Conservancy Criticized by Senate Committee

Published August 1, 2005

The Nature Conservancy must make a firm commitment to ending recent abuses that have called into question its compliance with federal laws bestowing economic favor on charities, concluded a U.S. Senate Finance Committee report issued June 7.

Post Exposed Abuses

The committee began an inquiry into the Nature Conservancy after the Washington Post in 2003 published a series of articles exposing large-scale financial improprieties and activities running counter to the tax-exempt purposes of the organization.

According to the Post, the Nature Conservancy, which had amassed $3 billion in assets by pledging to save precious, environmentally pristine lands, has logged forests, arranged for the construction of opulent houses on fragile grasslands, drilled for natural gas under the last breeding ground of an endangered bird species, and made what appeared to be sweetheart financial deals with board members and their families.

“The nonprofit organization has bought land and services from board members’ companies,” the Post noted, “and it has declined to release property appraisals from the deals. It has sold choice Conservancy land to past and present trustees through its ‘conservation buyers’ program, which offers steep discounts in exchange for development restrictions. It has lent cash to its executives, including $1.55 million to its president.”

‘Legitimate Concerns’ Raised

Senate Finance Committee Chair Chuck Grassley (R-IA) had sharp words of criticism for the tax-exempt group.

“The report and attached documents show that The Nature Conservancy at times approaches tax matters affecting it and its donors in an aggressive manner that can result in substantial tax benefits no different than many large corporations,” said Grassley in a June 7 statement to the media.

“Transparency and full disclosure are cornerstones in reassuring the public that charities and those who donate to them deserve the favorable tax benefits they receive,” Grassley said. “Time and again, The Nature Conservancy’s Forms 990 provide only bare bones information, if any at all, regarding its participation in transactions with insiders as well as unique and complex programs such as the emissions credits arrangements and its conservation buyer program.”

Tax Shelter Shell Game

“The Nature Conservancy, with assets of $4 billion, is one of the largest environmental groups in the country,” said Gretchen Randall, senior partner at Winningreen public policy consulting group. “However, it has used conservation easements and other programs for the benefit of officers and donors. TNC has also been lax in overseeing the easements as required by the Internal Revenue Service.

“Congress needs to tighten the law regarding tax-exempt charitable organizations and provide stronger oversight,” Randall added. “We need to consider whether ‘advocacy groups’ should [continue to] be tax-exempt or whether that status should be reserved for schools, hospitals, churches, and true charities.”

“The organization made some serious mistakes,” said Jane Shaw, senior fellow at the Bozeman, Montana-based PERC. “The Post rightly criticized the organization for giving special treatment to some people that enabled them to benefit from the use of conservation easements.

“But this is different from complaining about the Nature Conservancy for drilling gas wells or cutting down trees,” Shaw continued. “One of the good things about the Nature Conservancy is that its managers are willing to look for ‘win-win’ situations in which the environment is protected and economic activity is also conducted. We need more organizations doing that sort of thing. It would be a shame if Congress discouraged nonprofits from such activities.”

“When the Nature Conservancy was started in the early 1950s, its goal was to find special little areas and preserve them privately, in the Toquevellian tradition of private, voluntary action and association,” noted Robert J. Smith, senior environmental scholar for the Competitive Enterprise Institute.

“But as the conservancy grew and accumulated wealth, it began to work ever more closely with the federal government, acquiring land in any manner possible, and then selling most of it to the government at a substantial profit. They had become little more than a real estate arm of the federal government, and often a rather shady and strong-armed agent. The Nature Conservancy is no longer a friend of private property or a free society.”

“On environmental and economic grounds,” said CEI President Fred Smith, “the tax subsidies for ‘environmental purchases’ should be repealed. To many, environmentalism has become a religion. This is fine–but the cathedrals of nature, like those of God, should not be financed by taxpayers, but rather by the faithful.”

James Hoare ([email protected]) is managing attorney at the Syracuse, New York office of McGivney, Kluger & Gannon.