Koch Millions Spread Influence Through Nonprofits, Colleges
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HOME ABOUT STAFF INVESTIGATIONS ILAB BLOGS WORKSHOP NEWS Koch millions spread influence through nonprofits, colleges B Y C H A R L E S L E W I S , E R I C H O L M B E R G , A L E X I A F E R N A N D E Z C A M P B E L L , LY D I A B E Y O U D Monday, July 1st, 2013 ShareThis Koch Industries, one of the largest privately held corporations in the world and principally owned by billionaires Charles and David Koch, has developed what may be the best funded, multifaceted, public policy, political and educational presence in the nation today. From direct political influence and robust lobbying to nonprofit policy research and advocacy, and even increasingly in academia and the broader public “marketplace of ideas,” this extensive, cross-sector Koch club or network appears to be unprecedented in size, scope and funding. And the relationship between these for-profit and nonprofit entities is often mutually reinforcing to the direct financial and political interests of the behemoth corporation — broadly characterized as deregulation, limited government and free markets. The cumulative cost to Koch Industries and Charles and David Koch for this extraordinary alchemy of political and lobbying influence, nonprofit public policy underwriting and educational institutional support was $134 million over a recent five- year period. The global conglomerate has 60,000 employees and annual revenue of $115 billion and estimated pretax profit margins of 10 percent, according to Forbes. An analysis by the Investigative Reporting Workshop found that from 2007 through 2011, Koch private foundations gave $41.2 million to 89 nonprofit organizations and an annual libertarian conference. Koch Industries and Charles and David Koch contributed $8.7 million to candidates and the Republican Party in the three election cycles between 2007 through 2012. In addition, Koch private foundations contributed $30.5 million to 221 U.S. colleges and universities and $46.3 million to the arts and other more traditionally charitable purposes during this period. And while Koch Industries’ lobbyists were spending $53.9 million to further the giant corporation’s federal and state policy agenda, the nonprofits it funded were simultaneously “educating” the public and lawmakers about energy, the environment and other issues in public testimony on Capitol Hill. For example, in 2011 and 2012, Koch Industries Public Sector LLC, the lobbying arm of Koch Industries, advocated for the Energy Tax Prevention Act, which would have rolled back the Supreme Court’s ruling that the Environmental Protection Agency (EPA) could regulate greenhouse gases. The bill was sponsored by Rep. Fred Upton, R-Mich., and co- signed by 92 Republicans (and three Democrats), 61 of whom signed an anti-climate tax “pledge.” An economist with the American Council for Capital Formation — a nonprofit group that receives Koch money — testified about that same bill before the House Energy and Commerce Committee. Margo Thorning told members of the House in February 2011 that regulation of greenhouse gas emissions “makes little economic or environmental sense,” according to her testimony. There were similar confluences of interest, with Koch foundation-funded, tax-exempt nonprofits and Koch’s commercial lobbyists saying similar things about the same pending legislation on Capitol Hill — such as in 2007-2008 on the proposed America’s Climate Security Act. In 2011 and 2012, Koch Industries and one of its supported nonprofits, the Heritage Foundation, “educated” lawmakers and their staff in their respective ways regarding the proposed New Alternatives Transportation to Give Americans Solutions Act legislation. Altogether, since 2007, Koch nonprofit organizations testified before U.S. Senate and House of Representatives committees or subcommittees at least 49 times, according to lobbying disclosure information compiled by the Center for Responsive Politics and testimony available from Congressional Quarterly/Roll Call. Private foundations cannot by law “be organized or operated for the benefit of private interests,” and they are required by law to disclose their charitable contributions to the Internal Revenue Service. But enforcement of potential violations is generally regarded to be sporadic and somewhat mysterious. For example, even if the IRS actually decides to investigate a private foundation or tax-exempt organization grantees, initial communications between the government and the organization in question are private — no formal notice is available in any public record. The Workshop did not find evidence of any pending publicly Koch money disclosed inquiry or action by the IRS against any of the five From 2007-2011, Koch private foundations Koch-funded foundations. contributed the following: Lawyer Gregory L. Colvin of Adler & Colvin in San Francisco, who 89 nonprofits and one annual conference has represented conservative and liberal IRS tax-exempt received: nonprofit organizations for 35 years, told Congress in April and the Workshop more broadly last week, “The tax rules are vague, unpredictable, and unevenly applied. Only the most flagrant violations could be knowing, willful, or deliberate and subject to criminal prosecution.” The scandal-ridden IRS, notoriously 221 U.S. colleges and underfunded and operating under antiquated, decades-old laws universities received: and regulations, has another debilitating limitation. According to Marcus Owens, the former director of the Exempt Organizations Division of the IRS and now a tax lawyer in private practice at Caplin & Drysdale in Washington, “Congress has drafted the rules The arts, humanities, that the IRS must abide by [and the precise extent to which medicine and youth organizations received: nonprofit, tax-exempt organizations can operate politically or legislatively or in the regulatory context of whether activities are for public or private benefit], and that allows a pretty wide array of activities.” Source: Research by And against the backdrop of the current IRS scandal and the Eric Holmberg, based on additional scrutiny of IRS tax enforcement, it now appears that 990 IRS forms; graphic by Cristina Keane, Investigative the Koch brothers are moving toward even less transparency, Reporting Workshop beyond giving millions of dollars to such controversial “dark money” organizations as Donors Trust (whose secret money efforts have been exposed in the past year in detail by the Center for Public Integrity and other news outlets). A few months ago, Koch strategists reportedly set up two new, even more secretive, 501(c)6 money-funneling organizations to further bolster and help underwrite their national network, mimicking the opaque approach of the U.S. Chamber of Commerce. According to NPR, now more of the Koch’s considerable largesse will be directed to support a “business league” that will push business-friendly legislation in the states, the Association for American Innovation (which does not yet appear to have a website), and a public “messaging niche” social welfare nonprofit group called American Commitment. Charles Koch, David Koch and Koch Industries Executive Vice President Richard Fink declined to be interviewed for this report. In an email response to our request for these interviews, Melissa Cohlmia, director of corporate communication for Koch Industries Public Sector, LLC, wrote, “Your attempts to silence us and others with whom you disagree are troubling to all Americans who cherish free speech and the First Amendment. You have a right to engage in advocacy journalism and we respect that right. However, we choose to engage with journalists who are balanced, truthful, and fair- minded. We therefore decline your request for interviews.” We contacted officials at some of the nonprofits receiving the most Koch foundation funding during this five-year period — the George Mason University Foundation ($16.3 million); the Institute for Humane Studies ($10.3 million) and the Mercatus Center ($3.7 million), both of which are affiliated with George Mason University; Americans for Prosperity Foundation ($3.6 million); Donors Trust ($3.3 million); and the Charles Koch Institute ($2.8 million). Their sentiments were similar to those expressed by the chief financial officer of the pro- business, libertarian Institute for Humane Studies, Gary Leff, who told the Workshop, “We’re not a political organization. … We have no position on current legislation. We don’t do lobbying of any kind. Our work complies with our status as a 501(c)3. It would be illegal for us to get involved in politics of any kind.” When asked why the institute doesn’t disclose its donors on its website, he said, “I’m surprised you ask that. Nobody really ever asks us that. It is standard practice not to disclose donors on the Web. We have plaques in our office recognizing our contributors.” Others echoed similar sentiments, also stressing the politically innocuous nature of their respective enterprises. Few of the 89 nonprofit organizations to which Koch private foundations gave contributions from 2007 through 2011 disclose the sources of their funding on their websites; we obtained the identities of which organizations received these contributions from Koch foundation annual IRS 990 forms. (To access the IRS 990 annual reports for 2007-2011, for both the funding foundations and the recipient nonprofit organizations, go here.) From 2007 through 2011, the five major Top recipients Koch-funded, private foundations Koch foundations donated to 221 universities during the 2007-2011 period, giving as little as $1,000 to Wisconsin contributed a reported total of $117.9 Lutheran College and more than $16 million to George Mason million. The breakdown by foundation University. The Kochs donated to 89 nonprofits and one annual conference, all of which have public policy and and amount: educational missions synchronous with those of the Koch corporation — deregulation, limited government and free • Charles G. Koch Charitable Foundation, markets. $52.7 million Top 5 college and university recipients • David H. Koch Charitable Foundation, $41.3 million (includes a non-public, policy-related donation to the Lincoln Center of $35 million) • Claude R.