Where The Battles Are Being Fought
Laura Murphy Lee
Dr. Thomas DiLorenzo
MS. LEDBETTER: Hi, I'm Edythe Ledbetter from the Center for Marine Conservation. I'm vice president of finance and administration there.
I'm going to move right along and introduce to you Henry Suhrke, who is sitting immediately to my left. He is the editor and publisher of Philanthropy Monthly and the publisher of the survey of "State Laws Regulating Charitable Solicitation." Prior to founding Philanthropy Monthly, he worked in fundraising with a variety of clients including the Kennedy Center for the Performing Arts.
Many of you would know Mr. Suhrke personally. Others of you know the Philanthropy Monthly. He is a graduate of Northwestern University and holds a Master's in Business Administration from Harvard University. So, without ado.
I'd like to first react just a little bit to the previous panel.
First, I agree with Ellie Smeal on the importance of these activities particularly for small organizations.
In almost all of the regulatory efforts that affect our organizations, be it in setting accounting standards, be it in watchdog organizations, in legislation, things are usually done by compromise.
The fact is that the well off organizations can afford to compromise at a level that the smaller organizations cannot. If your voice is not at the table, if you are a small organization at that point, you are going to be sold into a bargain that you would not opt for if you had spoken up.
I know of a great many instances where that happens. The well off charities concede that accounting costs could be allocated any way they wanted to. They still looked good, but the small charities did not look good.
Second, I think Mr. Keene made the comment that public policy makers often just don't understand the costs of direct mail. I think that's true but there was a refreshing incident -- I think oftentimes they do understand. The reason they do is that's how they raise money themselves for their campaigns by direct mail. So, that when the positions that are taken are discriminated against a non-profit organization, it lays bare the intent, which is not done through ignorance but it is to interfere with the organization.
Third,the distinction very properly made between charities and advocacy organizations is one that you need to be rather careful about. In some state laws, a charity is defined so as to include (c)(3) and (c)(4). That distinction is not true in federal law. So, the definition depends on where it is being used.
Finally, a sort of sardonic note on the fundraising cost and the public perceptions on it.
One of the funniest things I had the pleasure of commenting on some years ago was an annual ranking that "Money Magazine" of all people does on charities. They ranked as the best exemplary charity because of its efficiency in its fundraising costs, a group that got over 60 percent of its income from the government.
Of all people, Money Magazine ought to be aware of that kind of distinction, ought to know better.Well, to get onto what I really had intended to say. It seems to me that, a powerful obstacle to a broader understanding of the jeopard of First Amendment freedoms is the inclinations of some very thoughtful citizens not to take such concerns too seriously so as not to be though naive or paranoid.
The scenario is that we are all adults who revere the life of reason and for whom such things as enemy lists and conspiracy theories are often extravagant or really fictional. Don't really such things deflect the listener's attention from the subject being discussed on to speculation about the psyche of the speaker, who may be seen as somewhat unsophisticated?
My thesis this morning is that from my own everyday experience as an editor concerned with the speech of fundraising and/or advocacy, the phenomena that we're talking about is entirely consistent with reason and that it is of a scope that really calls for our attention. To start off in not so far away Brussels, the rules are being written today that will define the legal form of an association which is to be recognized as such by the European union countries. Robin Guthrie, former charity commissioner of the UK, commented as follows on the cultural clash that is involved in that debate. He said:
Behind the proposed statute for European association lies the assumption that it is the governments and the commission of the European communities that will decide whether what we do as private citizens in the public arena is for the public good or not. Government decisions on such matters are bound to be affected by short-term political considerations. It is for you and me to decide what it is in our interest as citizens in accordance with our own judgment and understanding not what the politicians and bureaucrats of the moment may think.
Then he comes to the crucial point. "These thoughts are different from the notion of state and of the individual in relation to the state that prevails in France." He was giving this speech in Strassburg (phonetic). It's in France. I hesitate to utter them in this company, but they must be expressed if we are to understand each other.
It seems to me that the issues, to identify the issues that we are here -- and to focus our attention on where First Amendment freedoms, which are the basis of our civil society are at stake, is clearly preliminary to understanding and consistent with the life of reason.
It is the people who worry about the naivete or paranoia that may be behind them. We have to identify where those issues are.
A second point. In Canada, the first fundraising as protected speech at an appellate level was recently decided in favor of the speech interests in accordance with the new Canadian Constitution. However, that decision is being appealed. The subject, in any case, is just opening now in Canada. It is not settled.
I cite these cases to demonstrate the universality of concerns that we are addressing. The everyday battles, however, are much closer to home.
Consider this. In 1990, the State of Ohio passed a new Charitable Solicitation Law, one of the most egregious provisions which was that, the state forbade any solicitation funds for the "dissemination of information about missing children," unless the soliciting organization had the help of a professional fund raiser or if it had been in business or had federal tax-exemption for less than two years, things which obviously have nothing to do with their publishing information about missing children.
In 1992, the Federal District Court under Judge Walter Rice, informed the state that such a provision was clearly unconstitutional. However, Ohio is appealing the ruling and the State's argument before the U.S. Court of Appeals for the Sixth Circuit is uniquely revealing.
The legislature of Ohio enacted this regulation based on this permissible judgment that the distribution of materials relating to missing children is one of the most effective tools in the search for missing children. This search has become a continuing activity in which the state is directly involved by statute. The State of Ohio now operates an information bulletin concerning missing children, a missing children clearinghouse and a missing children educational program.
In other words, Ohio has simply asserted that it has the power to silence private speech, because it wants to exercise that power on its own to the detriment and, I might say, on the backs of missing children. It is really, if you think about it, a reprehensible activity. There is not even the claim that it wants to prevent fraud or any proof that the private efforts, historically have had any harmful effects. The plea is simply for the efficiency of monopoly.
I think you will recognize that this is exactly the argument that's being decided in Brussels right now, which after all, that effort is not so far from home.
Let's look at the Federal Trade Commission. Recently, the acting director of the Consumer Protection Division of the Federal Trade Commission testified before a U.S. Senate subcommittee that the FTC in its new initiatives against charitable fundraising abuses, which he calls abuses, had been greatly aided by the cooperation of state attorneys general, private, watchdog organizations, et cetera, through "providing them with scripts, forms and other information on suspicious fundraising."
Who is paranoid?
It just seems to me, this is a sad commentary on our government's regard for First Amendment freedoms that a government agency head would have no qualms about even using that kind of language in public testimony, the purpose of which was to get expanded scope for his agency. What I'm trying to show is the evidence which, in my opinion, is strong that many regulatory provisions of federal, state and local law are intended to prevent speech which is a very difficult thing to comprehend.
These include mandated disclosures which, by their time placement of tedious or of a tedious nature can have no effect but to preclude speech. In that same Ohio statute there are recitations that must be made of the name, the status and the address with ZIP codes, et cetera of each organization that may benefit from such a solicitation.
They wrap these disclosures in the mantle of education of donors or consumer protection really doesn't save the situation at all. It is clear that they are intended so that people will not speak, because it is too honest to do so.
Let me turn to the IRS.
Recently acute observers identified a trend in IRS determination letters for tax exemption being conditioned on actions not required by law. It is important to note that the goodness of government's intention is not at issue here.
Washington attorney, Ben Tazewell (phonetic), writing in that estimable publication, "Philanthropy Monthly," said that the IRS, "As a condition of receiving a favorable determination letter granting tax-exempt status required some charities, one, to promise that the organization would not award any contract to an insider." What about an employment contract?
Two, "promise that the board of directors would be comprised of unrelated persons representing a broad segment of the community and/or, three, promise that the organization will solicit at least three outside bids for all significant purchases and services."
In the vital area of lobbying, vital to all of you particularly here, the IRS, in at least one case, informed a charity that its tax-exempt status was conditioned upon the organization using the expenditure test under Section 501(h) to measure its lobbying, instead of the provision of the law that this is an optional selection with each organization.
I think it's important to remember that the motives of government for such actions are very -- some are as crude as the search for efficiency. Some are politically motivated. Some may be motivated by the best of intentions and some are intended to prevent speech.
The motivation, really is not the point. Today's good intentions may have quite different results tomorrow under the aegis of new bureaucrats. That, it seems to me, leads to the genius of his unique coalition. To preserve our freedoms, it seems to me, we must raise and defend the hard-won concerns of our freedom of expression. Government does not need to patronize non-profits with any superior knowledge of what is good for us.
Fund raisers should not have to apologize for their work, since "paid employment" is after all the norm in our society. I think we ought to be able to recognize where that came from.
Our system assumes that it is not the role of government to decide what ought to be discussed. It is enormously in the interest of our everyday ability to achieve our recognized objectives that we have support in an organization that institutionalizes the vigilance that is necessary for us to survive.
As we go along, I think it's important to remember that for many of us, we experience the burden of the regulations and respond in terms of the compliance to it rather than to the underlying threats as they are really presented and I think that's been very helpful to bring that out. I'd like to go on now and introduce John McIllquham, who is President of the Nonprofit Times.
He's seated in the last filled seat at the table. John, as President of the Nonprofit Times produces the largest publication for executives in the nonprofit industry. He has also served as National Director of Advertising and Public Relations for the GALLUP organization, and has been Vice President Publisher of Fundraising Management.
Thanks very much, John.
I'd like to take a slightly different view than those opinions which have been expressed this morning. I'd like to share with you a story of my days as president of a residence hall at Ohio State University in which I was exposed to my first political battle and perhaps my last.
The great issue of the day which consumed a number of sleeping and waking hours of my time was, can women come to visit men on open house days from Sundays between the hours of seven to nine.
This political battle which enraged many of the students at Ohio State ended up with me agreeing to the University's insistence that if we were going to have open houses, I was to issue rulers to appointed floor representatives whose job it was to measure the door openings, which could be closed no longer than two and one half inches.
I used to call my father persistently as I got engaged in the special interests that were forming in the dormitory, conservatives asking for dress codes and liberals opposing them. My father passed along a message to me which I would like to share with you because it probably capsulize most of the problems that non-profits are facing today.
He said to me, if you continue to do what you do you'll continue to get what you got. The point is that non-profit organizations, though they disdain and scorn government interference and, as Eleanor Smeal pointed out this morning, are increasingly dependent upon government support.
We have just completed a seven-year study of the 100 largest charities in the United States. Our definition of a charity is an organization whose revenues comprise at least 10 percent from public support. In this way, we could exclude organizations whose sole support comes from endowments or fees for services.
Of these 100 largest charities which, by the way, represent two of our every ten dollars contributed to all charities in the country -- approximately $22 billion in 1993. Of these 100 charities, the top 10 charities raise half of the revenue for the entire 100.
What is significant about these numbers is that over the past five years, the percentage of public contributions continues to slip as the percentage of government funding continues to rise. In 1993, these 100 charities generated 22 percent of their $21 billion from government grants.
As a matter of fact, Catholic Charities which was also mentioned, is the largest fundraising organization in the country last year raising $1.93 billion but $1.27 billion of that comes from government grants.
Lutheran Social Ministries, which raised $1.8 billion fell off of our list entirely because 93 percent of their income now comes from government sources. The Girl Scouts of America which in 1991 reported that 70 percent of the $450 million came from public contributions, in 1993 reported that their $460 million comes from less than 20 percent of public support, a 50 percent drop in public contributions over the last three years. And the list goes on.
Volunteers of America and the Association of Retarded Citizens with combined revenues of $1 billion have an average of 70 percent of revenues from government resources.
What amazes me is that even though these organizations disdain the regulation, they are now in a position, as United Cerebral Palsy and several of them are, of hiring lobbyists and representatives to make sure that when a state releases a new program that they are on the line first. If the regulators attempt to see organizations in a way which you and I see them which is important in advocating viewpoints, then they are completely befuddled by the attacks that non-profit organizations are continuing to be exposed to in the press. Let me point to a recent example of what happens to regulators who act in the name of not only consumers, but in protecting their privacy.
The State of Hawaii passed a bill which will take effect in January 1995. It was passes as a consumer protection bill and in the last page was this little paragraph which apparently nobody read, which essentially said that no non-profit organization can solicit any resident in the State of Hawaii unless they get that resident's permission in advance.
This so-called positive option was generally seen by the state attorney general's office as a way of protecting Hawaiian residents from so-called mainland charities that are taking dollars away from Hawaiian charities.
The issue is that not one non-profit trade association, not independent sector, not the National Society for Fundraising Executives, not the American Society of Association Executives, did anything about reversing the impact of this bill. The Disabled American Veterans convinced the Direct Marketing Association, however, to try to intervene and they retained a legislative council to go to Hawaii and try to provide amendments to this law which they were successful in doing, only to this degree.
Any organization which now has list suppression capability is exempt from the law. Otherwise, all charities raising money in Hawaii after July of 1995 must have the donor's permission, in advance, to raise money.
The state attorney general in Kentucky has just announced that he is going to attempt to challenge the Riley decision by drafting legislation which will overturn the First Amendment protection provided by the court in fundraising solicitations.
There are seven cases right now, six of them dealing with higher education institutions and one with a public broadcasting station in which state regulators are attempting to have, in Michigan, West Virginia, South Carolina, Ohio and Indiana, university donor lists to be available as a public record and, therefore, open to public access. These attempts succeeded in South Carolina and Ohio but they failed in Michigan, West Virginia and Indiana, although the state has just announced that they are going to appeal this decision.
In the public broadcasting station's case in Jacksonville, Florida, an attorney who happened to be a contributor apparently has been keeping up in his reading and read these cases that I just previously cited to you in which there was one common theme.
The states argued that, if a non-profit organization accepts any government subsidy or money, it is therefore, subject to Sunshine Laws and that includes donor lists as well as the name, address, the amount of gifts, the frequency and the dates on which the gifts were made.
The courts in Florida dismissed this case on a technicality but this disgruntled donor who, actually is trying to open the PBS station's donor fund so that he can solicit contributors to help him in getting a program that was canceled back on the air has announced that he intends to appeal this decision.
So, in essence, you have state regulators who are looking at, not only the extent and support that their individual, local and state governments are providing to non-profits, but are now insisting that if they take state money they must do what the state says. In New Jersey, for instance, there is a consumer protection law that is now being passed.
It's in the House and the Senate is expected to adopt the measure in which there was very little outcry from New Jersey non-profit organizations over a licensing fee that the state wants to set up which is a fee based on contributed income going from $10 for organizations that raise less than $100,000 to $25 for organizations raising more than $50 million.
Most non-profits decided that that was a very small amount of money and at a hearing, somebody stood up and said, if you're looking at the law, even though the fees are small, the state has reserved its right to audit the books to make sure that you're paying the right amount of fees to the contributed income.
An executive director of one of the largest hospitals stood up and said, in a stunning announcement, do you mean that the state would really do that?
The other issue that needs to be addressed and hopefully, the Free Speech Coalition which has been an advocate and a passionate one for the voice of non-profits, has been a lack of board involvement in protecting the integrity of organizations.
If you look at the largest charities over the last five years that have been embroiled in the public scams that have fueled many of the regulators' concerns -- PTL, Covenant House, Morehouse College, Students Against Drunk Driving, Boston University and, of course, the infamous United Way, you come to realize that despite having boards of governors or trustees comprised of the titans of industry who have some of the biggest Big Eight accounting firms issuing squeaky clean audit reports, executives are permitted or allowed to move millions of dollars around.
As a matter of fact, I don't know how many of you are aware. You probably have read in the paper about the 182 page, 71 count indictment that the U.S. Attorney of Virginia has issued against William (inaudible), charging him with, among other things, tax evasion and money laundering and moving about $16 million in funds from one spinoff for-profit to another.
The issue that concerns me terribly is that in all of these scandals, the board seems to have taken a hands-off, we are victims of rogue operators attitude. I only hope and implore that each of you, though you are a student passionate and advocates for free speech, will go back and encourage your boards who also have their spheres of influence, to try and attempt to protect the rights and integrity of non-profits, which I hope through these cases will indicate to you are increasingly under assault every day. Thank you.
Well, if nothing else I think maybe we've proved to Hawaii that charities are not islands. I'm glad that Laura Murphy is here with us today. I'm going to switch the order and give you a chance to catch your breath for just a minute.
I'd like to next introduce Dr. Tom DiLorenzo, who is Professor of Economics at Salinger School of Business and Management, at Loyola College in Baltimore.
As you can see from your agenda, he is the author of "Unhealthy Charities" which many of you have already read. He is an adjunct scholar at Cato Institute, with the Center for Study of American Business and is a senior fellow with the Capitol Research Center in Washington. He has held faculty institutions in a number of institutions in this area, at Whittenburg (phonetic) University, the University of Tennessee at Chattanooga and the State University of New York.
He, himself, is a graduate of Westminster College and has a Ph.D. in economics from VPI and State University.
Thank you very much for being here.
I'd like to thank the Coalition for inviting me to speak for ten minutes. I assume they asked me to speak about chapter eight of my book, which is about so-called look-alikes, which really aren't look-alikes. What I thought I would do is start out by mentioning a little anecdote.
There is a small charity in California called the "Cancer Federation." It was started 20 years ago by a man named John Steinbacher (phonetic). They sent out a fundraising letter to New Jersey. They provided services all around the country. They subsidized medical students, medical researchers and so they fund raise all around the country and they raised about 500 bucks in New Jersey.
He told me over the phone -- I never met him, but he read my book and he's been on the phone -- that the day after the fundraising letter arrived in New Jersey, he received a certified letter for the state attorney general saying, cut it out.
He found out that, of course, it was the American Cancer Society that was outraged that he raised 500 bucks in the State of New Jersey and they wanted to put an end to that right away.
This is the sort of thing that we discuss in this one chapter of our book you might call non-profit sector protectionism, which is pervasive. Some of the bigger charities in the health field that we've looked at seem to have devoted a lot of time cultivating contacts in state legislatures and the State Attorney's General to keep the competition out.
Another anecdote or example is how -- and I'm sort of beating up on the American Cancer Society -- they got the Attorney General of Pennsylvania to sue another small charity called the Cancer Fund of America and five other smaller ones, not for doing anything illegal. They actually came out and said there is nothing illegal here. What they sued them over was confusion. They were going door-to-door soliciting money and it was confusion that they were guilty of.
Pete Marwick accounting firm gave this group a clean bill of health but as we just mentioned, they gave Covenant House a clean bill of health and United Way, too, different accounting firms. But, anyway, they weren't accused of any hanky-panky in an accounting sense.
The law suit was filed, nevertheless and it ended with a consent agreement which, of course, a lot of times is a gun at the table agreement, where the Cancer Fund of America and five other smaller charities agreed to pay $50,000 each in fines and the fines did not go to the state treasury in Pennsylvania. They went to the American Cancer Society. That's nice work if you can find it.
I haven't done a lot of research on this but I keep getting letters after the book came out from people like John Steinbacher telling me this is what is going on. I even had a letter from one man in the mid-West claiming -- he is a lawyer.
He's been litigating these kinds of cases, defending the smaller charities for years and years. He offered to send me all the tax returns of the American Cancer Society that lists how much money they have been spending on this sort of predatory litigation. I haven't received them yet. I guess they are in the mail.
It gives me the impression a lot of this type of thing must be going on and not just by that particular large charity but by others. In 1989, what we call the big three health charities in our book, the American Cancer Society, the American Heart Association and American Lung Association, convinced members of Congress to hold hearings on what they call the look-alike issue.
The chairman of the ACS said, "Fundraising by the look-alike organizations should be stopped by the government. The best interests of the public are not being served by what look-alikes do and, therefore, some legislation ought to be in order."
As an economist, the first thing I think of is, well, what if Lee Iacocca, the former Chairman of Chrysler, said, selling cars by these look-alike automobile organizations should be stopped. The best interests of the public are not being served by what they do. It seems to me that they are just simply saying, we need a federal law to keep all our competition out.
And, the so-called look-alikes from what I've learned are [in fact] not look-alikes. They're called look-alikes by the big charities but in most instances, the reasons why they were created is that there were gaps that they fill; gaps that were not being filled by the big charities.
How could you raise money out there, anyway? If you just think about it, by saying, well, you know, the American Cancer Society with half a billion net worth is doing this. The two of us would like to do this, too; give us money. That would be a tough thing to do. You know, why should I give money to the two of us if this 70 year old, well-established organization is doing the same exact thing? Why is there a need to give us, with an unproven track record, money to do this?
That is not generally what these organizations are. They perceive a need that is not being filled and they try to fill it and they raise money to do this.
Another quote, by the way, a good one is the Attorney General of Pennsylvania that I mentioned. He said: "I am delighted to be used by the American Cancer Society."
He was accused in the newspaper of being used by them and he's delighted to be used.
Another statement by Keith Greener, the ACS Chairman. He said, he was complaining at a Congressional hearing. Look-alikes typically use a topic like cancer that gets the public very excited and they raise money like this.
I can't figure out how that is different from what his organization does at all. He thinks it should be illegal for the small charities, but okay for his.
The American Lung Association complained -- this is what Joyce Waites (phonetic), the spokesman said. "Our country's entire system and spirit of volunteerism is at stake." That's a pretty shocking kind of statement. When she was asked why, she said there were several organizations which she did not name at the hearing, anyway, that were using "slogans or fundraising methods similar to the American Lung Association's." So, they apparently have a copyright or patent on door to door fundraising, they think. That's all that was in the hearings.
The other member of the big three, the American Heart Association's Chairman of the Board, William Benthoff (phonetic), called for a "national solution," federal regulation for this. The reason why is that he claimed that there were organizations that raise funds to assist heart disease patients and the use the words heart and fund in their solicitations and there should be a federal law against that.
I was only asked to speak for ten minutes. From my research, it seems as though these are clear cut instances of protectionism, of larger, more established charities throwing their weight around through politics, to try to use politics, to keep smaller and oftentimes more innovative charities out of the market. This is bad for the recipients of charity because it's often the smaller, more entrepreneurial upstart organizations that are more effective than the larger, older, ossified, bureaucratic charities.
So, it's not in the best interest of the public, I would think, to eliminate competition in fundraising. None of us likes competition, I suppose, but from the public interest point of view, as an economist, I have to say competition is a good idea for charities as well as corporations.
I think that's all the time I'll take.
Thank you very much.
This is an occasion that I look forward to because I just came from the Senate floor where we defeated a cloture petition by a vote of 52 to 46 on lobbying disclosure. I'm happy about that because the ACLU took a close look at a conference report which just came out last week, where substantial changes were made that would have a great impact on all non-profit organizations.
Before I get into that, I guess I should say a little about myself. I have been the ACLU Washington Office Director since February of 1993 and this is my third professional position with the ACLU.
I was a lobbyist here in the Washington Office from 1979 to 1982 and then Director of Development and Planning, for the ACLU of southern California and I have served on two boards of the ACLU and one in southern California and one in Chicago. So, I have a longstanding relationship with this institution. I started 18 years ago working on Capitol Hill.
I worked for two Members of Congress. When I was in California after I left the ACLU, I worked for the Assembly Speaker there, Willie Brown. I have worked on national presidential campaigns as well.
But going back to the lobbying disclosure legislation, as we began to review the conference report on lobbying disclosure, we saw a lot of problems. I think the chief problem is that it would affect non-profits in arbitrary matters.
For example, if you were a non-profit in California and you wanted to send a representative to Washington to meet with your delegation because the cost of air fare is higher than if you were situated in Northern Virginia, you would meet the threshold of what constitutes lobbying and what expenditures constitute lobbying much more quickly than someone based in Northern Virginia and you could be lobbying on the same issue.
I think that is rather arbitrary and I think it is a shame that the United States Congress didn't include any kind of adjustment formula so that people from all parts of the country would be treated equally. The other issue, that was an issue for the ACLU is that religious organizations and religiously-affiliated organizations were totally exempt from the disclosure requirements. Now, whether you are with the National Council of Churches, (inaudible), the Nation of Islam, the Catholic Conference or the Christian Coalition, I think the American public wants to know if any of these organizations have lobbyists or are influencing Congress. We don't feel that it's a violation of these organizations free exercise of religion to have to report, along with other non- profits.
I mean, this creates such a broad loophole in terms of the recording requirements that, I was thinking about if this thing passed, leaving the ACLU and starting the church of What is Happening Now and developing my own tax exemption so that I wouldn't have to disclose.
The disclosure requirements are so burdensome. Right now, non-profits have to comply with 47 pages of regulations from the IRS. This lobbying disclosure legislation would create additional burdens and who knows how many pages of regulations and yet, a new office would be created. I think that that creates a burden, especially for the smaller organizations.
I estimated in the Washington Office of the ACLU, where we have seven registered lobbyists, that the cost of complying with the lobbying disclosure legislation would cost me at least three-fourths of the salary of one lobbyist. So, that means my ability to influence the process in a substantive manner would be depleted because our income is flat, like those of many other organizations.
So, unless I get a new infusion of non-tax deductible contributions through our membership, we're not going to have the growth to compensate for the loss of income that will affect our administrative costs, and, therefore, our lobbying costs.
I also think that there is a very, very big problem in this legislation with regard to disclosing contributor lists.
One of the issues that the ACLU was involved in many years ago in 1958 is NAACP v. Alabama, where the Supreme Court ruled that it was not necessary for the NAACP to turn over its membership list to the state. Senator Levin has repeatedly said this would not happen in the lobbying disclosure legislation before us. It may not be before us for much longer but I'm sure this will come back next year. Let me give you a hypothetical example where I think membership and contributor information will overlap.
Let's say you live in a small town and the Federal Government is thinking about putting a toxic waste site in your community and a group of you gather at a church. It's not a church-sponsored activity. You are just using the church as a meeting place. Let's say 500 people get together and you want to send someone to Washington to lobby on their behalf to fight the placement of this toxic waste site.
You then take up a collection. Everybody gives $10 to get the local lawyer to represent them for a couple of weeks in Washington. This will compensate him for the salary he loses in his law practice. It will give him air fare, it will give him hotel and he doesn't even have to be in Washington for three weeks but he has to spend three weeks' worth of his time in any six-month period on lobbying.
At that point, you would have to submit the names of every contributor to this effort, to the Office of Lobbying Disclosure. The problem I have with that is, let's say, that there is a big company in town that wants this toxic waste site, that wants to get the contract from the Federal Government to build the site and 100 of those 500 people are employees of this site. Maybe they don't want the company that they work for to know that they are contributing to an effort to keep their community environmentally safe.
I think this raises the specter of intimidation and there are no privacy protection in this law. That's our other problem with it. Who has access to this list? How is an investigation triggered? Suppose the IRS wants copies of the contributor information. Suppose the FBI wants copies of the contributor information.
I think this has a tremendous chilling effect on the fundamental right to petition one's government and I think we need to have -- insist that the Congress reject this. They are going to try to bring it back tomorrow. I understand that they're going to try to get rid of the lobbying disclosure part and bring up the gift tax, but I don't trust it. I think we need to make our voices known on this.
I want to give you another hypothetical situation. Let's say, that in Pensacola, Florida where there has been a lot of violence associated with the abortion clinics, a group of people who are against violence want to pay for an attorney to go meet with the Justice Department and to take their concerns to provide the Justice Department with information that may assist them in investigating the violence at these clinics.
Everyone who contributes to that effort will have to give their name, address, place of business, the nature of their business to the Office of Lobbying Disclosure. In this environment of violence, do you think people are going to be willing to step forward and make those kinds of contributions if they feel that there is an environment of retaliation in their own communities?
I mean, this cuts across all lines, whether you're pro-choice, anti-choice, pro-big business, anti-big business environmental, anything. I think we've got to proceed very, very carefully when we look at lobbying disclosure legislation and ensure that in our laudable efforts to fight corruption we don't unduly hamper people who want to assemble.
That is the purest kind of lobbying that goes on, people who assemble around a need or particular issue. I'm not talking about the problems that the ACLU is going to have or the National Right to Life Committee is going to have. We will find a way. I'm talking about that wonderful spirit that develops in communities across the nation where they feel that they have the right to go to Congress but because of this kind of legislation they're going to be a little intimidated by it. The civil fines for not complying go into $200,000. Yet, the irony is -- the more I read this, the more I even want to get into the whole gift tax issue.
The Congress faces no such fines for violating this law. I'll give you an example.
I started working on the Hill 18 years ago and I have some longstanding personal friends there. I go to the Hill as a lobbyist and I see a friend and I say, let me buy you lunch. I'm not buying them lunch necessarily to lobby them but let's say I forget to report this.
Someone sees me having lunch, calls the Senate Ethics Committee, opens an investigation. I have to hire a lawyer. I have to defend it. I have to document why I didn't do it and the staff person could encounter reprisals for this.
I don't think it's well thought out and I think that when you put something in the Senate Ethics Committee, they already have punishments. They have a right to censure, reprimand, do any number of things to members of Congress and their staff. I think to have one set of rules governing members of Congress and your staff and another set of rules governing lobbyists and the disparity in the sentences or in the fines being so great, I think that's also unfair.
We didn't get into that in the letter to the Senate. We were doing everything to slow this thing down but we only have, I guess, a day and a half left of Congress in this session. I brought extra copies of the ACLU's letter and I hope you take a serious look at it and if you have any questions or concerns please call me.
I want to just leave an opportunity -- we're running a little bit late -- for one question and then, probably be able to take a break. We may be able to squeeze in two. It depends on the question and the length of the answers.
Would someone want to come forward with a question at this time? Will you come up and speak?
PARTICIPANT: I am Joy Terrelll of the Independent Sector. I have heard this gentleman refer to us as not supportive of some legislation. I was just trying to get some clarification as to what that legislation was that you were referring to that we do not support.
MR. MCILLQUHAM: I was referring to a law which was passed in Hawaii essentially introducing a positive option requiring residents to be notified ahead of time that they can receive a solicitation. My point was, that there was no formal action by any of the trade associations representing non-profit interests to try to reverse this.
PARTICIPANT: It is up to the nationals to have their affiliates participate in advocacy. It's not up to the Independent Sector to get their nationals to make their affiliates. I just wanted some clarification of this.
MR. MCILLQUHAM: Agreed.
MR. SEGERMARK: The Free Speech Coalition didn't lobby in Hawaii either and I needed a couple of weeks in Hawaii.
MS. LEDBETTER: There is another question in the back of the room.
PARTICIPANT: One of the important things, I think, is to figure out what we can do about some of these reprehensible state laws. With respect to disclosure of contributor lists, wouldn't it be a good idea, since there is not a college in America that doesn't accept federal money -- to simply start in those states that require full disclosure of their lists, to make a demand for full disclosure of every one of those colleges whether they are private or states lists. The way to break these laws is to actually put them to use. Those people will run to their legislatures and say, what is going on here. This isn't what you meant, is it?
I'm asking you whether you think that is a plausible attack.
MR. SEGERMARK: I think it is a good idea.
I think in the same vein, we could exploit in some way the fact that politicians depend on people's gifts. What is sauce for the goose, is sauce for the gander in that case. I think it is a fine idea.
MS. MURPHY: I just want to add though that the ACLU is not against disclosure per se, but I think we have to reach a point where we establish what kind of disclosure serves what interests. If you look at the whole history of lobbying disclosures, for example, it really came on because of the Webb Tech (phonetic), the Keating Five, the ABSCAM, where there were really strong corporate interests at stake and big companies. But the net was cast so wide in this legislation that we're all caught up in it together.
PARTICIPANT: I'd like to make a point that, interestingly enough on disclosure it's somewhat surprising, at least to me, how few non-profits will be willing to disclose the simplest request for information about their own finances. A survey we did of about 25 of the largest United Ways, 24 of them refused to provide a copy of the Form 990. Half of them told us to go to the IRS to get copies of it.
So, non-profits also draw the wrath of regulators when they, themselves refuse to provide even the minimum amount of information about salaries or the biographies, who their executives are, how much money they raise.
In a survey of 100 largest charities, 20 of them and I'm still struggling to find out what's going on. Twenty 20 of them, when we faxed back their 990s, changed the numbers on them. I'm not sure what that means.
MS. LEDBETTER: I think with that, I'm going to ask you to join with me in thanking the panelists this morning.