Washington, DC, November 16, 2004 — Earlier today, Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint with the Internal Revenue Service alleging that the Center for Consumer Freedom (“CCF”) has violated its tax exempt status in three ways: 1) by engaging in prohibited electioneering against presidential candidate Dennis Kucinich; 2) by making substantial payments to the founder of the organization Richard Berman and to Berman’s wholly owned for profit entity Berman & Co.; and 3) by engaging in activities with no charitable purpose.
According to the IRS, participation by a 501(c)(3) organization in a political campaign on behalf of or against any specific candidate is strictly prohibited, yet CCF openly opposed the candidacy of Dennis Kucinich, making such statements as “perhaps the Ohioans [sic] from his district should show some ‘starlit magic’ by sending this wacko looking for a new job next November.”
IRS law also prohibits private individuals from benefitting from non-profit organizations. Richard Berman, the founder and president of the for profit lobbying and public relations firm Berman & Co. Inc. (“BCI”), started the non-profit Guest Choice Network (“GCN”) in 1999. All of GCN’s activities were conducted by Berman and BCI, and from 1999-2001, the organization had no employees. Berman dissolved GCN in 2001, changing the name to the Center for Consumer Freedom. CCF, like GCN, has no employees and is run out of BCI’s offices. Significantly, Berman and BCI have received nearly $2 million from GCN and CCF since 1999.
Tax exempt organizations must have a charitable purpose. But GCN and CCF really just lobby on behalf of food producers, the restaurant industry and the tobacco industry. Documents that became public as a result of the global tobacco litigation settlement show that Philip Morris was once of the largest contributors to GCN and CCF. Berman pitched GCN to Philip Morris claiming that the organization could “unite the restaurant and hospitality industries in a campaign to defend their consumers and marketing programs against attacks from anti-smoking, anti-drinking, anti-meat activists…” Another document indicated that Philip Morris would support Berman’s group because it would broaden the focus of the “smoking issue” and expand into the bigger picture of over-regulation.”
Melanie Sloan, CREW’s executive director, stated that “any one of these violations would be significant enough for the IRS to revoke an organization’s tax exempt status. Given all of the violations CCF has committed, a full and fair investigation should result in the organization losing its exemption.” Sloan continued, “Organizations like CCF give charities a black eye. Since when does Philip Morris deserve a tax deduction for hiring a lobbyist to create strategies to ensure that restaurants can allow smoking? Where is the charitable purpose in that?”