Press Conference Fiasco over IRS Whistleblower Complaint

The watchdog group Citizens for Ethics and Responsibility in Washington had a big surprise during a conference call with reporters Tuesday to announce the latest complaint CREW had filed with the Internal Revenue Service: the subject of the complaint joined the call and defended himself.

CREW’s executive director Melanie Sloan was in the midst of announcing the whistleblower complaint against conservative attorney James Bopp Jr., his eponymous Bopp Law Firm, and his tax-exempt organization, the James Madison Center for Free Speech. As she responded to reporters’ questions about the IRS whistleblower complaint her group had filed, Bopp crashed the party and began explaining his own position, until he was cut off by CREW officials, who demanded he should organize his own conference call.

According to CREW’s complaint, Bopp’s tax-exempt 501(c)(3) organization, the James Madison Center, misrepresented its activities to divert virtually all of its money into the Bopp Law Firm for Mr. Bopp’s personal enrichment, in violation of prohibitions against using charitable organizations for private inurement and private benefit. As a result, JMCFS and the Bopp Law Firm now owe the IRS more than $6.2 million in back taxes, CREW claimed.  By repeatedly signing and submitting to the IRS inaccurate tax forms, CREW contends that Bopp may have made false statements in violation of federal criminal law. CREW has asked the IRS, the Indiana Attorney General, the U.S. Attorney for the Southern District of Indiana, the Indiana Secretary of State, and the D.C. Department of Consumer and Regulatory Affairs to investigate.

Bopp is best known for representing Citizens United in a case involving the documentary “Hillary: The Movie,” and allegations of campaign finance violations. The case eventually went to the Supreme Court and changed the entire landscape of campaign finance law, opening the door to virtually unlimited amounts of corporate money in political campaigns. While he did not argue the case before the Supreme Court, Bopp’s firm had represented Citizens United in earlier stages of the case and has also represented other conservative groups such as the Republican National Committee, the Republican Governors Association, the National Organization for Marriage, Focus on the Family, the National Right to Life Committee and the Club for Growth. One of the pro-life groups he represents, the Susan B. Anthony List, also provides much of the funding for the James Madison Center for Free Speech.

“The key allegation of the complaint is that the JMCFS, under Mr. Bopp’s control, diverted more than 99 percent of its revenues between 2006 and 2011 to fund legal services by the Bopp Law Firm,” said Sloan. “JMCFS is a 501(c)3 organization that was a public charity until 2008 and is now a private foundation. It’s ostensibly governed by a board of directors, with Mr. Bopp serving as the general counsel. In reality, however, as Mr. Bopp has also stated, he controls JMCFS. Notably one person listed as the JMCFS president has rejected that characterization, claiming only to be a trustee. JMCFS shares offices with the Bopp Law Firm, has no paid staff of its own, no separate phone number, and considers the firm its general counsel. The firm handles all of JMCFS’s management issues, bookkeeping and the filing of IRS returns. For all intents and purposes, the Bopp Law Firm is really the alter-ego of JMCFS. Nevertheless, on its tax forms, its 990s, JMCFS has repeatedly failed to report the Bopp Law Firm as an independent contractor. In essence, this means JMCFS is simply an instrument Bopp is using to pay his legal fees, and this means that donors have been able to take charitable deductions for what would otherwise be nondeductible payments made to the Bopp Law Firm.”

The IRS complaint alleges that by diverting nearly all of JMCFS’s funds to the Bopp Law Firm, Bopp violated the tax code’s prohibition on private inurement, Sloan contended, meaning that 501(c)3 organizations can’t siphon off assets to insiders.

“Bopp also appears to have used the 501(c)3 to create a substantial benefit for his private interest by diverting the funds to the law firm,” Sloan added. “Under the tax code, private foundations that have engaged in self-dealing or made taxable expenditures for noncharitable purposes are subject to tax penalties. Further, the law allows an individual to file a complaint with the IRS Whistleblower Office, as long as the taxes and penalties would exceed $2 million. As a result of the violations that we believe JMCFS, the Bopp Law Firm, and Mr. Bopp have engaged in, we believe there is a liability of more than $6.2 million in excise tax liability. And just in case you’re wondering, a filer may be awarded anywhere from 15 to 30 percent of the amount the IRS collects if the information submitted by the whistleblower substantially contributes to the IRS’s detection and recovery of funds, so here that could be roughly between $600,000 and $1.8 million.”

In addition, by deliberately filing inaccurate tax returns, Sloan argued that Bopp may have violated criminal laws, such as making false statements and conspiracy to defraud. Because of these possible criminal violations, CREW has forwarded the IRS complaint to prosecutors.

Bopp stepped in after a question from a reporter asked how what Bopp was doing was any different from what any other nonprofit does that supports legal advocacy on constitutional issues.

“This is Jim Bopp and I am on the call, and I would be happy to answer any questions,” he said. “The simple response to this complaint is that I am the only one that does any work for the Madison Center, so I’m the only one that gets paid. The Madison Center has contracted with the Bopp Law Firm to provide litigation support for Madison Center cases. Unfortunately we’re not very good at fundraising so the vast majority of my work for the Madison Center is done pro bono. I do all of the administrative [work] and file taxes pro bono. I give speeches, I write articles, I testify pro bono, and the vast majority of our litigation I do is pro bono. When you have a small not-for-profit, you only want one general counsel.”

He was soon interrupted by Sloan, who instructed him, “Mr. Bopp, I’m just going to say that you’re welcome to have your own call when you’re set…”

Bopp interrupted her, “Well, you didn’t advise me of this thing, and I’m here to answer questions. You didn’t ask me questions before you fielded these ridiculous complaints, so I’m going to answer them. And if you’re afraid to have me answer them, it tells a lot about your complaint. The fact is, I’m the only one that gets paid because I’m the only one that does work, even though the vast majority of the work that I do for the Madison Center is pro bono. We might look at the source here, CREW. You can see hundreds…”

At this point, amid a frenzy of whispers, his line was interrupted by a question from one of the CREW officials, who asked him why his law firm wasn’t reporting as an independent contractor on the Form 990.

Bopp then seemed to continue his prior statement before he was interrupted, contending that the dozens of complaints filed by CREW had never been found meritorious. “I think you’re just paid by Soros to harass conservatives, drive them out of the political system by filing complaints, bogus complaints,” he added before being interrupted again. (CREW officials later admitted that they were partly funded by George Soros’s Open Society Institute, but that they have no contact with Soros and noted that they have filed complaints against Democratic lawmakers like Sen. Bob Menendez of New Jersey as well as conservatives.)

A CREW official repeated his question asking Bopp why he or his firm is not listed as an independent contractor on the Madison Center’s Form 990. “We’re properly listed. We have a retainer agreement as general counsel. They only have one general counsel,” Bopp began to explain before he was interrupted again by Sloan.

“Mr. Bopp, we’re happy to answer questions about the complaints we filed today, and Mr. Bopp is of course welcome to answer any reporters’ questions, but we organized this call so that we could tell you about the complaint we filed and you can ask questions about any of the details about the complaints themselves. I’m sure he’ll be happy to respond at great length to our complaints.”

Bopp didn’t seem to stick around much longer on the call, however, and it wasn’t clear if that was his intention or if his line was cut off.

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