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Tuesday, October 25, 2011

Nominal Non-Profits and Mergers & Acquisitions

If I may steal a page from Above the Law, the "wedding of the week" in the Sunday Times wedding section this week was, without a doubt, the nuptials of Anna Handzlik and Jordan Sekulow.  Details are here.  Here is a key paragraph:

The couple and the bridegroom’s father all work for the American Center for Law and Justice, a conservative legal advocacy group in Washington. The bride is a social media adviser and blogger. The bridegroom is the executive director, overseeing the organization’s work in the United States and abroad. His father is the chief counsel. The bride also works on the bridegroom’s syndicated radio program, “The Jordan Sekulow Show,” as an on-air contributor.

And more on the groom's parents:

His father is the host of “Jay Sekulow Live,” a program on the Christian Radio network. He is also a trustee of the Supreme Court Historical Society. The bridegroom’s mother, who works in Washington, is the executive vice president of Regency Productions, which produces both the bridegroom’s and her husband’s radio programs.

How nice to see a family business still thriving in this day and age!  More details on that business here and here.

Posted by Paul Horwitz on October 25, 2011 at 07:27 AM in Paul Horwitz | Permalink

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Comments

Actually, I should have read the U.S. Today story first. It's quite thorough and makes most of my points, together with some solid reporting -- "CLAG" is only 50% owned by Sekulow, it says.

Posted by: BDG | Oct 25, 2011 9:49:22 AM

Their tax returns are interesting reading. Jay Sekulow takes a salary of $0 for 2010. http://www.guidestar.org/FinDocuments/2010/541/586/2010-541586817-06604eb6-9.pdf

But the ACLJ also pays about $2.5 million to a putatively unrelated for-profit, "Constitutional Litigation and Advocacy G". We can only speculate who owns that operation. The returns also note that staff fly first class or charter, due to "security" and "timing" considerations.

Non-profits are actually allowed to pay surprisingly generous salaries, since they can pay up to what a comparable for-profit would pay. (I've argued that's dumb.) But even under that standard, if the $2.5 million (plus the value of the charter flights) is actually compensation for Sekulow, it would probably be found to be excessive, which could trigger penalties for the organization and its board under 26 USC 4958, or revocation of its nonprofit status.

And there's an interesting arrangement with Liberty University, which pays $450,000 per year to another Sekulow-controlled nonprofit in exchange for Sekulow's services as a teacher, which then pays all that money over to an entity called "Educational Resources A," which isn't a nonprofit as far as I can tell. http://www.guidestar.org/FinDocuments/2009/202/487/2009-202487980-069b8ae5-9.pdf

Though one can't be certain on the available information, the Liberty arrangement is a common structure for avoiding payroll taxes, although the insertion of a nonprofit in the middle is unusual.

So, in other words, thanks for a good final exam question, Paul.

Posted by: BDG | Oct 25, 2011 9:45:58 AM

Your emoticons are showing, Dr. Lecter. Seriously, I don't want to suggest that these things are limited to some particular ideological stripe. It may be that this particular kind of behavior is more likely to characterize ideologically inflected non-profits on the right than the left, for various structural reasons, but 1) I can't say so for sure, and 2) there are lots of other ways in which people on the "left" (really, I mean establishment liberals here) can find ways to receive a great deal of social and financial capital for their work. I do think, however, that we should always question--not condemn outright, but question--the nexus between doing good and doing well; and the ACLJ case is not really a general example of this--it's a more dramatic example of abuses of the non-profit structure. And then, of course, the gap between the rhetoric of the ACLJ's fundraising and the reality of the uses to which those funds are put is worthy of comment.

Posted by: Paul Horwitz | Oct 25, 2011 8:24:48 AM

Oh come now, Paul! Surely you wouldn't suggest that those who do good (which are probably not a group comprised exclusively of conseravtives) should not also do well? :)

Posted by: Marc DeGirolami | Oct 25, 2011 8:18:06 AM

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