Dear Everyone;
The SF Chronicle has a front page story on the NY real estate investor Libertarian Howie Rich and how he is funding the vote Yes on Prop 90 campaign for eminent domain and other similar measures across the country.
Ron Getty
SF Libertarian
http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/10/05/MNGBOLINSB1.DTL&type=printable
Mogul's network bankrolls Prop. 90
Web of advocacy groups funnels millions to pass property rights initiative
- Patrick Hoge, Chronicle Staff Writer
Thursday, October 5, 2006
A network of tax-exempt advocacy groups -- all with ties to a New York real estate investor -- is funneling millions of dollars to the campaign for a California property rights measure in a way that cloaks the identity and number of financial supporters.
The intricate financial web is the source of nearly all the money used to promote Proposition 90, an initiative on the November ballot aimed in part at curbing the power of government to seize private property. The financing network has spent more than $14.6 million around the country since late last year on 20 initiative drives, most concerning property rights and taxes.
The man at the center of this national effort is Howie Rich, a wealthy libertarian who believes in limited government and has long used tax-exempt groups to promote his favored candidates and political beliefs -- property rights, term limits, tax cuts and school vouchers, among others.
The practice of using tax-exempt groups to fund campaigns has been criticized by some political-finance experts as opaque and deceptive. Unlike other political organizations, advocacy groups don't have to disclose their donors.
In interviews and e-mails to The Chronicle, Rich said the groups help protect people who think like him, people who want to cut government powers but fear retribution if their names are published in public campaign-finance disclosure reports.
"If you are advocating change, those currently in power often do not take it sitting down," Rich said. "That is why most groups do not disclose their donors -- it is truly a First Amendment concern."
The advocacy groups operate with varying levels of openness. Some have Web sites, others don't. Some have filed necessary tax paperwork, others haven't. And while federal tax regulators say they pay attention to abuses of tax-exempt organizations, including those founded by liberal activists, campaign-finance experts say little has been done to control the increasingly effective groups.
"Why does it have to be so secretive?'' asked John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California. "It smells bad, and there ought to be more transparency.''
Rich's advocacy groups have rallied behind California's Prop. 90, contributing 92 percent of the money in support of the measure as of this week. If passed, the measure would prevent cities from using eminent-domain powers to seize land and transfer the property to a new owner, such as a shopping mall developer. Governments also would have to pay for passing laws that devalue private property.
Critics say it would be a costly initiative and would lead to an onslaught of litigation. The measure also could make it virtually impossible for cities to plan developments and protect the environment, opponents argue. National efforts to limit eminent-domain powers gained momentum after the U.S. Supreme Court ruled last summer that a Connecticut city could seize homes and turn the land over to a private developer as part of a redevelopment project that included condos, a hotel and commercial space.
As of this week in California, campaign records show that nearly $3.4 million out of $3.6 million raised in support of Prop. 90 came via five entities that Rich either leads or has helped fund in the past. Another $200,000 came from Howard Ahmanson Jr., a Southern California conservative activist.
Donations included:
-- $1.5 million from Rich's Fund for Democracy, which he describes simply as "a trust.'' The organization is not incorporated and has no publicly stated aim.
-- $1 million from Americans for Limited Government, a tax-exempt advocacy group that Rich runs. The group's stated purpose is to promote smaller government, according to tax documents.
-- $600,000 from Montanans In Action, a tax-exempt group incorporated in December that received seed money from Americans for Limited Government. A Montana attorney is fighting to get the donors' names disclosed.
-- $220,000 from the Club for Growth State Action, a tax-exempt group of which Rich is a director. The group promotes "economic growth, limited government and minimal taxation," according to documents.
-- $50,000 from Colorado At Its Best, a tax-exempt group of which Rich is a director. Documents state the group's goal is to affect policy on "education, government operations and efficiency and representative democracy."
Prop. 90 opponents had raised $3.9 million as of Wednesday. Major contributors include the League of California Cities ($1.4 million), the California Public Securities Association, a group of banks that underwrite municipal bonds ($400,000), and Forest City Residential West, a development firm ($250,000).
An IRS spokesman declined to discuss any specific tax-exempt groups or possible investigations. However, this year the agency started a program to stop churches and charities from engaging in political activity. Unlike contributions to tax-exempt advocacy groups, those to churches and charities are tax-deductible.
Jesse Weller, a spokesman for the IRS in Oakland, said there are no limits to how much advocacy groups can spend on ballot initiatives. They also can support or oppose political candidates as long as that isn't a group's main purpose, Weller said.
Yet a report issued in July by George Washington University's Campaign Finance Institute found that the IRS does little to regulate the advocacy groups. The report said the IRS does not effectively monitor the groups' reports, which can be vague or misleading.
Stephen Weissman, an associate director of the university institute, said the advocacy groups should be required to disclose donors when giving to ballot initiatives.
"If people (voters) are being asked to support something, they ought to know who is asking them,'' Weissman said.
Some of the groups haven't filed the paperwork that declares their official purpose and the people in charge. Other advocacy groups state explicitly that part of their goal is to fund ballot initiatives. According to documents reviewed by The Chronicle, the stated purpose of U.S. Term Limits, another advocacy group that Rich leads, is "to educate the public through newsletters and special issue mailings. To provide funding to state initiative efforts and provide leadership to organize the legislation of term limits."
Various watchdog organizations say the networks might be an abuse of tax law.
"A lot of times (the groups) are just used as part of an elaborate money-laundering scheme to hide the true involvement of donors,'' said Ned Wigglesworth, a policy advocate for California Common Cause. "Donors want to back an effort anonymously and make that very clear to the organizations they donate to and cater their donating accordingly."
Craig Holman, a lobbyist for campaign-finance group Public Citizen, agreed. Public Citizen has urged the IRS to investigate such advocacy groups.
"There is something dirty about this activity. We don't have a chance to find out who's paying for this," Holman said.
In the case of Rich's network, it's common for his associates to be intricately involved.
Laird Maxwell, for example, chairs America At Its Best. Maxwell's wife, Lori Klein, once did fundraising work for Rich's U.S. Term Limits, and she is sponsoring a Rich-backed property rights initiative in Arizona.
Maxwell says he's just a simple Idaho "cowboy," but the political contributions he was involved in this year alone have been anything but simple.
According to campaign finance reports, America At Its Best got $2.8 million from two Rich-led entities -- Americans for Limited Government and the Fund for Democracy -- and then donated $640,000 to a Missouri group called Missourians in Charge, which in turn received $1.65 million from the Fund for Democracy. America At Its Best, which has not filed recent tax forms that would explain the group's mission, will not disclose any individual donors.
"What's weird about it?'' Maxwell asked. "When you're engaged in a battle, you need to move this way or that way."
Supporters who want to contribute often fear retaliation, especially if they do business with local governments, he said.
"I have a lot of people say, 'I'd like to help you, but then I won't be able to get my building permit,' " said Maxwell, a longtime anti-tax activist.
Rich said the controversy over his donor lists has been stirred up by opponents who would rather attack him than discuss issues like eminent domain.
"Sadly, union officials and fans of big government know they can't debate the issues at hand, and they also know that voters and taxpayers aren't with them,'' he said. "They're terrified that they will lose the power that they currently hold over -- and the money they soak from -- the taxpayers.''
He added that his network is funded by thousands of individual donors from across the country.
But that's impossible to prove without disclosing the donor lists, something Rich refuses to do. Critics say Rich is trying to create the illusion of grassroots support.
An example: The November ballot identified Prop. 90's sponsor as Anita Anderson, a Potrero Hill resident who once worked for Rich's wife, Andrea Rich, at a libertarian book publishing company. Anderson said in an interview that she supports the measure but has had little involvement in the campaign.
Not all of the Rich-backed initiatives will be decided by voters this year. Nine measures were removed from the ballot in five states -- Michigan, Missouri, Montana, Nevada and Oklahoma -- for various reasons, including signature-gathering fraud.
Rich isn't the only person to use advocacy groups for political purposes.
Republican insider Grover Norquist heads the advocacy group Americans for Tax Reform, which has financially supported some of Rich's efforts, documents show. He defended the use of such tax-exempt groups, arguing that left-leaning groups -- including unions -- also contribute to political campaigns.
"The difference is they steal their money (from union members), and we get ours voluntarily," he said.
Liberal activists also use the financing strategy. Rich pointed to the Democracy Alliance, a coalition of wealthy Democrats formed last year with the aim of funding think tanks and advocacy groups. According to several news reports, the founders said they were trying to emulate the groups that they believe helped Republicans win office. Representatives for the group did not return calls for comment.
Likewise, the tax-exempt Ballot Initiative Strategy Center, a labor-backed advocacy group based in Washington, D.C., is fighting Rich's political efforts and pushing half a dozen minimum wage initiatives around the country.
Kristina Wilfore, a spokeswoman for the Ballot Initiative Strategy Center, said comparing her group to Rich's operations is "offensive.''
The center will identify its major donors but won't detail how much the donors gave. Wilfore said the group has only given about $60,000 to five initiatives, including efforts to increase the minimum wage and clean-energy measures.
Wilfore said the center's major donors include the Tides Foundation, Service Employees International Union, the American Federation of State, County and Municipal Employees and the National Education Association.
"I welcome a comparison between the Ballot Initiative Strategy Center and Howard Rich," Wilfore said. "We're not dumping money into shell organizations."
SPHERE OF INFLUENCE
Howie Rich, a libertarian New York real estate investor, is at the center of a network of tax-exempt groups that have funneled millions of dollars to ballot initiatives in California and nationwide. Unlike political groups, advocacy groups don't have to disclose donors.
$14.65 million
Donors unknown Americans For Limited Government
Chairman
$4.44 million
- California: $1million
- Oregon: $1million
- Nevada: $793,000
- Arizona: $892,000
- Oklahoma: $455,000
- Washington: $260,000
- Maine: $20,000
- Colorado: $462,000
- California: $50,000
(Contributed $2.43 million to America At Its Best)
Fund For Democracy
Trust of which Rich is trustee
$3.82 million
California: $1.5 million
Missouri: $1.65 million
Idaho: $237,000
Michigan: $ unknown
Arizona: $34,500
(Contributed $400,000 to America At Its Best)
Club For Growth State Action
Director
$270,000
California: $220,000
(Contributed $50,000 to America At Its Best)
America At Its Best
Got millions from Rich-led groups
$2.83 million
Nebraska: $1.82 million
Missouri: $640,000
Idaho: $100,000
U.S. Term Limits
President
$1.83 million
Oregon: $1.78 million
Missouri: $50,000
Legislative Education Action Drive
Founder
$70,000
Oklahoma:: $70,000
Colorado Club For Growth
Local affiliate of a Rich-led group
$200,000
Oklahoma: $200,000
Colorado At Its Best
Director
$512,000
Montanans In Action
Got seed money, at least, from a Rich-led group
$1.39 million
Montana: $795,000
California: $600,000