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Eco-group violated tax laws?
Free-enterprise organization files complaint with IRS

 

Posted: February 17, 2002
1:00 a.m. Eastern

 

By Sarah Foster
 2002 WorldNetDaily.com

A small but influential nonprofit environmental organization with a cultivated image of underdog crusader against the forces of corporate greed and environmental degradation has violated major U.S. tax laws by engaging in excessive lobbying and politicking on both federal and state issues, according to the Center for the Defense of Free Enterprise, a non-partisan group in Bellevue, Wash., that specializes in research about the environmental movement.

The Center believes so strongly that the violations by the Environmental Working Group, based in Washington, D.C., are so blatant and of such long-standing, it filed a nine-page letter Feb. 8 with IRS Commissioner Charles O. Rossotti, detailing its findings and requesting immediate revocation of the EWG's tax-exempt status.

"To us, it's patently clear that in their actions from the very beginning, EWG served a lobbying function," said the Center's vice president, Ron Arnold, discussing the allegations with WorldNetDaily. "Over the years, they went far beyond what a nonprofit organization can do without legally abusing its tax-exempt privileges."

Among numerous violations charged in the complaint are allegations that the EWG:

 

"Such actions by a 'public charity' are clearly illegal and should (at a minimum) result in revocation of the organization's tax-exempt status," the Center claims.

The complaint states: "The EWG flagrantly intervened in several state and national level political campaigns despite clear federal statutes and regulations specifically prohibiting such activities. Moreover, the EWG, an organization that has admitted the lobbying nature of its activities both before and after the relevant tax periods, claims not to have expended any funds for lobbying during 1999 and 2000, even though the organization continued to operate and continued to produce reports, letters and statements on pending legislative issues and against specific politicians, most of which are posted on EWG's own website. Had they claimed to have spent any money at all on legislative lobbying activities, their actions would not be so reprehensible. Instead, they chose to claim no lobbying expenditures at all."

The Environmental Working Group did not return WorldNetDaily's phone calls, but on its website, it describes itself as a not-for-profit research organization based in Washington, D.C., with an office in Oakland, Calif., "dedicated to improving public health and protecting the environment by reducing pollution in air, water and food. Our researchers unearth large databases from state and federal government agencies and other sources. Then, using their considerable computer hardware, software, and database management expertise, EWG analysts sift through the databases to discover the relevant information and newsworthy stories that are buried within the mountains of data."

This Internet research won high marks from the Chronicle of Philanthropy, a biweekly journal that publishes news about public charities.

"Since the group's founding ... it has acquired a reputation for producing reports that often combine extensive research and sophisticated data analysis with a flair for finding the human-interest element that can animate their presentation of a particular environmental policy issue," the Chronicle reported in a profile of EWG published in January last year.

"The group's influence in and out of Washington is greatly out of proportion to its size: 17 staff members with some powerful Macintosh G4 computers and a $1.6 million-budget working in a modest office where the walls are hung with spare mouse cords and bicycle helmets," the Chronicle enthused, noting that EWG had issued 15 reports over three years on pesticide residues in food "that helped shape the nature of that debate, which culminated in 1996 with the passage of the Food Quality Protection Act."

"Part of the gap we're able to fill is to take publicly available data and make it meaningful and accessible," said Mike Casey, EWG's vice president for public affairs. The group does not target the general public directly, but rather the news media, "who have the capacity to broadcast the charity's message far and wide."

In other words, the group's modus operandi, is to arrange for stories to be floated by the media regarding legislation it wants passed or defeated relying on the media to generate the necessary public support or outrage to ensure passage or defeat.

EWG has long been known for its campaigns against pesticides and chemical fertilizers in food production and chemicals in general, characterized by dissemination of what many critics claim is junk science presented as scientific truth to unquestioning media.

"The Environmental Working Group's main claim to fame is its anti-chemical fear-mongering," writes columnist Michelle Malkin in the Washington Times. "It scares pregnant women about the nondangers of chlorinated water and says even one bite of some fruit sprayed with pesticides could cause 'dizziness, nausea and blurred vision.' The group has also declared war on nail polish, hairspray, playgrounds, portable classrooms and ABC News correspondent John Stossel."

The Center offers numerous examples of the group's lobbying activities through the media. Some examples:

 

A major project by the group at the moment is its Farm Subsidy Database that documents some $71 billion in federal agricultural handouts from 1996-2000. Anyone with access to the Internet can check EWG's website for the latest skinny on who's getting how much in tax dollars in a state, county, even congressional district. The posted information has surprised and shocked many Americans who thought subsidies went strictly to small and medium-size farmers not to takers like media mogul Ted Turner, mega-banker David Rockefeller, pro-basketball star Scottie Pippen and ABC newsman Sam Donaldson.

EWG claims the database has inspired over 21.1 million searches by reporters, politicians and ordinary citizens eager or just simply curious to find out who's raking in tax dollars. Its impact has already been enormous.

"The single most important moment in this long season of fitful farm legislation will turn out to have been the publication of the Farm Subsidy Database," opined the New York Times.

Arnold is not so enthusiastic and questions EWG's motives in launching the project.

"The fact the database is available publicly is of no concern to me or to the Center," he said. "We think that who's getting the money should be a matter of public information. The government's giving it to people, taxpayers are paying it, so taxpayers have a right to know. But the fact that a nonprofit group set it up as part of a political agenda is clearly out of that category. They're doing it for social and political change by influencing legislation. That amounts to lobbying, and we think the IRS should look into that."

As he sees it, "the idea behind the project seems to be to create and enact a Farm Bill that will decrease America's industrial mass-market food production and replace it with subsidized small-scale organic food production which simply would not meet the food needs of America."

Indeed, the Working Group is not opposed to subsidies per se, only those going to agri-industry. It wholeheartedly supports pork-barrel handouts, as long as the pork is green.

"Farm assistance is vital for agriculture and rural America," the EWG maintains. "We need robust programs to support farmers' incomes while helping them protect natural resources and the environment. EWG staff have worked for many years on policies that have brought billions of dollars in support to the farm sector through the Conservation Reserve Program, Wetlands Reserves and other important conservation programs." Not enough tax dollars are earmarked for these, EWG complains.

The database was paid for by a $1.62 million grant from the Joyce Foundation in Chicago, made in the year 2000 and spread over three years. The EWG explains that it is to support "a concentrated program of agricultural reform." The foundation itself, in its own IRS Form 990 for that year, candidly states the grant is "for work on the 2002 Farm Bill."

Canadian wheat

On examining its 990 for the year 2000, Arnold discovered that the Joyce Foundation owns over $1.8 million in Canadian Wheat Board securities. One of the eight subsidized crops in the United States is wheat.

"So here they're giving $1.62 million to a group that's doing things to embarrass and convince and pressure Congress to take away subsidies to American wheat farmers, and they have investments in the Canadian Wheat Board what's going on here?" Arnold demanded.

The Farm Subsidy Database isn't the EWG's first use of a computer to try and take down a perceived enemy.

For seven years, while advancing its primary anti-chemical agenda, EWG ran a parallel operation focused on the Wise Use movement, its activities and its leaders, one of whom is Ron Arnold. The Wise Use movement is a loose coalition of property-rights groups, their allies in the resource-based industries like mining and logging, ranchers, farmers basically people who rely on the land for their livelihoods and enjoyment. Arnold and the Center's president, Alan Gottlieb, have been credited with founding the movement and Arnold with coining the term "wise use." During the late '80s and early '90s, Arnold worked at organizing and coordinating the efforts of the disparate groups.

Recognizing the burgeoning movement as a particular threat to the environmentalist agenda, in 1992 and '93 the W. Alton Jones Foundation gave $145,000 in two grants to the then-fledgling Working Group to set up a project called CLEAR Clearinghouse on Environmental Advocacy and Research that was designed to compile data about the Wise Use movement and alert environmentalists about its activities.

Its first product was the publication "The Wise Use Movement: Strategic Analysis and Fifty State Review." It was eventually posted on its website. Like the Farm Subsidy Database, there's a map. Each state can be clicked on to see where the action is and who's heading the opposition.

The EWG says CLEAR "is a national clearinghouse for information on the growing anti-environmental 'wise use' movement. CLEAR researchers have compiled an extensive library of materials and resources to help environmental groups and concerned individuals expose the truth about environmental backlash activists and their strategies and tactics." The information was sent to its allies which in turn send it out to the grassroots eco-activists. It developed a database of Wise Use groups and subscribed to their newsletters.

From 1993 until early 1999, CLEAR kept the environmental movement supplied with information about its opponents. A four-page fax and e-mail alert, "A CLEAR View," relayed information about the activities and campaigns of Wise Use groups.

Arnold has a different perspective. "CLEAR has spent hundreds of thousands of foundation dollars for the sole purpose of gathering and disseminating anti-Wise Use propaganda," he wrote in "EcoTerror," the second of three books he authored on the environmental movement. "Now they even have a fancy webpage that tracks some 2,000 Wise Use groups."

But Arnold himself is no slouch when it comes to computers. Figuring turnabout is fair play, he developed a database for the Center at www.UndueInfluence.com where over 100 green groups including EWG are profiled, and the grants they've received or handed out are listed. The information is drawn from 990s and the database of the Foundation Center, a New York City-based organization that tracks nonprofit groups.

That's how the Joyce Foundation's $1.62 million grant for lobbying was discovered. It's one of six grants, totaling $3.94 million, the foundation has given EWG since 1991. Arnold lists 93 major grants to EWG from giant foundations like Joyce, going back as far as 1989. Other big-time donors to the "nearly invisible" Working Group include the Ford Foundation ($2.41 million since 1989); W. Alton Jones ($1.22 million since 1991, including the $145,000 to destroy the Wise Use movement) and Pew Charitable Trusts ($1.22 million since 1991). That'll buy a lot of mouse cords and bike helmets.

Arnold, a researcher and author, has written a trilogy of books about environmental groups and the foundations that provide them with limitless amounts of money. The first, "Trashing the Economy: How Runaway Environmentalism is Wrecking America" (1993) is his words "a road map to a concentration of money and power unlike anything America has ever seen." In its nearly 700 pages, he and co-author Alan Gottlieb take a hard look at some 75 major environmental groups and their finances. "EcoTerror" (1997) is the second of the three. In the third, "Undue Influence" (1999), Arnold explains the machinations of an "iron triangle" of coordinated interests wealthy foundations, environmental green groups and zealous bureaucrats whose actions are "crippling rural goods-producing economies in the name of protecting nature."

Why this group?

Arnold doesn't mention the Environmental Working Group in "Trashing the Economy," and has only a couple of brief but scathing references in the two other books. Out of all the organizations he studied and profiled, why did he pick this one to lodge a complaint about?

Primarily because the EWG has only recently made itself visible, and the others as far as Arnold can discover have not done anything Arnold considers so blatantly unlawful.

"I've been watching and tracking [EWG] over the years, but they were hiding under the umbrella of the Tides Foundation and practically invisible," Arnold explained. "They were like a secret society, with money coming in and no accountability. But about the time I was finishing my research for "Undue Influence," they began to emerge as a separate corporation in Washington, D.C., which meant that in the fullness of time, they would have to file their form 990s and we would be able to see a little bit of what they were doing."

'The puppy mill'

The Tides Foundation is a powerful San Francisco-based nonprofit that receives massive amounts of money from giant foundations, which it distributes to hundreds of environmental groups. Besides serving as a "money funnel," it creates "projects" separate organizations really that cluster under its broad umbrella for secrecy and tax purposes. Tides has over 250 of these. As one of them, the EWG did not need to file a 990 form with the IRS, and it usually showed up on the Tides' 990 only as a name. A filed 990 is a public document, and an organization called GuideStar posts the 990s of all 501(c)(3) organizations on the World Wide Web.

Because of its prolific production of eco-groups, Arnold dubbed the Tides Foundation the "puppy mill of the environmental movement." Since 1989, EWG was one of its puppies, but in 1999 it left the kennel as a full-grown dog, obtained 501(c)(3) status from the IRS later that year in its own name and began filing 990s. It filed a short Form 990 for two months in 1999 and a complete one for the year 2000.

Red flag

Recipient groups like EWG are allowed to do a modest amount of lobbying (20 percent of an annual budget on its own efforts to influence legislation, plus 5 percent urging others to do so), but they are expected to indicate on their Form 990s the amount of money spent. It's called the 20-5 rule, and lobbying expenditures are limited to it.

"We noticed some strange things on their 990s," Arnold recalled. "The first year, there was nothing in the spaces where lobbying expenses are supposed to go, which seemed strange because we knew from newspaper accounts that EWG was lobbying. Then their second year's 990 came out, for 2000, and there were still no numbers and we knew that was impossible. That was a red flag. Just seeing that there was nothing listed said there's something very wrong here.

"The EWG far exceeded the 20-5 rule, and they didn't report it. Those are two very serious offenses. Plus, they also politick. It's absolutely forbidden for a 501(c)(3) to try and affect the outcome of ballot issues like elections of candidates, initiatives and referendums. You can't do that. You can't be a tax-exempt, nonprofit, tax-deductible kind of organization and do any of that. But EWG has," he said.

The present action marks the second time the Center has sent a complaint to the IRS. In July, it called on the agency to investigate the actions of the San Francisco-based environmental group Rainforest Action Network (RAN) to determine whether it is abusing its 501(c)(3) tax-exempt status through its continual involvement in "unlawful acts against businesses."

In a press release, Arnold said, "Rainforest Action Network needs to be investigated because it routinely breaks the law to achieve its purposes, by trespassing, theft of goods so-called 'ethical shoplifting' against Home Depot, for example intimidating customers, harassing employees and using unlawful blockades to stop people from going where they have a right to go. RAN calls it civil disobedience, but that's just unlawful activity in pretty words."

Arnold told WorldNetDaily that the Center called only for an investigation, not revocation of the group's tax-exempt status as it requested in its complaint against the Environment Working Group. He said he had not heard anything official from the IRS regarding steps taken against RAN, but assumes it is investigating and that he's noticed that RAN bailed out of a campaign against Staples, the office-supply chain.

"They had been very loud on that, but since we announced we'd sent the letter to the IRS, they've been more low-key on just about everything," he said.

 



Sarah Foster is a staff reporter for WorldNetDaily.

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