Overview

When is a foundation not a foundation? When it gives away other foundations’ money.

Most of America’s big-money philanthropies trace their largesse back to one or two wealthy contributors. The Pew Charitable Trusts was funded by Joseph Pew’s Sun Oil Company earnings, the David & Lucille Packard Foundation got its endowment from the Hewlett-Packard fortune, the Charles Stewart Mott Foundation grew out of General Motors profits, and so on. In most cases, the donors’ descendants manage and invest these huge piles of money, distributing a portion each year to nonprofit groups of all kinds (the IRS insists that at least 5 percent is given away each year). This is the way philanthropic grantmaking has worked for over a century: whether a given endowment’s bottom line occupies six digits or twelve, the basic idea has remained the same.

Now comes the Tides Foundation and its recent offshoot, the Tides Center, creating a new model for grantmaking — one that strains the boundaries of U.S. tax law in the pursuit of its leftist, activist goals.

Set up in 1976 by California activist Drummond Pike, Tides does two things better than any other foundation or charity in the U.S. today: it routinely obscures the sources of its tax-exempt millions, and makes it difficult (if not impossible) to discern how the funds are actually being used.

In practice, “Tides” behaves less like a philanthropy than a money-laundering enterprise (apologies to Procter & Gamble), taking money from other foundations and spending it as the donor requires. Called donor-advised giving, this pass-through funding vehicle provides public-relations insulation for the money’s original donors. By using Tides to funnel its capital, a large public charity can indirectly fund a project with which it would prefer not to be directly identified in public. Drummond Pike has reinforced this view, telling The Chronicle of Philanthropy: “Anonymity is very important to most of the people we work with.”

In order to get an idea of the massive scale on which the Tides Foundation plays its shell game, consider that Tides has collected over $200 million since 1997, most of it from other foundations. The list of grantees who eventually received these funds includes many of the most notorious anti-consumer groups in U.S. history: Greenpeace, the Natural Resources Defense Council (NRDC), Environmental Media Services, Environmental Working Group, and even fringe groups like the now-defunct Mothers & Others for a Livable Planet (which used actress Meryl Streep to “front” the 1989 Alar-on-apples health scare fraud for NRDC).

For corporations and other organizations that eventually find themselves in these grantees’ crosshairs, there is practically no way to find out where their money originated. For the general public, the money trail ends at Tides’ front door. In many cases, even the eventual recipient of the funding has no idea how Tides got it in the first place.

Remarkably, all of this appears to be perfectly legal. The IRS has traditionally been friendly toward this “donor-advised” giving model, because in theory it allows people who don’t have millions of dollars to use an existing philanthropy as a “fiscal sponsor.” This allows them to distribute their money to worthwhile charities, while avoiding the overhead expenses of setting up a whole new foundation.

In practice, though, the Tides Foundation has turned this well-meaning idea on its head. When traditional foundations give millions of dollars to Tides, they’re not required to tell the IRS anything about the grants’ eventual purposes. Some document it anyway; most do not. When Tides files its annual tax return, of course, it has to document where its donations went — but not where they came from.

Where the Money Comes From

The Tides Foundation is quickly becoming the 800-pound gorilla of radical activist funding, and this couldn’t happen without a nine-figure balance sheet. Just about every big name in the world of public grantmaking lists Tides as a major recipient. Anyone who has heard the closing moments of a National Public Radio news broadcast is familiar with these names.

In 1999 alone, Tides took in an astounding $42.9 million. It gave out $31.1 million in grants that year, and applied the rest to a balance sheet whose bottom line is over $120 million. Since 1996, one foundation alone (the Pew Charitable Trusts) has poured over $40 million into Tides. And at least 17 others have made grants to Tides in excess of $100,000.

The Tides Center: A Legal Spin-Off

While Tides makes its name by facilitating large pass-through grants to outside groups, many of Tides’ grantees are essentially activist startups. Part of Tides’ overall plan is to provide day-to-day assistance to the younger groups that it “incubates.” This can translate into program expertise, human resources and benefits management, assistance with facilities leasing, and even help with public relations and media. Tides typically charges groups 8 percent of their gross income for these services.

Until recently, these administrative functions were provided to grantees by the Tides Foundation itself. But in order to limit exposure to any lawsuits that might be filed against its many affiliated groups (many injured parties have considered suing environmental groups in recent years), a new and legally separate entity was born. In 1996 the Tides Center was spun off, insulating the Foundation’s purse and permanently separating Tides’ grantmaking and administrative functions.

Many environmental groups that now operate on their own got their start as a “project” of the Tides Center. These include the Environmental Working Group, Environmental Media Services, and the Natural Resources Defense Council — which was itself founded with a sizable Tides “grant.” The Tides Center began with a seemingly innocent transfer of $9 million from the Tides Foundation. The Center immediately took over the operations of nearly all of the Tides “projects,” and undertook the task of “incubating” dozens more. There are currently over 350 such projects, and the number grows each year.

This practice of “incubation” allows Tides to provide traditional foundations with a unique service. If an existing funder wants to pour money into a specific agenda for which no activist group exists, Tides will start one from scratch. At least 30 of the Tides Center’s current “projects” were created out of thin air in response to the needs of one foundation or another.

The Tides Center board of directors has been especially busy of late. In 2001 the first Tides “franchise” office (not counting Tides’ presence in Washington and New York) was opened in Pittsburgh. This new outpost, called the Tides Center of Western Pennsylvania, was erected largely at the urging of Pittsburgh native Teresa Heinz (the widow of Senator John Heinz, the ketchup heir). Heinz pulls more strings in the foundation world than almost any other old-money socialite; she’s presently married to U.S. Senator John Kerry (D-MA). The Tides Foundation has collaborated on funding projects with the Heinz Endowments (Teresa Heinz’s personal domain) for over 10 years.

The tangled web

The Tides “complex” has established itself as an important funding nexus for movements and causes aligned with leftist ideology. Everyone who’s anyone in the big-money activist world now has some connection to Drummond Pike and his deputies.

Consider that as early as 1989, when the Natural Resources Defense Council (NRDC) wanted to promote the now-infamous health scare about apples and the chemical additive Alar, the Tides Foundation was used as a financial conduit to allow NRDC to pay Fenton’s fees. NRDC was itself set up by Tides, and has since incorporated on its own, one of over a dozen other multi-million dollar former Tides projects to do so.

Fenton Communications, itself a touchstone for radical political campaigns, made use of the Tides Center to set up its Environmental Media Services (EMS) in 1994 (it has also since emerged from under Tides’ protection and formally set up shop in Fenton’s offices). The fact that Tides originally ran EMS’ day-to-day operations provided PR spinmeister David Fenton with “plausible deniability” — a ready-made alibi against charges that this supposedly “nonpartisan” media outfit was just a shill for his paying clients. Now, of course, we all know that it is just that.

Similar stories can be told about SeaWeb, the Environmental Working Group, the National Environmental Trust (formerly known as the Environmental Information Center) and the Center for a Sustainable Economy, each of which received millions while under the Tides umbrella. Besides having been “incubated” in this fashion, the other principal commonality among these organizations is a client relationship with Fenton Communications.

The depth and financial implications of the Tides/Fenton connection is truly impressive, if not surprising. After all, long-time Fenton partner and recently-departed Environmental Media Services chief Arlie Schardt has sat on the board of the Tides Center/Tides Foundation complex since the very beginning. At present, the Fenton Communications client list includes at least 36 Tides grantees, as well as 10 big-money foundations that use Tides as a pass-through funding vehicle just about every year. In some cases, the Tides Foundation has been used to funnel money from one Fenton client to another.

Even taking into account the peculiar relationship between Tides and its in-house “projects,” Tides only spends about 40% of its money on these organizations. The rest goes to other left-leaning grantees, many of which have managers or board members that are connected to Tides in other ways.

For instance, the Tides Center’s corporate registration documents on file in Minnesota show that Institute for Agriculture and Trade Policy (IATP) president Mark Ritchie is its “registered agent.” This might explain why the Tides Foundation has paid over $20,000 to a commercial corporation owned by Ritchie and his brother. It’s a “sustainable coffee” company called Headwaters Inc., which does business with the public using the name Peace Coffee. The Ritchie brothers run this for-profit venture out of the same offices of their nonprofit (IATP), which just happens to advocate society’s total conversion to Peace Coffee’s main product. It’s a clever bit of flim-flammery, and the Tides Foundation has been helping to foot the bill.

This is business as usual for Mark Ritchie, though. He is the mastermind behind several other food-scare and health-scare organizations, all of which get appreciable funding through his Tides connection. A Tides Center “project” called the Trade Research Consortium lists its purpose as “research that illuminates the links between trade, environmental, and social justice.” Ritchie is its only discernable contact person. Similarly, Ritchie’s IATP runs the organic-only food advocacy group Sustain, but has taken great pains to hide this relationship (the group’s Internet domain listing was altered just hours after the connection was noted in an on-line discussion group in 2001). Ritchie also started the Consumer’s Choice Council, a Tides grantee that lobbies for “eco-labels” on everything from soybeans to coffee.

Tides also maintains an interesting relationship with the multi-billion-dollar Pew Charitable Trusts. Since 1993 Pew has used the Tides Foundation and/or Tides Center to “manage” three high-profile journalism initiatives: the Pew Center for Excellence in Journalism, the Pew Center for Civic Journalism, and the Pew Center for the People and the Press. These Pew “Centers” are set up as for-profit media companies, which means that Pew (as a “private foundation”) is legally prohibited from funding them directly. Tides has no such hurdle, so it has gladly raked in over $95 million from Pew since 1990 — taking the standard 8 percent as pure profit.

In practice, the social reformers at the helm of the Pew Charitable Trusts use these media entities to run public opinion polling; to indoctrinate young reporters in “reporting techniques” that are consistent with Pew’s social goals; and to “promote” (read: subsidize) actual reporting and story preparation that meets Pew’s definition of “civic journalism.” Civic journalism, by the way, is defined as reporting that “mobilizes Americans” behind issues that Pew considers important.

Blackeye

Widespread philanthropic support is the best-kept secret of America’s most vocal activist groups, and the people running the foundations will stop at nothing to fund their agendas. By taking advantage of collective-funding pioneers like Tides, even the smallest group can now speak with the weight of an entire activist community. The Tides Foundation exists, in part, to give the Left’s small-fries (and their fringe messages) the collective bullhorn and bankroll necessary to remake society in their image.

With dozens of wealthy foundations bankrolling radical activist groups, a good deal of public philanthropy has become a shell game. The money flows freely, largely undetected, thanks to Tides’ innovative funding vehicles. The many groups that Tides “incubates” (and which operate under Tides’ umbrella) are smart, fierce, and built to last — their targets in industry are just now beginning to learn the size of this organized opposition and its institutional bankroll.

In order to keep the gravy train running, Tides has demonstrated remarkable ingenuity in coming up with unusual funding streams in addition to its mainstays in traditional philanthropy. Consider the following:

When Ben & Jerry’s announced that profits from its popular “Rainforest Crunch” ice cream flavor were earmarked for save-the-earth charities, the mass media swooned. What they didn’t tell you was that 20% of the cut went directly to the Tides Foundation.

In 1999 the Tides Foundation created “eGrants.org,” the first internet-only foundation funding source. Web-savvy leftists can privately give any amount they like to Tides, and earmark it for specific projects. And it’s all tax-deductible.

Back in 1985, Drummond Pike and two colleagues started the Working Assets Funding Service, a for-profit company whose family of credit-card, mutual fund, and long-distance telephone services have grown into a $130 million business. Working Assets lures consumers (over 400,000 so far) with promises of “socially responsible” commerce. A two-percent cut of the profits go to activist causes — funneled, of course, through the Tides Foundation.

Working Assets has itself become a propaganda tool, sending telephone customers monthly bills with political lobbying information tucked inside. These messages always emphasize a leftist perspective, and often contain blatant misinformation. In one such 1999 billing insert, Working Assets urged its customers to call their representatives in Congress and urge support for a “Genetically Engineered Food Right to Know Act.” Their rationale: “[S]tringent food testing is needed to identify [GE foods’] health risks.” Working Assets forgot to mention that genetically modified foods are already tested extensively by the Food and Drug Administration, for an average of over 10 years.

Another 1999 missive from Working Assets called for a permanent ban on the use of antibiotics in livestock feed, claiming that “mounting evidence” indicated that such practices exposed humans to additional health risks. Again, Working Assets showed its strained relationship with the truth. The National Academy of Sciences (NAS) has said that its researchers are “unable to find data directly implicating subtherapeutic doses of antibiotics in livestock with illnesses in people.” An earlier report from NAS ruled: “The assertion that… antibiotics in livestock feed are hazardous to human health has been neither proven nor disproven.”

Scientists from an NAS panel told The New York Times in 1998 that such a ban in agriculture “would cost consumers $1.2 billion to $2.5 billion a year in higher prices for meat and other foods.” In addition, they said, animal diseases might become more widespread without the regular use of antibiotics, thereby increasing the risks to human health. Besides, the Food and Drug Administration already regulates all farm antibiotics, and regularly inspects all manufacturers of “medicated” animal feed.

Motivation

Thumbing Their Noses At America

Among the most unbelievable “projects” of the Tides Center is something called the Institute for Global Communications (www.igc.org). IGC is a clearinghouse for Leftist propagandists of all stripes, including living-wage advocates, anti-war protesters, slave-reparations hucksters, and a wide variety of extreme environmentalists. In February 2002 Orange County Register columnist Steven Greenhut called it “a network of the loony left” that “has to be seen to be believed… One alert posted in an IGC member conference calls for financial support for the Earth Liberation Front… Another message warns readers against cooperating with the FBI.”

The Chronicle of Philanthropy has documented this sort of America-bashing before. In a November 15, 2001 story, the Chronicle reported that the Tides Center had given the Independent Media Center (IMC) $376,000 — ironically, from its “9/11 fund.” IMC is a notorious bastion of far left, radical viewpoints, and also serves as an organizing outpost for all sorts of large-scale protest activity. In particular, the IMC served as a “virtual” staging ground prior to the April 20, 2002 anti-war protests in Washington, DC. Visitors to the IMC web site can read the rantings of “black bloc” anarchists, violent animal-rights criminals, and an assortment of anti-American advocates, all brought to you by the Tides Center and its tax exemption.

Skirting the Tax Law

The Tides Foundation and Tides Center continue to build their activist war chest by exacting an 8 to 9 percent “handling fee” on funds that pass through on their way to other activists. Some monies are awarded as “grants” in the traditional fashion (according to “donor-advised” agreements). It’s impossible to know for sure whose money is being spent for which of these grants. Other funds go toward management services to existing activist organizations in return for a percentage of their gross revenues. In still other examples, the Tides Center offers financial and administrative support for start-up advocacy groups.

In this last case, the Tides Center offers a sort of blanket tax-exempt designation for its grantees and projects. The entire foundation (pun intended) on which the Tides Center is built depends on the notion that the law allows one tax-exempt group to “lend” its exemption to another organization.

The legality of this proposition has never been challenged in court, but Tides’ practice of allowing smaller groups to share “piggyback” tax-exempt status could make its own 501(c)(3) status vulnerable.

In 1997 Larry Wright, an officer with the Northern California District of the IRS, told The San Francisco Bay Guardian that “tax-exempt status is not transferable.” A nonprofit like Tides that holds a tax exemption, he said, legally has to prove that the activities of all of its sponsored “projects” satisfy the same exact tax-exempt purpose for which its own exemption was granted. “You can’t just set up a clearinghouse,” Wright said. “[Tides] can’t pass along its tax-exempt status.”

There ought to be a law. Oops — there is a law. It should be enforced.