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How a Case of Union Bashing Might Violate IRS Rules How a Case of Union Bashing Might Violate IRS Rules

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Blogs / Influence

How a Case of Union Bashing Might Violate IRS Rules

November 2, 2012
A D.C. public relations executive who is running nonprofits, including one that slammed unions, out of his firm's Washington office might be violating Internal Revenue Service rules tax lawyers are saying, Bloomberg reported today.

Here's what's happening, according to Bloomberg: 

When Smithfield Foods Inc. (SFD) was trying to fend off a union organizing drive at its largest meat- processing plant, it hired public relations executive Rick Berman. They discussed "preparing the nuclear strike," according to e-mail records.

Soon after, a non-profit called the Center for Union Facts began running television ads slamming the "union bosses" who were trying to organize Smithfield's plant in Tar Heel, North Carolina. That was no coincidence: Berman also runs the center.

Berman operates five such non-profit groups from the offices of his for-profit Washington public relations firm. Those five organizations paid his firm $15 million from 2008 to 2010 for its work, tax records show.

Tax lawyers say this arrangement may violate Internal Revenue Service rules that prohibit executives from profiting off the tax-exempt entities they run. IRS rules also require charities to have a public purpose.

You might remember an ad from the Center for Union Facts, which is at the heart of Bloomberg's report, that ran during the presidential debate season (how long ago was that?). Berman's group paid for the $120,000 spot that was part of a larger $10 million campaign that pushed for the Employee Rights Act. 

Marcus Owens, a former director of the exempt organizations department at the IRS, told Bloomberg that Berman's "web of organizations clearly, in my view, is operating for his private benefit and for the private benefit of his clients. That's "a clear violation of the requirements for tax-exempt status."

A spokeswoman for Berman's firm did not comment to Bloomberg, but referred reporters to a an online fact sheet

Read the Bloomberg story here.
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