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On May 11, 2012, about 20 state legislators from 15 oil- and gas-rich states are scheduled to meet in a hotel conference room in Charlotte. Representatives from major energy companies will be there, too. Oil and gas lobbying groups will give presentations to the lawmakers on fossil fuel prices and the need for modernizing the nation’s power grid. But no “lobbying” will take place. What happens in Charlotte will be called education.
For three decades, the American Legislative Exchange Council, the meeting’s host, has brought together corporations (including Pfizer (PFE), AT&T (T), and ExxonMobil (XOM)) and state legislators to write what it calls model bills—pieces of legislation the industries would like to become law. Often this means protecting favored tax treatment or keeping regulations at bay. ALEC has also approved model bills on social issues, including gun control and voter registration. The bills then get passed around among the 1,800 mostly Republican legislators who are ALEC members. They introduce the model bills about 1,000 times a year in state capitols around the country, the group says. About 200 become law. ALEC pays for the meetings through membership fees (called donations) that corporations pay. The legislators receive travel stipends (called scholarships) to attend the meetings. ALEC is registered with the IRS as a nonprofit that provides a public service, not as a lobbyist that seeks to influence.
This offers two benefits: Corporate members can deduct yearly dues, which run up to $25,000—more if they want to sponsor meetings; and ALEC doesn’t have to disclose the names of legislators and executives who attend. That’s important, because if ALEC operated with complete openness it would have difficulty operating at all. ALEC has attracted a wide and wealthy range of supporters in part because it’s done its work behind closed doors. Membership lists were secret. The origins of the model bills were secret. Part of ALEC’s mission is to present industry-backed legislation as grass-roots work. If this were to become clear to everyone, there’d be no reason for corporations to use it.
Unfortunately for ALEC, that’s exactly what’s happening. Last year, government accountability group Common Cause successfully filed Freedom of Information Act requests with state legislators to learn more about their dealings with ALEC. At the same time, someone leaked ALEC’s internal bill library. All told, thousands of pages of internal ALEC documents were put online, including minutes and attendee lists for the last two years of meetings.
ColorofChange.org, a civil rights group, discovered in ALEC’s now-public library a model bill for voter ID laws passed by 34 states. The laws’ opponents say they suppress voting by minorities. In December the group began sending letters to ALEC’s corporate members asking how much they valued their minority customers. Since then McDonald’s (MCD), Wendy’s (WEN), Coca-Cola (KO), PepsiCo (PEP), Yum! Brands (YUM), Procter & Gamble (PG), and Intuit (INTU), among others, have stopped donating to ALEC. The corporate departures accelerated after the death of Trayvon Martin: Florida’s so-called stand-your-ground law also sits in ALEC’s model bill library.
In April, Common Cause sent a tax whistleblower complaint to the IRS, claiming ALEC is a lobbying group and seeking to strip its nonprofit status. Common Cause spokeswoman Mary Boyle says the group had been waiting for months for the right moment to lodge its complaint. “The Trayvon Martin thing was like a gift,” she says.
Quoting from the U.S. tax code, ALEC’s lawyer Alan Dye says the group engages “in nonpartisan analysis, study, or research” and therefore is not a lobbying group. In an e-mail, he says ALEC is the victim of a “committed effort by extreme liberal front groups to diminish ALEC’s effectiveness in supporting free-market solutions in the states. … ALEC does not lobby and makes every effort to ensure that its processes are effective and compliant.” Dye is certainly right about one thing: The groups attacking ALEC are committed to diminishing its effectiveness. Their most successful tactic has been simply to show what it does.
The bottom line: A trove of private ALEC documents was posted online, leading prominent companies, including Coca-Cola, to leave the group.