October 18, 2021
This October, as Americans mark another Breast Cancer Awareness Month, many organizations and advocates are looking for ways to support the cause. But The Daily Beast reports, there’s one group that donors may wan to avoid: The American Breast Cancer Coalition.
Although it sounds like a noble charity, the ABCC actually is a political group—a political action committee (PAC)—and rather than trying to actually address breast cancer, the ABCC appears to be a scheme to extract millions of dollars in donations, mostly from small contributors.
In recent robocalls, a feminine voice claims the goal of the group’s fundraising is to “support legislators who will fight for the fast-track approval of life-saving breast cancer health bills and breast cancer treatment drugs to the FDA.”
But financial records on file with the Internal Revenue Service tell a different story—reviewed in a joint investigation between The Daily Beast and OpenSecrets—revealing payments to firms with ties to a multimillion-dollar “scam PAC” network.
In May 2019, Bill Davis created the nonprofit, and the group quickly started raising money.
In the space of two years, ABCC has brought in nearly $3.57 million, according to IRS filings. But the nonprofit has so far paid nearly every dollar it has raised to fundraising companies. According to The Daily Beast, some of those companies even have ties to a telemarketing kingpin who was fined $56 million last year for bilking donors out of tens of millions of dollars in fake charity contributions.
What’s more, it’s not alone.
The ABCC is just one of a number of political groups masquerading as charities, known broadly as “scam PACs.” These shady organizations purport to raise money for a number of heart-tugging issues—e.g., law enforcement, wounded veterans, firefighters, children with disabilities—but plow nearly every dollar back into raising more money, often in major payouts to the same network of shady telemarketing companies and other firms.
By registering as a political group instead of a charity organization, scam PACs can usually operate in a legal gray area beyond the reach of authorities that regulate campaign finance and nonprofit activity.
But the ABCC case is even more brazen. Even though the ABCC is a PAC, unlike typical scam PACs, it has not registered with the Federal Election Commission. Instead, it has registered with the IRS as a “527” political group—an apparently recent (and legal) tactical shift to make investigations more difficult for the public, the press, and regulators.
Political groups known as 527s—so named after a section of the tax code that governs their operations—are tax-exempt nonprofits that are supposed to operate primarily to influence the “selection, nomination, election, appointment, or defeat of candidates for federal, state, or local public office.”
While 527s are allowed to make expenditures for reasons that do not relate to political campaign activities, such as lobbying, those groups may be subject to taxes on activities that do not further political purposes.
Any political group whose “major purpose” is the nomination or election of federal candidates is required to register with the FEC as a federal political committee. But these 527 groups are not subject to FEC oversight, and are often called “shadow groups.”
The IRS does require 527s to disclose and itemize all contributors that give more than $200 in a calendar year, as well as the expenditures that they make. But unlike federal political committees, whose contribution and expenditure data is readily searchable on the FEC website, information about these 527s is largely locked away in PDF files with the IRS and difficult to find and digest.
A number of 527 “shadow groups” share the same familiar raising and spending patterns. Among them are the Cancer Recovery Action Network, the National Cancer Alliance, the National Committee for Volunteer Firefighters, the American Police Officers Alliance, the National Coalition for Disabled Veterans and several similarly named organizations, which all pay a network of loosely affiliated companies.
Eric Friedman, head of Maryland’s Montgomery County Department of Consumer Protection, has spent the last two years unraveling these networks. In 2019, he busted a ring of scam PACs, and asked the FEC to investigate a group called the Breast Cancer Health Council.
Speaking to The Daily Beast, Friedman likened the task to an “almost impossible” game of whack-a-mole, and said his small research team had also noted that groups have shifted from FEC-registered PACs to 527s.
“Scammers are clever and constantly moving. So it looks like the trajectory started as phony charities, [which] then decided they were better off operating as phony FEC groups, and now the latest transition—just in time for Halloween, I guess—is to be a phony PAC registered with the IRS instead of with the FEC,” Friedman said.
Asked why these groups have made the new shift, Friedman said it was complicated, “but the short of it is that it’s easier to hide what they’re doing, so we’re now looking at that phase of the scam.”
Lloyd Mayer, a nonprofit law expert at the University of Notre Dame Law School, explained why the change poses a new hurdle.
“The obvious reason to move away from being a federal political committee to a 527 is the FEC actually has a full staff look at all reports that are filed. The IRS could do that in theory, but they don’t,” Mayer said, noting that the available IRS staff—already stretched thin—is “an order of magnitude” smaller for this work.
“No one is looking to see if the filings make sense, if the math is correct, if the numbers are semi-accurate,” he added. “You could shade them, lie, misrepresent, fudge, make it hard to see.”
Phil Hackney, a nationally recognized nonprofit law expert at the University of Pittsburgh School of Law, said he is most frequently concerned about the opposite scheme—political groups posing as nonprofits—and had never seen this approach.
“I don’t know of anybody looking at the question of someone using a 527 as a vehicle to carry out a scam. It’s actually hard to say something about it, because you don’t have a body of law addressing vehicles being used in this way, and I’m not sure if you could use tax law to crack down,” Hackney said.
But he noted that the Federal Trade Commission and state attorneys general may have jurisdiction “regarding consumer interest protections and possible wire fraud,” an observation shared by multiple campaign finance and nonprofit law experts.
Research contact @thedailybeast
