By • Eric
This exercise is a demonstration in how charitable donations are channeled through the “Not-For-Profit Industrial Compex.” We will see a donation flow through a series of conflicts of interest which would violate a tax-exempt status obtained via IRS Form 1023.
Note: these four diagrams I made for the purpose of this demonstration are used in a zoomed in presentation further into the blog post.
The Bottom Line:
Upon disbursement of the cash proceeds to an NPO to meet the pledge of a charitable contribution by another business entity, the round-robin begins in terms of the pass through of that very cash within the realm of the Nonprofit(NPO) world and it’s vendors, creditors, donors and beyond. And I am going to show you how charitable contributions made to these tax exempt NPOs generate more than just virtue signaling clout (for donating to “a good cause”) and a tax deduction to be used to offset taxable income for the entity making the donation. The following is a simple diagram of the clockwork-like movement of the cash donation (as you read on, you will be blown away how this – with all of its conflicts of interest) – is achieved through the manipulation of regulatory compliance loopholes that are exploited in a manner to such a tactful, involved degree – that the IRS simply does not have the investigative capacity to detect and investigate conflicts of interest that arise between related parties.
The following diagram is the simplistic summary of the dissection of the anatomy of how this round-robin of the cash donation made by the for-profit entity (earning them an income tax benefit) – how this cash quite literally returns to them during the ordinary course of business operations:
Globalization and the Financialization of the US Economy
The business community at large, both Wall Street and ‘Main Street”, has undergone radical, disruptive change at an exponential rate in the last 30+/+ years. Globalization is the term that sums it up best. Through globalization, the world has witnessed the evisceration of the middle class (small businesses swallowed up by the likes of Walmart), the funneling of financial capital poured into and under control of the BlackRock, Vanguard and State Street holy trinity of fuckery, the fiat-based world reserve currency, the USD, rely more and more to its Petrodollar tether -and we have begun to see the multipolarity (China-Russia-Iran-Syria asymmetrical defense against Neo-Liberal policy), the exportation of manufacturing and industry labor from the US to areas across the globe – further erasing America’s middle class.
The global financial system has a billion guns firing rounds at the encroaching outside world attempts to get close to any reform. And the system’s ammunition supply is eternal.
We have also learned (beyond the 2008 financial crisis) of the elaborate schemes of the greedy Think Bernie Madoff ponzi scheme, where some $65 BILLION disappeared in thin air. Then Enron’s labyrinth of subsidiary “variable interest entities” that kept the SEVENTH MOST VALUABLE company on the planet afloat until the charade came crashing down like a lead zeppelin and with it wiped out employee benefit pension funds. It is also of extreme importance to note how Arthur Anderson LLP, Enron’s financial statement auditor, in an aggregation of rogue behavior of which the sum forced the firm (then one of the “Big Five” global public accounting firms) to lose its licenses as certified public accountants in all 50 states here in the US. Funnily enough, the remnants of Arthur Anderson LLP is now known as the global risk management behemoth Accenture (yes that Accenture – one of Klaus Schwab’s “yes men” for the Great Reset project.
The global financial Rabbical class does not face repercussions from the regulatory compliance federal agencies (ie IRS, SEC) as it has continued where 2008 left off – only this time, circa current year, since the likes of JP Morgan, Goldman Sachs, Bank of America, HSBC, Citigroup, etc have adapted to the preferences of Twitter Blue Checks – sponsoring, promoting and injecting charitable contributions into the SJW causes of BLM, LBGTQ+++ and “ESG” (Environmental, Social, Governance) disclosures to their results of operations, much to the delight of the Church of the Woke, to Davos and to shitbags like Chuck Schumer, Elizabeth Warren, Skate, Time Magazine, AOC, GQ Magazine, The View, CNN, Nancy Pelosi, NASA, Code Pink, countless genderfluid queers (since the aforementioned financial institutions human resource policies on diversity mirror the sentiments of the book “White Fragility.”
Globalization has left the world unrecognizable to the eyes of someone from 1954, if that person had a time machine and came to 2021 and saw the delights of Clown World’s Piss Earth and all of its glory. We know these things. The objective of this bog post is to demonstrate little known (to the ordinary people) some of the financial chicanery that is heavily capitalized upon by the global financial philanthro-capitalist elite.
The True Beneficiaries of Tax Exempt Paradigm
Since the financial institutions and private equity firms, in aggregate, through the process of gradualization, have procured enough shares in the companies of the S&P 500 that they have a material ownership in these businesses when viewing this financial mafia as a collective. Classic weapons of momentum based trading are rigged to work in their favor. For instance, speculation, arbitrage, futures, options, other derivatives – the movement of these mechanisms are often driven by a predetermined course of action put in play by the major shareholders, more over, by the institutions that own and operate the financial capital infrastructure that investment activity is conducted upon.
Ownership and Cumulative Voting
An aspect that the the shoddy, shitty, oven-tier “financial reporting” done by the likes of shitlib websites like Quartz, Buzzfeed, Slate, Salon, Mother Jones – how even Business Insider, NY Times, Washington Post, etc – even CNBC Financial News spends very little emphasis on the non-financial advantage that a large stake of ownership of shares in a publicly traded company affords the owners: VOTING – that is, each share represents a vote in the direction of the affairs on the company in a process called cumulative voting. The scope of what types of changes in the direction of a company are decided at shareholder quorums is far too detailed to examine for the sake of this exercise. One of the typical critical outcomes of a shareholder total vote is the appointment of the Board of the Directors.
Primary Distinction: For-Profit v Nonprofit
- A for-profit business carries out business operations with the objective to maximize shareholder wealth. In a for-profit company, the objective of conducting business operations is to maximize shareholder wealth. Through the cumulative, shareholder voting, the Board of Directors is appointed. Keep in mind that the majority shareholders (who can coordinate alliances with other significant shareholders who share the same vision for the immediate direction of the company both have invested in) a Director can be elected who is actually one of those shareholders or who works on behalf of those very shareholders). Thus we have a consortium of investors with an a shared philosophical vision of how the company partially under their ownership should be run.
- A nonprofit business carries out business operations with the objective of supporting its “Mission Statement.” The Mission Statement is the formal and specific reason for the NPO’s creation in the first place. The Mission Statement is the humanitarian/charitable/etc cause the NPO is serving. For example, the objective of helping people that are homeless to obtain access to food, medical services, temporary shelter and ultimately a place to call home – this is the Mission Statement of the NPO. The NPO is in operation to achieve the Mission Statement.
More Financial Napalm
To continue, the lesser known yet highly abused financial weapons of Wall Street include the use of insider information, lobbying to persuade and gain political clout, exotic derivatives (which are no different than gambling, frankly). In the private equity realm there are constant hostile takeovers, mergers/acquisitions/divestures, the use of litigation to seize the intellectual property of businesses that are the targets of takeovers. Allow us not to omit the off-shore treasury mechanisms that are employed as standard operating procedure in circumventing income tax liabilities and also in shielding the identities – through a network of dormant corporate entities connected to other dormant entities- the true owners of business operations engaging in questionable business ethics.
Well of course they are! That’s exactly how the financial ruling class became and maintains their stature as the financial ruling class – manipulation of loopholes, bending the interpretation of business laws – this is what the high powered international litigation attorneys are paid for…to protect the actions of the BlackRocks, the Bains and the Boston Consulting Consulting Group from being penalized.
With regards to the weapons of financial capital, the weapons cache has no end.
The Nonprofit Organization (NPO), too is a Weapon of Financialization courtesy of Globalization. How did this happen?
The nonprofit business entity is another one of these weapons, it is well known, that for-profit corporations, wealthy individuals, “philanthropists” will make charitable contributions to tax exempt organizations that will serve the aim of appearing to “support noble causes” in tandem with generating an alleviation of income tax liabilities – “charitable contributions eligible for tax deductions.” It is here that I will illustrate to you a much more potent explosivity that the realm of nonprofit world provides to its participants.
Brief Outline of the Nonprofit (NPO) and Tax Exemption
The NPO gains an income tax exempt status because it is a business operation that is for a charitable cause. The NPO is operating for the common good, therefore, imposing income tax stipulations would hinder the ability of the NPO to serve that purpose.
There is a common misconception that the NPO is “nonprofit” because it does not “make any money.” This is not the case – the NPO most certainly generates profits, however, there are no owners of the NPO. There are no shareholders.
Structuring the Weapon Deployment
In this example, there are three primary business entities involved:
- The Charitable Contributor: a For-Profit professional services parent company – the company holds the ownership of two specific subsidiary operations,one a business advisory firm, the other a risk management firm.
- Receiver of the Charitable Contribution: Nonprofit Entity (with Tax Exempt status.)
- For-profit property investment parent company – the company holds the ownership of three subsidiaries; a real estate holding company, a property management company and a valuation firm.
The above diagram indicates the basic organizational charts and layout of the three entities.
Sequence of Events and Transactions:
In my professional experience as an auditor of the financial statements, it was quite common to see interplay between the different businesses, as one would serve the other in the capacities such as vendor, creditor, client, landlord, etc. I have placed numbers next to each KEY EVENT – of which the first conflict of interest sets in motion a manipulative scheme which intertwines “Related Parties” that ultimately conduct transactions with one another.
Structuring the Rogue Events (arrangements)
The diagram illustrates the flow of events (of which underlying assumptions will be explained below in further detail:
Diagram: Events (decision making capacity shifts, obligations created, contracts executed):
- The Property Investment conglomerate owns and operates it’s three subsidiary operations. The subsidiary of focus here is the Valuation Co. The underlying assumption is that each specific operation has its own Executive Management group, which answers to the Board of Directors at the parent level. An Executive from the Valuation Firm is appointed to the Board of Directors of the the Risk Management subsidiary of the Professional Services Conglomerate.
- The Board of Directors makes the broad based decisions about the best direction for the business entity to take. This includes decisions about Charitable Contributions – if to make them, to which Nonprofit to make them to, the amount to donate, etc. It is not a secret that nepotism plays a most significant role in terms of which NPO is selected as the beneficiary of a charitable contribution. Two benefits realized by the donor by making the donation are:
- Income Tax Deduction for the fiscal year.
- Virtue signaling clout by supporting charitable cause.
- In the example I have illustrated, we have see that the management executive of the Valuation Co has joined the Board of Directors of the Professional Services Conglomerate. With nepotism a factor, with persuasive efforts, this Executive has gotten the Board of Directors to make the charitable contribution to the particular nonprofit. The process here will include alot of back channel communications – in order to avoid documentation of the gleaming conflict of interest that will arise from the following arrangements.
- The grant letter with the pledge to make the grant can contain a provision that the proceeds of the grant must be used for the rent of office space for the NPO. This is a temporarily restricted form of revenue for the NPO.
- It is, again, during the back channel communications that there is a determination made in advance that in order for the NPO to recieve this charitable contribution, it must sign a lease agreement for office space with the subsidiary “Real Estate Holding Co”
- Notice thru the direction of the red arrows that the Executive from the Valuation Co (subsidiary of the Property Investment Conglomerate Parent Company) had been instrumental in bringing this deal into the fold.
- The major conflict of interest is that he is on the Board of Directors of the company making the charitable contribution. A stipulation of the use of the cash disbursement that will come from the contribution is that the funds must be allocated towards the eventual lease payments made for office space – office space owned by the Real Estate Holding Co, which is owned by the same parent company as the Valuation Co. the Executive comes from!!!
- Finally, there is a consulting agreement entered into between the Property Management subsidiary of the Property Investment Parent Company and the Business Advisory firm of the Professional Services Parent Company making the charitable contribution.
- The flow of the charitable contribution to be transacted in the first place (due to the Executive from the Valuation Co presence on the Board of Directors of the Risk Management subsidiary of the Professional Services Parent Company ) is going from the Professional Services Parent Company, to the NPO, to the Real Estate Holding Co – a subsidiary of the Property Investment Parent Company.
- The consulting agreement has the Business Advisory Firm performing services for the Property Management subsidiary of the Property Investment Parent Company (which through the consolidation of subsidiaries into the parent company, is in essence the recipient of the rents received from the NPO).
The following diagram is the path of the cash proceeds – once disbursement of the charitable contribution has been made. The path of the cash proceeds follows the same route as the preceding events(arrangements) only green arrows are used to designate the fact that cash is now on the move.
Finally, we see that the entity that made the charitable contribution has not only wound up as an ultimate beneficiary of the arrangement – having cash it donated having a destination within the very coffers of the point of origination. We also see that the contribution itself generated an income tax benefit (taxable income deduction) that will be able to be utilized at the time of filing the annual income tax return.
Conclusion: all three top level entities benefit:
- Property Investment Conglomerate:
- Procures Board of Directors position on a major Professional Services Conglomerate’s upper echelon. This is the type of networking that allows for the type of related party transactions with glaring conflicts of interest to persist and persist – to the point they become normalized and overlooked by the regulatory compliance outfit designed to prevent these arrangements (the IRS).
- In having it’s Real Estate Holding Co have one of its properties rented out by the NPO, this covers the costs associated with the operation and the attainment of the equity in the office building (we assume there is a mortgage being paid on the office space).
- By leasing office space to the NPO, it is scoring it’s virtue signaling clout hosting a “worthy cause” – which in the world of NPOs, curries good favor with the potential of procuring other NPO tenants in the future.
- The services rendered by the Business Advisory Firm of the Professional Services Conglomerate enhanced the operations of the Property Management subsidiary, resulting in another value add.
- NPO (Tax Exempt):
- The NPO has established a relationship with a new charitable contributor, which is the most vital aspect to the going concern. The NPO is reliant upon grants, contributions, donations and minor service fees earned as forms of revenue to carry out it’s mission statement for the fiscal year.
- The tendency in the realm of NPOs is that once serious For-profit business operations are making charitable contributions to an NPO, it is a rule of thumb that in the future more and more reputable entities will take an interest in the making charitable contributions as well (and keep in mind the clandestine inner-deals arranged by the parties involved – THIS IS THE MOST ATTRACTIVE FEATURE OF THE NPO! THE ABILITY TO STRUCTURE ROGUE FINANCIAL TRANSACTIONS UNDER THE GUISE OF CHARITY!!!)
- Professional Services Conglomerate:
- What more needs to be said here? The company made a charitable contribution (which as a bonus has afforded them a year-end income tax deduction) – the cash proceeds went round robin and through the structure of subsidiary operations and consolidation of the operating results of those subsidiaries – the charitable contribution disbursed by them literally went round robin and wound right back in their pocket.
- All the while, they earned the virtue signaling clout, they learned the racket inside and out and to top it off they will get an additional income tax liability reduction at year-end.
These types of arrangements exists throughout the entire NPO world. It is a subject rarely ever discussed – for many and most of the current “Fortune 500/Davos” types are in on it ….not just in on it….they pioneered this craft.
Made in America. Meticulously planned and carefully executed inter-related events and transactions that purposely manipulate and abuse the landscape of the tax exempt business world.
The ride never ends….