By Pam Martens: May 23, 2013
There are IRS scandals and then there are IRS Scandals – with a capital S. Last year, we reported on the capital S kind. For decades, billionaires Charles and David Koch had secretly owned shares giving them 50 percent ownership of the Cato Institute – a 501(c)(3) nonprofit organization subsidized by the taxpayer — while pushing a deregulatory agenda for big business. Today, Cato is functioning as a megaphone to spin the current flap over the IRS to advance its agenda.
Before the news broke in 2012 of the Kochs’ ownership in Cato, most of America believed that nonprofits could not be owned by individuals and were required under the law to have a freely elected Board of Directors. (Charles Koch had found a loophole in the law in Kansas where Cato was originally formed.) The Internal Revenue Service warns that charitable organizations like the Cato Institute, organized as a 501(c)(3) “must not be organized or operated for the benefit of private interests…” But last year, following the death of another shareholder, Charles and David Koch filed a lawsuit to assert their shareholder rights at Cato, making it clear private interests were behind a dark curtain at the Institute.
The Koch brothers, majority owners of the super secretive private conglomerate, Koch Industries, have direct links to the current furor over the IRS singling out the Tea Party for extra scrutiny when new applicants apply to the IRS for tax-exempt status using the name Tea Party in their registrant title. In 1984 the Koch brothers spearheaded the creation of Citizens for a Sound Economy (CSE), which started its first Tea Party in 2002. CSE was a nonprofit front for the interests of Koch Industries and Big Tobacco, receiving $5.3 million between 1991 and 2002 from Philip Morris and other tobacco companies. CSE evolved into another Koch brothers’ created nonprofit, Americans for Prosperity, which ramped up the formation of Tea Parties, while reporting to David Koch on the success of the project.
Last year, as the Kochs battled to take control of Cato, a Senior Fellow at the Institute, Jerry Taylor, shared an insider’s take with a blogging friend, Jonathan Adler, on what was motivating the Kochs. Taylor gave permission to Adler to share his statement. “The answer was given in early November of last year when David Koch, Richard Fink (he of many Koch hats), and Kevin Gentry met with Cato board chairman Bob Levy. They told Bob that they intended to use their board majority to remove Ed Crane from Cato and transform our Institute into an intellectual ammo-shop for Americans for Prosperity and other allied (presumably, Koch-controlled) organizations.”
In June of 2012, the dispute was ended with the Kochs agreeing to end the share ownership structure at Cato and Cato caving in to lots of Koch cronies on the Board, including David Koch and others with direct ties to CSE and Americans for Prosperity.
Today, Cato’s “ammo-shop” is firing on all cylinders to keep the IRS v Tea Party “scandal” alive in the corporate media echo chamber.
Yesterday, Michael Tanner, a senior fellow at Cato, wrote the following at the National Review Online: “Assume for a moment that everyone in the Obama administration is telling the truth about Benghazi, the IRS harassment of conservative groups, and the surveillance of the AP reporters. That means that such major government institutions as the State Department, the CIA, the Justice Department, and the IRS were massively incompetent. The alternative to venality and corruption is that important government agencies are more or less incapable of organizing a two-car funeral. Feel better?”
Two days before Tanner’s opinion piece, a Vice President of Cato, Gene Healy, made the pitch for impeachment at the Washington Examiner: “You may be appalled about IRS inquisitions for Tea Party groups and dragnet subpoenas for investigative reporters, but what’s really outrageous, according to some commentators, is that a couple of Republicans recently dared to use the ‘I-word’ – ‘impeachment.’ ”
And among many other Cato scribes on the topic, there was John Samples, Director of Cato’s Center for Representative Government, who wrote on May 20 at the Cato web site: “The defenders’ [of the IRS] account goes this way. Yes, the IRS was inept in enforcing the law, but incompetence does not equal partisan malice. The real scandal, we are told, was the groups posing as charities and spending money on political campaigns. Congress should strictly revise the rules governing tax exemptions to make sure no one can hide their political activities from the government. And, finally, as Nancy Pelosi remarked, Citizens United should be overturned…Citizens United had nothing to do with charitable organizations.”
Samples could hardly be more wrong. The U.S. Supreme Court’s decision in Federal Election Commission v Citizens United opened the spigots to unlimited corporate money in political campaigns. Corporations decided to leverage that windfall by making sure their unlimited spending would be funneled through 501(c)(4) nonprofits which are not required to report the names of the donors paying for the tens of millions of dollars in political attack ads.
Now that’s a Scandal with a capital S and it has the Koch brothers’ name written all over it.
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