Policy Report I:
Federal Actions Affecting Nonprofit Groups
Moderator:
Howard Segermark
Legislative Director, Free Speech Coalition
Mike McCloskey
Chairman, Sierra Club
Serving as a Lightening Rod for Government
Reprisal
David Keene
Resident Fellow,
First Amendment Center at Vanderbilt
University
Deceptive Mailing Practices
Tom Schatz
Executive Director, Citizens Against Government Waste
"Prohibited Practices" in the Social Security
Amendments
HOWARD SEGERMARK
LEGISLATIVE DIRECTOR, FREE SPEECH COALITION
MR. SEGERMARK: Ladies and gentlemen, my
name is Howard Segermark, Legislative Director of the Free
Speech Coalition. We have a very distinguished panel here
today.
Mike McCloskey is head of the Sierra
Club. His record is rather distinguished in that he has
scars from, what would you say, five administrations? At
least, five Presidential Administrations.
Mike's story, I think, is one of the
first I've heard when the Free Speech was organized about 18
months ago, and one of the reasons for us to be concerned
about these things. I'm going to ask to briefly tell us
about some of his experiences serving as a lightening rod
for reprisals for the federal government. Mike
McCloskey.
MIKE MCCLOSKEY
CHAIRMAN, SIERRA CLUB
MR. MCCLOSKEY: This afternoon I want to
tell you something about the history of the experiences that
we've had with various regulatory agencies. As a high
profile organization we've often attracted their attention.
Many cases have been brought against us for allegedly
violating their rules. Usually, these have been triggered by
some new, more aggressive pattern of activity on our part.
We've learned through the years that we have to fight these
cases or things will get worse.
Let me begin back in the 1960's. At that
time, the Sierra Club was a (C)3 organization. Many of the
things that we were setup to protect were under assault then
from the federal government. At that time, trying to build
dams, for instance, in national parks such as the Grand
Canyon, we launched a vigorous public advocacy program, at
that time, directed at Congress to defeat the dams.
In the end, we succeeded. We ran a series
of full-page newspaper advertisements across the country
deriving public opinion. Supporters of the dams in the
Johnson Administration were outraged by the aggressiveness
of our lobbying.
They got the IRS to withdraw our tax
deductibility. This happened in a 24-hour period; from the
moment the ad ran, within 24 hours, hand-delivered to our
door was this notice of intent to revoke our
deductibility.
Rarely in times of even war has the U.S.
Government worked so well.
(Laughter)
Ostensibly, we were spending
substantially to influence legislation, they said. But in
reality, it was not how much we were spending that bothered
them but how open and forthright we were in opposing them.
They wanted to send a message to anybody else who might be
tempted to do this, that they would risk losing their tax
deductibility. We appealed their ruling administratively,
but ultimately we switched to becoming a (C)4 organization
instead. Earlier, we had the foresight to organize a
companion (C)3 foundation and then at that time we activated
it. Then we split our revenues between the (C)3 and the
(C)4. So this whole experience with the IRS in the '60's has
shaped our outlook ever since.
The IRS' decision, also, had an
unexpected rebound effect upon the U.S. Postal Service. They
decided in the early 1970's that since we were no longer
tax-deductible, then we should no longer be entitled to
preferential non-profit rates, either. Now, technically,
there was no connection between the definitions and rulings
of the IRS and those of the postal service. But the postal
service must have thought that it also would like to send a
message to lie low if you want to keep access to these
special rates.
We fought this ruling with administrative
appeals. We went into federal courts. We lost. There was
just too much deference to agency judgment at that time.
However, in 1976, when the Conoble (phonetic) Bill was
passed that allowed (C)3 charities to lobby within limits,
we launched another effort to get back these special rates.
We got a Washington law firm that had contacts with the
postal service. Ultimately, we succeeded and did get back
our access, at that time, to these rates.
Our lawyer argued that the parallel IRS
provisions have now changed. Actually, nothing had changed
in the intervening years with respect to the relevance of
postal laws. A more friendly administration, however, had
come to Washington at that time and that may have helped
explain the different result we finally got.
In the early '70's, we did another thing
that followed in this pattern. We organized a public
interest law firm to represent us and other environmental
groups, too. Actually, we had been bringing cases against
the government for a few years then, and had begun to annoy
the federal government. When our application and those of
other new public interest law firms hit the desks of the
IRS; they rebelled against the very idea of letting these
firms operate in a tax exempt manner.
Who had ever heard of the idea of a
public interest approach to law? We then helped, and others
helped, rally experts in law schools and elsewhere to bring
the word, get the word to the IRS. Eventually the issue was
settled, but with the express understanding that such firms
could not take money directly from those who benefitted from
these cases. And those were other tax exempt
organizations.
Somehow, transfers of money from one tax
exempt organization to another was not acceptable. The real
problem, of course, was that machinery was being set up to
sue the government right and left and they didn't like
that.
Today, we have hundreds of cases pending
at any one time against the government; mainly, the federal
government and we win most of them. As the 1980's began, the
Sierra Club decided that it needed to get into the business
of influencing the outcome of elections. So we organized a
political actions committee; Scope, we called it. One of the
first of the environmental organizations to get into
electoral work in a big way.
Of course, our activities in that arena
were regulated by the FEC. True to form, early on, we were
cited by the FEC for a violation of their rules. Their rules
didn't contemplate that all sorts of in-kind contributions,
such as donations of labor and mailing lists would be
made.
They ruled that we could not donate our
mailing lists. Instead, we had to donate money to the
candidates and the candidates had to rent the mailing lists
from us and use the money we donated to them to rent the
mailing lists. We resisted that ruling for quite some time
but ultimately, we were forced to comply.
The FEC did not really seem to understand
the nature of cause based PACs. We have learned to operate
under their rules in the ensuing years and today have a PAC
which endorses hundreds of candidates for Congress each
election.
Prior to the 1980's, the Sierra Club had
interpreted the rules on reporting on lobbying activity in
the way the United States Supreme Court ruled in
1954.
Up until that time, we had not solicited
money directly to spend on lobbying unless we hadn't
registered, nor had any other lobbying entities. However,
given the record that we had of attracting regulatory
scrutiny, we decided that we had better do it anyway, even
though it was a pain.
We then, scrupulously reported every dime
we spent on printing bills and so forth. The net result was
that we suddenly started being listed as one of the big
spending non-profit lobbies in Washington, though we
couldn't have been that big. Of course, under the new
Lobbying Disclosure Bill things would really have gotten
worse and we can all celebrate the demise of that
today.
Another case, UBIT; the Sierra Club has
published books for over half of its long lifetime. Since
the 1960's, we've been a major publisher of calendars. In
fact, by the late '80's, we had become author of the
best-selling continuing line of calendars in the United
States, in the marketplace. We are also the largest
publisher of environmental books.
Thus, I suppose we helped attract
attention to the UBIT issue which, as you may remember, hit
Congress in the late '80's in the Ways and Means Committee;
specifically, Mr. Pickles' oversight sub-committee. Under
the bill that he tried to move at that time, we would have
had to have paid taxes on many of our publications, despite
the fact that they -- related to our chartered public
purpose. Our outings were similarly threatened.
The sin we seem to be guilty of was that
of being big and successful. Fortunately, the non-profit
community defended itself vigorously then and defeated that
legislative effort. However, as you know, the same forces
are now cranking up the battle all over again.
Finally, the latest chapter in this tale
concerns a decision of the Sierra Club to lend its name to
Affinity Credit Card Operations. We did this in the
mid-1980's. We thought these might be a coming thing and,
indeed, they proved to be. The IRS must have been worried
about these efforts of non-profits to develop new sources of
revenue because it pounced on us right away.
In a 1986 audit, it declared that we were
actively involved in running the credit card operation and
thus they said we could not claim that the monies paid to us
by the bank were tax exempt royalties.
By now we had learned our lesson; fight
back at every step of the way. We proceeded to spend four
years exhausting our administrative remedies. We then went
to court and just last month, the U.S. Tax Court finally
ruled in our favor. That the monies paid to us for the use
of our name are royalties and they are tax exempt. Earlier
it had held that the use of our membership list was also --
or the money we got from them was also a royalty.
We are waiting to see whether the IRS
will appeal this. It probably will. It will probably take
another year to work our way through the Court of Appeals
and who knows whether that will be the end of the
line.
But this case is likely to be a landmark
case and we're not shying away from pressing the issue. It
may, when it's all said and done, have taken us a decade to
get through the courts on it.
Now, you might conclude from this
recitation that we have been foolhardy. However, through all
of these incidents we have been represented by competent
counsel. We thought we were following the law and sometimes
the courts did agree. We were often doing just what other
organizations were doing also, but none have consistently
drawn the scrutiny that we have. One has to believe that
many of these crackdowns have been politically
inspired.
Our offense has been that we've been
visible, aggressive and successful. We have also been
pioneers in new ways of getting things done. The lesson
we've learned painfully and slowly is that we can't be
shamed by these experiences. We have to defend ourselves of
all of our vigor for as long as it takes.
If we allow ourselves to be a punching
bag, we'll be pummeled into submission. Our whole non-profit
movement should draw the same lesson. Collectively, we have
to be resolute in defending ourselves in justifying what we
do. The more we do so, the more we will be liberated from
fear and the freer we will be to chart our own
destinies.
MR. SEGERMARK: Outstanding.
Mr. Keene is our next speaker. David's
biography is in your notes. He is a visiting professional
scholar with the Freedom Forum's First Amendment Center at
Vanderbilt University. David also is an attorney and he is a
lobbyist. He has been said to remark that, "Given a chance
to identify myself between being a lobbyist and an attorney,
he says, I'll pick lobbyist as being the most honorable
profession." David has first-hand experiences of political
intimidation with an organization he's associated with.
David, would you talk about that?
DAVID KEENE
RESIDENT FELLOW,
FIRST AMENDMENT CENTER AT VANDERBILT UNIVERSITY
MR. KEENE: Well, many of those attending
who know at least the first few chapters of this, I have to
begin by saying that it is an inveterate -- much if not all
of what you do is (inaudible).
Also, I might say that I think that
Mike's experiences at the Sierra Club leading him to the one
conclusion that he made at the end of his remarks, and that
is, that one thing that he's learned is that you have to
fight this every step of the way, is the thing that we all
ought to leave this conference with.
Because if it isn't fought every step of
the way, it will happen and it will be revisited every time.
As Ted Stevens (phonetic) said on the floor of the Senate,
invoking the Sierra Club's name as his principal enemy last
year when he attempted to get legislation passed that would
have had effects on all of us; he said, if I don't get it
now, I will get it next year. I'll be back the year after
and I'll keep after until I get you.
The fact that a United States Senator can
stand on the floor of the Senate and make remarks like that
about what he intends to do to groups exercising their
legitimate rights under the First Amendment, says something
about the Senate.
Do you remember this morning, I referred
in passing, to the whole question of the brown envelope that
we laughed about here last year? If you read through the
materials that the Coalition provided prior to the
conference, you read through the section where, in fact,
legislation has now been adopted and signed into law that
could, indeed, make it a criminal act to use the wrong color
envelope.
The language in that legislation was
interesting because it goes to -- it sort of intermingles, I
think, the various reasons for which these regulations and
bills are passed. I think there is a group of motives. In
some places it's simply an attempt to get revenue. Some
people that were supporting the UBIT thing wanted money.
They see in the non-profit sector a lot of money and they
think that it would be good to get their hands on it
because, after all, then they could spend it.
I think that's probably the primary
motivation of a state like Tennessee that requires a $1,000
registration fee. They're not so interested in what you fill
out the forms with as much as they are with the check. It
may be that that is why Pennsylvania so actively harasses
organizations to get the money. That's one motive.
In fact, in some ways, that is a more
benign motive than some of the others that are activating
people in introducing legislation and regulations. I think
the other two -- one, is what's broadly construed as
consumer protection. They want to protect the public so that
they're not giving to the wrong people, or they're not being
defrauded out of their contributions, or joining groups that
aren't doing what they think they ought to do.
In reading through some of the
discussions of different legislative proposals, it was clear
that the Congress has suggested that since non-profit status
is, in part, granted so that groups can do things which are
a benefit to the public, what better organization than a
Congress made up of people like Dan Rostenkowski is there to
decide what would be to the benefit of the public? So, there
are suggestions now within Congressional committees and
elsewhere that Congress ought to decide on the hiring
practices of non- profits. Is there enough diversity in the
staff; hiring the right kinds of people?
After all, non-profit status is a
privilege; not a right, and, therefore, we ought to be doing
the right things. Are we spending our money in the right
places? Are non-profit groups really doing that which the
Congress believes would be to the benefit of the American
public?
Who better to make the determination of
what would be to the benefit of the American public than the
Congress or bureaucrats, at least authorized and funded by
the Congress.
The third motive is the one that is the
most pernicious; and that's the motive that's best
exemplified by Ted Stevens (phonetic) in the case of the
Sierra Club and David Pryor, in the case of the American
Conservative Union and almost any other group that has at
any time criticized Bill Clinton.
I've described David Pryor as Paul Axault
(phonetic) with an attitude; a man who considers himself the
President's closest friend on the Hill and who sees as his
chosen challenge to go after anyone who disagrees with
anything that his President has to say.
It was David Pryor at the press
conference I referred to this morning who suggested that
anyone who criticizes the Clinton health care plans was, in
fact, involved in fraudulent discussions because none of
these effects were true; and that anybody who criticized it
was, in fact, lying and said that he intended to introduce
legislation to make it impossible in the future for people
to lie about presidential initiatives. A New York Times
reporter said we'd like to see that legislation.
(Laughter)
MR. KEENE: He said he'd have to get back
to them. But the fact of the matter is that he is who I
consider as sort of my poster child for government
interference in the non-profit community, is in a position
to do something, because he chairs the right subcommittee;
the postal subcommittee and things of that sort.
Last year when we met, it was shortly
after I had received a letter from the good Senator
suggesting that I, within six days of receipt of the letter,
get myself up to his office to explain my felonious
activities on behalf of my organization. He suggested in his
letter to me that an Arkansas constituent had gotten a
letter signed by Senator Dole asking for funds on behalf of
the American -- Union and that at the bottom of the letter
it said, not to be printed or mailed at tax-payer
expense.
Since we were a non-profit group it was
at taxpayer expense. There were laws against fraud and that
I violated those laws; and that he expected me in his office
by a date certain. I, of course, told him to stick it in his
ear and didn't go there.
I did not hear much for awhile but
finally, Bill Olson and the other attorneys from the
Coalition received a call from his chief of staff suggesting
that while, of course, the Senator wouldn't have anything to
do with this; they should know that I'm a criminal and that
I shouldn't be surprised if criminal investigators show up
to look into my activities. It sounds like something that
might happen to you.
At 9:30 the next morning, criminal
investigators from the Postal Service showed up; not at my
office but at the office of the Republican leader of the
United States Senate desiring all of the information he
could give them about this criminal mailing that he had
signed. As we know, he has an attitude, too.
(Laughter)
MR. KEENE: That was the end of that phase
of the prior investigation. Since then, he has held a press
conference that I described earlier at which he suggested
that the American Conservative Union, and any other group
that doesn't get all of its money from the federal
government is, in fact, involved in consumer fraud and that
something ought to be done about us.
Following that, I sent him a copy of the
Constitution and suggested that he might want to read it
because he had, no doubt, forgotten the First Amendment
since he became sworn into office and having sworn to uphold
it.
The fact is, though that it is David
Pryor who exemplifies the mixture of these two elements. In
addition to being the chief defender of the President of the
United States; Senator Pryor labels himself as the chief
defender of the elderly. He suggests that since people who
contribute to all of these groups tend to be older than
other Americans, that he, therefore, has a duty to protect
their interests. It was he and his staff people who
suggested that we shouldn't mail things in brown envelopes
because the elderly would think that such mailings were from
the government, and therefore, they should be
proscribed.
It's interesting to note that the Chief
of Staff who suggested that perhaps I belong in a cell; is
now the Chairman of the Postal Rate Commission and has taken
the position, prior to appointment to that job, that
non-profits should not have the right to mail at preferred
rates. So, even though he's changed his job he has, in fact,
increased his influence over our futures.
But I want to go back to this thing that
passed, just because it tells you a little bit about what's
going on. I asked Anthony at lunch about these slap suits.
In many ways, that's what these things are. If we really
fought many of these things as you have done, you eventually
do prevail.
But the people who initiated the action
against you also won, because they cost you tremendous
amounts of resources; both in terms of time and in terms of
money. It's the inhibition of non- profit advocacy activity
that these people are after. It's not so much that they want
to put Mike McCloskey in jail, or me in jail, or anyone else
in jail. They want us to shut up. To the extent that they
can even force the fight to go on and on, and they have more
resources than we ever will have, they always win, to some
extent.
But if you looked at the mailing you got
from the Free Speech Coalition about the legislation that
the President signed into law this year, it prohibits -- and
this is just a sample -- because this can extend to other
areas. When I asked Anthony at lunch about HUD, that doesn't
have to be restricted to HUD.
Presumably, if it's legitimate for HUD to
go after people because they're saying things against what
they see as the law, other agencies can do the same thing
and for all we know, are doing the same thing and it just
hasn't come to our attention, because those sorts of things
went on for a long time before they were brought to public
attention.
But, consider this legislation, and I'm
quoting from it. It "prohibits advocacy organizations from
going into the mails with what they `know or should know'
would convey the false impression that the item mailed was
approved, endorsed, or authorized by the Social Security
Administration, HHS, the Administration, Medicaid, SSA, SSI,
EHHS, to the Department of the Treasury, or prohibits the
use of the name of any bureau, office or subdivision of the
Department, or the Secretary of the Treasury, or Treasurer
of the United States, or the title or name of any other
employee with the Department of Treasury, or the name of any
obligation issued by the Department of the Treasury, or any
colorable imitation of any set words, titles, abbreviations,
initials, symbols, or emblems in any way that might
`reasonably' could be interpreted or construed as conveying
any official authorization or status."
The legislation that was signed instructs
the courts in such cases to ignore the presence of any
disclaimer. And proof under the way in which the Postal
Service is operated on these sorts of things, can be as
simple as finding two or three people out of a million who
received a letter who are willing to stand up and swear that
they thought that it came from an official agency, or they
thought it implied official authorization.
The fact that 999,997 didn't come to that
conclusion is irrelevant. And it includes fines of $10,000
per piece of mail, and up to a year in jail for each
violation which is per piece mailed. When Senator Pryor came
after us, it was before the passage of this letter and I
don't think we made any attacks implicit or in any other
way, on former Senator Vincent.
But he did suggest that, in his view,
having a United States Senator sign a fundraising letter for
a non-profit advocacy group was, in essence, conveying to
the public the impression that, that group had the support
of the United States Senate, a government official Senator
and that, therefore, it was actionable, even under existing
law, and that we shouldn't be using public officials to sign
our letters.
So, these kinds of things extend far
beyond where they begin and are a real threat. I think all
we're trying to do here is give you the sense, regardless of
where you're coming from, that these kinds of things are
going on and will continue to go on. Lobby disclosure will
be back and so will many of these other things.
There will be 16 other suggestions of
what might be done about the "illegitimate activities of
public interest groups." But I would just conclude by
echoing what Mike said earlier, and that is that we have to
be vigilant to spot each of these things and to fight each
of them as they come along. Thank you.
MR. SEGERMARK: Thank you, David.
Tom Schatz is Executive Director of
Citizens Against Government Waste. I should have insisted on
a conference ahead of time because I hope David didn't take
too much of your thunder.
MR. SCHATZ: Oh, no.
MR. SEGERMARK: Tom has actually done some
research and talked with some of the people who will be in
charge of administering this social security law provision
affecting prohibited mailing practices. Let's go to that and
then we'll get into some conversation.
TOM SCHATZ
EXECUTIVE DIRECTOR, CITIZENS AGAINST GOVERNMENT WASTE
MR. SCHATZ: I think Anthony Griffin at
lunch today probably said it all when he said maybe we
should all be a little paranoid. We've been relatively lucky
with some of this stuff. Certainly the trail-blazing
activities of the Sierra Club, ACU and others who have been
out there really fighting tooth and nail, have I think
benefitted every single one of us.
A year ago, when I first heard about this
group, I kind of felt, maybe it's not going to happen to us.
In part, because had some experiences with the Postal
Service and with Social Security; both of which have
resulted in some modifications to letters, which ultimately
didn't affect our bottom line.
But clearly, we're dealing with a much
broader issue. I have a legal background as well. The fact
is that it's very encouraging to see this kind of group get
together for something like this. Because we really should
make them a lot more worried about us than we are about
them. I think that's part of what we're trying to do
here.
We did have a mailing back in 1986. It
was the first year we had done any significant mailings --
'88, excuse me. In this case, it was one of those packages,
which in those days seemed to work. Maybe they're not as
good any more. It had a big picture of the White House on
the cover and mentioned the Grace Commission which, of
course, was the predecessor to the Citizens Against
Government Waste.
Peter Grace and Jack Anderson were, of
course, the co- chairmen and have been of our group many
years. We were just reproducing the cover of the Grace
Commission Report, fairly innocently, but in a very, very
large document and got a call from the Postal Service to
come on down and talk. They didn't file a suit. They didn't
threaten our tax status. They said, come on down and
talk.
We, ultimately, ended up modifying that
package and maybe the fact that it didn't do all that well
in the first place was another reason to do so. I guess,
success would have enabled us to do a little more with
it.
But it ended up, in a sense saying, to
make a point that Citizens Against Government Waste if a
private non-profit organization and that the Grace
Commission, of course, was a governmental entity, which was
true and not true. At least it didn't get its money from the
government, but it got its authority from there.
So, we took a little slap on the wrist
and moved forward. Then, in 1990, we started to mail on
social security; on the deficit problem and the trust fund.
The fact that it's going to run out of money some day; and
maybe the fact that we do not immediately say to, as we call
them, the senior citizens, you know, your lives or your
social security is being threatened. Let the Social Security
Administration -- not again immediately go and sue us. They
wrote a little letter and gave us a phone call and we
talked.
This is the actual letter and it says:
"Special Report, Social Security Crisis Update." A diversion
of funds from Social Security Trust Fund defines the federal
deficit which we all know is true. This special report has
been prepared by Citizens Against Government Waste, a
private, non-profit organization.
If you look at the size of a private,
non-profit organization it's fairly small, but if you read a
lot of the statutes it's supposed to be over here, and big,
and everything else. I don't know what is going to happen
under the new statute because this may or may not be good
any more.
I have suggested and I will send social
security another sample and we'll see what they say because
this is how we might do it the first time, in terms of
modifying and explaining who we were and what we were up to.
Maybe we'll be lucky or maybe we won't, but I certainly feel
a little more emboldened by the presence of people here to
fight it a little harder this time, if they come back and
say, sorry, you can't do this.
Now, none of the prohibitive words in the
statute are in here. You are allowed to use social security.
You are not allowed to use Social Security Administration,
or supplemental security income, or HHS, or -- from what I
have read of the statute. They also don't prohibit you from
using social security trust funds, to the best of my
knowledge.
Now, we'll, as I said, see what they do
here. But, this is really an ongoing battle. This issue is
important, I think to the future of everybody in this
country. I think certainly something that anybody who is in
the baby boomer generation, or in generation X, or even
those who haven't been born yet should know about
this.
Basically, all we're saying is that they
are taking social security money, diverting it, and there
won't be any left in the future.
Now, what is untrue about that, except
that you get some actuary from social security who will
argue otherwise; oh, yes, the money will be here. Okay,
well, let's see. That's why I'm putting money aside in other
places. There are Members of Congress who are very concerned
about the impact of these mailings on senior
citizens.
In the 1989 Deceptive Mailing Practices
Act, which was not specifically related to social security;
there was an '88 law and, of course, this '94 law. They had
a series of hearings on just deceptive mailing practices,
period; which arose, in part, out of Congressman Tom Sawyer,
who is the Chairman of the Subcommittee on the Census, being
concerned about mailings being sent out being called
environmental census, complete with a Census household
number, -- was that one of yours, Frank?
(Laughter)
MR. SCHATZ: Anyway, he was concerned that
they looked like the Census. Of course, the response to the
Census was much lower than it had been in the past; and why
not blame the non- profit sector? Many people just didn't
feel like answering.
So, he took that as an excuse to go out
and pass the Deceptive Mailing Practices Act of 1989. That
designates as non-mailable anything, any solicitation which
could reasonably be construed as a bill, invoice or
statement of account due; or any solicitation which is
offered in terms implying any federal government connection
or endorsement, unless there is an appropriate
disclaimer.
Now, of course, they have said in
relation to social security and treasury, it doesn't matter
if you have a disclaimer. So, it will be interesting to see
if you can still use a disclaimer on other kinds of
mailings; if you want to take this a step further in terms
of analysis.
Olympia Snow, who is otherwise I think a
wonderful representative, is very protective of senior
citizens in her state. Her major concern is social security.
She pointed out that in 1986 a constituent brought to her
attention a mailing which offered to obtain a child's social
security card for a $10 fee; which is something else that
this statute was after.
The time of the mailing and the name
implied that the mailing was from the federal government
urging compliance with a requirement of the Social Security
Administration. For the '88 social security amendments to
the '89 Act on Deceptive Mailing Practices, they did hold a
series of hearings. At least there was some opportunity to
know what's going on. In 1994, even if people were looking,
they probably didn't even know about the changes that were
being made on the Social Security Bill which we filed for
two reasons.
That is, make the Social Security
Administration independent because they were making changes
in the supplements of security income, which were proposals
that our organization had supported. But until we got the
material from the Free Speech Coalition, fully justifying
our membership I might add, if not more, I don't think
anybody really knew about this.
That's perhaps the most dangerous thing
of all. The reason that we need a group like this and people
looking at this, so that the next time we get one of these,
we can get in there and stop it before it happens.
At this point what we're talking about is
hacking it if after the fact. But I think given the
mobilization we've seen on things like lobbying and other
activities that are affecting grassroots operations, and I'm
in full agreement with Ralph Reed, that this is the wave of
the future. As you can see, members are getting at least as
responsive, if not more to groups like ours and yours that
have membership and not necessarily PACs as they are to the
people who have PACs.
When you go in and tell them that you've
got a bunch of people demonstrating outside their office
next Saturday, which we have at about 170 sites around the
country, they pay a little bit more attention than they used
to because they realize there's a lot more -- communications
behind that group of people.
Now, I don't know who is going to be the
one to challenge this. Maybe it will end up being since we
got the letter. We're going to send it over to social
security and we'll see what happens.
But there is some other really kind of
damaging aspects to this. David mentioned one, which is the
fact that it's per letter as opposed to per mailing; which,
of course, makes the penalties greater. They eliminate the
$100,000 annual cap on penalties. There used to be the cap
on what social security could go after.
It no longer requires social security to
go to the Department of Justice first and find out if the
Justice Department will take the suit. SSA could just come
right out and sue you. They don't have to waste any time,
and the money goes into the "trust fund" instead of the
general treasury, a nice little touch. And, if you want to
reproduce any social security form or publication you have
to ask the Administrator of Social Security for that.
Again, most important, as we talked about
a few times, is the determination of whether there is a
violation is made without regard to any disclaimer. I spoke
to Jim Bunning's staffer on the House Ways and Means
Committee the other day. She claims, that "we are going
after the bad guys," and back to your paranoia
discussion.
Well, who are the bad guys?
PARTICIPANT: You.
MR. SCHATZ: Yeah, it could be anybody. We
haven't been out there. They didn't say us. They, actually
-- I would prefer not to name the organization, but she
mentioned a specific organization. She said, well, you know,
they're still out there scaring the old folks, and in 1990,
we thought that what we did would be enough to stop
them.
That's why we're really going after these
mailings that are out there to scare the old folks into
sending everybody money, which she also said was just
despicable, period, but she, so far, couldn't do much about
that. Meaning that I guess she couldn't stop or they
couldn't stop every single mailing, as I guess Senator Pryor
is trying to do, but they were trying specifically to stop a
group of people that were going after the seniors.
So, you've got David Prior on one side.
You've got Jim Bunning, and I'm sure others on the House
Ways and Means Committee on the other side all saying that
this kind of thing just can't happen in the United States.
Clearly, there are several instances that they are going to
go way too far. Let's hope that the kinds of activities that
we've seen in terms of the protection of our civil liberties
and First Amendment rights continue.
We're happy to be part of this
organization, the Free Speech Coalition. I hope that we will
continue to go out and fight for these things; because it's
really honestly not a matter of whether this organization or
others survive. It's whether are rights survive. I think
that's what we're really talking about.
MR. SEGERMARK: Thank you, Tom.
Let me throw out the first question, that
is something that I think our civil libertarian friends
would be concerned about. It sounds like you are going to
the Social Security Administration to pre-clear your
mail?
MR. SCHATZ: Well, we -- no, we did it --
they came to us first. They wrote to us and said, we want to
see your mailing and we want to talk to you about it. We
figured it would be easier to do that. Since we had an
ongoing relationship in this instance, I said, look, we're
using the same mailing that we've used for four years. But
I'm concerned about what this new statute is going to do.
I'm just curious to see what you think about it.
In a way, in a sense, it's an easy test.
If they say no, well, then we know what we're up against. If
they say yes, then at least in this one particular case,
which may or may not do anyone else any good -- no, I
wouldn't call it pre-clearance. We've already mailed
them.
They can come after us now because it's
out in the mail if they wanted to. There's no
difference.
PARTICIPANT: That relates to something I
was going to ask Mike. As I looked over all of these things
that they're doing, one of the things that's been proposed
last year and is being proposed again that strikes me as the
most potentially dangerous in terms of controlling the
activities of advocacy groups; and that's what is happening
here. It is the proposal for intermediate sanctions by the
IRS; so that every couple of years they can evaluate you
like you were a radio station and see if you're doing the
right thing. Then, either fine you or then pull your
tax-exemption.
They claim that now the burden on them to
yank your tax- exemption or your non-profit status is so
great, that they really need intermediate sanctions so they
can go after you --
PARTICIPANT: Let's just talk about that
for a second, if we may. In the health bill that was
approved by the House Ways and Means Committee, but never
taken to the floor; Congressman Pickle put a provision in
which would set up a number of intermediate sanctions
against non-profit organizations; and would impose taxes on
them which would double in volume or repeated
offenses.
One of the offenses was a fascinating
one, called disqualified persons. This would mean that if,
in fact, an officer, or a board member, or a relative of an
officer or a board member did contract services for one of
those officers or board members, the organization could be
taxed the equivalent amount of that contract. In other
words, this may be fine and dandy for again the larger
non-profits; but think of your Mom and Pop booster club or
something, they can't print their own stuff for pay, because
these are disqualified persons you're going to deal with;
another whole layer of bureaucracy.
Congressman Pickle has said that he was
committed to seeing to it that this would be applied to all
non-profits. You might want to refer to that House bill to
see that provision. It's a scary one.
(Inaudible)
PARTICIPANT: But his staff is not
retiring, and you know who wrote that provision.
PARTICIPANT: Well, on the intermediate
sanction question, very frankly, some of the non-profit
sector, particularly those groups organized in the
independent sector, have been the source of some of those
ideas. I'm on the board of the Independent Sector and the
Government Relations Committee. So, I've been part of the
decision-making process that has led them to do that.
I think it's sort of the feeling you are
in a Catch 22 situation here. That the present situation
either leads, on one hand, to lax enforcement where abuses
do occur; or when there is enforcement, the penalties are so
that it's overkill. The potential for overkill leads to the
hesitation to enforce; and then we have United Way scandals
and other things.
My understanding is that the Intermediate
Sanction Bill deals principally with the question of
inurement.
PARTICIPANT: At present.
PARTICIPANT: Present. Oh, yes, it could
lead to an unfolding chamber of horrors and get out of
control, but anything could.
PARTICIPANT: That raises a question. In
the United Way Case there are laws as -- discovered on the
books to deal with that. In the case of the fraudulent
mailing on social security, you know, saying we'll do this
for $10 part of the government, there are laws, fraud laws,
to deal with those kinds of things.
The laws that we're talking go way beyond
that and allow, really, and I think they're designed really
as a prior restraint on both speech and petition activities.
It's the prior restraint that's the worst part of it. I
mean, going after it at any stage is bad.
But it's clear to me that when you look
at these things and if you just go with his discussion of a
staff member on all this language -- what this staff member
was saying.
We didn't like what these people said.
They haven't done illegal. So, we're going to pass a law
that, by God, will get them. Now, that strikes me as not a
healthy kind of motivation for legislation.
MR. SEGERMARK: Comments and questions
from the audience, too, of course. Mike, you first and then
the gentleman back here.
MR. MCCLOSKEY: I think there is much to
what you are saying. While there may be some abuses, bad
situations that often the remedy is worse than the problem.
Once, particularly they start dealing with so-called
loopholes, they start casting the net more and more widely.
They're not able to anticipate all of the things they're
going to do as a result; and all sorts of problems are being
created.
But, you know, the fact is they are
regulating in the field right now. It's not working
adequately. So they're trying to do some sort of a fix on
it.
MR. SEGERMARK: Henry.
MR. SUHRKE: With respect to the
intermediate sanctions; isn't it true that the State
Attorneys General already have power to surcharge trustees
and to do all sorts of intermediate things; which if they
were doing their job properly, would deal with these
questions in a much more equitable way, rather than giving
new powers to the federal government which, really aren't
necessary; if they were being exercised at a point where the
intermediate steps are already taken into
consideration?
Notice the powers of the Attorney General
have great gradation; is that right?
PARTICIPANT: Well, that's my
understanding. I think you're basically right. As I
understand one of the motivations of the independent sector,
among those non-profits, is that the climate is getting so
bad here that unless we sort of pre-empt worse solutions,
they're going to come along the way.
We need to get something of a remedial
nature out there ourselves to -- basically, what they're
doing is restating the existing law in inurement and
providing intermediate sanctions to deal with it at the
federal level. Now, that may or may not be the best strategy
and it's not without its risks, but there are also risks of
allowing the Philadelphia Enquirer and others to keep going
on a tear that we're all bad; and the field and the
community are totally corrupt.
PARTICIPANT: But they're not the
government.
MR. SUHRKE: No, but they're creating a
climate which is having an adverse effect on
donations.
MR. SEGERMARK: Rich.
MR. STEINBERG: I, too, feel that the
independent sector made a bad judgment in deciding where to
stand on intermediate sanctions. A couple of things I wanted
to point out here.
One, in the past, the independent sector
has called for precision in regulation. When they supported
the various fundraising cases, the state argued, oh, we're
only going after the bad guys. There are provisions for
administrative waiver, et cetera, which the independent
sector didn't recognize.
In this case the legislation proposed
outlaws self-dealing, which is not same thing as inurement,
except in charitable trusts. They are trying to extend the
law of trusts to 501(C)3's with no debate.
That's a minor point compared to the
other point which is, that the law provides penalties to any
board member that approves excess compensation, regardless
of whether it was a simple mistake in judgment by an amateur
on the board. It also prohibits any liability insurance from
covering these board members.
Now, this is not the kind of restating
the law. This is feel good. Let's get some PR out there to
make it look like we're against the bad guys, too, instead
of precision. It's going to hurt the independent sector in
the future when it goes against one of their members. That's
my opinion.
MR. SEGERMARK: I want to continue this
argument, if we can, in the next session.
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