Who pays for class-action foundation?

By Mark Tapscott

Issues of judicial and regulatory integrity are raised about the funding of tax-exempt foundations like the Institute for Law and Economy Policy (ILEP) when it appears their programs could be influenced by participants in a criminal racketeering enterprise.

Foundations like ILEP are required by the IRS to disclose extensive details about their funding and programs to help assure that their resources are actually devoted to the tax-exempt purposes for which they are organized. The disclosure is done in the organization's Form 990 annual tax return.

IRS regulations require that 990s be made promptly available to anyone who asks to see them.. The Examiner looked at ILEP 990s for all years since its 1996 founding, except 2000, 2003 and 2006, which are unavailable from public sources like Guidestar.1

Edward Labaton, a New York-based class action lawyer who says he has been ILEP's president since its founding, declined to provide copies of the missing 990s. He said the group "is a private organization and as a matter of policy does not comment on financial matters."

The silence of Labaton and other ILEP officials raises numerous questions about the foundation's finances and management, including:

The only income noted on the group's Form 990s are "contributions" averaging $141,000 annually since 2000. None of the contributors are listed by name. Both Duke Law Professor James Cox and former SEC Commissioner Harvey Goldschmidt said the contributions came from law firms but neither could name specific firms or amounts. Are any of the contributions from Milberg Weiss or Lerach Coughlin?
Both Cox and Goldschmidt said ILEP also receives "Cy Pres" payments from undistributed settlement funds in class action lawsuits. But none is listed on the group's Form 990s and The Examiner could confirm only one, for $30,547 last year from a Texas securities case. What other Cy Pres payments has ILEP received?
No program revenues are listed on ILEP's Form 990s, even though tuition is routinely charged and attendees are asked to make checks payable to ILEP. Amounts paid to ILEP could be deducted from an individual's federal taxes. Is ILEP providing a full tax deduction for trips that are partially recreational?
The group reported average annual expenses of $112, 276, including $86,035 for "conference expenses," but none for staff salaries or benefits. Cox said it costs ILEP about $30,000 to host its annual conference, the foundation's primary activity. How were the other funds spent?
There are no entries for income or other compensation from commercial firms that co-sponsor ILEP events such as Citizens Bank of Philadelphia and settlement administration companies such as the Garden City Group, Strategic Claims Services and Complete Claims Solutions. Spokesmen for each of those firms did not return The Examiner's telephone calls and emails seeking comment for this article. Did these firms provide funding or only their names to ILEP?

Mark Tapscott is the editorial page editor of The Washington Examiner.

Who pays for class-action foundation?

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