Media Matters: Bully Masquerading as Tax-Exempt Charity

According to public records, David Brock’s Media Matters group has ignored important legal requirements for tax-exempt charities.  Instead of reveling in the impact of his attacks against Laura Ingraham, David Brock and his team at Media Matters for America  (MMFA) need to try complying with the strict laws that do regulate activities of publicly supported, tax-exempt organizations.

In theory, MMFA is an “educational” charity.  IRS guidance concerning how an educational charity may avoid illegal partisan and legislative advocacy is instructive:

“The problem relating to the definition of "educational" is now a comparatively narrow one— how to classify public discussion of controversial topics. Rev. Rul. 68–263, 1968–1 C.B. 256, holds that the publication of material which discredits particular institutions and individuals on the basis of unsupported opinions and incomplete information about their affiliations is not educational. In Rev. Rul. 66–256, 1966–2 C.B. 210, however, an organization that conducted public forums, lectures, and debates on controversial social, political, and international questions was held to be educational. Although the speakers were frequently controversial, the organization adopted an unbiased position. Organizations doing research or educating the public on controversial public issues must stick to the reasoned approach and avoid unsupported opinion. They must also avoid the advocacy of specific legislation as a substantial part of their activity.”

So, if MMFA were, in fact, a lawfully organized and operated charitable organization in each jurisdiction where it solicited contributions and/or carried out activities in furtherance of its specific and authorized tax-exempt purposes, MMFA would have to avoid publishing “material which discredits particular institutions and individuals on the basis of unsupported opinions and incomplete information about their affiliations,” adopt “an unbiased position,” “stick to [a] reasoned approach and avoid unsupported opinion,” and “avoid the advocacy of specific legislation as a substantial part of their activity.”

And, If MMFA were to form an affiliated action organization under IRS Code section 501 [c]4, operators of both entities would need to ensure that each is a lawfully constituted organization in every relevant jurisdiction.

Ongoing review of public filings for MMFA and certain of its affiliates in key U.S. jurisdictions reveals that MMFA and a purported organization called “Media Matters Action Network” do not appear to have passed the “organizational test” and the “operational test” -- key markers that the I.R.S. normally uses to distinguish a “formless aggregation” or club from an “organization.”

Media Matters Action Network (MMAN)

According to information available through the New York Attorney General Charity Bureau website, MMAN was formed in Washington, D.C. by Aug. 15, 2004 by David Brock and others with a “mission” that is indistinguishable from that of MMFA, specifically: “Monitoring, analyzing, and correcting conservative misinformation in the U.S. media.”

According to the only registration record posted currently for MMAN on the NY AG Charity Bureau website, MMAN did not bother to register inside NY, as is required under NY laws until Jan. 4, 2006 at the earliest. Yet, on Nov. 17. 2006, MMAN president Bradley Beychok and CFO Pilar Martinez signed an annual report to New York, and conveyed a copy of an annual report to the I.R.S. concerning 2015 that showed substantial activities in the year before MMAN had registered, yet also acknowledged a need to send the I.R.S. report in question to N.Y. government authorities.

In simplest terms, then, MMAN declarations seem to show that key officers knowingly violated a raft of NY state laws that require organizations to register truthfully in advance before soliciting and operating purported tax-exempt organizations inside the state. Links to these laws are found here:

But wait, as they say on annoying infomercials, it gets worse.

The annual report to NY reveals that MMAN employed the fundraising services of The Bonner Group, Inc. starting in July 2014, yet Bonner has not registered in NY to provide such services as is required by law, according to search results through the NY Attorney General Charity Bureau website.  However, MMAN affirms in its NY filings that it paid substantial sums to Bonner for fundraising services.

Finally, for now, a search through the NY Secretary of State online records shows that MMAN may never have registered to do business in the state as state laws strictly require.

Where may this leave MMFA, David Brock, their common “fundraiser” and their common “independent” auditor, Gelman, Rosenberg & Freedman?

Either these purported entities and individuals are simply ignorant of applicable laws, or are aware of the laws, but believed they might never be held accountable for violations of them.

Brock’s fighting arm, MMAN, is certainly not an “organization” or tax-exempt looking at only some of the available evidence, because it fails both the organizational and operational tests. This means that any disallowed and partisan activities carried out so visibly against Laura Ingraham and others cannot be shielded by claiming they were perpetrated by Brock, his associates, and their advisors outside MMFA through MMAN.

What may happen now?

If New York Attorney General Eric Schneiderman, the I.R.S., the F.B.I., and the Department of Justice do not care, perhaps the illegal bullying in guise of charity plays on.

Most Americans believe the vital charity sector is a force for immense good, a few exceptions notwithstanding.

For tax-exempt organizations, key deadlines approach in mid-May -- trustees, executives, and their professional advisors take these filing requirements seriously and report truthfully.

Americans across the political spectrum expect that laws must be applied even-handedly in all sectors.

Only brazen scoundrels embrace the practice of charity fraud

To be continued.

Charles Ortel, a retired investment banker, concentrates on exposing complex frauds in his new career as an investigator, writer and commentator. Since August 2017, he has been hosting the "Sunday with Charles" podcast.