Tricks of the Trade: Structuring Events and Transactions Around a Nonprofit’s Reception of a Charitable Contribution to Mask Conflicts of Interest

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:

Note here that we have a conglomerate making a donation to an NPO, the NPO has rent to pay, its rent is paid to a separate conglomerate. The first conglomerate – the one that made the donation – performed consulting services for the landlord of the NPO. In essence – the donation has moved in circular direction, right back into the coffers of the source of the donation. The IRS (as well as the Attorney General’s offices at the state level) call this a conflict of interest. This chart is a primer, to illustrate to the reader a simple view of what is at play. I am going to show you the innards; the guts, of how this is pulled off.

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:

  1. 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.
  2. Receiver of the Charitable Contribution: Nonprofit Entity (with Tax Exempt status.)
  3. 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):

  1. 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.
  2. 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.
  3. 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.
  4. 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!!!
  5. 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:

  1. 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.
  2. 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!!!)
  3. 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….

The unprecedented consolidation of the modern media industry has severe consequences • Helen Johnson

Source: Miscellany News

When President Dwight D. Eisenhower coined the term “military-industrial complex” in his Farewell Address to the nation on Jan. 17, 1961, he did more than warn against the “acquisition of unwarranted influence” and the “disastrous rise of misplaced power.” In fact, he alluded to how we might avoid such a dangerous threat: “Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

Eisenhower was right to emphasize the importance of an “alert and knowledgeable citizenry.” Without this key aspect of democracy, the people are unable to hold their government accountable or influence its decision-making—including, and perhaps especially, decision-making regarding war. In the United States, our free press is entrusted with keeping us “alert and knowledgeable.” The freedom of the press is a pillar of our democracy.

The First Amendment is meant to serve as a check against government control over the marketplace of ideas and dissemination of information. The American press prides itself on being independent and unbiased, which is meant to ensure that the public gets fairly neutral reporting and a truthful account of the news regardless of who may be involved. Justice Brennan summarizes this notion in the majority opinion of New York Times Company v. Sullivan: “[D]ebate on public issues should be uninhibited, robust, and wide-open, and [this] may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.” The concept of free media is intrinsically tied to democracy. The United States was founded on the principle of government by consent of the governed; a free press that keeps the citizenry informed of the happenings in government is what allows the “governed” to give their consent and make informed decisions when voting for elected officials.

For debate on public issues to be uninhibited and the marketplace of political ideas to be free, the logical conclusion is the more the better—more newspapers, more television stations, more editors, more writers and more independent, local media owners. This ensures that as many people’s voices as possible are heard, and that those in charge of media outlets are more likely to be locally based and familiar with their areas and communities. However, the consolidation of media conglomerates over recent history has moved us in the opposite direction.

In 1983 there were 50 dominant media corporations. Today there are five. These five conglomerates own about 90 percent of the media in the United States, including newspapers, magazines, book publishers, motion picture studios and radio and television stations. As of 2020, the five media giants are AT&T (Time Warner, CNN, HBO), Comcast (NBC Universal, Telemundo, Universal Pictures), Disney (ABC, ESPN, Pixar, Marvel Studios), News Corp (Fox News, Wall Street Journal, New York Post) and ViacomCBS (CBS, Paramount Pictures).

Many of the mergers that allowed for the consolidation within the media industry happened after winning antitrust approval from the Justice Department. An extreme lack of regulation regarding media companies has resulted in the media giants managing to secure major holdings in all forms of media, including newspapers, radio and television stations and movie studios. In his book “The New Media Monopoly,” Ben Bagdikian writes that “[t]his gives each of the five corporations and their leaders more communications power than was exercised by any despot or dictatorship in history.” The benefits of consolidation for company owners and shareholders are clear: the fewer the owners, the larger each one’s share of the billion-dollar media industry. Additionally, the larger the media giants grow, the more impossible it is for smaller, independent outlets to stay afloat.

The consolidation of media power extends beyond just mergers and monopolies. The big media giants oftentimes have interlocking directorates—which is when the same people serve on the board of directors of more than one company. According to a study by Aaron Moore in the Columbia Journalism Review in 2003, News Corporation, Disney, Viacom and Time Warner had 45 interlocking directors. The dominant five media conglomerates in 2004 had a total of 141 joint ventures. Although there is no recent compilation of data for the interlocking directorates of the big five media conglomerates today, Moore’s study is indicative of a constant pattern within the industry.

No analysis of the concentration of media power and the corporations that control today’s messaging would be complete without a close look at big tech and the internet. The huge tech companies of today have produced another form of power concentration and broadened the reach of major media conglomerates. Because of the internet, today’s news media reaches more Americans than ever before, while being controlled by the smallest number of owners in history.

The rise of the internet has also led to the tech giants accumulating an obscene amount of power over which media we consume. Unlike the conglomerates like AT&T, Comcast, Disney, etc. (and the news outlets they control), tech companies don’t produce the content we see—they control what we view. The market power of platforms like Google and Facebook is obscene: Facebook and Google combined account for over 70 percent of users directed to the websites of major news publishers. On its own this may seem trivial, but the rise of fake news, intense polarization and increased acceptance of conspiracy theories imply otherwise. The power held by huge tech giants only serves to magnify the impact that media conglomerates have over messaging.

The implications of the extreme consolidation of media power are extensive. First, the largest source of political money comes from corporations, and the media conglomerates are some of the largest corporations in the world. In the Forbes 2020 ranking of the world’s largest public companies, AT&T came in 11th, Comcast 27th, and Disney 36th. ViacomCBS and News Corp trailed the top three, at 472nd and 1737th, respectively. The tech companies are also at the top of the list. Alphabet (Google’s parent company) comes in 13th in the world and Facebook sits at a comfortable 39th. The market values of these companies range from $5.8 to $919 billion.

These billions upon billions equal more influence in political discourse and elections. Money determines the winning issues and candidates in American politics, so the larger the corporation, the stronger the influence. But no other industry is as directly linked to voting patterns as the media industry. Their product is the messaging that dictates the issues and candidates that dominate the national arena.

What this means is that not only do the media giants contribute money to campaigns, they also cover them. They report, record, narrate, document and broadcast them. Consequently, the political power of media conglomerates grows exponentially with their size and wealth; the larger the corporation, the greater its political influence through both monetary power and messaging. The greater the political power of the media giants, the more easily they lobby and influence the government to slash regulations, grant antitrust approvals and pass laws that increase their corporate domination.

One such law is the 1996 Telecommunications Act. The Telecommunications Act amended the Communications Act of 1934 and was the first major overhaul of telecommunications law in over 60 years. According to the Federal Communications Commission (FCC), the goal of the law was to “[l]et anyone enter any communications business––to let any communications business compete in any market against any other.” In effect, the legislation deregulated the broadcasting and telecommunications markets. The media giants benefited immensely from the Telecommunications Act and lobbied extensively for its passage—which is why it should come as no surprise that major news outlets completely failed to cover the legislation.

Concentrated media power not only affects which issues take the spotlight in the news, but their power in the entire realm of politics. Political parties and elected officials are keenly aware of the almost-absolute control of media giants in the news. Big money in other industries already holds gross power over elected officials due to campaign financing—add to that the fear of unfavorable news coverage, and it is no surprise that bills like the Telecommunications Act are passed easily.

The consequences of concentrated political influence among the media conglomerates is more far-reaching still. Media giants have the power to not only shape public debate, ensure the passage of favorable legislation and bend elected officials to their will, but also to bolster entire ideologies. One must look no further than Fox News. The American cable news television channel was spawned by Australian-American Rupert Murdoch, i.e. media mogul and creator of the empire that includes News Corp and Fox Corporation.

Fox News was launched on Oct. 7, 1996, as a conservative news network and is now the dominant cable news network in the United States. At the end of 2019, it averaged 2.5 million primetime viewers and was the top-rated network in all of cable for the fourth year in a row. According to a study published in The Quarterly Journal of Economics, there was a significant effect of the introduction of Fox News on the vote share in Presidential elections between 1996 and 2000, and Republicans gained 0.4 to 0.7 percentage points in the towns that broadcast Fox News. Fox News exemplifies the dramatic effect the news media has on the electorate and what happens when one media mogul with a political agenda builds an empire that becomes one of the largest media corporations in the world.

With the consolidation of media power, the pool of people that control the vast majority of the industry is ever shrinking. The smaller the pool that controls the news media, the narrower the information reported. Not only is the news oftentimes duplicative and always bound to the outlet’s parent corporation, but the media giants’ cartel-like relationships mean that the differences in reporting between each conglomerate are minor as well. These narrowed choices will themselves be biased by corporate interests. As noted, the political power held by the dominant media firms is readily used to make conditions more favorable for their growth and profit; likewise, they use their messaging power to enhance the social and economic values that are favorable to the corporate world.

Additionally, media giants are not only global corporations themselves, but are invested in other million- and billion-dollar industries. They are not stand-alone companies with isolated interests. Media conglomerates make money off of advertising, which holds influence over reporting and broadcasting. Beyond even this, however, the media giants have physical and financial ties to other industries. Interlocking directorates, revolving doors of personnel and financial stakes and holdings connect the corporate media to the state, the Pentagon, defense and arms manufacturers and the oil industry. Our free press, which assures “government by consent of the governed,” is in bed with the captains of industry and profiteers of war.