Rick Cohen

HHS Secretary Leavitt’s Unusual Philanthropy—Part I

Health and Human Secretary Secretary Mike Leavitt, previously the Republican governor of Utah, feels mightily aggrieved about the Washington Post's front page article on July 21 concerning his family's choice of a vehicle for their family philanthropy. The Dixie and Anne Leavitt Foundation (named after Mike's parents) is not a typical foundation, but a so-called "Type III supporting organization".

With our help in decoding its tax filings, obtained on the Internet at Guidestar, the Post reported that the Leavitt Foundation with assets of nearly $9 million had spent less than 1% of those assets for charities annually--even though those charities were basically Leavitt-connected charities, including one established to research and document the Leavitt family genealogy. Tucked into the documents (we obtained the form 990s for the Foundation for 2000, 2002, and 2003, though strangely 2001's was missing from the site which purported makes available pdfs of all nonprofit 990 filings) was also a loan of $332,000 that the Foundation made to a group of insurance interests controlled by, who else, the Leavitt family. And all of the foundation's assets were invested in two companies basically controlled by, who else, the Leavitt family.

In high dudgeon, the Leavitt family swung back saying that in 2005 and 2006 (for which the form 990s are not publicly available yet), the Foundation had spent more than 5% for its beneficiary charities. Its investments in Leavitt businesses was done to time a sale of stock (in a Leavitt-controlled water company) to maximize the return to the foundation (an earlier sale to diversify the foundation's holdings would have earned much less, according to the Secretary's press release). And, by the way, everything had been done on the up and up, it was legal.

All legal, the pathetic spending on behalf of the four "supported" organizations was OK according to the law and even signed off on by the Senate Finance Committee when the governor was nominated to be HHS Secretary. And on NPR's All Things Considered where we were among the voices raising concerns about the Leavitt style of philanthropy, one of the Leavitt family defended the loan as a good business investment yielding a high return to the foundation (but don't look at the fact that the Foundation's accountant who filled out the 990 filing listed the loan as potentially uncollectible). But apparently the loan was also legal (even though it wouldn't have been legal for a private foundation).

Because it may be legal doesn't make it right, and the two-headed leadership of the Senate Finance Committee, Chuck Grassley (R-IA) and Max Baucus (D-MT) nonetheless wrote to President Bush asking him to get behind an effort to legislate or regulate Type III Supporting Organizations out of existence. Why would the two senators be so ticked about whatever these Type III organizations are and why would the HHS Secretary be quite so defensive?

Because Type III supporting organizations are pretty much tax loopholes, subject to great abuse, and Grassley, Baucus, and the IRS all know it--and Leavitt should too. We'll highlight the reasons for why Leavitt's defense of his foundation doesn't hold up in Part II on his unusual philanthropy. Stay tuned.

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Posted at 10:34 PM, Jul 23, 2006 in Government Accountability
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