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TransCanada foes just "arm" of billionaire U.S. backers

2014-09-16 13:38 ET - In the News

See Street Wire (C-TRP) TransCanada Corp

by Stockwatch Business Reporter

The previous article in this two-part set, "TransCanada opponents not as poor as they pretend," introduced the U.S. Senate Committee on Environment and Public Works' (EPW) July 30 report on the "Billionaire's Club," a shadowy group of ultrawealthy Americans who shower money on environmental groups to promote supposedly grassroots causes, while enjoying generous tax breaks in the process. This second and final article discusses how the billionaires take advantage of loopholes in the U.S. tax code to turn their tax-advantaged donations into political outcomes. Figures are in U.S. dollars unless otherwise stated.

The billionaires send their funds through 501(c)(3) private foundations or 501(c)(3) public charities. (Section 501(c) of the U.S. Internal Revenue Code exempts some types of non-profits from some federal income taxes.) Public charities are generally the preferred vehicle because they provide greater tax benefits and are not required to disclose donors. Under U.S. law, public charities are not supposed to engage in political activities except for non-partisan voter education, and may not use more than 10 per cent of their resources for lobbying activities. Such rules are not a problem for the ultrarich. According the EPW report, the Billionaire's Club has found a sophisticated workaround.

Political influence

Nearly all the public charities discussed in the EPW report have an affiliated 501(c)(4) group with which it typically shares staff and board members. Such groups have almost no restrictions on political activities, or at least no restrictions that the Internal Revenue Service (IRS) seems to enforce. The 501(c)(3) group receives money from the Billionaire's Club and transfers it to its affiliated 501(c)(4), which may itself pass money to other 501(c)(4) organizations. In this way, the billionaires gain political influence while enjoying a significant tax benefit. The tangled route also helps obscure the original donors.

Intermediary public charities through which Billionaire's Club money is funnelled are either fiscal sponsors or pass-throughs, explains the EPW report. Fiscal sponsorship enables private foundations to circumvent their own requirement that grantees be recognized as tax-exempt by the IRS. That would eliminate a lot of activist groups, but fortunately for them, they can simply rent another entity's 501(c)(3) status for a fee, meeting the qualifications. Those entities are called fiscal sponsors.

The EPW report says Tides Inc. "sets the standard" for the fiscal sponsor relationship. Tides Inc.'s most recognizable 510(c)(3) affiliates are the Tides Foundation and the Tides Center. Both receive money from prominent foundations, such as the Rockefeller Brothers Fund and Sea Change, and both support each other heavily. Between 2010 and 2012, the Tides Foundation gave over $10-million to the Tides Center and the Tides Center gave over $39-million to the Tides Foundation. (The report is at a loss to explain the transfers except as a means of obscuring the money trail.) The Tides Center uses its money to act as "the leading fiscal sponsor in the nation," as it promotes itself. It has over 200 sponsored groups. Each of them is subject to the Tides Center's hands-on oversight and direction, which can include forming a governing board, managing payroll and monitoring risk.

The Sustainable Markets Foundation (SMF) is another illuminating fiscal sponsor, this time of Bill McKibbens's 350.org. In 2010, Mr. McKibben said that in 2009, his group was a "scruffy little outfit" with "almost no money." Yet 1sky.org, 350.org's predecessor, reported expenses of over $2.6-million from Oct. 1, 2008, to Sept. 30, 2009, and net assets of over $2.1-million. From 2011 to 2014, 350.org collected hundreds of thousands of dollars from the Park Foundation, the Rockefeller Brothers Foundation, the Tides Foundation and others, all through grants to SMF. The EPW report notes that Jay Halfon is on the board of directors of both 350.org and SMF, although Mr. Halfon does not mention his SMF affiliation on his 350.org biography. (He is also a director of the Park Foundation, a significant financier of SMF.)

A pass-through foundation also collects money from other sources but then, unlike a fiscal sponsor, passes it on to recognized charities. The EPW report points to the Energy Foundation as a perfect example. In 2011, the foundation received $13.9-million in grants from the Sea Change Foundation alone. It sent money to activist groups such as the National Resources Defense Council and the Sierra Club, which received nearly $3-million and around $1.25-million in 2011, respectively. The foundation does not always send money directly to these groups. It has also been known to transfer millions of dollars to them through yet another intermediary, such as the Green Tech Action Fund. As before, this seems designed to create distance between the donors and the ultimate recipients.

The EPW report notes that another source of money for the activist groups is the government. Far-left environmentalists who want a change of scenery seem to have wonderful luck at the EPA, where they funnel government money through grants to their former employers and co-workers. Under President Obama, the agency has given more than $27-million in taxpayer-financed grants to major environmental groups. The report identifies seven former activists currently holding senior positions in the agency, as well as six former Obama EPA officials are now (back) in the far-left environmental movement. Many of them worked for the movement before coming to the EPA.

"Bogus propaganda"

Whether delivered by the EPA or through the murky machinations of the Billionaire's Club, the money is soon put to work. The EPW report details the ways by which a network of donors, activists and bureaucrats go about "manufacturing phony 'grassroots' movements and ... promoting bogus propaganda disguised as science and news." Pseudoscientific studies are used to confirm an existing agenda and justify a predetermined policy outcome. The results are then trumpeted by far-left media outlets such as the Huffington Post or Mother Jones, which also receive money from the Billionaire's Club. For example, a story on a Park Foundation-supported anti-fracking study was carried by a Park-financed news outlet through a Park-backed media collaboration, and was further promoted on Twitter by the maker of Park-supported anti-fracking films.

(Far-left environmentalist filmmakers seem particularly nonchalant about where their money comes from. Project Veritas recently released an investigative video in which Hollywood producers of an anti-fracking film met with a man believed to represent rich Middle Eastern oil interests. Such a man would have his own reasons for opposing fracking, namely American energy independence. An unconcerned film producer shrugged this off: "This is not the first major project that we've had funded through a funding source which ... we didn't disclose.... It's money, so in that sense we have no moral issue.")

To gain credibility with the public, and to hide their large backers and the influence those backers exert, recipient groups pretend to be organic, disparate citizens' initiatives. In New York and Colorado, a faux-grassroots attack on fracking stemmed from massive contributions from three large foundations. In Virginia, an ostensibly local group battles coal mining. In Nebraska, the main target of ire - and indeed the political symbol for the entire green movement - is TransCanada Corp.'s Keystone XL. This fight has created some of the most famous players in the anti-fossil-fuel game. Two prominent names mentioned in the EPW report are Tom Steyer and Jane Kleeb.

Keystone crusaders

Mr. Steyer, a Californian billionaire and former hedge fund manager, began making his fuss over Keystone early last year. This was a few months after he departed his hedge fund, which invested hundreds of millions in fossil fuel companies while he was in charge. Since then he has tried and continues trying to strong-arm politicians into opposing Keystone, has co-produced social media campaigns that flooded Facebook and other platforms with anti-pipeline videos, and has even financed (through his NexGen Climate group) a report claiming that Keystone would prove an irresistible target for terrorists. His antics make him a regular feature in Stockwatch's Energy Summary and other media outlets.

The EPW report notes that Mr. Steyer has a strong conflict of interest in opposing Keystone because of his financial stake in a competing pipeline company called Kinder Morgan. Although he claimed that he would sell his interest in Kinder Morgan by late 2013, this cannot be verified.

Ms. Kleeb, another frequent figure in the Energy Summary, is the voice and founder of Bold Nebraska, a 501(c)(4) non-profit that opposes Keystone's planned route through Nebraska. It promotes itself as a local initiative by and for Nebraskans. "Nebraskans are bold," proclaims the website. "We are pioneers. We are reformers. We are independent." The proud declarations belie the fact that Bold Nebraska is just an "arm of the Billionaire's Club," says the EPW report. Much of the group's money does not actually come from Nebraskans. In 2012, the San Francisco-based Tides Foundation gave it $50,000 and Tides' San Francisco-based 501(c)(4) group, the Advocacy Fund, gave $15,000. These two donations represented one-third of the contributions Bold Nebraska received in 2012. In 2013, the Tides Foundation gave $90,000. Ms. Kleeb works hard to attract other out-of-state donors to Bold Nebraska. A New York Times Magazine profile on her in May, 2014, noted that she was "in the middle of a fundraising call with progressive donors, including the California billionaire Tom Steyer."

If nothing else, Ms. Kleeb is quick on her feet. Bold Nebraska wasted no time using the EPW report as ammunition for fundraising. An e-mail to supporters was sprinkled with let's-prove-them-wrong exhortations for money, with readers asked to "Chip in $25 now if you're a pipeline fighter" and "Help us fight back against this GOP attack by giving $25, $10, $5 or whatever you can." The group claimed that it takes its "marching orders" from regular citizens, who "are the ONLY reason that Bold Nebraska exists." It did not actually deny receiving money from non-Nebraskan sources; the best defence it seemed able to muster was that pro-pipeline groups receive non-local donations, too. A few days later, Ms. Kleeb wrote that "yes we got a grant from the Tides Foundation" but Bold Nebraska is still "state-based," which apparently makes all the difference.

Time to drop the act

"There aren't a lot of functioning democracies around the world that work this way," Mr. Obama said in a speech last fall, "where you can basically have millionaires and billionaires bankrolling whoever they want, however they want, in some cases undisclosed." The quotation applies just as well to the original context of campaign limits as it does to the Billionaire's Club. This cozy relationship between wealthy donors, far-left environmentalists and Mr. Obama's EPA is nothing less than collusion, accuses the EPW report.

What is even more troubling is that the EPW report "only scratches the surface." It would be incredibly arduous to track all the funnelled donations, EPA grants and dodgy foreign contributions that make their way to the pockets of far-left radicals, who masquerade as climate scientists or local heroes. In reality, they are part of a mature, well-financed and highly sophisticated network whose incentives and machinations are deliberately kept shrouded in mystery.

It is time for Big Green to drop David-and-Goliath pretense and let the world know who really finances the movement and what they really represent.

Write to Karen Baxter: karenb@stockwatch.com

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