“No food for you,” the Soup Nazi barks at an overweight restaurant customer at the front of a line of patrons who must be weighed before they are permitted to eat.
The character made famous on the Seinfeld television show, played by the actor Larry Thomas, is appearing in a commercial produced by the Center for Consumer Freedom, a Washington nonprofit group that is waging a campaign against nonprofit organizations and government regulators it believes are exaggerating the health risks of fattening foods and alcoholic beverages. The center is particularly critical of organizations that it says fail to disclose that they receive funds or are otherwise linked to what it calls radical groups.
Now, however, the Center for Consumer Freedom is itself under attack. A watchdog group in Washington has asked the Internal Revenue Service to revoke the center’s tax-exempt status, saying the center violated federal tax laws and is little more than a front organization promoting the interests of its corporate sponsors in the restaurant, tobacco, and alcoholic-beverage industries. The organization says that is not the case and that it has not violated any federal laws.
Citizens for Responsibility and Ethics in Washington, the watchdog group, last month told the IRS that the center should lose its tax-exempt status because it:
- Took a position opposing a presidential candidate, which potentially violates the federal law prohibiting nonprofit groups from engaging in electioneering.
- Paid its founder and president, Richard Berman, and his Washington public-relations and lobbying firm $1.35-million in 2002, more than two-thirds of the group’s total spending that year, which potentially violates federal law prohibiting any executive of a nonprofit organization from receiving “excess benefits” from his dealings with the group.
- Carries out activities that are not charitable, but instead are designed to advance the commercial interests of the tobacco, alcoholic-beverage, and restaurant industries.
Citizens for Responsibility and Ethics in Washington has filed numerous actions with federal regulatory agencies since it was created two years ago, mainly challenging the activities of conservative, Republican, and corporate political-action committees.
However, it is perhaps best known for filing complaints with the IRS and the Federal Election Commission alleging that Ralph Nader’s presidential campaign violated campaign law by using office space and telephones belonging to one of Mr. Nader’s nonprofit organizations. (Mr. Nader and the organizations involved denied any impropriety.)
‘Facts Are Incorrect’
Mr. Berman dismissed the complaints against his group, saying Citizens for Responsibility and Ethics in Washington had “lifted information out of context” from the center’s Web site.
“A lot of its facts are incorrect, and it misstated a lot of the law,” he said. Mr. Berman declined to discuss the details of the complaint to the IRS, saying, “I’m not going to get into a ‘he said, she said’ kind of thing.”
Internal Revenue Service officials are prohibited by law from saying whether they are investigating a group and cannot otherwise comment on complaints they have received about tax-exempt groups. Two experts on nonprofit tax law, however, said the allegations in the complaint are strong enough to warrant the IRS’s attention.
The alleged violation of the electioneering ban is based on a series of articles the center posted on its Web site criticizing Rep. Dennis Kucinich of Ohio, who was a candidate in the 2004 primaries for the Democratic presidential nomination.
The center referred to Mr. Kucinich’s opposition to genetically altered foods as a “Luddite’s ravings.” It also asked, “Is this a guy you’d want as commander-in-chief?” Another article is entitled “The Madness of King Dennis,” calling him “the nutty presidential candidate.” The Web site also suggested that voters in Ohio send “this wacko looking for a new job next November.”
“The IRS has taken the position that certain code words constitute political-campaign intervention,” said Marc Owens, a Washington lawyer who was head of the IRS division that oversees tax-exempt groups from 1990 to 2000. “When you use a candidate’s actual name and identify him as a candidate, and then use disparaging terms about him, it’s hard to say that’s not campaign intervention.”
Mr. Owens said he believed that the payments to Mr. Berman and his company raise questions about whether the center violated the law prohibiting an executive of a nonprofit group from receiving overly generous financial benefits.
“When you have those sorts of transactions with a related party, it puts an awful lot of pressure on a nonprofit to show whether it received fair value for the amounts it paid, particularly when the dollar numbers are that size and the nonprofit and his company are at the same address,” Mr. Owens said.
According to the Citizens for Responsibility and Ethics in Washington complaint, the center hired Mr. Berman’s company on a no-bid contract, without finding out whether another firm might charge less or whether the work could be done with in-house employees.
“This kind of arrangement should certainly trigger scrutiny,” said Frances Hill, a Miami University law professor who specializes in nonprofit groups.
Citizens for Responsibility and Ethics in Washington also cited documents from Philip Morris USA filed during a series of lawsuits, which it says show that Mr. Berman created the nonprofit group with funds from the tobacco company as part of an effort to block anti-smoking laws. He is quoted in one document as including the restaurant and alcoholic-beverage industries in his efforts to form “a multi-industry advisory council [to] help shape our message.”
The documents demonstrate that the center was not set up for a charitable purpose, as required by law, but rather to promote the commercial interests of those industries, says Citizens for Responsibility and Ethics in Washington.
“There are a lot of very strong signals here that this would be an appropriate group to audit,” Mr. Owens said.