Today, Citizens for Responsibility and Ethics in Washington (CREW) sent a letter to House Committee on Appropriations Chairman David Obey (D-WI) and Defense Appropriations Subcommittee Chairman Norm Dicks (D-WA), asking that the appropriations committee ban earmarks to non-profits that funnel earmarked funds to for-profits. CREW also asked the committee to issue guidance clarifying the circumstances under which non-profits can pass earmarked funds to for-profit enterprises under the existing ban.

On March 10, 2010, Reps. Obey and Dicks jointly issued a press release announcing that the appropriations committee would no longer approve earmark requests directed to for-profit entities. Recognizing that for-profit companies were likely to attempt to evade the ban by misusing non-profits, the new rule also requires agency Inspectors General to audit at least 5 percent of all earmarks directed to non-profit entities.

CREW Executive Director Melanie Sloan stated, “Chairmen Obey and Dicks deserve credit for trying to reign in earmarks, but it is a tough road to hoe considering how addicted members of Congress and businesses are to all that pork.” Sloan continued, “It was inevitable that some would try to circumvent the ban. The question is, confronted with clear evidence that for-profits are circumventing the ban by having non-profits serve as funnels for earmarked funds, what is the committee going to do about it?”

Press reports indicate that as soon as the ban was enacted, for-profit entities -- sometimes in collaboration with members of Congress -- began devising schemes to circumvent it. Both the New York Times and the Huffington Post reported that some for-profit companies have set up shadow non-profit organizations to get earmarked funds and others are exploiting partnerships with existing non-profits to serve as pass-throughs for federal funds. For example, Ohio defense contractor Imaging Systems Technology, which previously received $8.4 million in earmarks requested by Rep. Marcy Kaptur (D-OH) to produce body armor parts, established a non-profit entity specializing in the same product as the defense contractor, located at the same address, and naming the company’s vice-president as executive director. Rep. Kaptur then requested $10.4 million in earmarks for the new non-profit, the Great Lakes Research Center, noting it “met the requirements for reform.” Asked about the maneuver to skirt the for-profit earmarks ban, the defense contractor’s president replied: “It’s not illegal - so what?”

Other members of Congress, including James Moran (D-VA), Dan Maffei (D-NY), Michael Acuri (D-NY), and Corrine Brown (D-FL), also have worked with for-profit entities to circumvent the ban.

Given the lengths to which members of Congress and for-profit companies have gone to defy the ban, CREW suggests the appropriations committee issue a statement making clear that earmarks will not be awarded to non-profits that funnel any portion of earmarked funds to for-profit entities. In any event, because there has been confusion as to the ban’s parameters, CREW also suggests that the committee issue guidance regarding the scope of the ban.

Click here to read CREW’s letter to Chairmen Obey and Dicks.

Citizens for Responsibility and Ethics in Washington (CREW) is a non-profit legal watchdog group dedicated to holding public officials accountable for their actions. For more information, please visit www.citizensforethics.org or contact Peter Bjork at 202.408.5565 or pbjork@citizensforethics.org.