Slouching Towards Oblivion

Monday, April 05, 2010

A Case In Point

In a previous post, I said I think all the politicking and all the media attention are aimed at boosting ad revenues and/or contributions to a candidate or a cause.  In the last several days, it's come out that Sean Hannity and Ollie North are in some trouble because of the way their "charity", Freedom Alliance has been very lucrative for somebody, but hasn't managed to distribute much of their revenue to the people they say they're trying to help.

Details are still a little fuzzy as to how closely Hannity and North are to the everyday operations.  But when your charity delivers less than 10% of the proceeds to your intended beneficiaries, you might have a serious problem.  The benchmark for reputable charities is a split of about 25% for overhead and 75% of the collections paid out to the donees.

According to their  2006 Tax Return, they pulled in almost $11 Million, but they doled out less than $400k (about 3.8%).  The rest was spent on a variety of "admin" things, some of which were all about taking really REALLY good care of Hannity and his entourage.  ie: "a fleet" of high-end SUVs for transportation, several hotel suites, Gulfstream V airplanes, etc.

Freedom Alliance defenders claim that the money not paid out has been going to establish an endowment, but the tax records for any of that stuff haven't surfaced yet.

For me, this has the same kind of mild stench that goes along with what we've seen from Ollie North before.  Back in the early 90's (as I recall), North needed to make bunches of  money in a relative hurry because he'd been booted out of his semi-cushy government job at the White House, and wanted to get into politics.  He became the front man for a body armor manufacturer, which apparently put out a really good product, but it was something like twice the price as the nearest competitor's gear.  The market for this product is pretty well limited to government entities, and as hard as it seems to believe, there are actual rules about spending tax dollars carefully, so these purchases are put out to bid.  Well, Ollie's company doesn't really stand a chance in a straight-up contest, so they hit on a truly brilliant plan: Fund Raising!

Part of the deal that you propose in your bid is to do a charity fund drive in support of the local police department that you're trying to get to buy your body armor. (BTW - it's important for you NOT to mention that one thing making body armor necessary for the local cops is that your Fund Raising/Consulting firm is also doing a lot of work for the NRA to make sure the bad guys have plenty of weapons and ammo; but that's another story, and of course one thing has nothing to do with the other - doesn't everybody know that?)

Anyway, here's how it works.  Ollie's bulletproof vest costs $2000 and the other guy's vest costs $1000.

Ollie's bid says he'll sell his vests at $1000 each, but the customer agrees to hire Ollie's   Marketing Team to conduct a fund raising campaign that will not only make up the difference in his unit price, but also put a bunch of dollars into the Widows & Orphans Fund.  So The project kicks off, and when it's done, Ollie's made his $250k profit on the body armor, but that's just the start.  He's also pumped another $1 Million or so into the cops' charity, and taken a slice of that for himself as well - probably close to another million bucks.  It seems everybody got something good, but in fact, the tax payers actually volunteered to get hosed.  Don't get me wrong, the people got some value for their money, but where they could've paid $1,000,000 for 1000 bulletproof vests, they "chose" instead to pay closer to $3,000,000.

If you offer to make a donation to the Widows & Orphans Fund in exchange for a sweetheart deal, they call it Bribery and sometimes you go to jail.  But if you work it so the average citizen makes the donation, well - then they call it civic-minded and noble.

Attract the crowd with a political or charitable pitch, and then soak 'em.  Bait Ball.

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