Right-Wing Nonprofit Lavishes Millions on Top Brass

Right-Wing Nonprofit Lavishes Millions on Top Brass 1

The American Conservative Union touts itself as “the nation’s original conservative organization” and loves to rail against “reckless spending”—but it’s hardly cautious about turning over supporters’ cash to its own top executives.

The ACU, best known as the group behind the annual Conservative Political Action Conference, or CPAC, has enriched companies belonging to two of its directors to the tune of $4 million in the past five years, according to a review by The Daily Beast of their yearly tax forms and other required filings.

This cash has poured out of the ACU’s own coffers, out of its political committees, and straight from the pockets of the right-wing rank and file into firms controlled by Vice Chairman Charlie Gerow—now a candidate for governor of Pennsylvania—and Kimberly Bellissimo, secretary of the ACU’s foundation.

The ACU insisted to The Daily Beast that it selected the vendors purely on merit, and complied with all relevant rules and regulations.

“We take our fiduciary responsibilities seriously and work to ensure all compliance is adhered to, operating above board with the full backing of the board of directors,” spokeswoman Regina Bratton wrote in an email. “ACU requires all such contracts to be disclosed to our Board and all disclosures to be made as required by law.”

But the legal experts and ethics advocates The Daily Beast consulted for this story questioned whether the ACU had really conducted a thorough search to identify the most capable and cost-effective contractors to accomplish the organization’s aims—and expressed bafflement at apparently missing and misplaced information on the organization’s disclosures to the Internal Revenue Service.

It certainly sounds like that’s the sort of relationship that should trigger disclosure in at least one place in the return.”

Marcus Owens, an attorney who previously directed the IRS’s charities division

“As a nonprofit organization you have a duty to the people who are funding the organization’s mission to basically give them confidence in your stewardship of the money they are giving you,” said Robert Maguire, research director for the watchdog group Citizens for Responsibility and Ethics in Washington. “The best way to avoid conflicts of interest is to have rules that bar people who work for the organization or sit on the board of the organization from getting large contracts that the organization is giving out.”

A total of $153,315 has flowed from the ACU to Quantum Communications, a Harrisburg, Pennsylvania, firm registered in Gerow’s name and where he serves as CEO. The payments to Gerow began only in the last two years, despite his having held a leadership position at ACU for over a decade, according to his LinkedIn profile.

Of this, $128,318 came in a single disbursement from the group’s foundation in 2019, tax records show.

Marcus Owens, an attorney who previously directed the IRS’s charities division, noted that despite this payment the ACU answered “no” to a series of questions on its federal 990 form about whether it had hired any company in which one of its directors held a position or interest. He pointed out that the group had attested to the honesty of its reports to the IRS under penalty of perjury, and that leaving that information off could bring down civil and even criminal consequences.

“It certainly sounds like that’s the sort of relationship that should trigger disclosure in at least one place in the return,” he said. “If they answered that question incorrectly, and they are doing business with firms in which the officers, directors, and key employees have an ownership interest or are themselves officers and directors of those other firms, it’s difficult to say that isn’t material.”

Federal Election Commission filings, meanwhile, show one of the ACU’s political committees paid Quantum $25,000 in 2020.

Gerow refused to discuss his firm’s dealings with the ACU at any length with The Daily Beast, nor would he point to where the organization properly disclosed his role at Quantum.

“We file all sorts of conflict forms,” he said. “I understand where you’re coming from, but it’s all done appropriately, correctly, legally, and completely.”

However, Bratton—the ACU spokeswoman—conceded that the group had left information off its 2019 filing. But she added that it had recently submitted an amendment to correct the omission. Further, she asserted Gerow was the best-qualified professional to help the group “bring Trump-style criminal justice reforms to Pennsylvania.”

Gerow has since pointed to his work on criminal justice issues as proof he could build consensus as governor of Pennsylvania. Joan Harrington, an attorney who heads the social sector ethics department at Santa Clara University’s Markkula Center for Applied Ethics, said this raised special concerns since he was paid through the ACU Foundation, which enjoys a special tax status dependent on its abstaining from electoral campaigns.

She said it was possible that the Foundation’s payment to Quantum was “clean”—that is, decided upon without Gerow’s input and after the board had researched and determined the firm offered the absolute best value of any in the market. But she worried that donors, and members of the public who indirectly subsidize the groups through its tax exemption, are left unaware of the various relationships between ACU and its vendors.

“Everybody is intertwined and getting money from different places, and you and I cannot figure out what is going on,” Harrington said. “If it’s not transparent to the public how money is flowing to these organizations and companies, that’s concerning.”

Harrington’s concerns extended to ACU’s dealings with Bellissimo. The group’s federal committees have also dumped money into Bellissimo’s firms: $116,756.25 to her company ForthRight Strategy for graphic design and printing, and $516,418.16 to Direct Support Services—a company registered in Bellissimo’s name and based out of ForthRight’s offices—mostly for “database management.”

Additionally, the ACU’s financial reports to the IRS show that, beginning in 2016, the group has contracted ForthRight every year to run its direct mail fundraising campaigns.

But despite amassing $3,538,023 over four years, IRS records show that ForthRight has never remitted a cent to the ACU.

Instead, the filings show the ForthRight’s direct mail efforts for ACU in 2017, 2018, and 2019 broke exactly even. That is to say, despite Forthright’s intake from postal solicitations ranging from $234,056 to $1,535,050, each year it somehow only raised enough cash to pay for the expenses the firm’s work incurred. None of the funds ever made it back to the ACU, since Forthright got paid out of the donations.

“ACU did not provide funds to Forthright Strategy,” the nonprofit wrote in its disclosure. “Rather, direct mail expenses incurred by Forthright Strategy were paid from direct mail receipts.”

ACU used this explanation even in 2016, when it reported that ForthRight’s direct mail campaign raised only $273,970, but that the company retained $310,706. In other words, ForthRight held on to almost $37,000 more than it reported raising, even as the ACU asserted it had given the company no funds.

For Owens, the former IRS official, this provoked questions over whether the board at the organization—on which Bellissimo and Gerow both sit—had upheld its fiduciary duty to act in the ACU’s best interest.

“If those numbers are being reported accurately, and that is that the fundraising firm never generates a profit, a return, then that calls into question whether that’s a wise decision to hire them to raise money,” Owens said.

Owens added that reports of this nature could suggest either a “diversion of funds,” or misrepresentation of the actual sums the direct mail ventures raised, the kind of situation that a state attorney general might want to probe.

“It really does seem like there’s some missing information on that form 990, and some information that may not be accurate,” he said.

Bellissimo did not respond to requests for comment. For its part, the ACU maintained that its direct mail campaigns were costly and not intended to solely raise money but also to inform and enlarge the group’s base of supporters.

“The scope of our contract with ForthRight is focused on identifying conservative activists to carry out the message, as well as for donor development. Under this contract, Kimberly’s work has expanded our reach with the conservative message, exponentially,” Bratton wrote to The Daily Beast. “We reinvest our returns from direct mail back into the program rather than return funds to our general treasury. In this context, your question about the gross revenues is misleading.”

But Harrington argued that the wildly varying amounts raised each year do not suggest a prudent and well-considered investment strategy on the part of the organization. And while she acknowledged that direct mail campaigns are expensive and often unsuccessful, she also said they are historically susceptible to “milking” by unscrupulous operators.

“Zero dollars came into the nonprofit, and they’re saying ‘the benefit that we’re getting is educational,’” she said. “But they did it for fundraising reasons, and they are failing annually. And there’s other ways to do education than direct mail.”

Maguire, the CREW research director, recalled that a decade ago the ACU’s administrative director confessed to embezzling hundreds of thousands of dollars of the group’s funds. Right-of-center news site The Dispatch reported last week that a new federal probe into the ACU’s operations is now underway, although the outlet’s sources indicated that investigators were primarily interested in its campaign finance activities.