Center for Public Integrity: Koch-related group is reviewing financial transactions with Cain aide’s charity

By Peter H. Stone

Questions about Herman Cain’s financial support from a tax-exempt charity

Herman Cain’s campaign faces questions about tens of thousands of dollars in expenses that were paid by Prosperity USA, an organization claiming 501(c)(3) charity status with the IRS that is barred by law from political activities.

The conservative grassroots goliath, Americans for Prosperity, has confirmed that it had financial transactions with at least one charity in Wisconsin founded by Mark Block, chief of staff for Herman Cain’s presidential campaign. The group is reviewing those transactions, iWatch News has learned.

Block for about five years was Wisconsin state director of the tax-exempt nonprofit Americans for Prosperity . Early in 2010 Block launched Prosperity USA, a charity that shelled out $40,000 to cover charter air flights, iPads and other items for the Cain campaign, according to financial documents disclosed by the Milwaukee-Wisconsin Journal Sentinel.

One financial document cited by the paper shows that over $37,000 was listed as owed to Prosperity USA by FOH, which stands for Friends of Herman Cain, his campaign committee. It’s unclear whether those funds have been repaid. Cain’s campaign disclosures don’t list any debts to the charity.

Charities are barred by law from political and electoral activities because of their special IRS status.

Campaign finance experts said that if AFP funds were passed through charities to the Cain campaign, it would be an illegal contribution. “A tax-exempt organization cannot make contributions to a presidential campaign and cannot use intermediaries to mask its role in making contributions,” said Fred Wertheimer, the president of Democracy 21 and a veteran reform advocate.

Levi Russell, a spokesman for AFP, told iWatch News , that “there were financial dealings with Prosperity USA and/or the Wisconsin Prosperity Network.” The latter group is another charity that Block helped set up in Wisconsin in 2008 to boost conservative causes. It’s not clear why AFP is reviewing the latter group except that Block founded it too.

Russell said AFP was trying to “find out the timing and the nature of the transactions.”

“We want to hold off (saying more) in light of potential legal ramifications,” Russell said. AFP is expected to complete its review late next week.

In a follow up written statement, Russell said AFP has “total confidence that all interactions AFP had with Prosperity USA or Wisconsin Prosperity Network were in full compliance with applicable laws.”

The Cain campaign has asked an outside lawyer to review the matter.

AFP’s disclosure that it had financial dealings with at least one of the charities that Block set up is the latest twist in controversies that have beset the Cain campaign. Allegations of sexual harassment have ballooned during the week.

AFP is a grassroots lobbying powerhouse that claims some 1.8 million members. In the 2010 elections, it spent about $25 million on political activities and issue ads pushing for less regulation and government spending. The group, founded in part with money from the billionaire Koch brothers, is a 501(c)(4) organization, which means it does not have to identify its donors or disclose how much money they gave.

The Milwaukee newspaper, which relied heavily on Prosperity USA’s financial documents in its reporting, also disclosed that early this year the charity sent a check for $100,000 to the Congress of Racial Equality, a conservative black group, right before Cain was a featured speaker at a CORE event in January.

Niger Innis, the spokesman for CORE, did not respond to several calls and two emails seeking comment about what those funds were used for and whether any money went to the Cain campaign.

The financial documents show that Prosperity USA received $150,000 in loans from unidentified people.

The documents offer some intriguing hints of the close ties between Block’s charity and AFP. In the fall of 2010, Cain spoke at a conservative rally in Chicago which the documents indicate he went to at the behest of Americans for Prosperity. The charity was supposed to be paid $5,000 by AFP for Cain’s speech.

The documents also indicate that Block flew to Washington, courtesy of Prosperity USA, late last year to meet with Tim Phillips, the president of Americans for Prosperity, and David Koch.

Koch’s family controls the nation’s second largest privately held company, Koch Industries, a sprawling international business with large stakes in energy, paper products and financial services.

In 2005 and 2006, Cain traveled to many states including Wisconsin and Virginia where AFP was setting up state chapters. It was during this period that his ties to Mark Bloch were nurtured.

Block has had legal problems before involving campaign finance laws. In 1997 he chaired the victorious Wisconsin campaign for state Supreme Court Justice Jon Wilcox. The campaign prompted bipartisan charges from members of the state elections board that it improperly coordinated with an outside group.

In 2000 the elections board sued Block, Wilcox and Brent Pickens, the founder of a group called the Wisconsin Coalition for Voter Participation, charging the group setup a $200,000 fund to help Wilcox in an illegal coordination effort. In 2001, Block paid a $15,000 settlement and agreed to stay out of state politics for three years. Wilcox agreed to pay $35,000 and Pickens $10,000.

Cain is scheduled to speak Friday to an annual meeting hosted by AFP in Washington.