[EL] CREW's "Inurement" complaint might blow its own whistle

[David Keating]

Worth a read, from someone who doesn’t like Bopp:

http://www.forbes.com/sites/peterjreilly/2013/07/10/crew-embarrasses-itself-with-bopp-whistleblower-claim/

Conclusion:
Unfortunately, I think that Mr. Bopp and his firm did give JMFCS its money worth, which is why CREW is so pissed at him.  I don’t like the Citizens United decision any better than CREW does.  I almost wish that Mr. Bopp was a sleaze ball running a phony not for profit and taking people’s money and not doing anything.  Instead he ran his not for profit very lean, put almost all the money that came in into litigation and won some important cases supportive of the causes that JMFCS advocates.
One of my fantasies is to be appointed the common sense czar with the ability to direct IRS enforcement and overrule Tax Court decisions that I don’t like.  In my fantasy position, here is my response to CREW’s Form 211 -  Nothing to see here folks.  We are going to go fight crime someplace else.

David
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David Keating | President | Center for Competitive Politics
124 S. West Street, Suite 201 | Alexandria, VA 22314
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From: law-election-bounces at department-lists.uci.edu [mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of BZall at aol.com
Sent: Tuesday, July 09, 2013 6:50 PM
To: rhasen at law.uci.edu; law-election at uci.edu
Subject: Re: [EL] CREW's "Inurement" complaint might blow its own whistle

Seriously, this must be a joke. Or a publicity stunt by people who don't actually work in this area. Sounds sexy (in a media way), and tries to strangle someone CREW really doesn't like (making donors happy), but CREW may be surprised by what happens now.

Did no one see the automatic "excess benefit transaction" under IRC Section 4958 involved when a 501(c)(3) organization - in this case CREW - spends charitable resources to file a whistleblower complaint asking for $2,000,000 for its Executive Director - personally?

This is a complaint about "private inurement," but the complaint itself is classic inurement, with Sloane as the person to whom the benefit could inure. John Marshall Law School, People of God Community, all the classic inurement cases fit here. How is this at all different from Airlie Foundation (inurement from Executive Director's use of charity's assets for his own home)? Who counseled CREW that this was a good idea? Perhaps they thought there wouldn't be a problem because the IRS almost never pays these awards (actually, that's true, so maybe it was a good bet). But that bet itself might be a Circular 230 violation under the newly-announced standards.

Every ED has a story about how giving them personally the benefit of something the organization does is really a good thing. I guess this is one of those. But the common defense is something called the "incidental" doctrine, based on G.C.M. 37789 (1978), which says that the organization needs to do something to "benefit the public" and fulfil its tax-exempt purposes, and any benefit to the individual is purely "incidental" to the organization's benefit. Was "getting Bopp" considered such a wonderful thing for the organization that it didn't matter that the beneficiary of the charity's work was an insider? But really, is this an "incidental" situation? Read the IRS's own internal training description. http://www.irs.gov/pub/irs-tege/eotopicc90.pdf

Probably not. More likely, just a publicity stunt, with an interesting kicker. Someone needs to file a whistleblower complaint against CREW. Looks pretty straightforward here. At least as straightforward as their claim against Bopp. To quote their own press release: "Misusing a non-profit for personal gain is a serious offense and merits a thorough investigation.”

Barnaby Zall
Of Counsel
Weinberg, Jacobs & Tolani, LLP
10411 Motor City Drive, Suite 500
Bethesda, MD 20817
301-231-6943 (direct dial)
bzall at aol.com<mailto:bzall at aol.com>
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In a message dated 7/9/2013 12:39:19 P.M. Eastern Daylight Time, rhasen at law.uci.edu<mailto:rhasen at law.uci.edu> writes:
“CREW Executive Director Files IRS Whistleblower Complaint Against Campaign Finance Lawyer James Bopp”<http://electionlawblog.org/?p=52714>
Posted on July 9, 2013 8:23 am<http://electionlawblog.org/?p=52714> by Rick Hasen<http://electionlawblog.org/?author=3>

Press release<http://www.citizensforethics.org/legal-filings/entry/melanie-sloan-irs-whistleblower-complaint-james-bopp>:

Today, Melanie Sloan, Executive Director of Citizens for Responsibility and Ethics in Washington (CREW), filed a whistleblower complaint with the Internal Revenue Service (IRS) against James Bopp, Jr., the Bopp Law Firm, and the James Madison Center for Free Speech (JMCFS).

The complaint alleges Mr. Bopp and JMCFS, a tax-exempt 501(c)(3) organization, misrepresented their activities to divert virtually all of JMCFS’s money into the Bopp Law Firm for Mr. Bopp’s personal enrichment.  Additionally, CREW asked the Indiana Attorney General, the U.S. Attorney for the Southern District of Indiana, the Indiana Secretary of State, and the D.C. Department of Consumer and Regulatory Affairs to investigate.

I have been quite critica<http://electionlawblog.org/?p=16497>l of earlier attempts to go after Jim Bopp personally for activity which campaign reform groups don’t like.  We’ll see if there’s anything more substantial to these new allegations. (For background on the controversy, see this Slate piece<http://www.slate.com/articles/news_and_politics/jurisprudence/2012/10/james_bopp_jr_s_unusual_relationship_with_the_james_madison_center_.single.html>–not by me.)

UPDATE: Peter Overby tweets<https://twitter.com/peteroverby/status/354634146255089665>: “Cmpn fin rumble! @CREWcrew<https://twitter.com/CREWcrew> holds tele-conf to accuse Jim Bopp (Cits United) of violating 501c law. Bopp crashes call & attacks CREW.”
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