Goldwater Institute 'Lends' $1.9 Million to Rich Guy on Its Board

Goldwater Institute "Lends" $1.9 Million to Rich Guy on Its Board

By Stephen Lemons Fri., Mar. 15 2013 at 8:08 AM

Here follows my email interview with Goldwater Institute spokeswoman Lucy Caldwell:

Hi Stephen,

I've answered your questions below--thanks! Let me know if you need anything else--sorry to be sending from email, but I'm out of town and am going on hour 4 of dead cell phone!

Lucy Caldwell | Communications Director | Goldwater Institute | www.goldwaterinstitute.org | o: (602) 633-8986

"The Goldwater Institute is simply in the liberty business - and there's no institution in the country that performs that business better." - Columnist, journalist and author George Will

On Mar 14, 2013, at 8:15 PM, "Stephen Lemons" wrote:

Lucy,

Going through the report and comparing it to GI's 990 for 2011, most
of the dollar amounts re: wages, bonuses and loans seem correct.

I'd like for you to respond to these allegations from the report:

1) Regarding the $1.9M in loans to board member Norm McClelland, the
reports claims this is improper and a conflict of interest for these
reasons: McClelland has donated money to GI, and GI is the recipient
of taxpayer funds in the form of its nonprofit status and attorney's
fees it gets from suing governments. How does GI respond? Is this
practice an abuse of your taxpayer status? If not, why?

The Goldwater Institute invests is not "loaning" Shamrock money, as the report suggests. The Institute invests its idle cash in promissory notes with Shamrock and while they are holding our cash, we earn an above market interest rate. We draw the funds down as we need them throughout the year. Investing idle cash where it can earn interest is a prudent financial strategy.

The Institute follows all standard non-profit accounting rules and practices, that is why Charity Navigator gives us a 4-star ranking, the highest ranking possible for responsible financial stewardship.

2) The report also states that GI employs people who lobby for GI, yet
GI reports very little in lobbying expenses. why is this?

The IRS requires 501c(3)h organizations (nonprofits that engage in lobbying) to report how much of the budget is spent on lobbying. There is no single employee at the Goldwater Institute who works as a lobbyist exclusively, so the amount spent on lobbying is determined as a prorated calculation of percentage of a staff member's time spent lobbying ie if a staff member spent 5% of his time lobbying, we would report 5% of his compensation as going toward lobbying and so and so forth (that's just a hypothetical). That figure is an accurate representation of the funds that are spent on lobbying as a prorated calculation of salaries of those who lobby and resources spent toward lobbying.

The Goldwater Institute is in full compliance with both IRS lobbying reporting standards (which are actually far more comprehensive that Arizona's requirements, which do not require us to register our policy analysts as lobbyists) as well as state requirements.

Let me know if you need more explanation on this.

3) How does GI respond to the charge that it is essentially a tool of
the Koch brothers and ALEC?

The report highlights the fact that the Institute is supported by individuals and foundations that fund other conservative organizations. This fact is hardly a suprise: The Goldwater Institute is a conservative organization so naturally we receive funding from and work with other conservative organizations.

4) What is your response to the allegation that GI is heavily financed
by out of state interests?

We don't operate exclusively in Arizona, though we are proud to call the Land of Goldwater our homebase. We work in statehouses and with policymakers across the country--we've impacted policy in over 40 states. So we are proud to have supporters in all fifty states.

5) What's GI's response to the charge of hypocrisy, that GI
consistently argues against the rights of workers, the amount of money
public employees are paid, the expansion of AHCCCS, and yet, GI itself
pays exorbitant salaries and offers its top employees lavish bonuses?

The Goldwater Institute is a private organization funded by private individuals--not a public body funded by taxpayers.

Charity Navigator, America's leading independent charity evaluator, gives the Goldwater Institute a 4-star ranking, the highest possible rating in the industry. Ratings are based on transparency, accountability, ratio of administrative costs to program costs, among others. Less than 1% of U.S. charities have earned this ranking. In addition, the Goldwater Institute has passed an IRS audit without any findings. We continue to make our IRS Form 990 available on our website along with audited financial information.

6) Is there anything in the report that you fees is inaccurate that
you wish to address?

Neither the Center for Media and Democracy nor Arizona Working Families attempted to contact the Goldwater Institute in the course of producing the report, which may have contributed to the multiple errors the report contains.

The report criticizes the Goldwater Institute for accepting attorney's fees in legal cases we win.

The Goldwater Institute acts in the public interest to defend the constitutional rights of citizens. When government entities violate those rights, they become responsible for the legal fees associated with the defense of those rights. Any expenses recovered by the Goldwater Institute are applied to the further defense of taxpayers in future cases. The Goldwater Institute always warns governmental entities before engaging a lawsuit. However, when governments willfully violate constitutional rights, the Institute will not compromise on attorney fees due to the need to deter future illegal activity and encourage government to abide by the law.

Stephen Lemons
8:53 PM (40 minutes ago) to Lucy

Lucy,

Thanks for this, one follow-up re: this statement, "The Goldwater
Institute is a private organization funded by private individuals--not
a public body funded by taxpayers. "

But you are a tax-exempt organization, and donations to GI are
tax-deductible, right? I mean, it's not as if you're a private
business and pay corporate tax, correct? So the taxpayers do give you
a break, a huge break, and if you have "promissory notes" as they're
called in your 990, aren't you doing that in part with tax-exempt
donations?

SL

Lucy Caldwell
9:16 PM (18 minutes ago)
to me

Our supporters are private individuals who choose to donate to us, not taxpayers, as in the case of government.

I'm not sure what you're getting at, but it certainly is completely typical for a non-profit to invest for the future (this is why, for instance, many non-profits have endowments), so hopefully that answers your question.

Tags:

ALEC, Barry Goldwater, Center for Media and Democracy, Clint Bolick, Goldwater Institute

tjmurr

You have to just love these Jealous Liberal whack jobs who think private money belongs to them ( the collective)! So GI loans their own money to shamrock and in turn GI receives a good return. Now what the hell is wrong with that? It's a lot better than our Government loaning/giving tax dollars (our money) to their cronies in return for political donations, Money that will NEVER BE PAID BACK! Liberalism truly is a mental disorder!

marcy

1 Like

Stephen,

If you were looking to make a lot of money, yes you are in the wrong line of work. But you can also make a lot more that $300K/yr as a cardiologist so you might want to also argue that Clint Bolick is in the wrong line of work as well.

As for "How can an institution raking in so much cash argue that people below the poverty line should be denied medical care from the state's Medicaid program?", in what way would an argument that a particular government welfare program be abolished be diminished by the amount of money the organization making the argument has?

If the GI only had $100 in its bank account would its argument be more valid or are you claiming that only poor people can argue against welfare programs? In which case can only the rich have valid arguments for raising taxes on the rich?

Do you check with the PNT accountants to see how much money they have in the bank before publishing an article? Or if advertising revenue exceeds a certain amount per month do you find yourself unable to make certain arguments regarding social issues?

MotherJones topcommenter

2 Like

@marcy The big difference, of course, is that PNT is a private co. U know, free enterprise and all that, what GI is supposed to be for? Instead GI is all about helping fatcats on the backs of the American taxpayer. That's the irony, Marcy, that u intentionally miss. PNT is not a tax write off. Let GI become a for-profit co instead of masquerading as a "charity." Then u can shoot ur mouth off. Of course, that'll never happen, because Bolick wld never make that kind of scratch in the real world.

marcy

@MotherJones @marcy

The GI is not a charitable organization honey.

And they aren't masquerading as one either.

Free enterprise isn't limited to for profit businesses, not that non-profits can't make a profit.

Hope that isn't all too confusing for you. Now maybe you can go back and answer my questions.

JohnQ.Public topcommenter

2 Like

@marcy @MotherJones The way you refer to Mother Jones as "honey" almost makes your argument with Mother Jones sound like a lovers quarrel. Unless of course, Marcy, your using that endearing term just to be condescending.

MotherJones topcommenter

3 Like

@marcy @MotherJones It's a 501c3, idiot. Tax-exempt. Sure, it ain't a charity, it's a boondoggle, one propped up by the taxpayers. On one hand, they preach against social programs, on the other, they've signed up for socialism. As for profit, Bolick sure is makin one. Why don't we remove the tax-exempt crutch and see how long GI survives?

dennis20 topcommenter

2 Like

So when Brahm Resnik has his favorite GI rep on Sunday Square-off, he had damn well better be referring to them as lobbyists. He fell all over himself when someone pointed out he didn't call Julie Erfle a democrat for christ sakes. He was very apolagetic unlike when he ripped off my video and claimed credit for it. But HEY! He's got nice hair.

The Goldwater institute cares only about there own pocket books and that of the Koch brothers and ALEC.

MotherJones topcommenter

@dennis20 Resnik is such a sleaze.

sarum

1 Like

Well done.

ReggieVV

4 Like

How long are the voters in this State going to continue to elect stooges for ALEC and their child, the Goldwater Institute? Conservative voters, they don't care about you, only their money making.

sarum

1 Like

@ReggieVV Why are you so sure that they didn't? iow, what on earth makes you think elections aren't rigged?

eric.nelson745 topcommenter

5 Like

Barry would not be pleased to have his name on this outfit's letterhead.

MotherJones topcommenter

2 Like

@eric.nelson745 If Barry saw how much Clint Bolick was being paid, I suspect he'd strip his name or fire the lot of them.

JohnQ.Public topcommenter

6 Like

So, instead of investing his own money back into the business, it appears that Mr. McClelland donated $1.7 million to the Goldwater Institute and takes the accompanying tax deduction, but arranges for the Goldwater Institute to make a corresponding $1.7 million loan to his company at a nice little 2.25% interest rate. So it begins to look like McClelland gets to protect more of his personal wealth from taxes (which he wouldn't get to do if he personally loaned the money directly to the company) through the charitable donation, his company still gets the benefit of the access to capital and the Goldwater Institute gets a nice big chunk of change out of the deal to lobby and litigate for ways to further protect Mr. McClelland's personal wealth. What a perfect arrangement..

marcy

@JohnQ.Public

It's no longer his personal wealth, he gave it away. He's paying the exact same interest rate on that loan as I'm paying on my HELOC to a major bank.

In general you don't protect your "personal wealth" from taxes, other than estate taxes and property taxes you don't pay taxes on "wealth". If you are tired of having to pay taxes on large amounts of capital that you are earning 2.25% interest on you are perfectly free to donate the capital so you no longer earn that interest. You won't be financially better off for having done so.

JohnQ.Public topcommenter

1 Like

@marcy @JohnQ.Public He is protecting his personal wealth. When he makes a charitable contribution he generally reduces the income that he pays taxes on by a corresponding amount thereby allowing him to further increase his personal wealth by the amount money he did not pay in taxes(if, of course, he chooses to use his tax savings in this way). Sorry I used "personal wealth" as shorthand instead of this long winded explanation - I didn't think I was writing a complete treatise on the matter. If you have access to Shamrocks financials you can tell me whether the company could have accessed capital in the commercial markets at 2.25%. The commercial lending market is significantly different than your home equity or mortgage market. For all you know, Shamrock would not have been able to access capital in the commercial market at 2.25% based on factors like running in the red, being over-leveraged or for other reasons. In fact, in my experience, the only reason a company would likely seek an alternative market source of funding like this is because of an inability to obtain funding from more traditional sources or in more traditional markets, or for other unusual reasons.

JohnQ.Public topcommenter

1 Like

And it begs the question, what type of underwriting did the Goldwter Institue do. Since it doesn't appear that they have a portfolio of loans made n the alternative lending market, what is their underwriting experience and how dd they underwrite this one.

Now it could also be that Shamrock had a liquidity crisis in 2008/09 when the commercial paper market was in complete disarray and turned to any capital source it could find, including the owners exclusive access to the Goldwater Institutes cash. But their secrecy doesn't help them convince anyone that the explanation is no more nefarious than this.

david_saint01 topcommenter

6 Like

@JohnQ.Public lol why not call it what it is...tax evasion

Thane.Eichenauer

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

Judge Learned Hand, (1872-1961), Judge, U. S. Court of Appeals

Source:in the case of Gregory v. Helvering

http://quotes.liberty-tree.ca/quote_blog/Learned.Hand.Quote.6BF7

MotherJones topcommenter

2 Like

@Thane.Eichenauer On the other hand here you have in GI a pack of hypocrites who've signed up for a very lucrative socialism for themselves in the form of tax-write-offs for donors.

JohnQ.Public topcommenter

2 Like

@Thane.Eichenauer The issue is not that someone may work to exploit the provisions of the federal tax code to pay as little tax as possible. The issue is that the lawmakers that write and revise the federal tax code have become beholden to lobbyist whose sole goal is to incorporate into the tax code, on behalf of their clients, provisions that enable this type of tax mitigation or avoidance.

JohnQ.Public topcommenter

6 Like

@david_saint01 Because tax evasion makes it sound like its illegal, which is such a harsh way to look at it. If it's not illegal, its just tax mitigation - no worse than you 99%ers taking the personal deduction or mortgage deduction on your tax returns - entirely legal conduct designed to reduce our tax exposure. No worse than me buying a show horse to dance in the olympics but forming a company to do it through and taking a passive busines loss deduction. Or putting income-producing assets into a trust formed in a low tax country so I don't have to pay US taxes on the income those assets produce until I repatriate that income to the US (but only after I get my friends in Congress to declare a tax amnesty on repatriated income generated oversees). So you see, David, that word "evasion" is just so harsh and unwarranted. Now if you'll excuse me, Lovey Howell and I are going down to the marina for a three hour tour, a three hour tour.