ALEC, “Shadowy Group” Behind State Efforts To Sabotage Health Reform Faces Heat From IRS

Last August I wrote an in-depth piece about the American Legislative Exchange Council (ALEC), “a powerful but ‘discreet group’ that counts some 2,000 conservative state legislators as well as representatives from some of the nation’s largest industries as members.” The focus of that post was the prominent role ALEC has taken in organizing state-level resistance to the health reform law. The Council drafted model legislation entitled the “Freedom of Choice in Health Care Act” that has served as the basis for laws passed by eight states (including Virginia, Idaho, and Arizona) and has been “introduced or announced” in 42 others. This law would block any state or federal “public option,” bar the individual mandate and obviate other major provisions of the Affordable Care Act. According to the Council, the mission of ALEC’s health and human services care task force is to promote “free-market, pro-patient health care reforms at the state level.”

Today, Common Cause, a political watchdog group, filed a complaint with the Internal Revenue Service accusing the American Legislative Exchange Council of violating its tax-exempt status by lobbying state legislators. The Council, which is registered as a public charity under section 501(c)(3) of the tax code, recently made headlines because of its support of gun-rights bills similar to the “Stand Your Ground” statute at the center of the Trayvon Martin killing in Florida; advancing laws that weaken labor unions; and support for tougher voter registration rules. Most recently, ALEC has been under scrutiny for its intensive lobbying efforts to convince state legislators to oppose legislation  that would make it easier to recover money from businesses that defraud the state.

The New York Times reported yesterday that documents and records obtained by an investigation by the paper and Common Cause  “offer a glimpse of how special interests effectively turn ALEC’s lawmaker members into stealth lobbyists, providing them with talking points, signaling how they should vote and collaborating on bills affecting hundreds of issues like school vouchers and tobacco taxes.

“The documents — hundreds of pages of minutes of private meetings, member e-mail alerts and correspondence — were obtained by the watchdog group Common Cause and shared with The New York Times. Common Cause, which said it got some of the documents from a whistle-blower and others from public record requests in state legislatures, is using the files to support an Internal Revenue Service complaint asserting that ALEC has abused its tax-exempt status, something ALEC denies.”

In my piece I explain how as part of their campaign against the Affordable Care Act, ALEC  published “The State Legislators Guide to Repealing ObamaCare”, which urges lawmakers to “decline to build the ObamaCare edifice” and offers 14 practical steps states can take to undo or impede the Affordable Care Act. These steps include having states return federal grants for setting up health insurance exchanges, encouraging them to opt completely out of Medicaid, and urging them to file federal waiver petitions to block the medical loss ratio requirement (the new rule requiring insurers to spend 80-85% of premiums on patient care). At that time I wrote, “The last time the states were rallied to rise up against federal legislation was during the civil rights battle over forced integration of schools.”

I am reposting much of this piece below because it illustrates how ALEC consistently flaunts its tax-exempt status; relying primarily on industry funding to lobby conservative legislators to protect their interests–very often at the expense of public health, education and civil rights:

“Although ALEC bills itself as the voice of conservative state legislators, the real voice—and most of the money—comes from powerful corporate interests. ALEC’s membership lists ‘thousands of state legislators,’ who pay token dues of $50 each that account for slightly more than 1% of the group’s funding. According to the Center on Media and Democracy, a non-profit investigative reporting group, the other 98% of ALEC’s funding comes from hundreds of large corporations including Exxon Mobil, Kraft and Altria (formerly Phillip Morris); conservative foundations like Heritage and those bankrolled by Koch Industries and Peter Coors; as well as trade associations like the American Petroleum Institute, the American Rifle Association and PhRMA. Only membership dues are reported in tax filings; ‘gifts’ from corporate members that in some cases have totaled well over $1 million in the past decade add to the group’s coffers and have only recently been unearthed by groups like CMD and the National Institute for Money in State Politics. ‘Those funds help subsidize legislators’ trips to ALEC meetings, where they are wined, dined, and handed ‘model’ legislation to make law in their state,’ writes CMD’s executive director Lisa Graves. ”

[The recent Times investigation provides more detail: “Some companies give much more, all of it tax deductible: AT&T, Pfizer and Reynolds American each contributed $130,000 to $398,000, according to a copy of ALEC’s 2010 tax returns, obtained by The Times, that included donors’ names, which are normally withheld from public inspection.”]

“Corporate representatives sit on and co-chair (with Republican state legislators) ‘task forces’ that approve ‘legal rules that reach into almost every area of American life: worker and consumer rights, education, the rights of Americans injured or killed by corporations, taxes, health care, immigration, and the quality of the air we breathe and the water we drink,’ according to Graves. Click here to see the CMD’s full report on ALEC, details on the Council’s membership, funding and, for the first time, listings of over 800 ‘model bills’ jointly crafted by its corporate and state legislative members.

As a veritable font of pro-industry legislation (826 bills either drafted or backed by the group were introduced in the states in 2009 and 115 were enacted into law) ALEC is deeply in the pocket of private interests. Elected officials who introduce their bills are disingenuous if they claim to be acting in the interest of their voting constituents. They are more likely to be advancing the agenda of corporate America—often to the detriment of consumers, the environment and public health.

According to the American Association for Justice (a trial lawyers group), ‘ALEC’s campaigns and model legislation have run the gamut of issues, but all have either protected or promoted a corporate revenue stream, often at the expense of consumers.’ Initiatives have included working on behalf of oil companies to undermine the science of climate change; helping pharmaceutical companies block states from importing cheaper prescription drugs; and reducing taxes on tobacco products.

In terms of health care, Wendell Potter, a former health care executive and CMD’s Senior Fellow on Health Care, writes in The Nation, ‘As its archive reveals, ALEC has been at work for more than a decade on what amounts to a comprehensive wish list for insurers: from turning over the Medicare and Medicaid programs to them—assuring them a vast new stream of revenue—to letting insurers continue marketing substandard yet highly profitable policies while giving them protection from litigation.’ This includes model bills that allow insurers to sell products across state lines—including “junk insurance” and very high-deductible plans—even though they may not meet the standards of state insurance commissions.

The 2011 ALEC manifesto is more of the same from this group. But thanks to the treasure trove of information now made public by the Center for Media and Democracy’s “ALEC Exposed” site, the Council’s work has been put under a brighter spotlight. ProPublica has published a “Step-by-Step Guide” for journalists to help them (and the public) understand how ALEC influences state laws—as well as a searchable database of ALEC corporate members donations and the state legislators they influence. Consumer groups and media outlets are starting to delve into this newly available data and publicize the outsized influence of ALEC’s corporate partners on state legislation.”

In my original post I wrote that in July 2011 Common Cause had “called for an Internal Revenue Service audit of ALEC, charging that the group ‘may have filed false tax returns and put its tax-exempt, charitable status at risk.’ In a letter to the IRS, the government watch-dog group wrote, ‘it seems incontrovertible that ALEC is substantially and indeed primarily engaged in attempting to influence legislation [i.e. engaged in lobbying]… All of its efforts are geared toward developing and promoting favored state legislation. These proposals are generated in a private process where the business interests of its corporate members are highlighted, then shared only with the organization’s legislator members so they can take the proposals back to their states and introduce them as their own idea.’

Supporters of health reform and its planned roll-out in the states need to cut through the consumer-friendly façade of proposed laws that mimic ALEC’s legal models, and they need to highlight the complicit role of national corporate interests. Rather than protecting patient rights, ALEC’s recent call to state legislators to block the “ObamaCare edifice” is nothing more than a brazen attempt to protect the profits of insurance companies, pharmaceutical companies and other entrenched players whose actions have helped drive up health care spending to the crisis levels we are currently experiencing.”

It’s heartening that now, some nine months later, ALEC is finally feeling the heat of an IRS investigation. Perhaps it was the recent unwanted attention the Council has received for its lobbying in support of “Stand Your Ground” laws; perhaps it’s the group’s insidious efforts to get states to repeal new rules that make it easier to get money back from fraudulent businesses. But as the national health reform law faces an uncertain future, it’s even more important that efforts by shadowy groups like ALEC to effect state-level health policy be unmasked as the self-interested doings of industry-funded lobbyists; not the consumer advocates they pretend to be.