Investigations  
comments_image Comments

Corporate Frontman Known as 'Dr. Evil' Makes a Fine Living Attacking Charities

Millionaire PR operative and lobbyist Richard Berman and his shadowy web of corporate-front organizations rake in the dough by trashing public interest groups.
 
 
Share
 
 
 
 

Editor's Note: Reprinted by permission of The Humane Society of the United States.

If charity does indeed begin at home, in the case of Richard Berman, it starts in a $3 million, 8,800-square-foot mansion he shares with his second wife in McLean, Va. One of his first decisions in a day of many is whether to drive the Bentley or the Ferrari to work. On this particular spring morning, he goes with the Bentley.

Capable of zero to 60 in 4.4 seconds, the commute to his Washington D.C. office is no doubt enjoyable, even if the car’s 500-plus horsepower is bridled in congestion. He glides into his parking garage in the K Street corridor, gently backs the Bentley into a reserved spot and exits the car, clutching a bundle of newspapers under his arm.

He walks with a quick, determined gait to the elevator that takes him to his office, Berman and Co., a public relations/lobbying firm that consumes the entire eighth floor.  According to one visitor, the bustling office has all the appearances of a political boiler-room operation, a roomful of 25 to 30 young adults fervently attending to their computers and phones.  The walls are covered with ornate, mill-worked wood, and there is a constant stream of visitors.

But this is no ordinary PR operation. This is where white-knuckle lobbying and media buys merge with a handful of public charities Berman has created to spin and cajole public perception on a variety of issues. But for the most part, he attacks and intimidates those with contrary views, and under the banner of the public good serves the agendas of corporate America.

His targets are mostly activist charities that criticize or have conflicting views with big business. Organizations like The Humane Society of the United States, the Centers for Disease Control and Prevention, Mothers Against Drunk Driving, the Center for Science in the Public Interest. He also takes direct aim against labor unions and any politician who lines up on their side.  His strategy: Shoot the messenger.

When it comes to debate over such issues as animal welfare, blood-alcohol levels, minimum wage, union organizing, trans fats, sugar or mercury in fish, Berman is on the attack.  And his advocacy is always in step with his client list.

His Rolodex contains a far-reaching array of big-business interests in the tobacco, alcohol, restaurant and food industries. His political alliances run the gamut, from Newt Gingrich to George McGovern. But his political contributions show he prefers Republicans. His aggressive, shrill media campaigns have earned him the nickname—Dr. Evil.  It’s a moniker he cherishes.  Berman loves a fistfight, and will gladly cross the street to engage. 

“Richard Berman is a professional antagonist, trying to discredit people who are doing good in the world,” said Wayne Pacelle, President and CEO of The Humane Society of the United States “He does not seek sensible discourse; he simply sees HSUS as a pathway for enrichment ... This guy has developed a cottage industry attacking public interest organizations.”

Advocacy is Washington D.C.’s biggest business. And in a city crammed with PR/lobbying firms, charities and think tanks, Berman has emerged as one of its most controversial players, essentially because of the business model he has adopted and refined. It is commonplace for lawyers, lobbyists and PR types to labor on behalf of their clients’ bottom line, but real money, Berman has discovered, can come from charity.

It works like this:

Berman identifies issues that threaten the profit margins of the food and beverage industries—many of them clients—and establishes a tax-exempt public charity to raise money. In most cases, he appoints himself as executive director and appoints a board, often with ties to the food and beverage industries.  The charity established, he raises millions of dollars each year and then hires himself and his for-profit PR firm to do research, run ad campaigns and start websites.  His annual management fees run in the millions.

For example: Berman created a 501(c)(3) charity, the Center for Consumer Freedom (CCF) in 2002 to “educate the public on food and beverage issues.”  Berman generated more than $20 million in contributions to CCF through 2008 (he has yet to file his 2009 tax documents). Nearly half of that—more than $9 million—was paid to Berman and Co., of which Berman is the president and sole owner, or to Berman directly, in management fees and expenses, according to an analysis of his IRS tax returns.

In 2008, his charity reported $1.5 million in revenue, mostly from donations; Berman and Co. and Berman were paid nearly $1.4 million.

And that is just one of his charities. Berman and his company received at least an additional $17 million in management fees and compensation since 1997, according to a review of tax returns for three of his other charities. In short, the Berman public charity/private sector business model, which he controls from both ends, has made him a wealthy man.

Berman declined to be interviewed for this story, but during an in February, he offered this about the many websites he has created to push his message:

“I start a lot of these myself because I believe in them. Then I go to people and I say, ‘Listen, this is what I’m doing, and if your beliefs are consistent with mine, will you help me get this thing out?’ … I don’t say things I don’t believe.”

And when asked who those people are who decide to donate to his charities, Berman simply says, it’s none of your business.  MSNBC’s Maddow tried. CBS’ Morley Safer tried. But Berman is right: Public charities do not have to disclose the identities of their donors, and virtually none of them do.

Genesis

But a growing suspicion, inside Washington and beyond, is that Berman is simply funneling millions from anonymous corporate donors and trade associations into his own pocket.  That is the underlying premise in a November 2004 IRS complaint filed by Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington.

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.

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.

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 an abrupt upheaval in its board of directors. Berman, the executive director, was the only survivor.

“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.

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: