Freedom Partners

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This article is part of the Center for Media & Democracy's spotlight on front groups and corporate spin.

Freedom Partners, formally known as the Freedom Partners Chamber of Commerce (and previously the Association for American Innovation), describes itself as a "nonprofit, nonpartisan, 501(c)(6) chamber of commerce that promotes the benefits of free markets and a free society."[1] It has been described as "the Koch brothers secret bank."[2][3] Raising $256 million during the 2012 election cycle, it served as a "de facto bank" in the $400 million Koch network by "feeding money to groups downstream."[4] According to Politico, "It will be run by former top AFP strategist Alan Cobb and will wage a behind-the-scenes push in state capitols for reforms consistent with the brothers’ small-government, free-enterprise philosophy, including possibly curbing union power and abolishing income taxes."[5]

The Association for American Innovation was chartered as a Delaware corporation on November 2, 2011, according to Bizpedia.[6]

Koch Connection

The Koch Brothers are the conservative billionaire co-owners of Koch Industries. As two of the richest people in the world, they are key funders of the right-wing infrastructure, including the American Legislative Exchange Council (ALEC) and the State Policy Network (SPN). In SourceWatch, key articles on the Kochs include: Koch Brothers, Koch Industries, Americans for Prosperity, American Encore, and Freedom Partners.

501(c)(6) "Business League" Status

Forming the organization as a 501(c)(6) group for purposes of the tax code sets it apart from many of the other notorious and controversial "dark money" groups that were active in the 2010 and 2012 elections. These groups, such as Karl Rove's Crossroads GPS or Americans for Prosperity, are organized as 501(c)(4) "social welfare" nonprofits.[3]

IRS Section 501(c)(6) is reserved for business leagues, chambers of commerce, such as the U.S. Chamber of Commerce, or trade associations like the pharmaceutical lobby PhRMA or the American Bar Association. But, unlike those groups, there is little evidence the Association exists to advance the interests of any particular trade or industry.[3]

Marc Owens, former director of the IRS tax exempt division, told The Huffington Post, "It's possible that the Kochs think there's less audit exposure with a (c)(6)." But he added, "It's not clear to me what line of business is furthered by an innovation group. That could make it difficult to establish entitlement to (c)(6) status with the IRS."[7]

Vague, Ambiguous IRS Rules and Controversy over IRS Targeting of Conservative 501(c)(4) Groups

Much of the law governing both 501(c)(6) and 501(c)(4) groups is the same: political intervention cannot be their primary purpose. But the IRS rules for what constitutes political intervention are relatively ambiguous and rarely enforced.[8] And this provides an opening for the Kochs and their allies to continue influencing elections from the shadows.[3]

Although the IRS rules are ambiguous for both (c)(4) and (c)(6) groups, states like California,[9][10] Montana,[11] and New York[12] have attempted to enforce various state laws. However, another advantage to organizing the Association for American Innovation as a (c)(6): unlike (c)(4)s, they largely will not fall under the charitable trust jurisdiction of state attorneys general.[3]

Scrutiny of (c)(4) groups is likely to heat up from several angles, making a (c)(6) group more attractive. Attorney Greg Colvin, an expert in nonprofit law, told the Center for Media and Democracy, "A (c)(6) is exactly where you'd expect captains of industry to go for political leverage out of the public view, especially if the notorious 501(c)(4) organizations are about to be more heavily scrutinized and regulated by the IRS."[3]

This is especially true after the controversy surrounding the IRS targeting of tea party groups caused Senate Democrats to focus on the vague 501(c)(4) tax laws, which are seen to have contributed to this scandal.[8] As The Huffington Post reported, Senator Max Baucus (D-Mont.) said in his opening statement to a Senate Finance Committee hearing on IRS targeting of conservative groups, "Once the smoke of the current controversy clears, we need to examine the root of this issue and reform the nation’s vague 501(c)(4) tax laws." He elaborated, "[n]either the tax code nor the complex regulations that govern nonprofits provide clear standards for how much political activity a 501(c)(4) group can undertake. The code does not even provide a clear definition of what qualifies as political activity."[13]

Additionally, the government watchdog group Citizens for Responsibility and Ethics in Washington (CREW) filed a federal lawsuit in May 2013 asking for a judicial order that the IRS initiate a process to bring its rules on 501(c)(4) nonprofits in line with federal law, and this adds to the potential for even more scrutiny of (c)(4) groups.[14]

Finances

Between November 2011 (its creation) and November 2012, Freedom Partners raised $256 million and made grants totaling $236 million.[2]

Contributors and Membership

Freedom Partners boasts over 200 members, with each member paying at least $100,000 in annual dues, according to POLITICO.[2] Members are drawn from semi-annual conferences hosted by the Koch brothers. Despite Freedom Partners' connection to other Koch family entities, Freedom Partners' President Marc Short claims, "Koch-linked entities provided a 'minority' of the funds" for Freedom Partners in the 2012 fiscal year. Short also noted that "the largest single donor gave about $25 million."[2]

2012 Grants to Other Organizations

The $400 million Koch network.
The $400 million Koch network uses a maze of nonprofit groups and LLCs to conceal donations and campaign activity
Source: Robert Maguire with the Center for Responsive Politics. Matea Gold and Cristina Rivero/The Washington Post.

Freedom Partners' tax returns from the 2011 fiscal year reveal that the organization provided financial support for 30 groups (both private and government affiliated) between November 2011 and November 2012.(Freedom Partners 990 Tax Form, 2011)[15] Freedom Partners, unknown to the public at the time, raised and spent $250 million during the 2012 election cycle, making it the largest financial contributor to conservative groups in the 2012 election.[2]

As reported by Politico and confirmed by Freedom Partners' IRS filing, recipients of the largest grants included:

Freedom Partners also provided assistance to:

Freedom Partners' federal tax returns for 2011 also reveal several entities wholly owned by Freedom Partners. As noted by Lisa Graves of the Center for Media and Democracy, these entities are:

  • The "American Entrepreneur Fund LLC," which had assets of $885,316 and whose activities are listed as simply as "projects,"
  • The "American Enterprise Group LLC," which had assets of $424,975 and whose activities are listed as "management,"
  • The "American Strategies Group LLC," which had assets of $97,714 and whose activities are listed as "public outreach,"
  • The "MIC LLC," with assets of $25,000 and the job of "research," and
  • "American Strategic Innovations LLC," with assets of $4,976, the purpose of which was also listed as "research"[27]

Of the groups that received funding, several are, "limited liability corporations that are wholly owned by better-known nonprofits -- what the IRS refers to as "disregarded entities."[28] For example, according to OpenSecretsBlog, Corner Table LLC, Eleventh Edition LLC, and American Commitment LLC -- are all "disregarded entities" wholly owned by the Center to Protect Patient Rights.[28]

2014 Election Activity

According to the Washington Post, unlike the 2012 election, when Freedom Partners raised $256 million from unknown donors and then funneled that money through a complex maze of LLCs and nonprofits, this election cycle Freedom Partners "is bringing in-house many of the functions it financed through other groups in the last campaign."[29] The Post reports that, "The organization’s elevated role speaks to how the Kochs are exerting more control over the political activity they fund, a strategy that provides more accountability to fellow conservative donors who want to know how their money is being spent."

In an interview with Yahoo News, Freedom Partners spokesman James Davis said, “We’ve expanded quite a bit. I think it’s just an evolution and growth of Freedom Partners, and we’ll continue to grow.” He added that Freedom Partners was planning to play more of a role in the 2014 elections after the April advertising campaign against Democratic Senate candidates.[30]

Misleading and Untrue Campaign Advertising

"Pants on Fire" Attack Ad Against Rep. Bruce Braley

Freedom Partners aired this untruthul attack ad against Rep. Bruce Braley that was rated by fact-checkers as "pants on fire"

On April 8, 2014, Freedom Partners began a $1.1 million advertising campaign against Representative Bruce Braley (D-IA) and Senator Mark Udall (D-CO) that ran for three weeks.[31] The ad claims that Braley took "tens of thousands from his friends in the health insurance industry" and gave them "special favors" by voting for Obamacare. PolitiFact determined that Braley has received "$20,500 from health insurance sources...about $2,000 for every year he’s served in Congress" and total "insurance donations account for less than 1 percent of all the cash Braley has raised during his political career."[32] Norman Ornstein, a congressional scholar at the conservative American Enterprise Institute, explained that Braley’s past promises and pressure from his party are likely to have outweighed any campaign donations from the industry. In rating this advertisement's claims as "pants on fire" (the most untruthful rating possible), PolitiFact explained that "It’s ridiculous to suggest that donors who contributed less than 1 percent of his warchest weighed more heavily on his vote than his ideology, his past campaign promises and his partisan affiliation."[33]

Personnel

Board of Directors

Freedom Partners' Board Members are listed on its website as follows:

  • Marc Short - President
Marc Short is the former chief of staff for the House Republican Conference, former executive director of the Reagan Ranch, former executive director of Freedom Alliance, and former director of the Virginia Finance Committee for the Oliver North for U.S. Senate campaign.[34]
  • Richard Fink - Executive Vice President
Richard Fink is the current executive Vice President and a member of the Board of Directors for Koch Industries and is CEO of Koch Companies Public Sector. He is also currently the President of the Charles G. Koch Foundation and a Director of the Fred C. and Mary R. Koch Foundation.[34]
  • Wayne Gable - Chairman of the Board of Directors
Wayne Gable is the former Managing Director of International Government Affairs at Koch Industries.
  • Kevin Gentry - Board of Directors Member
Kevin Gentry is currently Vice President of Koch Companies Public Sector. He also is Vice Chairman of the Republican Party of Virginia.[34]
  • Nestor Weigand - Board of Directors Member
Nestor Weigand is Chairman of the Board and CEO for J.P. Weigand & Sons. He is also a director of the National Association of Realtors, chairman of the board of Wesley Medical Center, and a member of the Board of Directors of Regal Entertainment.[34][35]

Other Staff

  • James Davis - Vice President for Strategic Communications
James Davis is the former communications director of the 2012 Republican National Convention.[35]

Contact Information

Freedom Partners
2200 Wilson Blvd., Ste. 102-533
Arlington, VA 22201

info@freedompartners.org
(571) 384-5811

Articles and Resources

Related SourceWatch Articles

Related PRWatch Articles

External Resources

References

  1. Freedom Partners, "About Us," Freedom Partners website, accessed April 4, 2014.
  2. 2.0 2.1 2.2 2.3 2.4 2.5 Mike Allen and Jim Vandehei, The Koch Brothers Secret Bank, Politico, September 11, 2013.
  3. 3.0 3.1 3.2 3.3 3.4 3.5 Brendan Fischer, Kochs Form "Business League," Will Keep Political Spending In the Shadows, PRWatch.org, May 2, 2013.
  4. Matea Gold, "Koch-backed political coalition, designed to shield donors, raised $400 million in 2012," Washington Post, January 5, 2014.
  5. Kenneth P. Vogel, Koch World reboots, Politico, February 20, 2013.
  6. Association for American Innovation, Bizpedia.com, accessed February 2013.
  7. Peter H. Stone, New Koch Brothers Group Revamps Billionaires' Dark Money Operation, The Huffington Post, April 26, 2013.
  8. 8.0 8.1 Brendan Fischer, Ambiguity in Tax Rules and Disintegration of Election Law May Have Led to IRS Tea Party Mess, PRWatch.org, May 15, 2013.
  9. Brendan Fischer, California Elections Board Peels Back Layer of Dark Money Onion, Finds More Onion, PRWatch.org, November 6, 2012.
  10. Peter H. Stone, California Officials Turn Up The Heat On Secretive 'Dark Money' Groups, The Huffington Post, March 24, 2013.
  11. Emma Schwartz, Montana Court Rules “Dark Money” Group Violated State Law PBS Frontline, January 11, 2013.
  12. Eric Lach, Eric Schneiderman Proposes Dark Money Rules, TalkingPointsMemo.com, December 12, 2012.
  13. Paul Blumenthal, IRS Scandal Brings Senate Democrats' Focus To 501(c)(4) Abuse, The Huffington Post, May 21, 2013.
  14. Byron Tau, CREW suing IRS on nonprofit rules, Politico, May 21, 2013.
  15. 15.0 15.1 Freedom Partners, Freedom Partners, About Us, organizational website, accessed October 16, 2013.
  16. Tea Party Patriots About Us, Official Website, accessed October 28, 2013.
  17. Heritage Action for America, About, Heritage Action for America, accessed October 18, 2013.
  18. American Commitment, About Us, Organizational website, Accessed July 12, 2012
  19. NFIB, NFIB, organizational website, accessed September 20, 2012.
  20. A Snapshot of Ohio-based 501(c) Electioneering Groups Involved with Judicial Elections, Public Citizen, accessed October 30, 2013.
  21. West Michigan Policy ForumMission, Official Website, accessed October 30, 2013.
  22. Common Sense Issues,About Us, Official Website, accessed October 30, 2013.
  23. National Association of Manufacturers, About, Official Website, accessed October 30, 2013.
  24. Robert Maguire and Viveca Novak, [1], "Open Secrets Blog," accessed October 30, 2013.
  25. Center for Shared Services, Mission, Official website, November 1, 2013.
  26. "About NRTWC," National Right to Work Committee website, accessed March 2009.
  27. Lisa Graves, New List of the Dark Money Shell Game Groups Connected to the Kochs, "PRWatch", September 18, 2013.
  28. 28.0 28.1 Open Secrets Blog Koch Group IRS Report Unlocks a Few Mysteries, Open Secrets, accessed November 1, 2013.
  29. Matea Gold, "Financial arm of Koch-backed political network launches first direct attack ads," Washington Post, April 8, 2014.
  30. Chris Moody, "The Koch's 'secret bank' takes another step out of the shadows," Yahoo News, April 10, 2014.
  31. Alexis Levinson, "New ads attack Braley, Udall on Obamacare," The Daily Caller, April 7, 2014.
  32. PolitiFact, "Says Bruce Braley took "tens of thousands from his friends in the health insurance industry" and gave them "special favors" by voting for Obamacare," PolitiFact.com, April 8, 2014.
  33. PolitiFact, "Says Bruce Braley took "tens of thousands from his friends in the health insurance industry" and gave them "special favors" by voting for Obamacare," PolitiFact.com, April 8, 2014.
  34. 34.0 34.1 34.2 34.3 Freedom Partners, Freedom Partners, Board Members, organizational website, accessed October 16, 2013.
  35. 35.0 35.1 Eric Lach, The Secret Koch Group That Gave Conservatives $236 Million In 2012, Talking Points Memo, September 12, 2013.