Koch Brothers, Worth $50 Billion, Sue Widow Over $16.00 of Nonprofit’s Stock (Secret Owners of Cato)

[stockholmer]

http://www.counterpunch.org/2012/03/05/koch-brothers-worth-50-billion-sue-widow-over-16-00-of-nonprofits-stock/

With the Koch brothers, it’s all about control. They reign over the largest private oil company in the U.S. with estimated revenues of $100 billion. They wield power over a sprawling network of nonprofit front groups with unbridled influence over everything from the Tea Party to economics professors at publicly funded universities. Forbes lists their personal wealth as $25 billion each. They own mansions in the toniest towns in America. And last week, in a decidedly Scrooge-esque maneuver, they filed a lawsuit against a widow who lost her husband to a stroke a mere four months ago over stock she inherited in the Cato Institute worth a measly $16.00.

The lawsuit, filed in the District Court of Johnson County, Kansas (the State where Cato was incorporated and home to Charles Koch) has opened up a nasty can of worms. Unknown to the public at large, the Cato Institute, a stronghold of free market, libertarian writers and speakers, has been privately owned by a handful of men for 35 years, notwithstanding its receipt of hundreds of millions of dollars in donations — which the wealthiest 1 percent have used as tax deductions to lower their tax tab to Uncle Sam; in itself a neat maneuver to shrink government.

The can of worms is this: the Internal Revenue Service warns that charitable organizations like the Cato Institute, organized as a 501(c)(3) http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html “must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual.”

Unfortunately for Cato, two of their owner-shareholders, Edward (Ed) Crane, long serving President, and William Niskanen, long serving Chairman and former husband of the widow being sued, have received millions in compensation from the Institute: a total of over $1.86 million in just tax years 2008, 2009, and 2010. Crane has served at Cato for over 35 years, Niskanen for 26 years until his death in October of 2011, suggesting their cumulative compensation would be an extremely large benefit to private shareholders, an eventuality expressly disallowed for 501(c)(3)s by the IRS. This could potentially subject Cato to significant back taxes and require donors to file amended tax returns to remove the nonqualified deductions.


snip

[stlsaxman]

1. Get those m'f'ers!

[annabanana]

2. WAY past time to rein in these f*#%ers.

They are stealing from America every damn day.

[libtodeath]

11. They should be in jail by now

no one gets that much wealth without cheating someone.

[gordianot]

3. Dickens would have loved the Koch brothers as villain material.

They could also be used as parable material for Jesus the "Non Prodigal Sons". I also kind of wonder if they confiscated the Widows Mite?

[JHB]

4. Libertarian quote of the day:

The original Cato Five, who signed a “Shareholders Agreement” on January 26, 1977 were: Charles Koch, George Pearson, Roger MacBride, Murray Rothbard, and Edward Crane.

Pearson became an employee of Koch Industries; MacBride was the Presidential nominee of the Libertarian Party in 1976; Rothbard became a libertarian icon. A 1981 issue of The Libertarian Forum, a newsletter edited by Rothbard, charged Crane and Charles Koch with illegally grabbing his shares of Cato and barring him from attending future Board meetings in order to consolidate their control. The details of Cato having owners and the extent of their control over the nonprofit has not found its way into mainstream media until now.

Rothbard, who died in 1995, summed up the episode as follows: “Let each and every one of you, dear readers, consider this crucial question: How many fellow libertarians would you trust to guard your back in an ambush?… As a friend and long-time libertarian observed in reply: ‘Ambush, hell. How many libertarians would you allow in the same room with you and trust not to poison your food?’ ”

Nice to have one actually acknowledge that the kind of libertarianism promoted by Cato amounts to "freedom for the most ruthless".
(As opposed to, say, civil libertarianism, where the focus is on the limiting the ability of the powerful to push people around (or worse).)

[thesquanderer]

5. Obama: "Maybe I could send a drone after the Koch bros...."

...after all, they are enemies of the state...

[bart95]

13. well, you know he wont be sending one to Goldman Sachs

unless it's dropping a money bomb

[HereSince1628]

6. Koch Bros. battle over crown jewels of ideological empire, street value $16.00

When the founding houses of the Landsraad do battle between themselves it really isn't over street value,

and widows aren't innocent bystanders.

[UCmeNdc]

7. And some people wonder why the United States is not truly free

There are more ways a person can own you than actually putting you in chains!

[freefall]

8. Thanks for posting this, stockholmer.

Wouldn't it be wonderful if the IRS pursues this and all those folks who have been donating for years had to file amended returns because Cato is deemed to have violated the legal requirements of a 501(c)(3)?

To me that would be the best outcome this situation could possibly have. Based on the information in the article Cato has definitely been in violation. Whether or not the IRS will follow through remains to be seen.

Hopefully, Cato is already losing its reputation as a truly nonpartisan, libertarian organization:

http://www2.macleans.ca/2012/03/19/the-billionaire-koch-brothers-want-the-cato-institute-to-bolster-the-republican-party/

"Some libertarians have been outraged by the attempt to force Cato into a more Republican-friendly posture; Julian Sanchez, a Cato fellow, wrote a “pre-signation” letter announcing he would leave if the Kochs succeed: “I’ll be sad to go, if it comes to that, but sadder to see a proud institution lose its autonomy.”

To be continued.

[AmateurPolymath]

9. The Koch Brothers are a microcosm of everything wrong with America

Inherited millions in the birth lottery? Check.

Big Oil Polluters getting away with causing cancer in rural communities? Check.

Politically-connected, holding chairs on ALEC? Check.

Arrogant as all hell about their material possessions? Check.

Funded alleged "grassroots" movements that convince the poor to vote against their own interests? Check.

Bitched about "welfare queens" and "handouts" while receiving millions in tax subsides? Check.

Traded racist remarks while resegregating our school system? Most likely.

[bart95]

10. i think it's naive to consider them that different than others of that wealth

bill gates does a lot better at pr, but that's about the only difference

bill gates has relentlessly pushed the middle class out of tech and brought back indentured servitude, and yes, he was born to rich parents with connections

he was the SINGLE witness at a senate tech labor hearing. the richest man in the world, as the only witness at a LABOR hearing?!?!?! that's about as close to dictatorship as it gets, if you are in tech. even ancient egypt was not more lopsided than that. 'Let's ask the Pharaoh for his thoughts on pyramid labor'

as far as monopolistic power goes, where was your gas refined at? what operating system are you using on your computer to answer this post. in all probability, it involves gates more than the kochs

i'm pretty familiar with both

and believe it or not, one of the largest political donations of the Kochs, was 20 million to the ACLU to defeat the 'Patriot Act'. And they may have done it for no other reason than to keep the gubmint out of their business, doing the right thing for the wrong reasons. But it's still something most would not have guessed they had done. Not a defender of the Kochs in general, but this 'black and white' view of 'good billionairs' and 'bad billionairs' is a mirage IMO

[bart95]

14. classic congress exchange with gates

&feature=related

raw arrogance

[lonestarnot]

12. For such Richie Riches, they sure are worthless piles of shit.

[starroute]

15. This is confusing -- how could a non-profit even *have* shareholders?

I mean, this is not some abstract point of law or something that an organization could "get away with" thanks to clever accountants. If you're a non-profit, you don't have either shareholders or private owners. If you have shareholders, you're not a non-profit.

That IRS definition quoted in the OP isn't saying a 501(c)(3) can have private shareholders as long as they don't get rich off it. It's saying there can be no private shareholders, period. "To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual."

So just what is this fight really about?

http://articles.bplans.com/small-business-legal-issues/running-your-nonprofit-corporation/192

Like any corporation, a nonprofit has a board of directors to make important policy decisions, officers (president, treasurer and secretary) to oversee and manage the day-to-day operations of the organization, and possibly employees to do the work.

Unlike regular corporations, however, nonprofit corporations do not have shareholders or owners. (Nonprofits are owned by no one person or group of persons and cannot be sold. In the event the directors of a nonprofit want to dissolve the corporation, they must distribute all of its assets to another nonprofit corporation.)

[tblue37]

16. The RW owner of our local rag here in Lawrence, Kansas,

Has an editorial in today’s paper praising the Koch brothers to the skies:
http://www2.ljworld.com/news/2012/mar/31/koch-industries-and-koch-brothers-are-assets-state/

People can be so blinded by ideology!

[Initech]

17. They are such vile, disgusting, sleazy, worthless excuses for human beings.

They should have had their asses hauled in for treason charges against the government with Glenn Beck and the tea party hysteria that they've wrecked on this country.