleman becoming a Republican he had received only $225 combined from people on the Center's Board of Directors. Between 1996 and 1998, he received more than $5,000 for his mayoral campaign, and during the 1998 gubernatorial race received almost $15,000 from members of the Center's Board of Directors and their wives, with only $1,000 being donated by members of the board to Coleman's gubernatorial competitors*. Those same people donated not one penny to the state Democratic Party in 1998, either, yet in that one year gave more than $215,000 to the state Republican Party, with $200,000 coming from Cooper alone*.
When pressed, Pearlstein vehemently says that it's perfectly natural for the Center to be filled and run by Republicans, since most conservatives are Republicans. This claiming that the words "conservative" and "Republican" are synonymous seems an odd way of showing that the Center isn't merely an arm of the state Republican Party.
None of this is illegal or violates IRS rules regarding charities. But by becoming so close to the GOP was the Center in danger of promoting a political party? That proposition would be tested beginning in March of 1997 when Georgacas, the departing Chair of the State GOP, would join the Center.
In the spring of 1997, then-GOP Party Chair Chris Georgacas suggested to Mitch Pearlstein, head of the Center, that, after Georgacas stepped down as GOP Chair in July of that year he should head up a project for the Center that would provide a "blueprint" for future state executives and lawmakers.
One year later Georgacas would be rejected for an appointment to the Minnesota Board of Judicial Standards, only the fourth nominee since 1974 to be denied confirmation. State Senator Allan Spear, a DFLer, said at the time that Georgacas was not confirmed because "There is no evidence of him ever having had a life outside of partisan politics."
Pearlstein himself implied that he too was alive to the apparent conflict when he wrote to Center members in the summer of 1997 that "...some might wonder (how might I put this delicately?) if Mr. Georgacas' partisan style is incongruent with American Experiment's non-partisan style."
As Georgacas began work on the Georgacas Project, another CAE Board member, William Cooper, replaced him as the Chair of the state Republican Party. At the changing of the guard ceremony, Georgacas reassured his fellow Republicans that he would continue working with them "shoulder to shoulder, in the trenches, for the great electoral, moral and ideological victories yet to come." These words presciently described what would become Georgacas' role over the next 18 months, when he would at once head up the Policy Blueprint, head up a Draft Norm Coleman for Governor committee, and, barely 10 months after joining the Center, run GOP candidate Coleman's campaign.
If Georgacas was to be nonpartisan in his job as head of the Policy Blueprint, it would be the first time he had acted that way in more than 15 years.
Eventually the Georgacas Project would be renamed the Minnesota Policy Blueprint, and Georgacas would be joined in his chairman seat by Annette Meeks, formerly a top aid to Republican House Speaker Newt Gingrich. Georgacas and Meeks formed 19 committees to analyze the functioning of Minnesota State Government. Given that the nonpartisan Center was so close to the state Republican Party, you might have expected them to include at least some Democrats as heads of the committees. You would have been wrong (See Sidebar).
Cursor, the media-criticism web site that I co-edit, has confirmed that at least 20 of the 21 committee heads (including Georgacas and Meeks) are Republicans. Many are either functionaries of the party, officeholders, or office-seekers, including Weber, Michael Wigley and Ron Eibensteiner, a CAE Board member and major contributor who would eventually replace Cooper as state GOP Chair in 1999. The committee heads included four current and two former Republican state lawmakers, and zero Democrats. In fact, the committee, instead of looking like some scholarly inquiry, resembled nothing so much as an attempt at consensus building for the state Republican Party.
Clues to why this committee was so unbalanced are contained in the introduction to the finished product, where Pearlstein writes about the vision that drove it: "The Blueprint is a massive review in which almost all aspects of the executive branch of Minnesota state government have been subjected to conservative and free-market tests. It's inspirited in no small part by the fact that Minnesota, for all of its virtues, is one of the nation's highest taxed and most regulated states - and we believe that everyone would be better off if it weren't."
Sensing partisan intent, Republican insider Sarah Janacek, writing in the newsletter Politics in Minnesota in January 1998, while Georgacas was still at the Center, reported that "Because of its tax status as a nonprofit, CAE can't and doesn't admit out loud that the whole exercise is designed specifically to be given to Norm Coleman upon his expected ascension to the governorship. But with former Republican Party chair Chris Georgacas heading up this effort and the draft Coleman committee, it's a bit difficult to dodge the obvious."
Even an editorial in the Star Tribune, written just after Coleman was defeated in the gubernatorial election, admitted that the Policy Blueprint was probably intended for Coleman, stating that "Although Center leaders say the blueprint was done without a particular candidate in mind, there is little doubt that the ideas would have been particularly well received had Norm Coleman become governor."
One specific problem with the Minnesota Policy Blueprint was the composition of the committees who created it. As noted above, they were overwhelmingly Republican, and were led by two high-powered GOP political figures.
In itself, that is not illegal, either. The IRS has advised that individuals who are all members of the same political party are not prohibited from operating a charity. The organization may even be funded by a partisan organization. IRS regulations instead focus on the purpose behind the organization's activities, which are determined, in part, by drawing "factual inferences" from the record. If intervention is found, there is no need even for the activity to be substantial.
Click here for a quick look at how the Policy Blueprint bears a striking resemblance to the Minnesota Republican Party's platform.
In fact, it's hard to find any area where the Blueprint and the State GOP Platform significantly disagree. This should come as a no surprise given the composition of the Blueprint's authors, and the fact that the current Chair of the State Republican Party, Ron Eibensteiner, also sits on the Board of the Center, and was co-chair of the Republican Party's Platform Committee.
One question is which came first, the Policy Blueprint or the GOP Platform? On the surface it would appear that the GOP Platform did, since the Blueprint wasn't published until after the 1998 election. However, according to the St. Paul Pioneer Press (6/30/97), by the time Georgacas stepped down from his post as co-director, two-thirds of the committees were supposed to have met and drafted their recommendations, including the most important ones: "Elementary and Secondary Education," "Health," "Welfare," and "Economic Development and Sports."
And it's not hard to figure out why the $400,000 Blueprint turned out to be an analog to the Republican Party platform - that's how it was intended. The prospectus indicated the intent was to essentially achieve the Republican agenda, as reported by the Star Tribune in March 1998: "The goal is to produce a massive manifesto with a point-by-point plan for shrinking, privatizing and deregulating government, reducing taxes and putting much of the 'pro-family' social agenda into place as well."
In comparison, the 1998 Minnesota Republican Party's platform, leads off with the following statement: "We support reducing taxes, spending and regulation...[and] expanding tax credits, deductions or voucher programs."
More to the point, Pearlstein wrote that "I grant that reddish flags are raised by such circumstances..." but that the real issue was "...whether they [Georgacas, Weber or any other big name associated with the Center] act honorably and legally in their American Experiment roles...[not a] single example of any breach of such trust [has been presented.]"
Pearlstein may be many things, but he may not be an expert on charity law. In 1990, the first year of the Center, he made campaign contributions of $125 of the Center's funds to the state Republican Party and $100 to the Senatorial campaign of Republican Rudy Boschwitz. At the time, Pearlstein said he was intending to give money to the Democrats and Democratic candidates as well. He disclosed the donations when his lawyer informed him that he had broken the law. The Star Tribune reported that "Although Pearlstein, a Republican, said he'll continue to appear at strictly political events, he'll pay his own money."
The issue at hand is not whether individuals at the Center acted legally. The issue is whether the Center "promoted the success of a particular political party."
Pearlstein wrote a non-response letter to the Star Tribune in 1997, after Dick Senese, the DFL Party Chair at the time, had accused the Center of being the research arm of the Republican Party. Pearlstein argued that "Suffice it to say, as a tax-exempt organization, we are no such thing." Then, Pearlstein averred that "...to the extent that the chairman of the DFL thinks we are [the research arm of the Republican Party], we would be happy to be of similar service to his party, too."
The implication is that the Center has assisted the state Republican Party, and specifically the campaign of Norm Coleman, in a number of ways. According to IRS advisories, the benefit provided to the Republican Party need not have been intended - not even as a "primary benefit" - to jeopardize its charity status. All that need be shown is a "secondary benefit" to them.
How were the Republicans and Norm Coleman aided? First, the Center provided temporary, highly paid employment to the party's outgoing chair, until work could be found for him running the party's candidate for governor's campaign.
Pearlstein lent credence to this theory when he wrote about Georgacas' departure from the Center in the Blueprint's introduction. Georgacas, said Pearlstein, tongue planted firmly in cheek, "... was (I need to choose my words carefully here) hijacked and hauled away by Norm Coleman's gubernatorial campaign in March 1998...That said, I register - without a trace of facetiousness this time - my respect for his willingness to answer the more immediate call of what was then a just-perking governor's campaign."
In fact, Georgacas had indicated before he took the Blueprint job that he had intended to leave later to run a campaign. Given that the whole thing was Georgacas' idea, and that he was perhaps the most partisanly Republican figure in the whole state, and that he had never planned to stick around to finish the Blueprint, it is hard to understand why Pearlstein gave him the job in the first place.
Secondly, state Democrats have charged that Georgacas was, in fact, subsidized and helped by the Center in his work on the Committee for Minnesota's Future, which gave Coleman a running start on his campaign. Democrats say the Blueprint project was nothing more than the drafting of a campaign platform for the eventual Republican candidate for governor.
As evidence, Democrats point out the following:
When addressing his critics, Pearlstein also claims that a number of Democrats are involved in the Center, so it is really nonpartisan. It's hard to argue that the Democrats Pearlstein points out as participating in the Center's activities somehow provide balance.
One of those Democrats is Lawrence Perlman, the CEO of the Ceridian Corporation, who, despite claiming to be a Democrat, donated $1,000 to the state GOP party in 1998, and gave none to his declared party*. When asked why, Perlman said the money was given "as a favor to my friend Bill Cooper," who serves on the Center's Board of Directors with him, and was the head of the Minnesota GOP at the time.
One Democrat who used to be associated with the Center is Marshall Tanick, a respected liberal-oriented Twin Cities lawyer with extensive media law experience, who attended early Center events, even making financial contributions. Describing what he says has been an evolution of the Center to an essentially Republican organization, Tanick said that the Center's "ideological bent has turned into a partisan cloak that I think raises serious questions about their compliance with the IRS tax laws governing charities," adding that the Center's events weren't so "starkly partisan" in the past.
The reader might ask why he or she should care about one particular political faction ostensibly having its politicking subsidized by the general public. The answer is that, since the days of common law, it has been recognized that "a trust to promote the success of a particular political party is not charitable," because "there is no social interest in the underwriting of one or another of the political parties."
Just what constitutes "promoting the success of a particular political party" has been the focus of various statutes passed by Congress during the past 70 years, their interpretations by Tax Courts, and the publishing of regulations and advisories by the IRS. These regulations warn that there is frequently no "bright-line" test for determining when a charity has crossed the line of promoting a political party.
Whether the Center has broken tax laws will be left to the lawyers and auditors. But the coziness in which the think tank works in concert with the Republican Party is disappointing and ultimately dangerous to the level of political discourse in this state.