Chamber of Commerce Allegedly Laundered Millions in Charity Dollars to Defeat Financial Reform & Re-Elect Republicans

A watch-dog group charged that the CoC violated U.S. tax laws by funneling $18 million from its charitable, non-profit arm into lobbying.
By Joshua Holland, AlterNet
Posted on September 13, 2010

According to a complaint filed with the Internal Revenue Service last week, the U.S. Chamber of Commerce (CoC), the corporate right’s massive lobbying arm, laundered millions of dollars in charitable contributions to finance its political assault on the American working class.

The New York Times notes that the Chamber has “a war chest rivaling that of the Republican Party itself” and represents “the Obama administration’s most-well-financed rival on signature policy debates like health care and financial regulation.” According to the Washington Post, the $44.3 million the group has paid to lobbyists so far this year, along with the $50 million it plans on spending to elect business-friendly politicians this fall, will make it the top lobbyist in Washington once again. (The group is nevertheless unlikely to top the $144 million it spent buying political influence in 2009.)

Those expenditures represent the day-to-day business of the Chamber. But according to the complaint filed last week by U.S. Chamber Watch, a watch-dog group, the CoC violated U.S. tax laws by funneling $18 million in loans and grants that the Starr Foundation gave to the Chamber’s charitable, non-profit arm, the National Chamber Foundation into the CoC’s lobbying efforts. The Starr Foundation was created by AIG’s founder, Cornelius Vander Starr, and is led by former CEO Maurice Greenberg. According to Chamber Watch’s complaint, none of the group’s $12 million in principle loans had been repaid, and the “money appeared to have been given to the chamber’s foundation for unrestricted use.”

According to a New York Times analysis of the complaint:

The money, in violation of nonprofit restrictions, was ultimately funneled to the chamber itself and used to finance broader political causes, including support for legal tort reform to shield companies like A.I.G. from liability. Mr. Greenberg himself had worked to promote restrictions on lawsuits, the complaint notes.

Christy Setzer, a spokeperson for Chamber Watch, told AlterNet that the cash was ultimately funneled to the chamber itself where it was used to further its political agenda. “The Starr Foundation began giving about a million dollars per year to the National Chamber Foundation in 2000," she said. "Then in 2003, the Starr Foundation gives $5 million and then another $10 million in the following year. And subsequently, in the same time period, it appears that the National Chamber Foundation turns around and gives that money to the Chamber itself.”

“What’s interesting about all of this is what was happening at the time,” Setzer said. She noted that the cash was transferred during a time when the Chamber was amassing a massive war chest for the re-election of George W. Bush in 2004, and also when AIG was lobbying hard to roll back greater oversight of the financial industry’s accounting practices. “While the Chamber and AIG were campaigning against laws to crack down on accounting fraud, they were potentially committing accounting fraud of their own,” she said.

According to Setzer, during those years, 80 percent of the National Chamber Foundation’s operating budget was provided by the Starr Foundation. “There’s a question about what the role of the National Chamber Foundation really was other than to be a pass-through organization for this money.”

Stan Harrell, chief financial officer for the Chamber of Commerce, told the New York Times that the Chamber Watch complaint was politically motivated and that the CoC had disclosed the transaction as required under the law.

Mr. Harrell said that the funding from the Starr Foundation was listed in tax documents as a loan only in the most technical sense and that it was never intended to be paid back. Instead, he said, the money was restricted for long-term use on educational and research projects as part of the chamber’s capital plan and was invested by the chamber to ensure the Starr Foundation a set rate of return.

“We wanted to make sure we guaranteed the investment return,” Harrell told the Times. “Legally, that has to be represented as a loan.” But according to Setzer, the CoC’s potential legal problems stem from the fact that charitable organizations cannot give money to a political organization in the first place. “The issue isn’t that the money flowed from a charitable organization to a political organization and then was used for political purposes,” she told AlterNet. “The issue is that it flowed there at all … so their answer doesn’t respond to the legal complaint.”

The stakes surrounding the complaint are high. According to Setzer, if the IRS upholds it, the National Chamber Foundation would lose its status as a tax-exempt charitable organization. “Effectively, the National Chamber Foundation would cease to exist,” she said.