Power Grab

by Jason Chaffetz

  That question was answered during the 2018 confirmation hearings for Supreme Court justice Brett Kavanaugh. On the one hand, the ACLU had a history of fighting for due process and the presumption of innocence, which Kavanaugh had obviously been denied. These constitutional rights clearly applied to Kavanaugh, who was the target of uncorroborated allegations that failed to meet even the lowest evidentiary standard. On the other hand, Kavanaugh was a Republican and the ACLU is aligned with Democrats. Having to choose between their stated mission and their political objective, the ACLU jettisoned the mission.

  They didn’t just stand back and refuse to take a side, either. They proactively undermined their organization’s core principles, bragging in a news release about a $1 million multistate ad buy against Kavanaugh. Not just against Kavanaugh—but essentially against his right to due process and to the presumption of innocence. They wrote, “The ad buy is part of a larger advocacy effort that will engage the ACLU’s over 1.8 million members in actions that include phone banks, online petitions, congressional office visits, and a national day of action in partnership with other organizations.”

  The outrageous ads they ran actually compared Kavanaugh to high-profile accused sexual assaulters Bill Cosby and Harvey Weinstein—against whom there was corroborated evidence as well as due process. They were the kind of ads that can get you condemned by the ACLU.

  As Scott Bledsoe deftly explained in an October 2018 Federalist piece, “The ACLU is less interested in ensuring a fair process—and more keen on joining in the liberal firing squad against a judge who will solidify a conservative majority on the Supreme Court. It is no secret that the ACLU has a liberal bias, but their recent attack efforts against Kavanaugh show that they are willing to put partisanship above their core principles of defending civil liberties and due process.”

  Normally a nonprofit would be loath to take a position that might offend the donor base who presumably joined the organization to promote its mission. Why didn’t the ACLU worry about that? Is the ACLU’s donor base really filled with civil libertarians? That brings us back to Grassroots Campaigns.

  There is no indication that the ACLU uses Grassroots Campaigns for fund-raising purposes like some of the other nonprofits we looked at. But it did hire them for consultancy services totaling more than $10 million from 2014 to 2016. It gave more than twice the consulting fee to Grassroots Campaigns than to the next consultancy service listed in their 990 report.

  Like the other left-leaning charities who use consulting services from Grassroots Campaigns, ACLU has seen huge influxes of revenue during the time they’ve received these services. In these same reports for these years, the ACLU has gone from $10 million in debt in 2013 to $118 million in net assets in the 2016 report, three years later. Most of this increase occurred in the year 2016. The ACLU reports that most of its funding comes from membership dues.

  Who are these members? Are they people who genuinely care about civil liberties? Go back and look at ACLU.org. Their target audience is obvious—and it’s not necessarily civil libertarians. When the numbers are released for 2018, it will be interesting to note the impact of the Kavanaugh position on the ACLU’s fund-raising. If civil libertarians are funding the ACLU, we should see a significant drop in support post-Kavanaugh.

  Describing the Kavanaugh hit job as “the final nail in the ACLU’s coffin,” famed civil libertarian and longtime ACLU supporter Alan Dershowitz lamented the loss of America’s premier defender of civil rights. Writing for the Hill, Dershowitz said:

  [T]he core mission of the ACLU—and its financial priority—is to promote its left-wing agenda in litigation, in public commentary and, now, in elections. If you want to know the reason for this shift, just follow the money. ACLU contributors, including some of its most generous contributors, are strong anti-Trump zealots who believe that the end (getting rid of Trump) justifies any means (including denying Trump and his associates core civil liberties and due process).

  More recently, Dershowitz criticized the ACLU for failing to speak out on a judge-imposed gag order against Trump confidant Roger Stone. Partisan interests seem to be the driving force for the organization. Has civil liberties become nothing more than a side hustle for the ACLU?

  Other Fund-Raisers

  Grassroots Campaigns is not the only political group in this category. It’s not even the only such group owned by Colorado’s Douglas Phelps. Phelps has built a network of nonprofit organizations, each with the stated mission of furthering progressive causes. His biography says his organizations seek “a coordinated strategic approach to getting things done.” Coordinated is right. It seems many of the progressive groups are tied together.

  Among Phelps’s organizations are Telefund, Public Interest Network, the National Association of Organizations with Public Interest, US PIRG, the Fund for the Public Interest, and Environment America. Phelps remains the president or chairperson of each of them. In particular, Telefund is known for aggressive telemarketing tactics. Once someone donates to one of these charities, they can expect to be called by many more—often looking for ongoing monthly contributions.

  Former president Barack Obama got some of his community organizing experience at one of these groups. He referred to his time employed by US PIRG in the year following his graduation, saying, “I used to be a PIRG guy. You guys trained me well.”

  Most of Phelps’s nonprofit organizations are 501(c)4 advocacy organizations rather than 501(c)3 charity organizations. A review of public disclosures shows a close connection between these organizations. The 990 form for Environment America showed that it gave the Public Interest Network control over the selection of its board in 2016. Donations have been made between these organizations as well.

  There is also an investment vehicle for the Public Interest Network called 1543 LLC, in which Environment America invested and which comes under the direction of Douglas Phelps and the Public Interest Network. Other related parties to this group of nonprofits are the Clinton Foundation, the Sierra Club, the Center for American Progress, and the Democratic National Committee. Joe Biden was reported as having a fund-raiser at the home of Douglas Phelps in the 2014 election.

  The political infrastructure of the Democratic Party is inextricably linked to the infrastructure of America’s nonprofit sector.

  An Analysis of Conservative Nonprofits

  After learning what was happening on the left, I was curious to see whether the same patterns could be found on the right. Forbes magazine’s William P. Barrett compiles an annual list of America’s top charities. The most recent list, published in December 2018, includes several of Grassroots Campaigns’ clients. The ACLU comes in at #50. The Planned Parenthood Federation is #27 and the Nature Conservancy is #20.

  Perhaps the most well-known and liberal-maligned conservative nonprofit—the National Rifle Association (NRA)—does not appear anywhere on the list. For all the fearmongering from the left about the power of the NRA, it doesn’t even approach the size of the Clinton Foundation (#69) or the Barack Obama Foundation (#63). The NRA’s 2016 reserves of $75 million were dwarfed by the Clinton Foundation’s $326 million, although the NRA’s revenues were higher in the year of Hillary Clinton’s infamous defeat.

  The only charities on the Forbes list remotely tied to conservative political views might be the handful of religious ones—none of which engage in politics.

  There are, of course, conservative nonprofits. They may not approach the size and scale of their reflections on the left, but they do exist.

  As we began delving through the 990 forms of a cross section of some of America’s most influential conservative groups, the first difference we noted was the revenues and assets. Whereas politically oriented nonprofits on the left were seeing significant growth in those categories over time, conservative nonprofits looked more like the rest of the nonprofit sector with very modest gains.

  Over on the left, the Planned Parenthood Federation’s endowment funds had grown from $88 million in 2
013 to $157 million in 2016. The Nature Conservancy went from having $5.7 billion in assets in 2013 to $6.2 billion in 2016. The Nature Conservancy’s endowment fund grew from $993 million to $1.2 billion over that three-year period. Same story for the Southern Poverty Law Center, whose endowment fund was $281 million in 2013 and grew to $470 million by 2019.

  How do those numbers compare to conservative nonprofits? Let’s start with the venerable NRA, which has both a 501(c)(3) charity organization as well as a 501(c)(4) advocacy arm. In the 2016 Form 990, the foundation had $366 million in revenue, up a little from the $336 million they saw in 2015 and the $310 million in 2014. Net assets during those three years declined, primarily because of increased spending. These are healthy numbers, but the growth rates don’t match those of the left-leaning 501(c)(3) charities. Despite NRA’s huge membership and long history, its revenue numbers are dwarfed by those in the top one hundred charities. Similarly, the Gun Owners of America saw insignificant increases in revenues over the three years reported—from $1.9 million in 2013 to $2.2 million three years later with minimal reserves.

  Numbers USA, which considers itself a bipartisan group that works to decrease immigration, raised $7.4 million in 2016 with net assets of $10 million. Those are healthy numbers, but they are dwarfed by the left-wing nonprofits. The even smaller Eagle Forum is an influential family-run nonprofit with limited revenue. Total income dropped from just over $1 million in 2015 to $275,661 in 2016. Expenses have outspent revenue by $1.5 million during the 2015–16 cycle, with total assets at the time of $4.6 million. Similarly, the Center for Immigration Studies is a 501(c)3 organization. It had revenues of $2,772,885 in 2014 with net assets of $3,000,323. In 2015 it had revenues of $2,907,224 with net assets of $3,267,051. In 2016, it had revenues of $2,902,940 with net assets of $3,425,201. It’s certainly not having the exponential growth of its left-leaning counterparts but still is in a healthy position.

  The National Organization for Marriage had steady revenues at $1.3 million during the three years reported, but saw an operating loss in 2014. Focus on the Family, another well-known conservative nonprofit, has no public reporting since 2014. At that time, it had revenues of $86 million, or $2 million less than it raised the previous year. Net assets for 2013 and 2014 were $52 million and $51 million respectively. The National Right to Life Committee raised about $5 million in 2014 and 2015, but only about $3 million in 2016. The Family Research Council had a mixed bag with revenues of $15 million in 2014, $12 million in 2015, and $16 million in 2016.

  The one anomaly in my admittedly limited cross section of conservative nonprofits was Judicial Watch, a 501(c)(3) that has had some real success using Freedom of Information Act (FOIA) requests to force government transparency. There is no evidence Judicial Watch is engaged in the scheme to overpay fund-raisers who then turn around and do political canvassing. I only found this pattern on the left. But Judicial Watch does benefit from the same pattern of increasing donations that left-leaning groups are experiencing.

  Judicial Watch revenues in 2013 were $20 million. In 2014 the revenues significantly increased to almost $30 million; they increased again in 2015 to $37 million and went up even more dramatically in the last reported filing, to $45 million in 2016. Those numbers are nowhere close to ACLU or Planned Parenthood numbers, but they do reflect the same types of revenue increases as other political nonprofits. That could be a result of their proximity to political donors. But it may simply be a result of their unmitigated and high-profile success in obtaining substantive evidence withheld from Congress.

  Another pattern that didn’t repeat within conservative nonprofits was the net loss to fund-raising consultants. That pattern seems to be unique to clients of Grassroots Campaigns.

  The NRA paid for a number of fund-raising consultants in 2016 for which they received no funding, but they also did not raise any funds that were retained by the consultants. The fund-raisers that they did use, Allegiance and InfoCision, both produced profits for the NRA from their fund-raising, the former for a flat fee and producing excellent results. For example, in 2016 the NRA paid Allegiance $480,000 and Allegiance raised a net profit to NRA of $42,551,885. That’s the year Planned Parenthood raised $2.6 million from the $4.6 million they paid the fund-raiser, for a net loss of $1.9 million. According to the 990s, the NRA routinely distributes money to other organizations of all sizes and types. In 2016 they reported $47 million in expenses. Of these expenses, grants made to organizations (and some individuals) totaled $33,793,429, or 72 percent of their revenue.

  Many of the conservative nonprofits we analyzed didn’t even use outside fund-raisers. National Organization for Marriage, Gun Owners of America, Center for Immigration Studies, Eagle Forum—none of them reported payments to a fund-raiser. Of those that did, the fund-raiser consistently raised at least enough to break even.

  As for Judicial Watch, they did use outside fund-raisers. They paid one group $4.8 million for production of fund-raising packages and used another for administration of fund-raising lists. For actual fund-raising, they used the same organization as Family Watch, Center for Immigration Services, and Right to Life: MDS Communications Corporation. The fund-raising was not lucrative, but it never ran negative.

  Planned Parenthood’s use of outside fund-raisers is a bit of an anomaly among nonprofits of similar size. My review of the 990 forms for similarly sized nonprofits with no connection to politics showed they tend to do their fund-raising in-house. While it appears most nonprofits struggle to find outside fund-raisers who can raise significantly more than they cost, only clients of Grassroots Campaigns seem to be dramatically overpaying for fund-raising and allowing the fund-raiser to control the money raised.

  Corrupting Our Nonprofit Institutions

  The information we glean from public filings of nonprofit entities certainly raises some questions.

  For example, is the 501(c)(3) charity fund-raising activity only happening in politically competitive states and districts? When those volunteers knock on a door for fund-raising purposes, are they also canvassing? Are they gathering information to be used for political purposes at the same time they are supposedly raising funds? When they promise these people their donations will go to a charity, but then don’t actually net any funds for that charity, is that fraudulent?

  What about the massive reserves charities are stockpiling—how much of that money have they been able to indirectly funnel to their political activities? Is the dramatic increase in reserves of politicized charities over the last few years related to the fact that donors can now use charities as political vehicles? Is that conversion part of the consulting service that Grassroots Campaigns provides? Is this a new way for Democrats to signal virtue—as they funnel dark money into charities while pretending to eschew dark money from Super PACs?

  Those questions raise even more questions. Does the IRS have the necessary tools and data to figure any of this out? If so, are they even willing to do so? Are there any enterprising journalists brave enough to take on the pillars of the nonprofit community to investigate? And what is the opportunity cost of all of this political activity? Are charities even focused on the social welfare priorities upon which they were founded? Does the use of both a 501(c)(3) and a 501(c)(4) within the same organization ultimately politicize the whole endeavor? How far does the politicization extend? Are organizations with no explicit political bias somehow engaging in a clandestine way?

  Domestic Spending as a Conduit to Nonprofits

  These questions shed new light on the federal budget battles of the last ten years. The Democratic push for more domestic spending actually results in more spending on nonprofits. In fiscal year 2018, the federal government allocated $59 billion for nonprofit contracts and grants, according to USAspending.gov. Does any of that money directly or indirectly fund political activities?

  I remember when Republicans gained control of the House of Representatives after the 2010 midterms and made a concerted effort to cut federal spending.
Democrats had been increasing domestic spending, which includes heavy spending on government grants and contracts to nonprofit organizations, for years. Having been demoted from Speaker to House minority leader, Pelosi went to the mat to protect domestic spending.

  Because we had not yet won back control of the Senate and did not have support for Republican budgets there, we kept funding the government with continuing resolutions. These just extended the inflated funding levels previously set by Democrats. In 2011, Republicans used the debt ceiling vote as leverage to pass the Budget Control Act, which ultimately imposed automatic spending cuts. I didn’t vote for sequestration—I think tailored budget cuts are preferable to across-the-board cuts—but more important, I worried about defense spending.

  We were engaged in two foreign wars and President Obama wanted to cut defense spending by $100 billion a year annually. It had a huge impact on military readiness. Republicans were fighting to restore the massive cuts in military spending, with tens of billions of dollars needed to rebuild military infrastructure and modernize our weapons. Democrats were reluctant to increase military spending, but seemingly went along as long as there was an equivalent increase in domestic spending, from which the many grants and contracts to nonprofit entities flow.