Some types of nonprofits need to do more disclosure, not less. This is particularly true of those used by not just a few politicians — members of Congress, presidential candidates, and political shills — to do campaign dirty work behind the donor- and expenditure-anonymity of the 501(c)(3) public charities. The litany of many politicians and their charities, detailed in Nonprofit Quarterly over the years, highlights the need for public disclosure of donors and expenditures in charities associated with members of the U.S. House of Representatives and the Senate. This now has to expand to include the charities and foundations linked to Republican and Democratic presidential candidates.
Not many voters pull the lever on presidential candidates based on their positions on charity and philanthropy. You’ll dig in vain in the current candidates’ platforms for coherent thoughts about the nonprofit sector, at best rare asides of 501(c)(3) pabulum.
But how prospective leaders of the U.S. approach their own involvements in the nonprofit sector might be windows to their attitudes and approaches to ethics and accountability, on charity and philanthropy to be sure, and maybe as applied to the operations of government itself.
With the campaign season starting so early that the primaries may be afterthoughts, it’s time to remind presidential candidates of all stripes to avoid mucking around — intentionally or not — with 501(c)(3) nonprofits in the course of their campaigns.
Our bipartisan tour of the current crop of candidates begins with America’s Mayor, Rudy Giuliani, who ranks among the most nonprofit-experienced of the current crop of candidates, and John Edwards, who spawned a couple of charities after his vice presidential run in 2004.
The Giuliani Nonprofit Network
The first surprise on candidate Giuliani’s campaign disclosure report is to see his connection – actually, his wife’s — to the Changing Our World (COW) philanthropic consulting group  that publishes the widely circulated online onPhilanthropy. Changing Our World isn’t a nonprofit itself, but it is a significant and, with the articles of Susan Raymond, often serious contributor and analyst of information on dynamics in the philanthropic sector.
Judith Giuliani, formerly Judith Nathan, is reported to work at Changing Our World, even conducting press interviews about little known details of her previous marriages at the COW offices. Elsewhere, she has been described as a “former” managing director at COW, joining the fundraising firm in 2001 after having been with Bristol Meyers Squib (by profession, she is a registered nurse). Judith Giuliani was among the founding board members of the Twin Towers Fund, which the Mayor set up in response to 9/11 and took control of after leaving office, distributing some $216 million to 600 recipients. Changing Our World provided pro bono assistance in establishing the Fund, whose administrative costs were reportedly around 1% of its “operating budget.”
Changing Our World CEO Mike Hoffman and Mrs. Giuliani are both on the board of the nonprofit Rudolph W. Giuliani Center for Urban Leadership, whose address is always given as “c/o Giuliani Partners,” the multifaceted business operations of the former mayor. With a stated mission “to further the independent and non-partisan study of public policy concerns, and to promote the education and advancement of current and future leaders of the public sector,” the Center’s actual purpose is more mundane — Giuliani’s break with New York City tradition of publicly archiving the mayor’s papers, turning them over to a private entity that the former mayor basically controls.
The Twin Towers Fund like other 9/11 charities absorbed its share of scrutiny and criticism, but seems to have received generally clean audits. Of course, audits don’t show the whole story. Sometimes the issue isn’t the candidate’s personal nonprofit engagements, but the caliber of nonprofit people he associates with. For example, the vice chair of the Twin Towers Fund was longtime Giuliani confidant Bernard Kerik, whose most recent appearance on the public’s radar screen was his nomination and subsequent withdrawal as candidate to run the Bush Administration’s homeland security department, ostensibly for various personal and marital peccadillos. As he moved into presidential candidate mode, abetted by an emerging list of ethical problems attached to Kerik, Giuliani basically cut his business ties with Kerik at Giuliani Partners and Giuliani-Kerik LLC.
Kerik’s nonprofit behavior, all of a piece during the Giuliani administration and later his business partnership with the mayor, should raise concerns. When Kerik was commissioner of the City’s department of correction and later as Giuliani’s police commissioner, he also ran the New York City Correction Foundation, serving as its president. During Kerik’s watch, the sole authorized signatory for the foundation, one Frederick Patrick, managed to loot the foundation of $137,000 (or at least that’s what prosecutors were able to get him to cop to). According to prosecutors, the thieving foundation honcho Patrick, the foundation’s treasurer, used part of his swag for phone sex with Riker’s Island jail inmates. Investigations turned up reports of as much as $800,000 missing from the foundation, money that had been raised from rebates on overpriced cigarettes sold to jail inmates. Evidence is pretty scarce about the reported uses of the missing money — holiday parties for inmates and “promotional videos” (for the Tombs?).
One foundation board member quit when Patrick, the treasurer, refused to produce financial reports to the board. Not Kerik, who blissfully floated above the scandal in his foundation. When challenged about his protégé Patrick ‘s dipping into the foundation kitty, Kerik reportedly pled positional ignorance: Why should the president of a charitable foundation know what’s going on in the place?
Other items suggesting charitable and philanthropic misdeeds connected to Kerik have popped up in press: reports including: the use of $3,000 in Police Foundation funds to manufacture 30 busts of the then NYPD commissioner to be handed out as mementos; reports of a questionable law enforcement support group, the Federal Law Enforcement Foundation, headed by a Milstein Properties bigwig, providing top floor Battery Park City apartments for Kerik and his chief of staff; and purported special favors for publisher Judith Regan in return for her nearly $500,000 contribution to the New York Police and Fire Widows and Orphans Fund.
Caution signals: What might be gleaned from the Giuliani track record? A predilection for doing business with nonprofits where primary family members are in key nonprofit roles? A willingness to use nonprofits to replace the public sector (as in the archiving of his mayoral papers)? A blindness to predatory behavior by one’s closest friends and confidants? Not great signs for a White House occupant in charge of appointing board members for nonprofit and quasi-governmental boards — and for setting a tone of accountability for the nonprofit sector.
Promoting Themselves: Edwards and Paul
North Carolina’s John Edwards has garnered unwelcome attention recently for some of his nonprofit connections, and they’re worthy of concern. But some of the candidate’s philanthropic connections are quite serious, positive, and heart-wrenching. As most people know, the Edwards’s teenage son Wade died in a car accident. After that tragedy, his wife. Elizabeth Anania Edwards, stopped practicing law and John Edwards started his political career running for senator. What most don’t know is that Wade’s parents also started two nonprofits, one of them the Wade Edwards Foundation, which spawned the Wade Edwards Learning Lab at his high school in Raleigh. The foundation, a public charity, also provides some scholarship assistance and supports essay competitions, honoring Wade’s own talent as an essayist, and a short fiction contest for high school kids.
The Edwards’s also have a private foundation called the Lucius Wade Edwards Private Foundation, which pays part of the salaries of the woman who runs the Wade Edwards Foundation and the director of the Wade Edwards Learning Lab in Raleigh, the Foundation’s signature project. In addition, the private foundation pays for grants and scholarships that are presumably delivered through the Wade Edwards Foundation. In some of its early years, the foundation, capitalized mostly by $2.4 million from Edwards himself and $800,000 from one David F. Kirby, Edwards’ former law partner, its grant output has hovered around $10,000 annually in scholarships and awards. Although dedicated largely to the learning lab and related functions, the foundation also gave 5-figure grants to entities such as the University of North Carolina Law School and the Wake County Bar Association and in 2002 made a pledge of $333,000 toward a $500,000 endowment for a distinguished professor’s chair at the law school.
Where the nonprofit activities of John Edwards raise eyebrows is his Center for Promise and Opportunity, created in 2005 ostensibly to keep the issue of poverty on the public’s agenda. Actually, as a spokesperson for the Center for Responsive Politics put it, “It’s possible that the ‘opportunity’ the center was promoting was only John Edwards’ opportunity–his opportunity to run for president”. The nonprofit employed a bevy of political advisors from the 2004 campaign of the senator, nearly all of whom are back on the campaign for 2008. As a 501(c)(3) nonprofit, the Center doesn’t disclose its donors nor the names of anonymous consultants it paid as well. Much of what the Center has done since its creation has been to fly Edwards and his associates around the nation for speaking gigs, including the Opportunity Rocks speeches at numerous college campuses, all a none-too-subtle approach to adding to the visibility and profile of the former Democratic vice presidential candidate as he made plans for his 2008 run.
After his 2004 campaign, Edwards also served as director of yet another nonprofit, a center at the University of North Carolina — the Center on Poverty, Work and Opportunity — whose activities also appeared to focus more on providing a platform for Edwards and less like a functioning university research/policy center. In 2006, an investigative team at the UNC’s school newspaper found scant programmatic activity at the university-based center while the senator spent much of his energies traveling for the program of his non-university “promise opportunity” center. He actually created two “promise and opportunity” nonprofits, one the Center for Promise and Opportunity (a 501(c)(4)), the other with the surname “foundation” added (a 501(c)(3)), though the functional distinctions are impossible to determine from their 990s, except for the information that the (c)(3) foundation would design and implement “real world programs based on the policy ideas developed” at the (c)(4) center. The major activity of the 501(c)(3) arm is the College for Everyone program, providing in-state tuition help to North Carolina students, apparently one of those pilot programs to test policy ideas “addressing the root causes of poverty.”
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This is pretty thin stuff for a presidential candidate to peddle under the guise of nonprofit think-tanking. Edwards is hardly the only candidate with a nonprofit that seems topically and functionally geared to promoting the candidate and his ideas, as though the 501(c)(3) eligible activity is extolling the genius and insight of a politician. The former libertarian, now Republican presidential candidate Ron Paul has a similar nonprofit. The webpage of the Foundation for Rational Economics and Education begins with the headline “Ron Paul Presents,” promoting “Ron Paul’s ‘Freedom Report,’” “Ron Paul’s video television series,” and the “Ron Paul Freedom Library.” Unlike all the equivocations issued by the Edwards camp, Ron Paul’s nonprofit website is pretty unabashed in the “nonpartisan” ideas of the candidate that it is promoting.
Caution signals: While the Foundation for Rational Economics is pretty obvious in its programmatic theme, Ron Paul has no chance of becoming president, despite his blip in fundraising and fame after being the one Republican candidate to call for an immediate pull-out from Iraq. The Edwards scenario is much more troubling. John Edwards was on the Democrats’ national ticket in 2004 and has been seen as a viable candidate competing with Barack Obama and Hillary Clinton. What are the trouble signs? Creating a “nonprofit” with the same location as his political action committee? Using the nonprofit as a holding pen for campaign advisors and staff between election cycles? Even the predilection toward scholarships, a much favored congressional favor-currying device through nonprofits, has an inappropriate ring — Edwards supporters tried to use the scholarships as camouflage for the more political purposes of his charities.
The Edwards 501(c)(3) nonprofit world, combined with his PAC and 527s, suggests that the candidate has a somewhat blurry conception of the distinctions between public charities and political tools. And this undermines the potentially noteworthy work of the foundations and charities he and his wife established in honor of his son.
Particularly disturbing about the Edwards scenario is his absolute unwillingness to reveal the names of donors. Politicians’ hiding donors and expenditures behind the confidentiality of the 501(c)(3) public charity status is an abuse of the public trust. Ideologues of both parties tend to write this off as inconsequential, in part because they don’t really value the nonpartisan, mediating role of nonprofits working to hold the public and private sectors to account. To them, 501(c)(3)s are simply one tool in a quiver that includes 501(c)(4)s, 527s, and Political Action Committees to carry out partisan political activities, and politicians and their shills don’t really give a damn about Tocquevillian concept of nonprofits that they all quote in their speeches without a scintilla of understanding and concern.
For presidential candidates and members of Congress, the rules ought to be different. On Capitol Hill, there are calls for some kinds of public charities to have higher standards of disclosure regarding donors and expenditures. That’s entirely legitimate if and only if the disclosure starts with the charities of members of Congress. Although it is difficult to imagine that the behavior of presidential candidates would be a role model, the concept of full disclosure of donors and expenditures of politicians’ charities should start with those established by or run by candidates, their family members, their aides, and their campaign staff. And it won’t do to drape political charities in the toga of “good works” like providing scholarships to some college kids. If it’s a charity that is involved in the candidates’ scrum, Congressional or presidential, it should be held to a higher standard of disclosure. Much higher.
1. Cf. Rick Cohen, “One for the Money, Two for the Show: Nonprofits as Conduits for Political Influence,” Nonprofit Quarterly (Summer 2004)
2. Note: the name “Guiliani” does not show up at all on the Changing Our World Web site search engine.
4. Andrea Peyer and Maggie Haberman, “Rudy Judi’s Bombshell Reveals that He’s Her Third Husband,” New York Post (March 23, 2007)
5. David Saltonstall, “In Rudy’s heart & on payroll; Judith Giuliani got $125G to craft speeches”, Daily News (May 18, 2007).
6. However, according to the 2002 990 for the Twin Towers Fund, COW executive Carolyn Cavicchio served as the Fund’s paid deputy director, apparently in a loaned executive capacity.
8. The Center’s Form 990 in 2004 reported about $570,000 in archiving fees to two firms plus another $93,700 for storage.
11. Mike Baker, “Edwards ‘ Nonprofit Key to 2008 Campaign”, Associated Press (June 23, 2007)
12. Elizabeth Anania Edwards served from 2001 to 2005 on the University of North Carolina Board of Visitors, which is part of the UNC governance structure, providing advise to the trustees and chancellor on “maintaining the excellence” of the school, putting it into a position involved with the governance of the university that hosted this nonprofit, but not with the governance authority of a board of trustees (cf. Administration and Charter). Nonetheless, she was connected to the governing structure of UNC at the time overlapping when the former senator was running a university-based center.
13. Shannan Bowen, “Edwards on the road, Travels point to political ambition”, Daily Tar Heel (October 25, 2006)