Filthy Funds for FreedomWorks

Cody Hoesly

The Washington Post reports today that FreedomWorks, a leading member of the right-wing ballot measure industry here in Oregon, earns its money through some pretty disgusting methods.

The method revealed today in the Post goes like this.  FreedomWorks has a business scheme with Medical Savings Insurance Company.  The insurance company goes out and gets people to sign up for its policies.  Unbeknownst to those new members, insurance is not the only thing they're signing up for: the contract siphons their name and money off to FreedomWorks.  Neither the insurance company nor FreedomWorks ever tells the people what they're truly funding or what's happening to their personal information.

FreedomWorks gets three things out of the once-secret scheme: money in the form of regular "dues", names to add to its membership database, and more money when it rents out its database to other organizations and businesses.  The insurance company doesn't necessarily get anything out of the deal, but that's no problem because the head of the company, J. Patrick Rooney, is an ultraconservative who is just happy to support FreedomWorks.

So beware the next time you buy insurance - you may be funding the extreme right-wing here in Oregon without even knowing it.

Comments

  • Patty Wentz, Our Oregon (unverified)
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    No surprise that FreedomWorks is up to shenanigans, but this insurance scam takes the cake.

    Many Blue Oregon readers are already aware of FW's Oregon activities. As a refresher: According to the Contribution and Expenditure reports filed with the Secretary of State's office last May, FreedomWorks out of D.C. is "managing" two of the ballot measures we'll be voting on in November.

    One is Bill Sizemore's Tax Scam. Sizemore wrote it, Russ Walker (local head of FreedomWorks) is a chief petitioner, Loren Parks funded it, and FreedomWorks D.C. gets a cut for "managing" it.

    The second is the "judges by district" measure. That's being funded by the timber industry, Russ Walker is the chief petitioner, and FreedomWorks, D.C. gets $ for "managing" the measure.

    Quite a nice little profit center FW has here. What on earth are they "managing?" Walker has been chief spokesperson. Tim Trickey's Democracy Direct ran the signature gathering. Looks like FW just sits back and takes the checks.

    Fill in the blank: Money for nothing and the _ are free. (With apologies to Dire Straits.)

    Here's the OO analysis from the last C & E filing. It doesn't include supplementals filed since then, though. New reports are due end of day on Monday. We'll know even more about FreedomWorks' interests in Oregon then.

    Our Oregon

  • sasha (unverified)
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    Oh, Patti that is rich!

    Unions coerce dues from a substantial precentage of members who disagree with their politics, and then channel them to liberal politicians and organizations such as yours to keep the dollars flowing to public employee unions.

    And YOU complain about Freedomworks??????

    The policies sold by J. Patrick Rooney's insurance company are voluntary transactions, unlike forced union membership. If he packages a membership in Freedomworks with those policies and contributes part of the premium to FW, how is that unethical?

    Selling the customer data? Oh gee, that is real unusual. I'm sure that SEIU never allows its member list to be used by any other organization, right?

    A "profit center" for Russ Walekr and Freedom Works? I suppose you are working for a salary of zero, right?

    Your moral preening is really amusing.

  • (Show?)

    Non-profit and For-profit have nothing to do with salaries. People who work at non-profits are paid a salary or hourly wage just like everyone else who works.

    Non-profit means that groups like Our Oregon aren't out there to make a profit. It has absolutely nothing to do with the pay given to its workers, other than often times people at non-profits are paid less than their counterparts at for-profit groups.

  • LT (unverified)
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    Sasha, please read what I said on Saxton's Faustian Bargain topic.

    If you want to outlaw public employee unions, start a ballot measure to that effect. But don't try to tell us that FW is a wonderful group and all problems in this state can be traced to unions.

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    Sasha-

    What's the basis for your "substantial percentage" remark?

    Unions are political by nature, there's no illusion about the goals they pursue. The allegation of this article is that Medical Savings Insurance Company is acting unethically, by funneling resources toward things that are not necessarily in their customers' interests. FreedomWorks is understood to be a political organization; MSIC is not.

    You're right, selling customer data is not unusual, but it can be done ethically or unethically. This story, if accurate, describes something pretty ugly.

  • sasha (unverified)
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    Jenni: Not sure the distinction you are drawing. Freedom Works is a non-profit as is Our Oregon.

    LT: where did I argue that all the problems in this state are becuase of the unions? Why do you argue a point I never made? I was chiding Patti for being so breathlessly condemning of Freedom Works and Rooney ifor voluntary transactions when her little outfit is funded by unions that in substantial part get their funding through involuntary withholding.

    Pete: Basis for that claim? AFSCME has said it is something like 35% Republican.

  • Patty Wentz, Our Oregon (unverified)
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    Sasha, it's Patty with a Y. Not an I.

    Raise any issue you like. Use urgent punctuation marks with abandon. I don't mind. But please, spell my name correctly.

    And I think Mr. Forsyth laid out the distinction between FreedomWork's scam and union dues nicely.

    Patty

  • (Show?)

    Sasha:

    Thanks for responding to my question.

    But your criticisms of Patty, Jenni, and LT disregard the rest of my post.

    The point here is not that FreedomWorks is directly acting unethically (insofar as they're pursuing their mission.)

    It's that MSIC (a FOR-profit business, whose customers don't expect it to act politically) is acting unethically, and that FW is apparently aiding and abetting that unethical behavior.

  • David Wright (unverified)
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    I'm terribly confused. Where is the "filty" money I was promised in this article's headline? ;-)

    As I understand the facts laid out in this article:

    • A person buys insurance from a for-profit company;
    • That person actually does get the insurance they bought;
    • And, the for-profit company gives some of the profits to FreedomWorks.

    Again, where's the filth? Is the insurance company breaking any political finance laws? If so, that would have been important to point out, but no such claim has been made here.

    Why would you have any particular "expectation" about what a company does with its profits when you buy something from them? Pete, unions too in many cases use political funds for causes that are not in every member's best interests. I would argue that a union should be held to a much higher standard than a private for-profit company in this regard. The point of the union is to advocate for its members. If it does not advocate as a particular member wishes, it is failing that member in its core function. The point of an insurance company is to provide insurance for its customers. As long as it is actually providing what the customer paid for, it is performing its core function for that customer. What it does with the profits is up to that company.

    That said, I'm all for consumer information, and if you want to advertise what this company is doing with its money, more power to you. But casting it as somehow shady, unethical, or downright wrong (e.g., "Filthy") is really going too far, unless you have some specific violations to report.

  • (Show?)

    David, your summary isn't accurate. If it were, I'd agree with you about the money (but not the customer data.)

    The Post article says that the forms customers sign make them members of FreedomWorks without realizing they are getting involved with any kind of political organization.

    Of course every individual should read a contract carefully before signing, but we all know most people are lazy about that. Taking advantage of customers' laziness in this way is cheating. Claiming inflated membership numbers based on this sign-up tactic would be dishonest.

    As for the money, if MSIC were diverting a portion of its overall profits, that would be one thing. But sending the customers' money directly to FW is quite another. Especially if you subscribe to the view that political contributions are a form of "free speech." Doesn't sound so free to me.

  • (Show?)

    I haven't delved into the details here, but if MSIC is incorporated, then it's not allowed to contribute funds to federal candidates or federal PACs. If they're getting around that by taking money that a customer believes is going to a corporation, but then diverting it to a PAC, then they may be guilty of campaign finance law violations - by effectively putting corporate funds into a PAC account.

  • LT (unverified)
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    OK folks, I read the article, and will quote it below.

    As I understand the rules of nonprofits they are known by a number from the tax code (501 c3, 501 c4, etc.). That would be a matter of fact which could be checked. Maybe Freedomworks and unions are organized under the same chapter of the tax code, maybe they aren't. Facts can be checked.

    One of my college professors said a good contribution if someone had a lot of money would be to provide a basic reference set (almanac, book of sports records, etc.) to their favorite bars or taverns.There had been a study saying arguments of fact (who won the World Series in 1962, for instance) were more often escalated to beyond words than differences of opinion (are the Blazers a good team, political candidates and who should win, etc.). I've certainly seen that happen--people getting angry about arguments of fact. That's why I quoted the opening of the article below.

    It is one thing if Joe X buys an insurance policy and part of the proceeds go to a lobbying group (which CSE/FW is--run by a former member of Congress who said when he came here for the Measure 30 campaign that details of Oregon's budget didn't matter to him, just that the measure get on the ballot).

    It is another thing if someone is signing up for an insurance policy and the insurance company person says "in order for this to be valid, here is one more form to sign" and the form is really for a membership in CSE/FW.

    That strikes me as being the same as "Thanks for signing this petition, now if you would just sign here as well..." which as I recall some petitioners were caught doing--by Our Oregon if memory serves.

    Some political activists have no clue how many ordinary people (esp. in retail establishments where the customers complained about the gauntlet of petitioners outside the front door before that court decision) were thrilled that ANY group had the resources to go after such excesses. Statements like "those people who run ballot measures for a living should go out and get real work in the real world like the rest of us" were not aimed at any particular ideology.

    As I recall, there was a time some years ago when the likes of Lloyd Marbet and Don McIntire teamed up to "protect the initiative". But what they really meant was protecting the right of what some call "initiativemeisters" to tell us we had too much free time and should spend more of it studying their measures because nothing in our lives should be more important than voting on their measures (you may not like that attitude, but I heard it many times).

    These are the folks who revolted in 2000 and in the case of some people I knew and worked with didn't even open the voters pamphlet unless a friend told them to read about a measure. NO was the default position for these folks for every measure (unless they or a friend had signed the petition).

    Here is the opening of the article. Read it and tell me if it was just an insurance company donating proceeds from policy sales to a lobbying group, or if it was something sneakier.

    With Insurance Policy Comes Membership Unbeknown to Some, Those Signing Up With Firm Are Joining Conservative Group

    By Jonathan Weisman Washington Post Staff Writer Sunday, July 23, 2006; Page A05

    In 2001, Jennifer B. Chace heard an insurance broker's pitch for a new insurance company marketing tax-free medical savings accounts. She jumped at the offer, but first, the broker told her, she would have to sign an application -- already filled out -- that would entitle her to a low group rate.

    With that signature, Chace, a Florida dentist in the market for health insurance, unwittingly joined one of Washington's most prominent conservative organizations, Citizens for a Sound Economy, she would later testify.

    Ex-House majority leader Richard Armey (R-Tex.) heads the conservative group FreedomWorks, formerly called Citizens for a Sound Economy. (By Ray Lustig -- The Washington Post)

    "Before I showed you this form today, did you even realize that you signed a form that was an application for membership in Citizens for a Sound Economy?" her lawyer would ask during a 2004 deposition.

    "I don't know what Citizens for a Sound Economy is," she replied.

    Chace's experience has brought to light an obscure arrangement between a prominent Republican businessman, J. Patrick Rooney, and a free-market interest group that has netted the grass-roots organization hundreds of thousands of dollars and thousands of new members. Citizens for a Sound Economy -- now called FreedomWorks and headed by former House majority leader Richard K. Armey (R-Tex.) -- has netted more than $638,000 and about 16,000 members through the sale of insurance policies.

    Officials from FreedomWorks say the insurance sales are just another way for grass-roots groups to garner members and are no different from the activities of such giants as AARP, the senior citizens lobby.

  • (Show?)

    I was responding to this comment:

    A "profit center" for Russ Walekr and Freedom Works? I suppose you are working for a salary of zero, right?

    I pointed out that just because Patty works for a non-profit, that doesn't mean she works for nothing. I never said Freedomworks was a for-profit.

  • Gil Johnson (unverified)
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    A health insurance switcheroo isn't limited to FreedomWorks. A couple of lobbying organizations--National Federation of Independent Businesses and National Association of Self-Employed--offer health insurance policies to small business people. In addition to the health insurance premiums, the individual is also sold a package of other "benefits" for about $10 a month. Thins like discounts on eye glasses and dental visits and even some travel things. But I'm sure a percentage of this money goes to a very conservative lobbying agenda in Congress and in state legislatures. Now a few bucks a month may seem like peanuts, but these organizations claim hundreds of thousands of members.

    And NASE insurace, by the way, has a really sketchy reputation about paying off on claims.

  • David Wright (unverified)
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    Fascinating. Obviously there was more here than was described in the original item.

    Having read the Post article, I see now that the folks who purchased insurance at group rates did so after qualifying for those rates by joining the group (specifically, FW/CSE).

    So, you're right Pete, my original summary was clearly inaccurate. It should have been:

    • Customer is offered group rates on insurance;
    • Customer joins group to obtain group rates;
    • Sponsor of insurance derives membership dues for group membership of those who purchased the insurance.

    Which means, the insurance company isn't sending any part of their profits to FreedomWorks, nor are they donating any money to the organization (which would seem to mean they're probably in the clear on campaign finance laws). Rather, they are simply collecting dues from members of FreedomWorks, who became members to obtain the insurance that MSIC sells.

    Yes, it gets down to people needing to read what they sign. I disagree that taking advantage of peoples' inherent laziness in this regard is "cheating". Caveat emptor and all that. If the total cost of the insurance was correctly disclosed to the customer, then how were the customers "cheated"?

    I will grant you, on the other hand, that if the "membership application" accompanying the insurance application does not expressly state what you're applying to become a member of, that could be a problem. I am unclear from the Post article whether or not that is true. That the insurance policies themselves refer merely to a group number seems of almost no consequence, since to obtain the policy the customer must join the group (i.e., the policy itself does not enroll the customer in the group, so it's not particularly important that the policy clearly identify the group by name).

    And claiming membership numbers that include people who are paying dues, whether they realize what they're doing or not, is hardly dishonest. As long as the people have actually paid for their membership, certainly they must be counted as members? It would be dishonest to exclude them.

    Anyhow, bottom line it still looks to me like this practice, while not exactly transparent, still doesn't really approach "unethical". I wouldn't even call it "sneaky" as LT has implied (nicely done, BTW, copying the first half of the article but excluding the rebuttal in the second half). I come back to my original question -- did the customers actually receive insurance policies at the rates specified? Were they presented with separate membership application forms in order to qualify for those rates? If so, then the fact that they were technically required to join FreedomWorks to obtain their insurance seems fairly unimportant.

    But of course, if the business practice offends you, as I said by all means knock yourself out advertising that fact.

    By the way, none of what I've said should be taken as advocacy of FreedomWorks itself. I'd be of the same opinion if any political group, of any persuasion, had done exactly the same thing.

  • LT (unverified)
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    FW claimed they were doing the same thing as AARP.

    One of two things is true. Either FW says as AARP says in every promotion I have seen/ heard of, "by joining AARP, you'll get group insurance" OR FW is less clear than AARP.

    What really bothers me about the story is this: "She jumped at the offer, but first, the broker told her, she would have to sign an application -- already filled out -- that would entitle her to a low group rate."

    A dentist should be smart enough not to sign an application already filled out without asking LOTS of questions.

    However, unless the FW people have proof that AARP gives people already filled out AARP membership forms and says exactly the same thing FW says about what they are joining to get the group rate, then I don't see why I have to give FW any more benefit of the doubt than I would have given them before I read this story.

    This is the crowd that claimed jobs would be created if only they got their way on Measure 30 and then avoided questions about why that didn't happen. This is the group which talks about vague "spending discipline" but never about budget details.

    I view this story as just another sneaky action. I have no use for those like Dick Armey who think they are better than the rest of us. I am campaigning for my state rep's challenger because my state rep. co-sponsored bills with Thatcher at the req. of Freedom Works. I don't see why they deserve the benefit of the doubt on anything. I hope state insurance commissioners investigate these insurance practices and insurance policies with a microscope.

  • torridjoe (unverified)
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    Misrepresenting the use of money you're soliciting--whether by direct omission or by hiding it and failing to mention what your money automatically triggers (in this case memebership in an entirely unrelated enterprise to insurance)--is absolutely unethical.

    The comparison to unions is ludicrous. Even when you end up paying fair share dues to the union in your job, you KNOW you are paying dues, and you KNOW they will be used on activities which the union believes will foster growth for itself (whether you agree with all their activities or not). In this case, people who bought insurance had NO idea they were also supporting a sleazy anti-tax group. Yes, based on the way they've operated in Oregon, sleazy.

  • (Show?)

    Torrid,

    It's the fact that they are conservative that some can justify the lies in terms of duping joining Freedom Works. Maybe they should start claiming it's freedom of religon or something. It should would take the fraud to a whole new level.

  • anonymous (unverified)
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    This exemplifies the difference between Democrats and Republicans when it comes to politics. Most Democrats in the establishment still believe that politics is a full contact sport like boxing or football where rules, fairplay, and the like are relevent and desirable. Most establishment Republicans appear to believe that politics is the art of war where the only rule is right by superior firepower. Democrats may continue to win in state and local races playing by their current set of assumptions and rules, but they will continue to be a minority party on the national stage, and will continue to lose the policy debates until they start playing by a different set of rules.

  • jrw (unverified)
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    Anonymous wrote: This exemplifies the difference between Democrats and Republicans when it comes to politics. Most Democrats in the establishment still believe that politics is a full contact sport like boxing or football where rules, fairplay, and the like are relevent and desirable. Most establishment Republicans appear to believe that politics is the art of war where the only rule is right by superior firepower. Democrats may continue to win in state and local races playing by their current set of assumptions and rules, but they will continue to be a minority party on the national stage, and will continue to lose the policy debates until they start playing by a different set of rules.

    But is this desirable?

    Why should we acquiese to more of the same?

    Why shouldn't the Republicans be forced to play by the rules? After all, they're allegedly the party claiming to have a moral vision.

    Oops, I guess if it doesn't involve dead babies or "terrorists" or "Oooh Those Awful Gay Folks," then morals and ethics don't need to come into play.

    There's playing clean but hard and fair, and then there's playing dirty. Some of us believe that the means justify the ends, not the ends justify the means. The Republican support of the later clause is one cause of the so-called moral decline of contemporary society.

  • Becky (unverified)
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    Anonymous is spouting the exact errant thinking that many in the right wing in Oregon use: the other side is doing it, and if we want to win we've got to do it, too. Yes, they really do think the left is doing the same thing. I believe one of the most important things we as Americans can do in politics is to end this sort of thinking, this treatment of politics as war, wherein the rules don't apply and the focus is on your side winning. It's not about Republicans or Democrats, dammit, it's about Americans. Can't we ever get back to that?

  • anonymous (unverified)
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    Anonymous is spouting the exact errant thinking that many in the right wing in Oregon use: the other side is doing it, and if we want to win we've got to do it, too.

    Becky and JRW are ascribing to the exact errant thinking that has put the Democrats in the minority for the forseeable future. The way things should be is not the way things are. People are dying (literally), because Democrats like Becky don't want to take the gloves off in an election.

    Go talk to someone whose husband or son was killed in Iraq and come back and talk to me about the importance of electoral fair play.

    It'll be small consolation for a senior citizen who loses their house because they couldn't afford both their mortgage and their medicine, and the R's changed the bankruptcy laws to remove homestead provisions that "at least we fought fair" in a losing battle.

    We've got plenty of Dems who would be willing to (figuratively) die for the cause. We've got many Republicans who are willing to (figuratively) kill for the cause.

    Given that dynamic, is it really any surprise that the Republicans hold the reigns of power in this country?

    Not me. I'm sick to death of seeing good people get hurt because the Democratic Party refuses to go to the mattresses on their behalf.

  • Becky (unverified)
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    Don't know if it will change your mind, anonymous, but I'm not a Democrat. I'm a former Republican who left the fold because of the corruption you are claiming Democrats should adopt so they can get things done. As an American I'm saying you are wrong. That's not who we are as a people and it's time both parties clean house and end this sort of behavior.

  • jrw (unverified)
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    I'm with Becky.

    If I thought the end justifies the means, I wouldn't be politically where I am. At some point we have to stick to our principles, and doing that means playing the game ethically.

    What I see happening if progressive Democrats with principles start acting like corrupt conservative hypocrites is that eventually they turn right into the thing they oppose.

    And, BTW, a personal gripe--

    it's "reins" of power, not "reigns" of power. The metaphor is supposed to evoke riding a horse using reins, not reigns. "Reigns of power" only means "power of power," not the "control of power" image which "reins of power" is supposed to evoke. Yes, it's a spelling flame--over an all-too-common misspelling of which savvy politicos should be aware.

    jrw (who does happen to own and ride a reining horse, not a reigning horse, even though The Horse thinks she's in charge when blasting down the straightaway at horsey lightspeed)

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