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Through the Mud

In case you hadn't heard, you never want to "wrassle with a pig." Why? Because both of you get dirty, but only the pig likes it.

Pig wrestling was the subject of a Senate committee staff report released in mid-October. It was called "Investigation of Jack Abramoff's Use of Tax-Exempt Organizations," and it wasn't pretty. The Democratic staff of the Senate Finance Committee spent more than 600 pages describing in excruciating detail how five non-profits allowed themselves to be used as extensions of for-profit lobbying organizations. It was high-profile pig wrestling at its finest (or worst), and in the end the slime was so thick you couldn't tell who was the pig. Actually, by the time you finished reading, you had to conclude all the players were pigs, even if some of them had not been before they started.

Many of the 600-plus pages were copies of e-mails between Abramoff and various tax-exempt organization officials. After reading just a few such exchanges, the method and pattern of influence peddling becomes abundantly clear. Even for the politically sophisticated lobbying types--the honest ones--the report's ick factor is high. That's what makes it so credible.

Specifically, the report determined that several tax-exempt organizations helped to hide the sources of funds used for lobbying; took money to write newspaper columns favorable to Abramoff's clients; took money to introduce his clients to government officials; and acted as front organizations for congressional trips paid for by Abramoff's clients. The report then observed that such activities amounted to profit-seeking and private benefit behavior inconsistent with the organizations' tax-exemptions. The report's most disquieting conclusion was that by virtue of those tax exemptions, all U.S. taxpayers were effectively subsidizing Abramoff's lobbying activities, which in turn meant the tax-exempt organizations "appear to have perpetrated a fraud on other taxpayers." That means you and me.

Many ideas flow from this report. An obvious one is that the tax-exempt organizations tied up with Abramoff should have their exempt status revoked. In light of the time and money some of them spent serving his clients, it should be easy to show that such efforts constituted a substantial activity, thereby disqualifying them from exempt status. Another idea is to investigate whether by doing Abramoff's bidding the tax-exempts conferred either private inurement or private benefit on anyone. Still another idea is to tax the income from lobbying and public relations work done at Abramoff's behest as income "unrelated to the exempt purpose" of the organization--as it most certainly was.

And one more idea: Abramoff's business clients probably deducted their payments to the non-profits associated with him as business expenses. There should be further investigation on this point because payments to charities and social welfare organizations for lobbying activities may not be deducted as a business expense.

The report offered up other ideas. An especially intriguing one involved new rules for public charities (i.e., Sec. 501(c)(3) organizations) that a member of Congress founded or controlled. The long and short of this one is that all contributions to a congressman's own charity should be regularly and publicly disclosed. At the moment, no charity has to make such disclosures, which is why Abramoff began dealing with the tax-exempt non-profits in the first place.

Some observers think a mere disclosure requirement for charities run by senators and congressmen does not go far enough. They agree with law professor Frances R. Hill of the University of Miami that the guiding principle should be: a politician's only relationship with a charity should be as a contributor.

In the end, the Senate committee's staff report packed a wallop that might lead to reform. Think of these ideas as taking away the pigs' incentives to wrestle with the tax-exempts. Without the wrasslin' there's no dirt.


Bruce Collins is the general counsel of

C-SPAN, based in Washington, D.C.


Bruce D. Collins

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