January 26, 2015

Freedom Partners Quietly Reveals Spending $22 Million in the Final Two Months of 2013

By Matt Corley

Koch BrothersLast September, Freedom Partners Chamber of Commerce, a central node in the network of politically active nonprofit groups connected to the Koch brothers, released its tax return covering most of 2013.  That return revealed that the group’s spending had dropped sharply to $50 million from the previous year’s high of almost $238 million.  Since these tax forms – known as 990s – are required to be filed only once a year, the information appeared to be the last the public would receive about Freedom Partners’ finances until fall 2015.  That’s not the case though.

In early November, just after the election, Freedom Partners quietly posted a new tax return on its website, covering November and December of 2013.  In just those two months, Freedom Partners spent $22.3 million.  That’s a huge amount for two months.  In fact, it’s more than 44 percent of what the organization spent in the 12 prior months.

The tax filing makes clear Freedom Partners’ cash decline was likely temporary as the group was already ramping up its spending as it headed into the 2014 election year.  The organization entered 2014 with more than $38 million in assets, thanks in large part to almost $36 million in “membership dues” collected in the final two months of 2013.  (See CREW’s complaint to the Internal Revenue Service about how Freedom Partners lied on its tax returns by deliberately mischaracterizing hundreds of millions of dollars in contributions as membership dues here).

As usual, most of Freedom Partners’ money was distributed in grants to other nonprofit organizations.  In all, Freedom Partners gave out $18 million in grants in the final two months of 2013, including $10 million to Americans for Prosperity (AFP), the flagship activist arm of the Koch network.  The money was sent to AFP while the activist group was in the midst of a multi-million dollar ad campaign pummeling Democrats over Obamacare.  In all, the grant accounted for almost a quarter of AFP’s 2013 budget.

In addition to AFP, Freedom Partners also doled out millions to four other groups considered part of the Koch network: $3 million to the Center for Shared Services, an organization that provides administrative support for conservative nonprofits; $2.9 million to the Libre Initiative, a nonprofit focused on outreach to Latinos; $1.7 million to Public Notice, an advocacy group concerned with government spending; and $150,000 to Evangchr4 Trust, a group that aims to “apply Biblical principles to economics, politics and society.”  Freedom Partners also gave hundreds of thousands to two business groups, the U.S. Chamber of Commerce and the National Federation of Independent Business.

When Freedom Partners released its earlier tax return covering the period between November 1, 2012 and October 31, 2013, CREW noted the group’s legal bills appeared to have skyrocketed, totaling roughly $800,000 to two law firms.  In its new filing, Freedom Partners reported paying the same two firms, Pillsbury Winthrop Shaw Pittman LLP and Weinberg, Jacobs & Tolani, a combined $916,529.  In addition to the legal fees, Freedom Partners also reported several new contractors.  The organization paid more than $1.25 million to Prophet, a San Francisco-based firm, as well as $415,000 to Synthesis 411, LLC for “consulting services.”  Freedom Partners also paid ZMD LLC $250,000 for “event production.”  Little public information is available about either Synthesis 411, LLC or ZMD, LLC, though Freedom Partners’ affiliated super PAC also paid ZMD, LLC more than $6,000 in July 2014 for “video production services.”

Freedom Partners does not explain why the group filed and released a new tax filing covering just two months.  One possible explanation is the organization is attempting to align its fiscal year with the calendar year.  If that’s the case, one fringe benefit of such a move is clear.  Nonprofits like Freedom Partners are required to file their annual tax returns no later than 10.5 months after their fiscal year closes.  For Freedom Partners, this has meant releasing its prior year tax returns in September since its fiscal year ran until the end of November.  Due to this schedule, in 2014, Freedom Partners faced a series of stories about its political spending just a month and a half before Election Day.  Now, the group won’t be required to file its tax returns until mid-November each year, and stories about its spending won’t come out until after the election.

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