Courtesy of Pam Martens.
US Tea Party Was Formed by Koch's Citizens for a Sound Economy in 2002.
There are IRS scandals and then there are IRS Scandals – with a capital S. Last year, we reported on the capital S kind. For decades, billionaires Charles and David Koch had secretly owned shares giving them 50 percent ownership of the Cato Institute – a 501(c)(3) nonprofit organization subsidized by the taxpayer – while pushing a deregulatory agenda for big business. Today, Cato is functioning as a megaphone to spin the current flap over the IRS to advance its agenda.
Before the news broke in 2012 of the Kochs’ ownership in Cato, most of America believed that nonprofits could not be owned by individuals and were required under the law to have a freely elected Board of Directors. (Charles Koch had found a loophole in the law in Kansas where Cato was originally formed.) The Internal Revenue Service warns that charitable organizations like the Cato Institute, organized as a 501(c)(3) “must not be organized or operated for the benefit of private interests…” But last year, following the death of another shareholder, Charles and David Koch filed a lawsuit to assert their shareholder rights at Cato, making it clear private interests were behind a dark curtain at the Institute.
The Koch brothers, majority owners of the super secretive private conglomerate, Koch Industries, have direct links to the current furor over the IRS singling out the Tea Party for extra scrutiny when new applicants apply to the IRS for tax-exempt status using the name Tea Party in their registrant title. In 1984 the Koch brothers spearheaded the creation of Citizens for a Sound Economy (CSE), which started its first Tea Party in 2002. CSE was a nonprofit front for the interests of Koch Industries and Big Tobacco, receiving $5.3 million between 1991 and 2002 from Philip Morris and other tobacco companies. CSE evolved into another Koch brothers’ created nonprofit, Americans for Prosperity, which ramped up the formation of Tea Parties, while reporting to David Koch on the success of the project.
Last year, as the Kochs battled to take control of Cato, a Senior Fellow at the Institute, Jerry Taylor, shared an insider’s take with a blogging friend, Jonathan Adler, on what was motivating the Kochs. Taylor gave permission to Adler to share his statement. “The answer was given in early November of last year when David Koch, Richard Fink (he of many Koch hats), and Kevin Gentry met with Cato board chairman Bob Levy. They told Bob that they intended to use their board majority to remove Ed Crane from Cato and transform our Institute into an intellectual ammo-shop for Americans for Prosperity and other allied (presumably, Koch-controlled) organizations.”
In June of 2012, the dispute was ended with the Kochs agreeing to end the share ownership structure at Cato and Cato caving in to lots of Koch cronies on the Board, including David Koch and others with direct ties to CSE and Americans for Prosperity.
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