Day: August 27, 2012

In my last installment, I examined how the Rhode Island Statewide Coalition structured itself to gain political power and, as a surprise side bonus, serve as a tax shelter for some of its wealthy leaders.

I ended that installment with a general overview of how RISC uses a non-profit foundation, the RISC Foundation, as a way to raise large amount of cash from out of state donors while offering those donors the benefits of tax deductibility.

I also reported that while RISC is Rhode Island’s leading conservative lobbying and electoral organization, they report spending close to zero dollars on lobbying and getting its endorsed candidates elected.

In this installment, we’ll look in detail at how RISC spends its money.

Until recently, Charlestown held the dubious distinction of being the headquarters for Rhode Island’s top ultra-conservative political action group, the RI Statewide Coalition. Formed as the ”Shoreline Coalition,” RISC was set up as the voice of the landed gentry along the south coast, especially uber-rich seasonal property owners in Watch Hill and Shelter Harbor.

Their main issues were fighting the Narragansett Indian tribe and crusading for the rights of rich land-owners. They were particularly devoted to the idea of granting the right to vote to people based on property ownership, rather than on where they called home. I’ve written about them extensively on Progressive Charlestown.

 Where did the money go?

Anyone who reads the newspaper or reads Rhode Island knows that RISC is a conservative political action machine. Their money goes to pushing their right-wing causes and candidates. The way they do that – and dance around the lines set by IRS and the state – are a bit like watching a gymnast working the uneven bars.

RISC and RISC-PAC are allowed to get involved in politics. The rules vary slightly between them, but let’s just say that RISC and RISC-PAC can lobby, push causes, endorse and support candidates and engage in lots of other political action.

Of course, they are supposed to be “open and transparent” – meaning that they report their lobbying expenses to the IRS and the Secretary of State and their campaign expenditures to the Board of Elections. As I noted in the first installment, RISC and RISC-PAC are not very forthcoming when it comes to reporting what they spent to become the political players that they are.

But the RISC Foundation is strictly limited in what it can do, and political activity is severely limited under the tax code. That is the trade-off that allows them to offer their donors – including all those out of state folks – tax-deductions on their donations.

Here is a sampling of expenditures reported by RISC-F and RISC in its most recent report to the IRS:

• The Foundation pays 40% of the rent for the space co-occupied by them and RISC.
• According to the depreciation schedule in the Foundation’s most recent filing, the Foundation owns all the office furniture, file cabinets, computers and their LCD projector
• According to the RISC filing for the same period, RISC itself doesn’t own any of its furniture or computers
• The Foundation pays all of the cost of maintaining the RISC website.
• RISC reports no website expenses
• On its IRS-990 report, the Foundation says its website is at www.riscfoundation.com. The problem is you won’t find a website at that address. Further, according to Archive.org^[1], there apparently never was such a website.
• There is, of course, a RISC website, maintained and updated frequently. It just went through a complete overhaul after Donna Perry took over as Executive Director.
• RISC buys no office supplies
• The Foundation, on the other hand, paid $7,563 for supplies.
• The Foundation paid $25,703 for videos, $45,875 for public records, and $25,034 for a handbook on legislators.
• RISC reported it spent $47,062 to set up RISC’s business lobby network and another $27,444 on educational activities.
• The Foundation’s filing shows that it paid $5,086 for database maintenance, compared to only $2,109 for RISC.
• The Foundation paid $25,402 for “communications” while RISC only paid $6,335.
• On top of all that, the Foundation made a direct transfer of $33,401 to RISC.

So when it comes to doing the heavy lifting – to paying for RISC’s operations – it’s the Foundation with its tax-deductible, out-of-state money that shoulders the financial load.

And that’s just what was in the last IRS-990 report.

The earlier reports show essentially the same story – the Foundation raises most of the money in the form of tax-deductible donations mostly from out-of-state, and pays most of the organizations’ expenses.

Among the high-lights of earlier “charitable and educational” activities by the RISC Foundation, we find:

•  In the RISC Foundation’s first year of operation, 2006, it actually spent nine times more than it took in to campaign against the Narragansett Indian Tribe. This deficit appears to have been covered by a loan from RISC to the Foundation, the last time that RISC funded the Foundation, rather than the other way around.
•   In 2007, the RISC Foundation spent $24,415 to conduct a survey of voters on “the most important issues facing Rhode Island.”
•  Also that same year, the Foundation spent $50,226 to intervene in the state’s and Charlestown’s lawsuit against the US Department of Interior and the Narragansett Indian Tribe in the infamous Supreme Court  Carcieri v. Norton^[2] case.

IRS regulations on the conduct of non-profit, tax-exempt organizations like the RISC Foundation contain some very clear prohibitions – no direct endorsements or political intervention on behalf of particular candidates, parties or ballot questions. There are also some pretty clearly permitted activities, such as unbiased, non-partisan, purely educational material that addresses public issues.

Then there is a huge gray area where IRS notes that it reserves its right to examine the compliance of the non-profit on a case by case basis. At best, RISC’s use of its Foundation to collect large tax-deductible donations from its board members and others, and then to use the Foundation to cover so many of RISC’s costs, seems like a pretty dark shade of gray.

Add to that the absence of expenditure reporting for lobbying and for the support of its candidates, and there are lots of questions about the extent to which RISC plays by the rules.

 The Future of RISC

RISC is in the process of re-branding itself. They’ve moved out of Charlestown to West Warwick. They’ve moved Harry Staley and his daughter Harriet Lloyd out of day-to-day control – for years, RISC was the Staley family business. They’ve hired P.R. flack Donna Perry as director. Perry is a regular on radio, mostly on her shock-jock brother John DePetro’s program on WPRO^[3].

Perry says RISC has decided to re-organize the RISC Foundation which will now be chaired by retired Judge Robert Flanders – who just recently finished fleecing the city of Central Falls as their bankruptcy czar. Flanders and all-around happy guy Gary Sasse will turn the RISC Foundation into a bona fide research organization.

Whether that new role is in place of, or in addition to, the RISC Foundation’s role as a tax shelter for wealthy supporters of RISC’s political mission remains to be seen.

RISC just had its annual meeting on August 4 where Flanders, Sasse, Staley and others continued to blame public worker unions for everything from global warming to NBC’s Olympics coverage and excessive screaming on HBO’s “True Blood.” And, believe it or not, Donna Perry tells us that all this is part of “the expanding reform movement in Rhode Island.”

Reform what? Reform it how? And most importantly, reform it for whose benefit, I wonder?

 

[1] Archive.org is one of those great on-line research tools that allows you to search for web content that has been changed or removed but has still left a trace in internet archives. Generally, you have to take active steps to scrub your website to keep its old content from showing up on Archive.org. Either there never was a RISC Foundation website. Or if there was a RISC-F website, then it was thoroughly “scrubbed” when it was taken down. The Charlestown Citizens Alliance has been removing huge blocks of information from its website – intentionally or not, hardly any of these changes show up on Archive.org.

Harry Staley, RISC’s founder and long-time President, is listed as the administrator for the domain which is reserved with GoDaddy.com. GoDaddy.com charges $12.99 a year for this service. Among its assets, the RISC Foundation  lists the value of this non-existent website as $15,000.

[2] The case became Carcieri v. Salazar after Barack Obama was elected President and appointed Ken Salazar as Interior Secretary.

[3] Perry might find herself getting less air-time, given the new troubles her brother John DePetro faces and current suspension. DePetro’s problems have been extensively covered by Rhode Island’s Future (and it was DePetro’s ill-conceived remarks to RIF editor Bob Plain that got him suspended). Read the complaint against DePetro here.