Richard Berman

Richard Berman is the longtime president of the Washington, D.C.-based lobbying and consulting firm Berman and Company, Inc. (BCI), which specializes in strategic research and communications. Throughout the years Berman has been a stalwart supporter of business and industry in battles with consumer, safety, animal rights, and environmental groups. Berman has fought unions, Mothers Against Drunk Driving (MADD), the Humane Society of the United States (HSUS), and other groups trying to raise awareness about obesity, the dangers of smoking, mad cow disease, drunk driving, the minimum wage, and other issues. Nicknamed Dr. Evil by his critics,1 Berman has been compared to the influence peddlers of Thank You for Smoking.2 Berman founded and runs seven nonprofit groups and 40 linked front groups and projects, defending the interests of the food, tobacco, alcoholic beverage, and restaurant industries. Through these groups, Berman allows big corporations to run public relations campaigns to protect their bottom lines while staying anonymous and earning tax breaks. As the New York Times notes, Bermans industry donors including restaurant chains whose costs could rise if living conditions for animals have to be improved, and wine and spirits companies that might sell less liquor if MADD has its way can claim a deduction for charitable donations or business expenses. And since nonprofit groups do not have to disclose their donors, Mr. Bermans groups offer an even more valuable asset anonymity for companies that would rather their customers not know they are behind certain attacks.3 Berman is well paid by industry for his work. He serves as president or executive director of all seven organizations and then hires his own lobbying and public relations firm, thereby channeling a significant portion of all donations made to the groups into his own pocket. Berman told the New York Times up to 70 percent of his companys revenue is from his nonprofits.4 In 2011, Berman and his company received payments from his nonprofits equal to 59.3 percent of the groups combined annual expenses.5 One of the nonprofits directed 78.8 percent of its expenses to BCI.6 These organizations include:

The Center for Consumer Freedom (CCF, formerly Guest Choice Network [GCN]), which attacks animal rights activists and critics of the soda, restaurant, or food industries.

1 2

Jayne ODonnell, Got A Nasty Fight? Heres Your Man, USA Today, July 31, 2006. Harold Meyerson, Our Pious Babylon, Washington Post, April 6, 2006. 3 Stephanie Strom, Nonprofit Advocate Carves Out a For-Profit Niche, New York Times, June 17, 2010. 4 Id. 5 Center for Consumer Freedom, IRS Form 990, Initial Return 2011, filed November 8, 2012; Employment Policies Institute, IRS Form 990, Initial Return 2011, filed November 12, 2012; Center for Union Facts, IRS Form 990, Initial Return 2011, filed November 12, 2012; American Beverage Institute, IRS Form 990, Initial Return 2011, filed November 12, 2012; Enterprise Freedom Action Committee, IRS Form 990, Initial Return 2011, filed November 12, 2012; Family Coalition, IRS Form 990, Initial Return 2011, filed November 12, 2012. 6 Center for Consumer Freedom, IRS Form 990, Initial Return 2011, filed November 8, 2012.

In 2014, CCF officially changed its name to the Center for Organizational Research & Education (CORE), but continues to work under the CCF name7; The Employment Policies Institute (EmPI), which opposes increasing the minimum wage and promotes the claim that an increased minimum wage would drive the poor and uneducated out of the job market; The American Beverage Institute (ABI), which fights laws designed to curb drunk driving; The Center for Union Facts (CUF), which promotes disparaging information about unions; The Enterprise Freedom Action Committee (EFAC, formerly Employee Freedom Action Committee), which attacks unions and opposed health care reform; Family Coalition (FC), which opposes health care reform by granting money to other Berman organizations; and First Jobs Institute (FJI), which promoted personal finance advice to young people from a pro-business perspective. As of March 2014, FJIs website was down, and it is not clear that the group is still operational.

Additionally, Berman helped set up, but denied officially running, another tax-exempt group, the Humane Society for Shelter Pets (HSSP), which advocates for donations to local animal shelters rather than to the HSUS. HSSP eventually became part of Bermans CORE.8 Bermans nonprofits do not have independent offices or employees. Everything is run out of BCIs offices by BCI staff.9 The nonprofits are so indistinguishable from his for-profit consulting firm that when journalist Paul Roberts visited Bermans office for an interview about the Center for Consumer Freedoms advocacy, he noted that the guard in the lobby downstairs had never heard of Center for Consumer Freedom but was able to direct me to the offices of Berman & Company.10 Bermans dual role as the nonprofit director and for-profit manager of his front groups raises red flags. The Administrative and Technical Services Agreement outlining monthly payments to BCI from CCF is signed by Berman on behalf of both his firm and CCF. Bloomberg said this contract illustrates how the tax-exempt groups work with his public relations firm.11 Asked in a 2007 court deposition, who on the side of CCF determines whether to pay a bill or not pay one, Berman replied, I look at the hours billed to see if theyre reasonable. If you consider them reasonable, you have CCF pay Berman and Company? asked the lawyer. Correct, Berman said.12 Miriam Galston, a George Washington University law professor, told Bloomberg that Bermans position as director of a tax-exempt organization that hires his for-profit company raises red flags.13 Restaurant industry trade magazine

James Gerken, Environmental Policy Alliance, PR Firm Front Group, Targets LEED, Green Groups and EPA, Huffington Post, March 7, 2014. 8 Sara Johnson, LEED Exposed: Beltway Astroturf Organization Sets Sights on Green Building, Architect, March 6, 2014. 9 Strom, New York Times, June 17, 2010. 10 Paul Roberts, The End of Food. New York: Houghton Mifflin Company, 2008, at 93. 11 Mark Drajem and Brian Wingfield, Union Busting by Profiting From Non-Profit May Breach IRS, Bloomberg, November 2, 2012. 12 Id. 13 Id.

Nations Restaurant News, which knows Berman well since he has been a columnist for them for years, has referred to CCF as a nonprofit subsidiary of Berman and Co.14 Bermans nonprofits hire his for-profit firm without competitive bidding. In a 2004 Internal Revenue Service (IRS) complaint, Citizens for Responsibility and Ethics in Washington (CREW) charged CCF had hired BCI without a competitive bidding process. According to CREW, CCFs self-description of its hiring of BCI in a letter to the IRS suggested CCF did not seek competitive bids from other potential service providers before contracting with Bermans wholly-owned BCI.15 Miami University law professor Frances Hill, an expert on nonprofit groups, told the Chronicle of Philanthropy, [t]his kind of arrangement should certainly trigger scrutiny from the IRS.16 In 2010, the New York Times reported a board member at another Berman nonprofit, EmPI, had said the organizations board used a competitive bidding process to select Berman and Company, but when the Times asked him to elaborate, he referred them to Berman, who explained that in fact no other firm had ever bid on the business. Nobody else wants it, Berman said.17 Regulatory bodies have chastised Berman-run campaigns for operating in bad faith. Bermans organizations have run into trouble for registering website domain names that infringe upon copyrights held by their political opponents. In 2002, the Center for Science in the Public Interest (CSPI) filed a complaint with the National Arbitration Forum (NAF) arguing that domain names of two websites registered by CCF were confusingly similar to domains owned by CSPI.18 A NAF panelist ruled in favor of CSPI, concluding that CCF had registered and used the domains in bad faith and ordering that the domain names be transferred to CSPI.19 In two prior cases, NAF panelists ruled against Bermans GCN in domain disputes after GCN declined to respond to complaints from CSPI and Chefs Collaborative.20 In 2009, a federal judge in Illinois ordered Bermans EFAC to remove an ad from television and the Internet after the American College of Surgeons complained, according to Politico, that the group had violated trademark law and defamed the group by including the College of Surgeons on a scrolling list of doctors that were supposedly against President Obamas health care plan.21 Campaigns run by BCI have also been chastised by the Federal Trade Commission (FTC) for promoting false and misleading information. In 2008, the Indoor Tanning Association (ITA) hired BCI to help

14 15

Paul Frumkin, The Voice of the Industry Speaks Up, Nations Restaurant News, January 29, 2007. Complaint filed with the Internal Revenue Service by Citizens for Responsibility and Ethics in Washington against the Center for Consumer Freedom, November 16, 2004 (CREW IRS Complaint), available at http://www.citizensforethics.org/page/-/PDFs/Legal/Letters/IRS/2004-1116%20CREW%20CCF%20IRS%20complaint.pdf?nocdn=1, at 9 16 Harvy Lipman, IRS Asked to Investigate Charity That Fights Limits on Alcohol, Fatty Food, Chronicle of Philanthropy, December 9, 2004. 17 Strom, New York Times, June 17, 2010. 18 National Arbitration Forum, decision in Center for Science in the Public Interest v. Center for Consumer Freedom, Claim Number FA0210000128796, available at http://domains.adrforum.com/domains/decisions/128796.htm. 19 Id. 20 National Arbitration Forum, decision in Center for Science in the Public Interest v. Guest Choice Network, Claim Number FA0111000102524, available at http://domains.adrforum.com/domains/decisions/102524.htm; National Arbitration Forum, decision in Chefs Collaborative v. Guest Choice Network, Claim Number FA0111000102484, available at http://domains.adrforum.com/domains/decisions/102484.htm. 21 Ben Smith, Court Forces Health Care Foes Ad Off Air, Politico, December 17, 2009.

downplay the health risks of tanning beds and launched two websites, TrustTanning.com and SunlightScam.com, with BCI employee Sarah Longwell serving as media contact in press releases.22 In its 2008 tax filings, ITA reported paying BCI $342,656 for the campaign.23 In January 2010, the FTC filed a complaint against the ITA, charging the organization with making false health and safety claims about indoor tanning and barring the organization from making the misrepresentations challenged in the complaint, from misrepresenting any tests or studies, and from providing deceptive advertisements to members.24 Though BCI was not directly mentioned in the complaint, the FTC focused its criticisms on the BCI-led campaign that the ITA launched in March 2008 and ITA executive director John Overstreet told Ist Magazine the FTCs investigation was the result of the PR campaign known as the Berman Campaign.25 Much of the false and misleading information cited by the FTC was found on the two websites promoted by BCIs Longwell.26 Berman switched between his for-profit and nonprofit roles to suit his needs during an anti-union campaign. In October 2008, Berman co-led a Bank of America-hosted conference call on the Employee Free Choice Act (EFCA), in which he counseled, If there are not enough Republicans operating as a firewall, after this election it is going to be very difficult to hold the line on EFCA.27 One participant on the call suggested that participants could contribute to Bermans organization as a way of influencing the election while skirting campaign finance laws. Some organizations have written checks for $250,000, $500,000, some $2 million for this, said the man, whom the Huffington Post suggested was likely Steven Hantler of the Marcus Foundation.28 On the call, Berman directed listeners to websites run by two of his taxexempt groups, CUF and EFAC, to get more information.29 But when labor unions complained to the IRS that Berman may have violated tax laws by working to influence the election, then-BCI employee J. Justin Wilson claimed that Berman was speaking as the head of a for-profit company, according to National Journals CongressDaily.30 Bermans nonprofit set-up has drawn IRS complaints and donor advisories. When CREW filed its IRS complaint against CCF in 2004, it argued CCF had engaged in prohibited electioneering, made suspect payments constituting prohibited private inurement to Berman and

22

Shawn Zeller, Shedding Light on Tanning Salons, Congressional Quarterly Weekly, April 6, 2008; Press Release, Indoor Tanning Association, Indoor Tanning Association Launches Campaign Attacking Melanoma Hype, March 26, 2008; Bridget Huber Fairwarning, Tanning Industry Fights Back, The Times-Union, September 2, 2012. 23 Indoor Tanning Association, IRS Form 990, Initial Return 2008, filed November 2, 2009. 24 Press Release, Federal Trade Commission, Indoor Tanning Association Settles FTC Charges That It Deceived Consumers About Skin Cancer Risks From Tanning, January 26, 2010, available at http://www.ftc.gov/opa/2010/01/tanning.shtm. 25 Federal Trade Commission, Complaint against Indoor Tanning Association, Docket No. C-4290, May 13, 2010 (FTC Complaint), available at http://www.ftc.gov/os/caselist/0823159/100519tanningcmpt.pdf; Zeller, Congressional Quarterly, April 6, 2008; Press Release, Indoor Tanning Association, Indoor Tanning Association Launches Campaign Attacking Melanoma Hype, March 26, 2008; John P. Ribner, Are We Insane, Ist Magazine, January 2014. 26 FTC Complaint. 27 Sam Stein, Bailout Recipients Hosted Call to Defeat Key Labor Bill, Huffington Post, February 27, 2009. 28 Id. 29 Audio, Bank of America conference call on the Employee Free Choice Act, October 17, 2008, Clip 4, available at http://www.huffingtonpost.com/2009/01/27/bank-of-america-hosted-an_n_161248.html. 30 Kasie Hunt, Unions Ask IRS to Look at Activities of Berman, Marcus, National Journals CongressDaily, February 27, 2009.

his company, and continuously engaged in substantial non-exempt activities.31 In June 2012, HSUS also filed a complaint with the IRS, urging the agency to revoke the tax-exempt status of Bermans nonprofits and to impose penalties.32 In addition to arguing that Bermans nonprofits allowed companies to anonymously fund corporate campaigns under the guise of charity while unjustly profiting Berman, HSUS argued, according to Bloomberg, the financial transfers between organizations established by Berman let the groups create the illusion of public support required for non-profit status, noting a $6.9 million grant that CCF made to EmPI in 2009.33 Five independent outside experts told Bloomberg the HSUS allegations against BCI suggested an IRS review was warranted.34 The excessive payments to BCI have led an outside authority on charitable giving, Charity Navigator, to issue a donor advisory regarding five of Bermans front groups, saying they found the organizations practices are atypical as compared to how other charities operate.35

Press Release, Citizens for Responsibility and Ethics in Washington, CREW Files Complaint Against Center for Consumer Freedom Alleging Violations of Tax Exempt Status, November 16, 2004; CREW IRS complaint. 32 Drajem and Wingfield, Bloomberg, Nov. 2, 2012. 33 Id. 34 Id. 35 Charity Navigator, Donor Advisory against American Beverage Institute, available at http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=13376; Charity Navigator, Donor Advisory against Center for Consumer Freedom, available at http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=11842; Charity Navigator, Donor Advisory against Center for Union Facts, available at http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=13374; Charity Navigator, Donor Advisory against Employment Policies Institute, available at http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=13373; Charity Navigator, Donor Advisory against Enterprise Freedom Action Committee, available at http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=13375.
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