ALEC facing funding crisis from donor exodus in wake of Trayvon Martin row• Rightwing lobby group appealing to major donors to return
• Internal documents reveal so-called 'Prodigal Son Project'
• Network lost almost 400 state legislators over past two years
Jeb Bush speaks at Alec's 40th annual meeting in August. Alec has
identified more than 40 lapsed corporate members. Photo: M Spencer
An influential US lobbying network of Republican politicians and big
businesses is seeking to avert a looming funding crisis by appealing to
major donors that have abandoned it over the past two years following
criticism of its policy on gun laws.
The Guardian has learned that
the American Legislative Exchange Council (Alec), which shapes and
promotes legislation at state level across the US, has identified more
than 40 lapsed corporate members it wants to attract back into the fold
under a scheme referred to in its documents as the "Prodigal Son
The target firms include commercial giants such as Amazon, Coca-Cola, General Electric, Kraft, McDonald's and Walmart, all of which cut ties with the group following the furore over the killing of the unarmed black teenager Trayvon Martin in Florida in February 2012.
Alec was embroiled in the controversy surrounding Florida's 2005 "stand-your-ground" law
under which George Zimmerman, the neighbourhood watch volunteer who
shot and killed the 17-year-old Martin, initially claimed self-defence.
The Florida law was picked up by Alec, and, working in partnership with
the National Rifle Association, used as a template for one of its "model bills", which was then taken up by other states across the country.
Guardian has learned that by Alec's own reckoning the network has lost
almost 400 state legislators from its membership over the past two
years, as well as more than 60 corporations that form the core of its
funding. In the first six months of this year it suffered a hole in its
budget of more than a third of its projected income.
to the Prodigal Son Project is just one of many revelations contained
in a batch of internal Alec documents that have been obtained by the
Guardian. The documents, prepared for its most recent annual board
meeting in Chicago in August, cast light on the inner workings of the
They show that:
• Alec has set up a separate sister group called the "Jeffersonian Project"
amid concerns over possible government inquiries into whether its
activities constitute lobbying – which would threaten its tax-exempt
• the network has suffered a decline in its membership among state-based Republicans and among big corporations following the Trayvon Martin controversy;
• its income raised from conferences, membership fees and donations has fallen short, leaving the group with a potential funding crisis;
draft agreement prepared for the board meeting proposed that Alec's
chairs in each of the 50 states, who are drawn from senior legislators,
should be required to put the interests of the organisation first, thus setting up a possible conflict of interest with the voters who elected them;
• Alec also considered extending its remit to include the gambling industry, particularly online gambling, as a possible source of new members and revenue.
Alec reconvenes for its next nationwide meeting, described as a "states and nation policy summit",
on Wednesday in Washington. The three-day event will be attended by
hundreds of state legislators and corporate representatives.
sign of the influence the network holds with Republicans, it will be
addressed by rising stars of the party including US senator Ted Cruz of
Texas, who led the push for the recent government shutdown, and the
party's budget guru, Paul Ryan of Wisconsin.
The network also
counts among its former members the two highest ranking Republicans in
the House of Representatives, John Boehner and Eric Cantor, as well as
prominent Republican governors such as Scott Walker of Wisconsin and
John Kasich of Ohio.
The documents seen by the Guardian show that
Alec is hoping to avoid legal, tax and ethical challenges by creating a
separate sister organisation it calls the "Jeffersonian Project". The
new body would be categorised as a 501(c)(4) social welfare
organisation, a designation that would allow Alec to be far more overt
in its lobbying activities than its current charitable status as a
"Any activity that could be done by Alec may be done by
Jeffersonian Project if legal counsel advises it would provide greater
legal protection or lessen ethics concerns," a note on the proposed new body
to Alec's board of directors says. The note adds that the Jeffersonian
Project would remove "questions of ethical violations made by our
critics and state ethics boards and provides further legal protection".
critics have accused it of violating tax laws by lobbying on behalf of
rightwing legislation that advances the interests of its corporate
members. Among the areas that Alec has pursued aggressively in the form of model bills are measures to privatise public education, cut taxes, reduce public employee compensation and workplace rights, oppose Obamacare and resist state action to reduce global warming gas emissions.
letter included among the documents from Alec's lawyer, Alan Dye, warns
that "though we do not believe that any activity carried on by Alec is
lobbying, the IRS could disagree". It also makes clear that major
potential donors are holding back because they are anxious about Alec's
"Alec has been approached by donors who are willing to
make sizable donations, but insist that the donations go to a section
501(c)(4) organization," Dye writes.
Lisa Graves, executive director of the Center for Media and
Democracy, which monitors Alec's activities, said the Jeffersonian
Project laid bare Alec's internal concerns about the tax rules and the
perceived need to take steps to avoid getting into trouble. "It should
have disclosed its lobbying long ago," she said.
But Alec's senior
director of public affairs, Bill Meierling, insisted that the group
complies with all state and federal tax laws. He said the creation of
the Jeffersonian Project "does not indicate a desire to avoid trouble;
it illustrates a desire for compliance with the law".
also be proactive, rather than reactive. "We are preparing for the
possibility of future change that may alter the way we communicate with
The Obama administration last week signaled its intention to get tough on tax-exempt organisations that stray into the political realm.
Alec is not directly affected by the new rules as it does not engage in
election campaigning, but more intense federal scrutiny could have
Meierling insisted that Alec does not
lobby in any state. It "provides non-partisan study, research and
analysis on policy issues, and nothing more. Alec does not advocate the
passage of specific legislation; it discusses the impact of potential
policies on the American people."
Alec's own internal records of
its membership states that it has 1,810 state legislators on its
membership books – amounting to almost a quarter of all elected
representatives at state level across the nation. That support base has
declined though over the past two years, from a peak in 2011 of 2,200,
underlining the structural problems that the group faces in the wake of
the Trayvon Martin outrage.
Alec has also suffered heavy losses in its private backing from
corporate members that have declined from a similar 2011 peak of 280 to
214. Among the documents are Alec's own list of 38 companies that have
allowed their membership to lapse, including The Home Depot, the
over-50s organisation AARP, healthcare insurers such as WellPoint and
the pharmaceutical company Roche Diagnostics.
The documents show that Alec has struggled to hold on to members from the financial services industry. A note records that "many of these companies failed to renew at Alec due to controversy".
group accepts that it has lost members in recent months, but puts it
down to normal cyclical pressures. "No one disputes that Alec lost
public and private members during the past several years, but Alec and
its members work on issues relevant to the American people and will
continue to do so long into the future," Meierling said.
that "companies do not like controversy of any sort. It is also clear
that – whether true or untrue – accusations made of Alec cost members."
But he said the network intended to regain the trust of lapsed members by focusing on "transparency and engagement".
the decline in both public and private membership is starting to have
an impact on Alec's financial health, the documents show. Over the first
six months of this year, the network suffered a shortfall on its
projected budget of $547,500 in sponsorship of its thrice-yearly
national conferences, and a further shortfall of $440,792 on its general
support from memberships.
By 30 June this year it had developed a hole in its income of $1.4m on expected dues of $3.9m.
said that its financial challenges did not amount to a crisis, though
it admitted that there had been a shortfall in projected income.
the losses, Alec continues to be supported by some of the largest
rightwing foundations in the country, including the energy tycoons the Koch brothers, the Bradley Foundation and the Searle Freedom Trust set up by the creator of NutraSweet. Alec's list of corporate members includes companies such as the telecoms firm AT&T, energy concerns Exxon Mobil and Peabody Energy, the pharma company Pfizer, drinks giant Diageo and the tobacco multinational Altria.
the hole in Alec's budget still has to be filled, lending urgency to
the push to regain lapsed members referred to in the documents as the
Prodigal Son Project. Meierling said no "specific, named project
exists", but he added that "it is reasonable for any organisation to be
interested in engagement with former members".
A total of 41
companies are listed by Alec as targets to be lured back into
membership. Of those, only one – Wells Fargo – is known to be still
funding the network, acting as a sponsor of the August board meeting in Chicago.
is one of the companies that withdrew its membership of Alec in May
2012 complaining that the organisation had strayed from its core mission
to advance free-market policies and that the "divide between [its]
activities and our purpose as a business has become too wide". In April
2012, in the wake of criticism from Walmart and others, Alec shut down
its Public Safety and Elections Task Force, which had been responsible
for the stand-your-ground law as well as controversial voter suppression legislation.
Walmart continues to keep its distance. A company spokesperson, Lorenzo
Lopez, told the Guardian: "We don't have any current plans to rejoin
Coca-Cola was also asked whether they had plans to rejoin, but did not comment.
Graves said that the difficulty the network was having in attracting
back major corporate sponsors showed how vulnerable the network is to
public scrutiny. "This is a reflection of the power of sunlight on their
activities – for too many years they were operating largely in secret.
Corporations are sensitive to these issues."
obtained by the Guardian include a variety of papers prepared for Alec's
board of directors. To give a full and fair picture of the
organisation, the Guardian is publishing all of the documents.
them is a draft agreement that was prepared for Alec's board of
directors that set out the proposed responsibilities of the group's
state chairs from prominent, largely Republican, legislators. The draft
agreement contains the proposed commitment from state chairs that: "I will act with care and loyalty and put the interests of the organization first."
The duty of elected politicians to put the
interests of Alec first, with no mention of their obligations to the
voters who put them in office, would have set up an apparent conflict of
interest. But Alec said that the draft agreement was not adopted by the
membership committee or by any of the state chairs. "All legislators
are beholden to their constituents' interests first – if they are not,
they will be held accountable at the ballot box," Meierling said.
document prepared for the board meeting reveals that Alec considered
expanding its area of interests to take in gambling, specifically online
gambling and sports betting. The position paper notes
that $37bn in revenue was generated by gambling in the US last year,
providing a potentially lucrative source of new corporate members – it
lists giant casino operators such as Las Vegas Sands, MGM and Wynn
Resorts as potential draws. "This industry is very large and regulated
by the states. We believe they would have a strong interest in Alec."
Meierling said that the proposal was not taken up. The Alec board,
consisting solely of state legislators, rejected the gambling plan.
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