October 4, 2004

Suspicious Timing

Tennessee Citizen Action, the liberal activist group under investigation for possible voter registration fraud , has been busy attacking a wealthy Republican political donor in East Tennessee for giving large amounts of money to Republican PACs that are working to build a GOP majority in the state legislature - and now is attacking King Pharmaceuticals, a company once headed by that donor, John Gregory, for allegedly overbilling the state's healthcare program, TennCare, for Altace, a blood pressure medication.

And the timing of a recent decision by Tennessee's Democratic Gov. Phil Bredesen to return a year-old $5,000 campaign contribution connected to Gregory and King Pharmaceuticals ought to be raising questions about the propriety of Tennessee Citizen Action's political activities.

Here are two stories from the Kingsport (Tenn.) Times-News for background:

Gregory says TCA assertions are nonsense - Sept. 21

Retired King Pharmaceuticals Chairman and Chief Executive Officer John Gregory launched a counterattack Tuesday to charges made by a watchdog group seeking a pricing investigation into King's Altace blood pressure medication. Nashville-based Tennessee Citizen Action (TCA) asked the TennCare Office of Inspector General to investigate King, its subsidiaries and the Gregory family regarding activities related to Altace. TCA claimed the average wholesale price of Altace has increased from 1998 to 2004. A TennCare spokeswoman said Monday the request has been forwarded to the Medicaid Fraud Unit of the Tennessee Bureau of Investigation.

Last year, the Tennessee Registry of Election Finance unanimously dismissed TCA's complaint that Senate GOP Caucus Chair Ron Ramsey's RAAM (Republicans Achieving A Majority) PAC was used as an illegal "conduit" to make a campaign contribution to an unsuccessful state Senate candidate after receiving a $25,000 contribution from Gregory.

Gregory apparently views TCA's new charge as a continuing political attack on his contributions to conservative causes. Earlier this year, Gregory gave $100,000 to the Tennessee Conservative PAC and $250,000 to the Tennessee Legislative Campaign Committee, according to the state registry.

"Political contributions made by the PAC, as well as those by Mr. Gregory, are made to assist candidates who support and will give voice to socially conservative positions such as the pro-life message and traditional family values," former state Sen. James Holcomb, treasurer of the Tennessee Conservative PAC, said in a prepared release. "All of our contributions are given in accordance with Tennessee election finance law, and any claim to the contrary is absurd."

Two leading statehouse Democrats on Thursday castigated Bristol-based King Pharmaceuticals and the family of former company CEO John Gregory for pouring a stream of "dirty money" into Tennessee politics and called on Republican candidates to return all donations associated with the company or the family.

It was the second broad attack on Gregory and King in recent weeks on the state political front. Tennessee Citizen Action has called for an investigation into whether the company defrauded TennCare in its sales of the blood pressure medication Altace.

But that's not the most interesting part of the story.

This is: Tennessee's Democratic governor, Phil Bredesen, announced Oct. 1 he had returned a $5,000 contribution he received from Gregory's brother, Jeff Gregory, also a former executive with the pharmaceutical company. Here's the curious part: Bredesen received the contribution in late 2003. He returned it in August 2004 - just a few weeks before Tennessee Citizen Action and the Tennessee Democratic Party launched their coordinated effort to demonize Gregory and King Pharmaceuticals. Bredesen also said last week he plans on returning other contributions he received from King executives and King lobbyists. The Tennessean reports that Bredesen was a big recipient of King money - he took in some $30,000 in a fundraiser from King execs and lobbyists last November. (The Knoxville News-Sentinel has a more detailed story here.)

So, here is the question - one the Tennessee press has, so far, not asked. Did Bredesen know that the TCA was about to launch a political attack on Gregory and King Pharmaceuticals? Did he coordinate his quiet return of Jeff Gregory's $5,000 donation with the TCA so that he would have returned the money before the TCA began its "dirty money" attack? And if it could be shown that Bredesen actively coordinated his actions with the TCA, that would merely serve to underscore that the TCA's attack on Gregory and King Pharmaceuticals was a partisan political attack, in violation of the TCA's 501(c)(3) tax status.

The IRS code governs what a non-profit organized under section 501(c)(3) of the code can and can't do politically.

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violation of this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise tax.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including the presentation of public forums and the publication of voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity.

In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not constitute prohibited political campaign activity if conducted in a non-partisan manner. On the other hand, voter education or registration activities with evidence of bias that: (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.

If Tennessee Citizen Action actively coordinated it's attack on the Gregory family and King Pharmeuticals with the Democratic Party and Gov. Bredesen - as the timing of Bredesen's give-back suggests but does not prove - then TCA has violated its tax status.

It also would be interesting to see documentation of TCA's voter-registration drive, to determine if it is being conducted in a non-partisan manner. Given TCA's affiliation with USAction, a left-wing organization with ties to such groups as the Democratic Socialists of America via the Progressive Action Network, and to MoveOn.org, an organization funded largely by left-wing billionaire George Soros and the ultra-radical Tides Foundation (which gets money from a foundation controlled by Theresa Heinz-Kerry), I highly doubt their voter registration efforts are aimed at the entire state. More likely, TCA is focused on registering voters in heavily Democratic precincts.