The $19 Million That Sent New York’s Attorney General After The U.S. Chamber Of Commerce

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June 28, 2012 1:15 a.m.

Seven years before the Supreme Court changed the nature of campaign spending as we know it, a New York philanthropy began making massive donations to an arm of one of the most influential conservative forces in American politics.

The gifts, eventually totaling about $19 million, went little noticed at the time.

But now, a source familiar with the matter tells TPM, some of those donations are the focus of an investigation by New York Attorney General Eric Schneiderman that could shed light on the growing and largely untamed role tax-exempt groups are playing in politics.

The investigation, which was first reported late Tuesday by the New York Times, is looking at a series of gifts the New York philanthropy known as the Starr Foundation gave to the charitable arm of the pro-business powerhouse U.S. Chamber of Commerce.

The source said the probe is examining whether those gifts were then illegally funneled to the chamber’s political causes through a series of loans.

The Starr Foundation did not return a message seeking comment on Wednesday. But the Chamber of Commerce released a statement dismissing Schneiderman’s investigation as a political ploy.

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“In the midst of a highly charged political season, it comes as no surprise that the New York State Attorney General would use his office to rehash a very old story about the Chamber’s finances,” senior vice president Thomas Collamore wrote.

The Starr Foundation may not be a household name, but it has a huge charitable role throughout the United States.

Run by Maurice “Hank” Greenberg, the former chief executive of the insurance giant AIG, the foundation gives tens of millions of dollars a year to an array of groups. Its beneficiaries have included school students, New York’s Metropolitan Opera and Harvard University.

But federal tax records examined by TPM show that in 2003 Greenberg’s philanthropy began giving millions of dollars to the National Chamber Foundation. Registered as a tax-exempt 501(c)(3) organization, it bills itself as “the public policy think tank affiliate of the U.S. Chamber of Commerce.”

In the first year, gifts from Greenberg’s foundation totaled $7 million and were split into three donations. The following year, another three gifts from his foundation totaled $12 million.

At about the same time, a source familiar with the investigation tells TPM, the National Chamber Foundation began making what were described as loans of millions of dollars to the chamber itself.

The amount of those loans, the source said, totaled about $18.1 million.

While the amount of the original donations were not exactly the same as the loans that were eventually made to the U.S. Chamber of Commerce — $19 million versus $18.1 million — the source told TPM they were close enough to raise red flags. Schneiderman took up the investigation after what the source would only describe as a “watchdog group” filed a complaint last year.

After initially vetting the complaint, Schneiderman launched a full investigation into the matter. He recently sent a “wide-ranging” subpoena to the National Chamber Foundation, demanding copies of emails, memos and bank records in order get a clearer picture of the transactions, according to the source. Depending on what turns up, the investigation could branch out from there.

In his statement, the chamber’s Collamore confirmed the subpoena and called it “curiously timed.” He blamed the investigation on what he described as “an activist group.”

While it’s not clear exactly which group filed the complaint that spurred Schneiderman to act, his investigation appears to match closely with concerns raised in 2010 by a union-backed group called U.S. Chamber Watch.

In a complaint to the IRS, attorneys for Chamber Watch alleged that the payments were a way for Greenberg’s foundation to funnel money to the Chamber of Commerce for political causes.

“These operations,” they wrote, “include substantial lobbying and campaign intervention in support of an agenda that advances the private interests of AIG and its CEO, Hank Greenberg — both insiders with significant ties to the Starr Foundation.”

The group alleged that the chamber’s lobbying efforts matched up with Greenberg’s interests in Congress at the time. During those years the Chamber of Commerce spent huge amounts of money lobbying Congress on issues that could benefit AIG.

Records kept by the Center for Responsive Politics show the U.S. Chamber of Commerce spent more than $34 million in 2003 and $53 million in 2004 to lobby members of Congress. The records show the organization’s top issue those years, as it has been almost every year since, was tort reform.

Chamber Watch also alleged that Greenberg paired up with the Chamber of Commerce to send money to campaigns aimed at defeating politicians who opposed their efforts, including former Sen. Tom Daschle.

The group further alleged that the $18.1 million given to the Chamber of Commerce was never really a loan. It cited tax documents that show the chamber never paid off the balance and only began making interest payments two years after the loan was made.

As proof, Chamber Watch pointed to a 2010 New York Times story that took a closer look at the transactions. Stan Harrell, the chief financial officer of the Chamber of Commerce, told the newspaper that the money was recorded as a loan as part of a financial maneuver and that the whole thing was cleared by the organization’s attorneys and accountants.

“We wanted to make sure we guaranteed the investment return,” Harrell told the newspaper. “Legally, that has to be represented as a loan. This was all done very scrupulously. If anything, we overdisclosed the transaction.”

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