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Thursday, September 22, 2011

On Smith's bus, it gets complicated

Yesterday's post about the messy accounting practices at Portland mayoral candidate Jefferson Smith's much heralded Bus Project noted that there are really three different Bus entities. There's a section 501(c)(3) "charitable" organization named Oregon Progress Forum; a section 501(c)(4) organization named New Progressive Network; and a political action committee named Bus PAC. Bus PAC has been fined thousands of dollars by the Oregon secretary of state for, among other things, being unable to account for tens of thousands over the years.

We stumbled across this fact as we tried to figure out how much Smith was being paid by the "Bus Project." That's a question for which we haven't come up with a complete answer. We do know that the 501(c)(4) organization paid Smith compensation of about $33,300 a year in each of the last two years that it's filed financial reports with the IRS -- the most recent being the 12 months that ended on March 31, 2010. (They take their time with government filing, as we noted yesterday, and so the financials for the year ended March 31, 2011 probably won't get to the IRS for several more months.)

A $33,300 salary may not seem like much, but the IRS filings admit that it's for only 10 hours a week of work that the 501(c)(4) got out of Smith. You math majors out there will note that that works out to about $65 an hour. Not exactly lawyer rates, but not shabby for working at a nonprofit, either. And Smith is the only officer or director listed as receiving any compensation from the 501(c)(3) or the 501(c)(4). (He's shown as the principal officer of the 501(c)(4) on its March 2009 return; on the March 2010 return, the principal officer box was left blank.) The other 20 or so folks who serve as directors of those two entities apparently do so without pay, although the 2010 return of the 501(c)(4) mysteriously shows about $75,400 compensation paid to top brass, with only Smith's $33,300 being fully explained.

Is that all Smith gets paid? Maybe. But it's hard to tell from the IRS documents exactly who gets paid for what. The 501(c)(3) organization -- the tax-exempt "charity" that takes tax-deductible contributions from folks -- claims to have no employees whatsoever. But it does pay hefty amounts each year to some people or entities for "contract services" and "contract labor." On the March 2009 statements, for example, the 501(c)(3) showed that it laid out $73,279 for "contract labor," and $330,129 for "contract services." Did any of that go to Smith?

Probably not. Probably, a good chunk of that was paid to the 501(c)(4) Bus entity. On its March 2009 statements, the 501(c)(4) reported $336,898 of "program service revenue" in the form of "reimbursed expenses." Did the 501(c)(4) get paid for performing "contract services" for the 501(c)(3) "charity"? Entirely possible, seemingly likely.

So what did the 501(c)(4) do with the money it took in? Its total revenue for the year was $1.32 million. One thing it did was pay a lot of employees. For the March 2009 year, it showed 66 employees and payroll expenses of $454,642, including Smith's $33,300. It had only $11,800 of "contract labor" expense.

Another thing the 501(c)(4) did was make some huge grants to other "youth vote" type organizations around the country, to the tune of $616,300. These included $210,000 to something called the League of Young Voters in New York, and $175,000 to Progressive Future in Denver.

Unlike 501(c)(3) "charities," 501(c)(4) organizations are allowed to spend substantial money on politics, and the Bus 501(c)(4) did some of that. In the March 2009 report, it showed political expenditures of $41,321. And its volunteers reportedly spent 8,000 hours actively canvassing for state and local candidates in the 2008 elections. (Probably not too many Republicans.) Meanwhile, as noted yesterday, there was a fair amount of cash movement -- in the five-figure range -- between the 501(c)(4) organization and the PAC. Those transactions include circular cash flows that mere mortals can't understand based on the public record. But 501(c)(4) money definitely went to the PAC, and vice versa.

Stepping back to survey the whole picture for a minute, it appears that hundreds of thousands in tax-deductible donations come into the 501(c)(3) "charity," which must stay out of politics; the 501(c)(3) pays hundreds of thousands in "contract services" fees and "expense reimbursements" to the 501(c)(4), which is allowed to get involved in politics; and the 501(c)(4) flows some thousands to the PAC, for whom political campaigns are what it's all about. Now, tax-deductible dollars are not supposed to flow to politicians -- that's the ultimate no-no. Do any of them make that journey up the Bus money ladder? Only the Bus and the IRS could know for sure; from the documents that are available to the public, it's hard to tell.

Now, one thing that's been said in defense of the byzantine array of Bus entities is that everybody does it this way -- that it's a common setup for political activists to set up this type of trio of entities and party on accordingly. We've got to admit that we have no idea whether that's true or not. But the fact that everybody does it doesn't make it legal -- or ethical. (And whether someone who plays that game should be the mayor of Portland is an entirely separate question.)

Which brings us to the website issue. As we mentioned yesterday, the Bus entities for years shared a common website, busproject.org. On that website, donations are solicited for the PAC, among other things. That's a dicey thing for a 501(c)(3) "charity" to be party to. Remember, "charities" aren't supposed to be raising money for political campaigns, which is what PACs do.

The Smith fans out there have pointed out that nowadays, there are two websites -- busproject.org for the 501(c)(4), and busfoundation.org for the "charity." Fair enough. But that doesn't appear to have been the case as late as February of this year, when both entities reported to the IRS that they had but a single site, busproject.org. The wall between the sites seems to be of recent vintage. Here's a screen capture (be patient) from the unified site in April of 2010, showing that it was touting the PAC at that time.

Anyway, for those who would like to sift through the Bus entities' IRS filings, it's easy and free to do so. Set yourself up an account at guidestar.org, and search for the real names of the entities, which we list at the top of this post. With a little effort, you'll have all the information that we do. Or pick another nonprofit that you love or hate; they're pretty much all there.

UPDATE, 5:22 p.m.: The Bus group's defiant nonresponse is here.

Comments (11)

Is that all Smith gets paid? Maybe.

$33,300 a year for 10 hours a week of work is one thing, but how much of his daily activities are expensed from either entity? Food, cellphone, automobile, etc. That could be substantial.

It's not much of a wall between sites... The picture on the front page of the busfoundation.org site is of a bus with the busproject.org URL on it. And all of the email addresses for busfoundation.org are @busproject.org.

Looks like a shell game to me.
Maybe this Jefferson Smith is related to the infamous grifter and gambler, Jefferson "Soapy" Smith of the 19th century. He seems to be doing some of the same slight of hand tricks with the money!
Thanks Jack!

Jack, this is a public service. Jefferson Smith has two choices: (1) provide legitimate explanations for this structure or (2) watch his campaign stop before it starts. Totally fair either way. If only we'd been smart enough to ask questions of the last progressive darling who ran for mayor, we might not have the mess we're in now.

Jack, I suppose you tried to go in the direction of finding just how much Smith took out of all three non-profits beyond wages of $33,330.

Is there anyway to find out if he got reimbursed for vehicle expenses, travel, lodging, food, those extra pizzas, any kind of insurance, life insurance policy, child-care, medical, wife being an employee, what-have-you?

Just like in free enterprise or public employees, that seems to be the real number we need to know.

He's definitely got some 'splainin' to do.

It will be amusing to witness the contortions required.

The reality is that although Jack has been doing excellent work uncovering very serious issues that need to be addressed, the media is not going to pick up on them and they will probably get very little traction.

Once the media falls in love with you, they openly advocate instead of investigate. I think this guy is the media's new boyfriend, now that Sammy broke everyone's heart.

Willamette Week loves him. I'm not sure the rest of the media is equally enamored.

The challenge for mainstream media would be getting the public to pay attention long enough to get the picture.

Here's the executive summary for the reporters out there:

1. The Bus is actually three different companies.

2. The Bus PAC has been fined thousands of dollars for losing track of money and filing its financial statements late.

3. Smith has been paying himself $65 an hour as director, whereas all of the other directors are volunteers.

4. The PAC's financial statements show a series of circular-cash-flow transactions with the 501(c)(4) organization.

5. Questions can be raised about whether the 501(c)(3) tax-deductible "charity" is sufficiently separate from the politically active 501(c)(4) organization and PAC, including on the internet but in other respects as well, to satisfy the tax laws.

Too bad Nigel Jaquiss' hands are tied.

I wonder how many Republicans are involved in these fabulous efforts to build Democracy? "501 (c)(3)" my a**!

Bottom line, if this guy can't keep track of bar dues, personal finances, organizational filings, driving records...do we want him responsible for our $2.5 billion city budget. Um. No.

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