Calls Grow for State and Federal Investigations into ALEC’s Illicit Activities


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It is little secret that Republicans and their libertarian backers detest the idea of paying taxes, and over the past forty years one of their champions has been the American Legislative Exchange Council (ALEC). In fact, ALEC wrote a model resolution for Republicans to push through Congress urging a permanent extension of Bush-era tax cuts they claimed “spurred economic growth, allowed the spirit of entrepreneurship to flourish, and all while creating new jobs and opportunities for millions of Americans.” The blatant lie that Bush’s tax cuts for the rich created new jobs aside, the resolution revealed that ALEC is in the business of helping their corporate sponsors avoid paying taxes and it is little wonder why ALEC is being targeted for an investigation for illegally financing extravagant trips for state legislators and misleading the Internal Revenue Service about their illicit activities.

Two watchdog groups are asking the Internal Revenue Service and several state ethics committees to investigate ALEC for funneling corporate money through an ALEC slush fund to allow wealthy corporations to take a federal tax deduction for furnishing lawmakers and their families with luxurious trips at fancy resorts. One such meeting is the upcoming ALEC conference this week to celebrate the anti-democracy group’s 40th year of assisting the richest corporations to write and pass legislation beneficial to their privatization efforts and profits. The watchdogs’ complaints also charge that ALEC conceals the sources of “slush funds” from public view and obscures the amount of spending from the IRS by claiming that it holds the corporate funds in “trust,” all the while writing lawmakers’ checks to cover their trips.

The so-called “scholarship fund” ALEC uses to fund the lavish trips also raises serious questions about the corporate group’s compliance with state gift and disclosure laws that in turn brings into question the lawmakers’ ethics in accepting ALEC’s travel gifts and precipitated the watchdog’s letters to state ethics committees.  In question is whether Republican state legislators taking the fancy trips (bribes) disclosed the gifts on their state financial disclosures, or if they noted they originated from corporate donors seeking favorable votes on ALEC template legislation.

The complaints laid out by Common Cause and the Center for Media and Democracy contend that ALEC’s corporate sponsors contributed to the “scholarship fund” and then wrote off their donations because ALEC is a 501(c)(3) tax-exempt non-profit similar to “social welfare” groups the IRS targeted last year. ALEC then writes checks out of the “scholarship fund” to pay for Republican lawmakers and their families’ trips to resorts. Both groups also called on the IRS to investigate ALEC for filing fraudulent tax returns that massively under-reported and grossly misrepresented its “scholarship scheme.” It does not take a genius to figure out that the corporate money takes a detour into the slush fund before being doled out to Republican legislators who return the favor by supporting ALEC’s templates written by the corporations paying for the trips.

The groups also sent letters to ethics oversight agencies in various states advising authorities to carefully review the ALEC “scholarship” scheme to determine if it complies with state gift and disclosure laws, as well as investigating whether or not the Republican legislators declared the gifts on their state disclosures. To determine which Republicans are attending this week’s 40th anniversary soirée, the groups are sending letters to each state’s ALEC elected chair asking for a list of legislators’ who received corporate gifts to travel to the conference as well as which corporations are paying for the trips. They also asked each ALEC chair to provide a “full public accounting” of “scholarship” recipients and funders for the past five years to discover how many corporations paid for Republicans’ trips and then deducted the money as contributions to a 501(c)(3) charitable non-profit. It is apparent that ALEC is using the non-profit designation to conceal their sponsors as well as launder corporate donations to ALEC’s scholarship fund en route to legislators; a thorough IRS investigation will reveal the truth.

According to Common Cause’s vice president for policy and litigation, Arn Pearson, cooperation by ALEC coupled with IRS and state ethics committee investigations will show the public that ALEC’s promise of transparency was a lie. “Our elected officials really should not accept expense-paid trips and lodging from special interests, but if they choose to do so, the voters are entitled to know who is paying, and how much.” ALEC knows precisely which corporations gave gifts to legislators and deducted them as charitable donations, as well as which legislators received the free trips in exchange for cooperating in the template passing scheme. The executive director of Center for Media and Democracy said that “we now know which corporations funded trips to posh resorts for hundreds of lawmakers to vote behind closed doors with lobbyists on proposals to change state laws,” and that it is “disgraceful for ALEC to use its tax-exempt status to act as a conduit for gifts to facilitate influence peddling that advances the lobbying agenda of special interests to the detriment of ordinary Americans. This is corruption.”

Some of the topics ALEC will press Republicans to pass are the benefits of fracking to the oil industry, how to block GMO labeling, tactics to undermine renewable energy initiatives, maintain reliance on coal and fossil fuels, block minimum wage hikes, privatize schools and public toll roads, and how to eliminate occupational licensing requirements to allow any layperson to take teachers’ jobs for minimum wage. Attendees will also learn how to break unions by following the ALEC tactics Wisconsin governor Scott Walker put in place last year, as well as schemes to deny global climate change such as promoting “the many benefits of increased atmospheric CO2” ALEC funders the Koch brothers champion. All of the topics for discussion benefit ALEC’s corporate donors by giving them access and opportunity to write template legislation for and with Republicans so they can take them back to their home state legislatures and pass them into law.

For the past forty years ALEC has been the primary actor in handing corporations legislative power in Congress and state legislatures as well as advancing the crusade to privatize public entities from schools to roads and highways. They are also solely responsible for the rash of stand your ground laws, voter suppression laws, and union busting schemes around the nation at the behest of their corporate donors. However, they may get their comeuppance if their money laundering scheme is investigated and prosecuted that will touch corporate donors for deducting gifts to politicians and legislators who took free trips in exchange for favorable votes on issues to enrich the corporations shelling out the gifts.

ALEC has been on a crusade to increase profits for corporations and CEOs with corporation-voted bills to rewrite the tax code that not only eliminates most taxes for the rich, but also starves state and federal governments of revenue. With their successful crusades in the states, ALEC was emboldened to devise a way for their corporate donors to deduct political contributions to Republican legislators for their services through a slush fund and fraudulently filed tax returns that massively underreported and grossly misrepresented its “scholarship scheme” in violation of their 501(c)(3) tax exempt status.

According to an investigative report, ALEC’S member companies funneled at least $4 million to lawmakers since 2006 through the “scholarship” fund, and it is incumbent on the IRS and state ethics committees to uncover the malfeasance and prosecute the violators to the fullest extent of the law.  It is important for Americans to remember that one of the worst criminals in American history eluded prosecution for years, and it was the Internal Revenue Service that finally put Al Capone in prison for the rest of his life for simple income tax evasion. Capone was a bad man guilty of hurting and killing many people, but he was a saint compared to the damage inflicted by the American Legislative Exchange Council on the American people and democracy, and one hopes the IRS can take down ALEC and their corporate donors for tax evasion as well.

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