Rick Berman's For-Profit Non-Profits Under the Microscope

Front group king Rick Berman, who has worked in the shadows for years, is starting to draw closer scrutiny from the IRS, the media and the public for the unique, self-dealing business model he developed to champion for big business. Berman, a former lobbyist, set up six nonprofit organizations with innocuous names like the Center for Consumer Freedom, the American Beverage Institute and the Employment Policies Institute. Despite their nonprofit designation, together these groups provide as much as 70 percent of the revenues of his for-profit enterprise, Berman and Company. The Center for Consumer Freedom, for example, took in $1.5 million in revenues in 2008, of which 93 percent went to Berman and his firm. The American Beverage Institute took in $1.7 million, of which 82 percent went to Berman and his firm. None of his non-profit groups have independent offices or staff, and all of them pay Berman's for-profit business for services like accounting, copying, writing, operating Web sites, placing opinion-editorials, and bookkeeping, which is managed by Berman's wife, Dixie Lynn Berman. Rick Berman sits on the boards of his organizations, holds a total of 24 positions within them, and he serves as Executive Director for most of them. Sounds fishy, right?

Attacking the Messenger

Berman's signature method of operation is to discredit the messenger rather than address the message head on. Recently, in true form, he has been attacking the Humane Society of the United States by trying to convince the public that the organization "wants to force us all to be vegetarians or vegans." Why would Berman, or anyone, want to attack the Humane Society, let alone with such an implausible claim? Because the Society has had an ongoing campaign to achieve better living conditions for livestock, which, if it came to fruition, could cost agribusiness millions. The campaign has no doubt brought the Humane Society to the attention of agribusiness, restaurant chains and other animal-unfriendly business enterprises which are likely funding Berman's attacks on the organization. The Humane Society, though, to its credit, has refused to passively take Berman's attacks. In response, the organization has been working to publicize Berman's self-dealing business set up, with some success. On June 17, the New York Times published a front-page expose' of Berman's operation. What happened next? True to style, Berman attacked the New York Times by posting a bizarre and ridiculous mock-up of the Times on a Website attacking the Humane Society.

So who is funding Berman's attacks on the Humane Society and other organizations? That's the big, fat secret.

Laundering Lobbying Money, Hiding Clients

Berman formerly lobbied for the very same industries that now support his nonprofits. That's probably no coincidence. Berman found a way to continue lobbying for the same clients, while serving their interests even more closely. He just had to change his business model, and a little terminology.

His business model essentially labels corporate lobbying funds as "donations," and then launders the money through nonprofit "educational" groups. An official U.S. government non-profit designation permits him keep his funders' names secret, so we don't know who he works for (although we can hazard a pretty good guess). Through these "donations" to "nonprofits," Berman mounts vicious attacks on groups that advocate policies that could negatively affect big business. His business model keeps businesses from being connected back to the vicious attacks, which could be bad for business.

A Thinly-Veiled Commercial Enterprise

Jack Reilly, a former IRS attorney, says the case can be made that Berman establishes nonprofit groups for the purpose of funneling business to his for-profit firm, a self-dealing activity that makes his overall enterprise commercial in nature, not "non-profit."

Now, after decades of abusing the concept and intent of a government non-profit status, Berman's operations are finally drawing closer scrutiny from the IRS, the New York Times, the public and the organizations he attacks. If we keep up the pressure, perhaps even more transparency will lie in Rick Berman's future -- like exposure of the businesses who fund him.