• ‚Äč
    • Share to Facebook
    • Twitter
    • Email
    • Print

May 11, 2010

Investigative Report: Richard Berman

Corporate front-man makes a fine living attacking charities

  • LIVING LARGE—The McLean, Va., mansion that is home to Richard Berman, who has established a web of organizations to attack public interest charities and groups on behalf of hidden corporate clients and their agendas. The HSUS

  • LIVING LARGE—The McLean, Va., mansion that is home to Richard Berman, who has established a web of organizations to attack public interest charities and groups on behalf of hidden corporate clients and their agendas. The HSUS

  • LIVING LARGE—The McLean, Va., mansion that is home to Richard Berman, who has established a web of organizations to attack public interest charities and groups on behalf of hidden corporate clients and their agendas. The HSUS

  • LIVING LARGE—The McLean, Va., mansion that is home to Richard Berman, who has established a web of organizations to attack public interest charities and groups on behalf of hidden corporate clients and their agendas. The HSUS

Editor's note: Millionaire PR operative and lobbyist Richard Berman and his shadowy web of corporate-front organizations rake in large sums of money in attacking public interest groups, including The Humane Society of the United States.

The HSUS hired independent journalist Ian T. Shearn to write an investigative report about Berman and the workings of his groups. Shearn, as statehouse Bureau Chief of the Newark Star-Ledger, led a team of reporters that won a 2005 Pulitzer Prize for the newspaper in recognition of its coverage of the resignation of then-Gov. James McGreevey.

Shearn’s distinguished career spanned 29 years as reporter and editor. He is now a freelance writer based in Hillsborough, N.J.

Shearn’s contract required him to identify himself in all encounters as preparing a report for The HSUS. The final product, however, represents his independent reporting and judgment.

This is page 2 of 4. Click here to start at the beginning»

 


 

Berman’s CCF, Sloan wrote in her 23-page letter, was “created and operated expressly for the purpose of trying to protect the interests of the tobacco, alcohol and chain restaurant industries, all within the guise of ‘consumer freedom.""

CCF, originally called the Guest Choice Network, was incorporated in 1999 with a $600,000 donation from the Phillip Morris tobacco company.  Over the ensuing years, Phillip Morris would contribute an additional $2.3 million.  And while Berman has remained steadfast in keeping his donors private, the first breech in the wall came several years ago, when an unnamed former Berman employee publicly revealed a list of corporate funders for 2001 and 2002, which included the likes of Monsanto, Tyson Foods, Coca-Cola and Wendy’s International.

“Berman’s current client list is a virtual who’s who in the chain restaurant industry,” one Phillip Morris executive wrote to another in a 1995 memo.

With friends from the Miller Brewing Co. making an introduction, Berman was able to make a pitch to Phillip Morris tobacco executives in the mid-90s.  Anti-smoking sentiment was growing in the country, and Phillip Morris was doing its best to beat it down. Private Phillip Morris documents that became public during the federal tobacco litigations in the '90s show how the Berman business model was taking form in his attempt to gain business from the tobacco giant. 

“Berman’s current client list is a virtual who’s who in the chain restaurant industry,” one Phillip Morris executive wrote to another in a 1995 memo. “We believe we have found a worthy candidate. ...”

Berman’s idea was this: This isn’t just a tobacco issue. He would form an organization to “unite the restaurant and hospitality industries in a campaign to defend their consumers and marketing programs against attacks from anti-smoking, anti-drinking, anti-meat, etc. activists,” according to a 1995 letter from Berman to Phillip Morris.


VIDEO: Berman drives away in his Bentley.

The other key ingredient of his pitch was that they were fighting a losing battle if they made smoking or drinking the issue. Instead, the debate should be about excessive government regulation that took away people’s free will. 

Wittingly or not, Berman was borrowing pages right out of the playbooks of the abortion and racial equality movements from decades before.  Rights for African-Americans became a matter of “civil rights,” and those who supported abortion rallied around the “pro-choice” banner.

Berman’s appealing strategy, in essence, was simple and clear: Broaden your base, broaden the argument and poke your opponents in the eye.  All he needed was $600,000 to get it going, and Phillip Morris enthusiastically complied. And so, the Guest Choice Network was born in 1999, granted tax-exempt charity status in 2000 and renamed the Center for Consumer Freedom in 2002.  

There are other Berman non-profits, at least five, which have spawned dozens of websites, including:

» American Beverage Institute was created in 1991 to fight government regulation of alcohol consumption issues. Its biggest target is Mothers Against Drunk Driving, which was pushing lower blood-alcohol levels and is now advocating ignition interlock devices for convicted drunk drivers.

» Employment Policies Institute, also created in 1991, which has aggressively opposed federal minimum wage increases and mandated health insurance plans. 

» Center for Union Facts, created in 2006, has taken aim at labor unions and pro-labor legislation, including the Employee Free Choice Act.

  

P's & Q's

It is unclear whether the IRS acted upon Sloan’s complaint, as the federal agency never discloses its investigations, but Berman’s tax returns suggest the agency has shown some interest.  In CCF’s 2006 tax return, legal fees spiked to $130,000, about 10 times the amount of previous years.  In 2007, the charity’s returns showed two of CCF’s five board members — one a Berman and Co. employee, and the other a board member on another one of Berman’s public charities — had been replaced. In the IRS complaint, Sloan had specifically challenged the two directors’ ability to exercise independent judgment because of their conflicting roles with Berman. .

“I think what you are probably seeing,” said Marcus Owen, a former director of the IRS division that handles tax-exempt organizations, "are signs of an IRS audit ...The abrupt change in the board also feels like an IRS settlement demand."

The fact that Berman the philanthropist gives money to Berman the entrepreneur raises “real concerns,” said Owens, who is now in private practice, specializing in federal tax law. “Negotiating with one’s self,” he said, “indicates it’s not an arm’s length transaction,” as required by charity tax law.

Broaden your base, broaden the argument, and poke your opponents in the eye.

Owen’s point is underscored in Berman’s own words during a 2007 deposition in a federal lawsuit brought by Berman over ownership of a documentary film he funded. Following is an exchange between Berman and opposing counsel:

 Q: So the time spent by Berman and Company employees was charged to CCF?
 A: Yes.
 Q: Who at Berman and Company was deciding what time was charged to CCF?
 A: Individuals who work on the projects bill their time, and I determine who is working on the projects.
 Q: And then who on the side of CCF determines whether to pay a bill or not pay one?
 A: I look at the hours billed to see if they’re reasonable.
 Q: If you consider them reasonable, you have CCF pay Berman and Company?
 A: Correct.

» Continue to page 3 of this investigative report 
» Click through to pages 1, 2, 3, 4
» Get a pdf of the full report


 

Author’s note: In a public statement on May 17, a spokesman for Richard Berman noted an error in the above story, regarding a change in the composition of the board of directors at the Center for Consumer Freedom in 2007. That error has now been corrected.

As originally written, the story contained the following paragraph:

It is unclear whether the IRS acted upon Sloan’s complaint, as the federal agency never discloses its investigations, but Berman’s tax returns suggest the agency has shown some interest. In CCF’s 2006 tax return, legal fees spiked to $130,000, about 10 times the amount of previous years. In 2007, the charity’s returns showed an abrupt upheaval in its board of directors. Berman, the executive director, was the only survivor.

The last two sentences have been replaced with the following:

In 2007, the charity’s returns showed two of CCF’s five board members—one a Berman and Co. employee, and the other a board member on another one of Berman’s public charities—had been replaced. In the IRS complaint, Sloan had specifically challenged the two directors’ ability to exercise independent judgment because of their conflicting roles with Berman.

  • Sign Up

    Get updates on our work for animals and how you can help.

  • Log in using one of your preferred sites
    Login Failure
  • Take Action
  • Shop