Private Benefit/Inurement – Union Busting by Profiting From Nonprofit May Breach IRS Rules
When Smithfield Foods Inc. (SFD) was trying to fend off a union organizing drive at its largest meat-processing plant, it hired public relations executive Rick Berman. They discussed “preparing the nuclear strike,” according to e-mail records. Soon after, a non-profit called the Center for Union Facts began running television ads slamming the “union bosses” who were trying to organize Smithfield’s plant in Tar Heel, North Carolina. That was no coincidence: Berman also runs the center. Berman operates five such nonprofit groups from the offices of his for-profit Washington public relations firm. Those five organizations paid his firm $15 million from 2008 to 2010 for its work, tax records show. Tax lawyers say this arrangement may violate Internal Revenue Service rules that prohibit executives from profiting off the tax-exempt entities they run. IRS rules also require charities to have a public purpose.