Politicizing philanthropic giving and charitable fundraising to serve the interests of politicians is a dangerous road for presidential candidates and for the nonprofit sector as a whole.

In our continuing review of the nonprofit connections of current presidential candidates, the behavior of former Republican Massachusetts Governor Mitt Romney and Republican Senator John McCain of Arizona as generators and managers of tax-exempt organizations ought to raise some red flags. The manner in which pols handle their own philanthropic organizations provide revealing windows through which we might see glimpses of presidential aptitude.

This article examines some of the nonprofit and foundation connections of Romney and McCain. How these candidates conduct themselves vis-à-vis nonprofit organizations says a great deal about these people as putative national leaders. And sometimes there is plenty of reason to worry.

Money to Flaunt: Mitt Romney

Mitt Romney is worth a gazillion dollars—or, more precisely, something around $500 million, according to the Hill, or closer to $250 million, according to the former governor’s aides. Whatever the number, he’s probably the wealthiest candidate of either party in the race, surpassing even the wealth of John Kerry in 2004, who could include the millions of inherited fortune from his wife, Teresa Heinz Kerry, in his disclosure filings. Capable of self-financing a good chunk of his campaign expenses, Romney is also sufficiently superrich to have a pretty sizable foundation of his own (with his wife, Ann) as well as some other significant nonprofit connections.

Romney’s money appears to come from his tenure as CEO of Bain & Company, a management consulting firm, and later at Bain Capital, a private equity fund specializing in highly profitable leveraged buyouts. As many nonprofit leaders know, the Bridgespan Group, a nonprofit management consulting firm, was founded and “incubated” at Bain & Company. Romney has made money in lots of places, but his 15 years at the helm of Bain Capital tells the story: according to the Boston Globe, under Romney’s leadership the organization grew from a staff of seven with a capitalization of $37 million to one with 115 people in charge of $4 billion in assets, “doubling its return on realized assets every year.”

Mitt Romney’s personal philanthropic vehicle is the Tyler Charitable Foundation (a.k.a. the Ann D. and W. Mitt Romney Charitable Foundation II). By the end of 2005, the foundation had about $6 million in assets, including a new gift of more than $1 million from a blind trust in the name of Ann Romney. The foundation has made numerous $5,000 and 10,000 grants to well-known Boston-area charities—such as the Jimmy Fund (for non-Bostonians, a charity long associated with the Red Sox and Ted Williams); Boston Children’s Hospital; the Red Sox Foundation’s Teddy Ebersol fund; the Boys & Girls Club in Boston; and the United Way of Massachusetts—all logical philanthropic contributions for a sitting Massachusetts governor. But the bulk of the foundation’s grantmaking has been to religious entities such as the Mormons and affiliated institutions. Within its total grantmaking of a little over $3 million between 2000 and 2005, the Romneys’ foundation awarded the Church of Jesus Christ of Latter-Day Saints $2.2 million in three grants. In addition, the Romneys gave another $250,000 to BrighamYoung University (BYU), owned by the Mormon Church. A graduate of BYU, Romney has held official positions in the LDS church as a bishop (that is, as a lay leader of a congregation) and stake president (as a leader of a group of Mormon congregations).

In 2005 the grantmaking acquired something of a political hue, with $25,000 in grants apiece disbursed to the Heritage Foundation and the Federalist Society for Law and Public Policy Studies (which were relatively large donations for the foundation—other than its grants to the Mormon church, BYU, Weber State, and a onetime $36,000 grant to the United Way). According to the Boston Globe, while he was governor, Mitt Romney gave speeches to both of these conservative think tanks in 2005 and 2006 and worked closely with Heritage Foundation staff to design his highly publicized Massachusetts health care initiative.

While there is nothing illegal about the Tyler Charitable Foundation’s gifts to either the Mormon Church and its affiliates or to conservative think tanks, the foundation grantmaking is revealing. Significantly, when it comes to philanthropic grantmaking, the Romneys devote well more than two-thirds of their grantmaking to a particular religion as opposed to secular nonprofits

With the inclusion of Heritage and the Federalist Society in the grants list, the foundation takes on a political turn. Cozy relationships with these two respected conservative bastions does not hurt a Massachusetts Republican trying to burnish his conservative credentials with a conservative Republican electorate in the primaries. Nothing illegal here, but it will be interesting to see if the foundation continues and expands its new course of conservative think-tank grantmaking, especially now that (1) the election is in full swing, (2) Mitt Romney is a leading presidential candidate, and (3) the foundation has grown to $6 million in assets.

Romney’s foundation persona is probably invisible to most Americans, but he appeared on the radar screen during the 2002 Winter Olympics. Romney took over as CEO of the Salt Lake Organizing Committee (SLOC) after the FBI and the Justice Department launched investigations of the committee concerning allegations of $1 million in bribes paid to members of the International Olympic Committee (IOC) to attract the games to the Utah capital. Romney and others overhauled the operation and removed the stain of the SLOC ethical cesspool. Romney documented his success in Turnaround: Crisis Leadership and the Olympic Games, published by the right-wing publisher Regnery, well known for publishing the charges of the Swift Boat Veterans as Unfit for Command during the 2004 national elections. Under Romney, the deficit-riddled Olympics turned a sizable $100 million profit and Romney himself won widespread plaudits for his leadership and generosity (he donated $1 million to the SLOC and said he also donated his $922,980 in salary and $476,000 in severance to charity).

Since Romney is a nonprofit turnaround expert and a corporate investment guru, it is no surprise that he is a hot commodity in the nonprofit sector. For several years, he has served on the board of the Points of Light Foundation (POLF), which has roots going back to the administration of President George Herbert Walker Bush. Given Romney’s experience in mergers and acquisitions at Bain, it is no surprise that POLF recently went through a corporate-style merger, joining forces with Michelle Nunn’s Hands On Network. An oddity for a nonprofit whose mission is to promote volunteerism, POLF is very heavily funded, with a significant increase in its government funding coming under the administration of President George W. Bush. Under President Bill Clinton, according to POLF 990s, the organization received $5 million to $6 million from the federal government, though jumping to more than $8 million in FY2000, coinciding with the elections. Since Bush took the White House, POLF has routinely pocketed federal grants of $10 million or more annually, virtually double the Clinton-era federal funding, not including additional government-funded program services fees. Given the organization’s dependence on federal milk money, the prospect of having a prospective president on PLOF’s board probably provides a measure of comfort.

With the resignation of POLF President Bob Goodwin, whose salary during Romney’s board tenure happened to jump a cool hundred thou between 2004 and 2005 to $350,000, banking on a presidential candidate may be an important investment. But there are political dynamics afoot to raise concerns. The interim vice chair and chair-elect will be Neil Bush. One would hope that after having evicted a bunch of ethical low-lifes at the SLOC, Romney would hear the alarm bells going off about Neil Bush as the new leader of this organization. It doesn’t matter that Neil is brother to Jeb and George W. and son of George H.W. and Barbara. This is one guy who seems to be enveloped in scandal wherever he goes like the cloud of dirt hovering over Charlie Brown’s friend Pigpen. Neil Bush’s particulars are pretty eye-popping:

  • Neil was one of the central players in the nation’s massive and costly savings and loan crisis, having been a director of the failed Silverado Banking, Savings & LoanAssociation in Denver, costing American taxpayers $1.3 billion to bail out the association, and depositors still lost $200 million. Unlike others similarly situated in the S&L scandal, Neil Bush didn’t go to the pokey (he paid only $50,000 as part of a court-ordered settlement).
  • In 2005, his mom, Barbara, made a Katrina-related gift (through the Bush-Clinton Houston Hurricane Relief Fund) to the Houston Independent School District (HISD) contingent on HISD’s using the funds to purchase educational software from Neil’s Ignite Learning company (which received initial capitalization from convicted junk bond dealer Michael Milken, among others). In 2004 she helped an Oklahoma City foundation mount a $1,000-a-table fundraiser for local schools, whose funds were earmarked to purchase Ignite products.
  • Neil got the Houston Independent School District to commit to a $200,000 deal for his Ignite software (called “curriculum on wheels” or COWs, at $3,800 or more per machine) contingent on his helping the HISD Foundation raise $115,000 to be earmarked for the purchase.
  • The Washington Times Foundation, bankrolled by Reverend Sun Myung Moon, has made $1 million in grants to Virginia schools so they could purchase Neil’s Ignite COWs. Neil Bush has been appropriately supportive of Moon, showing up as a high-profile “peace leader” at the inaugural convocation of Moon’s Universal Peace Federation in Manila.

There’s so much more to the Neil Bush story that ought to send the Points of Light Foundation crowd and Mitt Romney running for the hills. It doesn’t even require exploration of his strange sexual interludes and vacations detailed in the divorce litigation with ex-wife, Sharon. The items above tell anyone that this guy doesn’t grasp the meaning of conflict of interest, isn’t concerned about selling his name to influence seekers, doesn’t wonder why some people might think that philanthropic donations earmarked for his company strike many people as dead wrong.

If Mitt Romney wants to lead the executive branch—a responsibility that includes the IRS’s oversight of nonprofit accountability—if he wants the American public to trust his judgment about picking replacements for Larry Small and others at the Smithsonian and elsewhere, he ought to complain loudly about the choice of Neil Bush as the POLF’s new chairman. As evidenced by his foundation grants to Heritage and the Federalist Society, however, he may be more concerned about shoring up his conservative credentials with Republican primary voters than about ensuring nonprofit and foundation accountability.

Straight Talking Derailed: John McCain

John McCain’s campaign is clearly on the rocks, running out of money, dumping staff left and right, and desperately searching for a purpose. The energy of the Straight Talk Express of the 2004 primaries is a distant memory that’s totally unconnected to the aimless, faltering of the McCain campaign bus today. Assuming that McCain is still in the race by the time this installment of the Cohen Report hits the Internet, there are lessons to be learned from McCain’s dalliances with the nonprofit sector.

It’s unlikely that any other candidate has a nonprofit résumé like McCain’s. McCain’s 2005 Senate financial disclosure form, for example, listed 24 nonprofits or foundations for which he served as board member, trustee, director, advisory board member, employee, or consultant, including Gallaudet University in Washington, D.C. (as a member of the board of trustees of this congressionally chartered school); the Council on Foreign Relations (as a member); the Hopi Mission School Foundation (as a board member); Rebuilding Together (as an advisory board member for this affordable housing–focused nonprofit); and the 521 Club (where he’s listed as a “member” of the museum dedicated to Ted Williams). McCain probably has exposure to as broad a range of nonprofits as any candidate in the 2008 campaign.

Of particular interest is his conduct with own foundation, the John and Cindy McCain Family Foundation, and with the Reform Institute. McCain’s foundation appears to make grants to a wide range of charities: schools, AIDS research and other health organizations, animal welfare, environmental causes, humanitarian organizations, and the arts. Operating costs are so minimal as to raise fundamental questions about the foundation’s activities given the operating costs of some similarly sized foundations elsewhere that seem to require a more money to make a lot fewer grants..

The implosion of McCain’s presidential campaign has its nonprofit connections as well. In recent news, the McCain campaign erupted into internecine warfare among the campaign staff in the wake of paltry fundraising and rapid spending. Longtime campaign advisers John Weaver and Mark Salter quit as McCain sided with his new campaign manager, Rick Davis. Observers credited Davis with “untenable” campaign spending practices and potential conflicts of interest, including hundreds of thousands of dollars of billable work authorized by the campaign to Davis’s consulting firm (Davis Manafort) and to Internet consulting firm 3eDC, which Davis and his partner Paul Manafort own.

The nonprofit connection is the Reform Institute, created by McCain to promote campaign finance and election reform. The 2003 990 for the Reform Institute notes payment of $110,000 for consulting to Richard Davis. Davis was also listed as president of the organization’s board of directors. The 2004 990 form listed Davis not as a consultant, but as a $120,000-a-year president and director. In 2005, Davis was down to $45,000 as president and director. And indeed, Davis may have functioned to promote McCain’s campaign finance positions, but he was actually a just-about-permanent piece of the McCain presidential campaign. Prior to his role in the current campaign, Davis managed McCain’s 2000 presidential campaign. The same goes for other members of the Reform Institute, such as Carla Eudy, the chief fundraiser for the Straight Talk Express and Friends of John McCain. At times, the Reform Institute’s home address was Rick Davis’s lobbying firm. The institute’s lawyer (from Caplin and Drysdale) was the counsel to McCain’s 2000 presidential campaign. The communications director was McCain’s campaign press secretary.

Many of the institute’s top contributors were corporations that do business with the Senate committees that McCain chaired. McCain’s Reform Institute, for example, cleaned up in contributions from telecom providers, including $100,000 from firms linked to EchoStar Communications Corporation’s Charles Ergen and $200,000 from Cablevision Systems Corporation’s Charles Dolan. Solicited by Reform Institute staff, Dolan’s contributions came a week before Dolan was scheduled to testify before McCain’s Commerce, Science, and Transportation Committee.

In the run-up to the 2004 Republican National Convention, McCain was a forthright critic of the virtually sham nonprofits that were being floated by both parties, attracting money from special interests eager to play up to a powerful senator. But under the guise of the Reform Institute, McCain created a nonprofit that served exactly those functions that he had long criticized. The Reform Institute was a holding pen for his campaign finance staff and a vehicle for contributions from special interests.

Eventually, McCain cut his ties to the institute, realizing how bad its operations looked for a candidate specializing in campaign finance reform and straight talk. But the relationship between McCain and the Reform Institute reveals a major blind spot in the candidate vis-à-vis his own nonprofits, despite his willingness to challenge those of his political peers.

Should we take McCain’s relationship with the Reform Institute into account? Remember his vigorous senatorial investigation of Jack Abramoff’s funneling of Indian tribe lobbying money for casino approvals, culminating in Gimme Five, one of the more astonishing congressional reports ever published? McCain and others were outraged by Abramoff and the tribes. One would never expect McCain to play that game after the Committee on Indian Affairs hearings. Unfortunately, according to the Wall Street Journal, McCain’s Rick Davis, now fully in charge of his campaign, has awarded sizable campaign contracts to Management Alliance Realty. The company is owned by an Indian casino developer who was introduced to the McCain campaign by the casino’s lobbyist, who used to work with Davis on Bob Dole’s presidential campaign.

Philanthropic Activity: An Unintended Mirror

How does one learn what a candidate is really like? From his television ads? From the campaign Web site? From answers in televised candidate debates? There is so much messaging and massaging going on that it’s truly impossible to find the person underneath the veneer of the political candidate.

But there is something truly revealing about the way politicians handle philanthropy. All too often, they treat it as something the public won’t notice or, worse, won’t care about if it does notice. To some pols, tax-exempt organizations are play money, vehicles to do a few extra things like buying and selling influence with special interests, tossing a few grants to groups that might reward you with political support, and employing campaign finance staff people between campaigns.

There are precious few opportunities for finding out what makes politicians tick. It may be that the nonprofits they create, manage. or support function as unanticipated mirrors of politicians’ values and ethics. With scant oversight by anyone in government, nonprofits are built with few checks and balances other than nonprofit leaders’ awareness of their role as stewards of the public trust. For candidates like McCain and Romney—as well as John Edwards, Rudy Giuliani, and Ron Paul—how they abuse their charities and foundations tells us more than they really want us to know about the kind of president any one of them might be.