Saturday, March 1, 2008
The Grand Rapids Press reports that the University of Michigan has issued a 21-page response to inquiries about the University's use of its $7.1 billiion endowment, the eighth largest in the country. The response highlighted the $40 million decrease in state appropriations since 2002, $117 million in recent cost cuts, and the $47 million spent from the endowment last year for scholarships and fellowships.
The inquiries came in the form of a letter from Senators Max Baucus and Chuck Grassley, the Chairman and Ranking Member, respectively, of the Senate Finance Committee as part of broader investigation into how colleges and universities are using their growing endowments. According to a January 24, 2008 press release from the Senators, available on the Senate Finance Committe website, they sent identical letters to the 136 colleges and universities with endowments of $500 million or more. The letters asked for a response within 30 days, but the University of Michigan appears to be the first institution to publicly release its response.
According to a report in Crain's Detroit Business, the University provided details of its response in a press briefing by Associate Vice President for Finance Peggy Norgren. She noted that spending of the endowment is limited both by donor restrictions and by the yield on the endowment, and that 62 percent of University of Michigan undergraduate stuents already receive some amount of financial aid.
The Denver Post reports that Colorado Republicans are promising to carefully scrutinize big-money donors to independent advocacy groups that have allegedly worked against Republican candidates in the past. The groups are apparently 527s that have been funded by wealthy Coloradians such as Pat Stryker and Tim Gill. While not stated in the article, presumably the required donor dislcosures by 527s helped the Colorado GOP identify these donors and their level of support, although an Atlantic Monthly article last year also detailed some of their efforts. The IRS makes filings by 527s available through an Internet-accessible searchable database.
(Full Disclosure: The firm with which I am Of Counsel represents some 527 groups in Colorado.)
The Dallas morning news reports that President Bush stated during his press conference on Thursday that his presidential library foundation has not yet decided whether it will disclosure the identiy of its donors. He did state that the foundation would probably accept donations from foreign sources. The library will be hosted by Southern Methodist University, along with a museum and public policy institute that together will form the George W. Bush Presidential Center and, according to an SMU press release, will be supported by the George W. Bush Presidential Library Foundation. The National Archives and Records Administration will run the library and museum, while the public policy institute will be an independent institution. The article reports that presidential libraries have usually identified most but not all of their donors, and have sometimes not provided the exact amounts and dates of gifts. There is currently no law requiring the public disclosure of donors to presidential libraries, although recently amended section 5 of the federal Lobbying Disclosure Act requires registered lobbyists to publicly disclose contributions of more than $200 to presidential libraries.
Friday, February 29, 2008
On February 25, 2008, the IRS issued guidance on the Form 990-N (hereinafter, "e-Postcard") filing requirement of small tax-exempt organizations (i.e., those with gross receipts annually of $25,000 or less). The Pension Protection Act of 2006 requires such organizations to file the e-Postcard starting in 2008 for tax years beginning with 2007. Small tax-exempt organizations are now required to make e-Postcard filings by the 15th day of the fifth month following the close of their tax year. The filing is made electronically only, and the public can view the e-filings on the IRS website. Prior to the new e-Postcard requirement, small tax-exempts were not required to file either Form 990 or 990-EZ. Small tax-exempts still do not have to file these forms. Also, while there is no immediate penalty for failing to file the e-Postcard, those nonprofits that fail to file the e-Postcard for three consecutive years will lose their tax-exempt status. The IRS will send a notice reminding organizations of the obligation to file but the ultimate responsibility rest with the tax-exempt organization. As a result, the IRS is urging everyone -- individuals, accountants, lawyers and volunteers -- to spread the word to local charities. Tax-exempts included on a group return and churches are not required to make this filing. On the other hand, larger tax-exempts with receipts of more than $25,000, private foundations and 509(a)(3) organizations are required to continue filing Form 990 or 990-EZ but are not required to also file the e-Postcard.
As a practical matter, tax-exempt organizations whose volunteers, staffs and directors change more frequently than other types of organizations must be vigilant. That would include updating the IRS on address changes as a matter of practice or protocol. The law requiring the e-Postcard balances the purposes of the act (i.e., giving potential donors more information and informing the public) with the fragile administrative realities of many small tax-exempt organizations. This balance was struck under the law in the following way -- the law does not impose late filing fees for filing late, and an organization's tax-exempt status will not be revoked for failing to file until after three consecutive years of failing to file the e-Postcard.
On the IRS website, the following information is provided, in part:
Small tax-exempt organizations whose gross receipts are normally $25,000 or less may be required to electronically submit Form 990-N, also known as the e-Postcard.
The Pension Protection Act of 2006 added this filing requirement to ensure that the IRS and potential donors have current information about your organization.
Due Date of the e-Postcard
The first e-Postcards are due in 2008 for tax years ending on or after December 31, 2007. The e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, 2007, the e-Postcard is due May 15, 2008. You cannot file the e-Postcard until after your tax year ends.
. . .
Information You Will Need To File the e-Postcard
The e-Postcard is easy to complete. All you need is the following information about your organization. Click on any of the links below, if you need more information about the item.
- Employer Identification Number (EIN), also known as a Taxpayer Identification Number (TIN)).
- Tax Year
- Legal name and mailing address
- Any other names the organization uses
- Name and address of a principal officer
- Web site address if the organization has one
- Confirmation that the organization’s annual gross receipts are normally $25,000 or less
- If applicable, a statement that the organization has terminated or is terminating (going out of business)
To learn more about the new requirement, see the IRS website.
The Chronicle of Philanthropy reports that a "growing numbers of states are passing laws designed to make it easier for nonprofit groups to spend money that donors have pledged to endowments, even if investment losses have caused the value of the donation to drop." The National Conference of Commissioners on Uniform State Laws (NCCUSL) recommended that states adopt such a law (i.e., The Uniform Prudent Management of Institutional Funds Act ) in 2006. The law loosens the rules on spending endowment gifts. The new law provides flexibility because it permits nonprofits to spend money even if the endowment dips below the pledged amount. An example of how the rule works is provided in the article. "If a donor pledged $1-million to endow scholarships, for example, no money could be used to pay for scholarships if investment losses pushed the prinicipal in the fund below $1- million." So far, fourteen states have adopted the new law, and more states are expected to ratify the law in the next few years. An additional sixteen states have introduced the law since the start of 2008. The NCCUSL provides a good description of the reasons behind the enactment.
Endowment Spending. UPMIFA improves the endowment spending rule by eliminating the concept of historic dollar value and providing better guidance regarding the operation of the prudence standard. Under UMIFA a charity can spend amounts above historic dollar value that the charity determines to be prudent. The Act directs the charity to focus on the purposes and needs of the charity rather than on the purposes and perpetual nature of the fund. Amounts below historic dollar value cannot be spent. The Drafting Committee concluded that this endowment spending rule created numerous problems and that restructuring the rule would benefit charities, their donors, and the public. The problems include:
1. Historic dollar value fixes valuation at a moment in time, and that moment is arbitrary. If a donor provides for a gift in the donor’s will, the date of valuation for the gift will likely be the donor’s date of death. (UMIFA left uncertain what the appropriate date for valuing a testamentary gift was.) The determination of historic dollar value can vary significantly depending upon when in the market cycle the donor dies. In addition, the fund may be below historic dollar value at the time the charity receives the gift if the value of the asset declines between the date of the donor’s death and the date the asset is actually distributed to the charity from the estate.
2. After a fund has been in existence for a number of years, historic dollar value may become meaningless. Assuming reasonable long term investment success, the value of the typical fund will be well above historic dollar value, and historic dollar value will no longer represent the purchasing power of the original gift. Without better guidance on spending the increase in value of the fund, historic dollar value does not provide adequate protection for the fund. If a charity views the restriction on spending simply as a direction to preserve historic dollar value, the charity may spend more than it should.
3. The Act does not provide clear answers to questions a charity faces when the value of an endowment fund drops below historic dollar value. A fund that is so encumbered is commonly called an “underwater” fund. Conflicting advice regarding whether an organization could spend from an underwater fund has led to difficulties for those managing charities. If a charity concluded that it could continue to spend trust accounting income until a fund regained its historic dollar value, the charity might invest for income rather than on a total-return basis. Thus, the historic dollar value rule can cause inappropriate distortions in investment policy and can ultimately lead to a decline in a fund’s real value. If, instead, a charity with an underwater fund continues to invest for growth, the charity may be unable to spend anything from an underwater endowment fund for several years. The inability of a charity to spend anything from an endowment is likely to be contrary to donor intent, which is to provide current benefits to the charity.
The Uniform Prudent Management of Institutional Funds Act is the successor to the Uniform Management of Institutional Funds Act of 1972, which was widely adopted among the various states (47). Both laws, according to NCCUSL, "provide[ ] statutory guidelines for management, investment, and expenditures of endowment funds held by charitable institutions. The new act expressly provides for diversification of assets, pooling of assets, and total return investment, to implement whole portfolio management, bringing the law governing charitable institutions in line with modern investment and expenditure practice." The legislative history of the act is available on the NCCUSL website.
The article explores the ramifications of this law to charities. Jack Siegel, a noted tax professional, expressed concern that the new rules make it look like the charity should be spending more money annually from their endowments. He thinks this is misleading, and especially troublesome during a time when the ranking Senior Republican on the Senate Finance Committee, Senator Charles Grassley, has been urging universities with big endowments to use those endowments to reduce rising tuition costs.
Following the enactment of the new law, the Financial Accounting Standards Board, a private organization, issued standards of financial accounting and reporting that can assist nonprofits comply with the new rules.
Please see full article for a complete story.
Tennessee Court Rejects Fisk University's Cy Pres Petition Seeking to Sell Donated O'Keeffe Collection: Fisk Survival at Stake
In Fisk University v. Georgia O'Keeffe Foundation, (full text of the opinion) a Tennessee chancery court declined to apply the cy pres doctrine in a manner that would allow struggling Fisk University to sell all or part of the artwork donated by the late, great artist Georgia O'Keeffe. The Court acknowledged Fisk's dire circumstances but concluded that the law requires that it not allow Fisk to sell the artwork despite the fact that Fisk is in critical condition. The Court also ruled that the case should proceed to trial to determine whether Fisk's violation of the terms of the gift allows the gift to revert to a secondary beneficiary. Things are looking bad for W.E.B. Dubois' alma mater. For an interesting critique of the opinion, see Jack Siegel's column.
The Charity Commission -- The Regulator for Charities in England and Wales yesterday released proposed guidance on the meaning of public benefit as it relates to the relief of poverty. At first I thought this was an odd thing to do -- publish 33 pages explaining why relief of poverty generates public benefit. The connection between relief of poverty and public benefit seems so obvious that no explanation is needed. But what about groups that relieve the poverty of those who might be breaking the law. I am particularly thinking about helping illegal immigrants. As many people know, there are efforts underway in a few closed minded communities to criminalize the provision of human assistance to people whose very existence in a certain time or place is considered illegal (absurd, I know, but true nevertheless). The proposed guidance doesn't go nearly far enough in discussing or illuminating that issue. Here is pretty much the entirety of the comment (appearing on page 21 of the document):
Some might argue that it is not for the public benefit to help people whose poverty is considered to be ‘self-induced’ or the result of ‘irresponsible behaviour’. We consider that, however a person finds themselves in poverty and however ‘irresponsibly’ people might have behaved which has resulted in their poverty, it is a characteristic of a civilised society that certain basic needs are met. Accordingly, we do not consider it appropriate for trustees to take a judgmental approach to the financial needs of beneficiaries if such beneficiaries genuinely lack a basic requirement of life. Likewise, we consider that it is proper for a charity to relieve the poverty of asylum seekers or other persons who, for whatever reason, are denied welfare benefits by law. While there might be public policy reasons why such people are not permitted access to welfare benefits, we think that it is permissible for charities to assist those people who are destitute or in need due to financial hardship. We do not consider that such cases give rise to any public harm that might influence whether an organisation is relieving poverty for public benefit. However, there might be circumstances in which there are public harm issues to consider and we would welcome views regarding circumstances where this might be the case.
I think most people would agree that a charitable organization that helps relieve poverty of an "illegal immigrant" is both doing something good by feeding, housing, or clothing the poor and simultaneously helping people break the law. Should the illegality doctrine result in the revocation of the organization's tax exempt status? Intellectual honesty forces us to conclude that maintaining watering holes in the southwestern desert, for example, so that illegal immigrants from Mexico don't die also has the effect of making the decision to cross the border illegally easier to make. The problem doesn't arise so much with our northern border because for one thing there are no deserts to worry about and for another thing, we seem quite unconcerned with illegal immigration from the north -- go figure! Ok, let me stop there before I get too hot and bothered.
Anyway, for readers who want to comment on the proposed guidance go here.
Noted nonprofit governance expert Jack Siegel has written an objective and interesting analysis of the concerns relating to a recent speech given by Barack Obama at the United Church of Christ's 50th anniversary General Synod in Hartford Connecticut on June 23, 2007. The analysis notes the efforts made by the Church prior to Obama's speech in an effort to avoid campaign intervention. Seigel concludes, nevertheless, that Obama crossed the line at certain points. Here is the conclusion:
We do think Congress must step in and write a prohibition on political campaign activity that addresses the reality of how churches and other Section 501(c)(3) organizations interact with political candidates. In addressing this problem, we would like to see Congress take an approach akin to that taken by the intermediate sanctions in Section 4958. That is, rather than penalizing the innocent entity or the entity that can't control a speaker once the speech has begun, the sanctions should focus on the speaker's conduct, penalizing the speaker. Many will argue that this raises First Amendment issues. We recognize that possibility, but are not convinced. Obviously, the speaker has a right to speak, but the speech in question is by invitation. Consequently, this is not silencing the speaker in terms of access to the public square.
I think Siegel hits the nail on the head when he states that Congress should address the reality of how churches interact with political candidates. That reality, it seems to me though, inevitably leads to the conclusion that prohibiting stump speeches, even from the pulpit, is a futile waste of time. I'm not even sure its good policy.
No human rights abuse has resulted in more formal international treaties than slavery. The great majority of these agreements resulted from pressure from civil society, starting in Great Britain late in the 18th century. Anti-Slavery is the world's oldest international human rights organization, having been founded in London in 1839. Since its inception, it has pressed for greater international recognition and elimination of numerous practices loosely grouped under forms of slavery. In addition to the well-known chattel variety, these include servitude and contemporary forms of slavery, such as debt bondage, compulsory marriage, forced or child labor, sham adoption of children, and trafficking in persons. The efforts of Anti-Slavery have not succeeded in a key area: establishment of a permanent monitoring committee under UN auspices to receive reports and recommend international action.
Defining and combating contemporary forms of slavery; examines the historical evolution of Anti-Slavery as an organization from its inception to the early 21st century. The article highlights reasons for the absence of an effective intra-governmental supervisory group, apart from the weak Working Group on Contemporary Forms of Slavery. The article also examines the evolution of slavery as an institution and concept, from chattel forms to current forms that are deeply embedded in social, economic and political structures, thereby making change all the more difficult.
Its a crying shame what humans do to one another and we should remember that crimes against humanity are not just historical drama. We continue to do such horrible things to one another and those of us interested in nonprofit law should stop and reflect sometimes on the important things our clients and our research subjects are doing.
We may safely assume that during a time of economic downturn, stakeholders tighten their belts and give less to charities. As a result, charities engage in more business activity to hold them over until donations flow again. That speculation seems to have been concerned by a recent article in the 2008 Winter Statistics of Income Bulletin. The article states that unrelated business income tax liability rose a whopping 66% from 2003 to 2004. The SOI articles are always very well written, by the way. Wouldn't it be nice if we all just flooded the EO Division with emails thanking them for their work. Anyway, here is an abstract from the report:
Tax-exempt organizations produced a total of $9.5 billion of gross unrelated business income (UBI) for 2004, nearly 13 percent more than the 2003 amount. After offsetting total gross UBI with $9.0 billion of total deductions, the resulting UBTI (less deficit) for 2004 was $0.5 billion. Positive UBTI amounted to $1.3 billion for 2004, a 65-percent increase over 2003, and the associated UBIT was $364.6 million. After adjusting UBIT with certain credits and other taxes, the total tax reported on Form 990‑T was $367.7 million.
The 2008 Winter Statistics of Income Bulletin contains an interesting article entitled, "A History of the Tax Exempt Sector: An SOI Perspective." Here is an excerpt:
The origins of the tax-exempt sector in the United States predate the formation of the republic. Absent an established Governmental framework, the early settlers formed charitable and other “voluntary” associations, such as hospitals, fire departments, and orphanages, to confront a wide variety of issues and ills of the era. These types of voluntary organizations have continued to thrive in the United States for centuries. In 1831, during his historic visit to the United States, Alexis de Tocqueville observed:
"Americans of all ages, conditions, and dispositions constantly unite together. Not only do they have commercial and industrial associations to which all belong but also a thousand other kinds, religious, moral, serious, futile…Americans group together to hold fetes, found seminaries, build inns, construct churches, distribute books…They establish prisons, schools by the same method…I have frequently admired the endless skill with which the inhabitants of the United States manage to set a common aim to the efforts of a great number of men and to persuade them to pursue it voluntarily."
Thursday, February 28, 2008
The New York Times reports that "AFS, a nonprofit formerly known as American Field Service, is one of the largest and oldest organizers of student exchanges. Since its founding as an ambulance corps during World War I, the agency has arranged exchanges for 325,000 American and foreign students from more then 50 countries." One student, Jonathan McCullum, spent the year in Egypt with a Coptic Christian family. The student alleges that the family starved him. He says that "he was denied of sufficient food while staying with [the]family of Coptic Christians, who fast for more than 200 days of a year." The parents believe that the nonprofit is at fault for not warning the family "that students placed with Coptic families would be subject to dietary restrictions." When the student returned to the United States, he had lost nearly one-third of his body weight, standing at a mere 97 pounds. Mr. McCullum stands 5 foot, 9 inches tall.
The article raises issues of accountability, disclosure and privacy. The family is considering a lawsuit against the charity for the ill-treatment their son received while on the exchange. The family also asserts that the nonprofit should have disclosed the circumstances of the student's stay before it reached a critical stage, and last, to what extent might the student want the organization to keep his condition private, meaning no parents.
See full article for complete story.
Parade Magazine interviews Justice Sandra Day O'Connor about the influence money and politics has on judges and the rule of law. Justice O'Connor expresses concern and hope. She says that:
[O]ur judicial system has safeguards to ensure consistency and preservation of the law. But it is threatened when judges ignore settled law and make decisions according to personal or public preferences.
The judiciary currently is experiencing unprecedented pressure from interest groups to make decisions that are based on politics. In Washington, D.C., we hear a lot about federal judges, and they have a critical role in upholding the Constitution. But having been a state judge and a state legislator, I know that the vast majority of law is state law. Ninety-five percent of litigation takes place in state courts. Many legal issues are primarily decided there, including divorce, property rights, employment law, product liability and medical malpractice.
Political pressure is a big problem in a number of our state courts. More than 89% of state judges go through some form of election process. Many of these elections recently have become full-fledged political battles, fueled by growing sums of money spent by candidates and special-interest groups to attack, defend and counterattack.
. . .
When so much money goes into influencing the outcome of a judicial election, it is hard to have faith that we are selecting judges who are fair and impartial. If I could do one thing to solve this problem, it would be to convince the states that select judges through partisan elections—that is, when a Democrat and Republican run against one another—to switch to merit selection instead. Under this plan, currently used in states such as Colorado and Nebraska, an independent commission of knowledgeable citizens recommends candidates to the governor, who appoints one of them as judge. After several years on the bench, the judge’s name is submitted to the electorate, who vote on whether he should keep his position. This method decreases the importance of money and politics in the process while still allowing voter input on retaining each judge.
I believe the long-term solution to the politicization of the judiciary process is education. Children, voters, policymakers and lawyers all should be informed about the importance of a fair, impartial judiciary. Judges should write their opinions in plain English so that the public can understand what the law is.
See Parade Article for full story.
USA TODAY reports that Catholics in the Diocese of Little Rock urged to stop making donations to the Susan G. Komen for the Cure Foundation, a 501(c)(3) charity, because the Foundation gave money to Planned Parenthood to hold breast exams and offer education to women in its clinics. In a statement, the Diocese states that "[d]onors cannot control how an organization designates its funds." As a consequence, "money donated to a specific service . . . directly frees up funds to support other areas of an organization's agenda." The Diocese expressed concern that the freed up money would be used to support the abortions and contraceptive services Planned Parenthood offers to its clients. A representative of the Komen Foundation said that less than one percent of the money raised by the Foundation went to Planned Parenthood, and the spokesperson further said, "I think it's just really unfortunate undue attention is being shed on organizations that are providing vital services in those communities." See USA TODAY for full article.
As the War on Terrorism continues, international NGOS (non-governmental organizations) and other aid relief and development organizations are operating within some of the most troubled nations in the world, and some are beginning to question what's ahead for charities. On Monday, February 25, in Pakistan, the offices of a British charity, Plan International, were attacked when "up to a dozen men armed with guns and grenades burst into the office of Plan International in . . . [a small city], 45 miles north of Islamabad." Three employees of the charity were killed. Other charities in the area, an area generally thought to be safe, expressed concern over the growing violence reports The Guardian, a major newspaper based in the London. See full article for complete story.
Wednesday, February 27, 2008
Four charities in the Boston area lost their court battle to have the will of Leonard R. Brener, a stockbroker, overturned. Five weeks before his death from a long bout with cancer, Mr. Brener changed his will naming his niece and her husband as beneficiaries to his estate. He claimed that he removed the charities from the will and bequeathed his estate to his niece and her husband because the family members took care of him in his dying days.
The charities sued to have the will overturned in November 2002. The lawsuit was brought under the premise that Mr. Brener lacked the mental capacity in his dying days to change his will. According to the article, the charities presented evidence of two medical doctors during the trial that Mr. Brener lacked mental capacity to change his will. The court found that one of the doctors never met Mr. Brener and the other sat of the board of one of the charities. On the contrary, the estate introduced evidence through one of the executors that Mr. Brener knew what he was doing. The lawsuit was initially filed in the Middlesex Probate and Family Court in Cambridge, Massachusetts. The lower court judge ruled against the charities and they appealed.
See articlefor full story.
Today, the Los Angeles Times reports that "[t]he IRS is investigating the United Church of Christ over a speech Sen[ator] Barack Obama gave at its national meeting last year after he became a candidate for president." The article further reports that Senator Obama is a member of the 1.2 million-member protestant group through his Chicago congregation, Trinity United Church of Christ.
The article also reports that the IRS said in its letter dated February 20 that it had concerns about articles posted on the church's website stating Senator Obama spoke to nearly 10,000 people at the event and that campaign workers staffed campaign tables outside of the event.
Last, the article points out that 501(c)(3) nonprofits are prohibited from endorsing candidates and providing support to campaigns. Nevertheless, the IRS letter states that, while nonprofits are allowed to invite political candidates to address them, "if a candidate is invited in his or her capacity as a candidate, then other candidates running for the same office must also be invited to speak, and there should be no indication of support for, or opposition to, any candidate by the organization." At the end of the article, a representative for Senator Obama states that he spoke in his personal capacity about his "personal spiritual journey" and that the "speech was not a campaign event."
See Article for complete story.
The Chronicle of Philanthropy reports that:
Leonard Riggio, chairman of the Barnes & Noble bookselling company, and his wife, Louise, have made a $20-million gift to build homes for low-income homeowners in New Orleans who have been unable to repair or rebuild after Hurricane Katrina. The donation is one of the largest to date for rebuilding on the Gulf Coast.
'When the hurricane hit and the levees broke, we just cried,' says Mr. Riggio. 'We felt so badly for the people in the area. We felt compelled to help out.'
The couple made the gift through their family foundation, which has created a nonprofit development arm, Project Home Again, to oversee building. The organization expects to [build] 120 to 150 houses.
See full article for complete story.
Tuesday, February 26, 2008
On February 23, 2008, the Boston Globe reported that "Children's Friend & Service, an antipoverty group [and a Rhode Island Charity], is suing Rhode Island Hospital to force it to honor the bequest of a woman who donated $4,000 to the hospital in her will . . . before she died in 1912." The article reports that an employee of the Charity unearthed the bequest searching through the Charity's archives in preparation for the Charity's 175th anniversary. See Boston Globe for full article.
On February 23, 2008, the Wall Street Journal reported that the Government continues its close scrutiny of Islamic Charities operating under the belief (with little direct evidence) that these charities are collecting donations and funding terrorism. The article discusses how Counterterrorism officials believe that Islamic charities are staying one step ahead of the Government as it searches out those charities that are sustaining the infrastructure of terrorists groups, and that following the first group of charities swept up in 2001 and 2002, a new set of charities are at work moving funds and donor files from one group to another.
Scholars and other critics disagree, according to the article. Critics point out that in "the last six years little evidence has emerged directly connecting charities to individual acts of terrorism." Below is a fuller excerpt of the story, highlighting the critics' concerns that most of the alleged evidence is unaccessible even to those charged with wrong-doing:
Officials say the moves against the organizations have aroused anger and opposition among many American Muslims and some civil-liberties advocates -- creating what counterterrorism officials acknowledge is a public-relations problem.
For one thing, critics have chided the government for keeping much of its evidence of terrorist connections secret and resorting to nonterrorism charges, such as tax and money-laundering violations, to put the leaders of some charities out of business.
Prosecutors say, though, that they won't abandon tactics that have brought results. "We incapacitate the bad guys," said Justice's Mr. Wainstein. "It might not be the sexiest way of doing it, and if we get criticized, so be it."
One big problem, some front-line prosecutors said, is that intelligence can show signs of terrorism support, but it is difficult to obtain the kind of unambiguous evidence that will stand up in court to prove money ended up with terrorists overseas. "Once it hits a foreign bank, it is gone to us," said one federal prosecutor who asked not to be named.
See Wall Street Journal for complete story. See also, earlier January 13 Nonprofit Law Prof Blog posting on Convictions of Islamic Charity Leaders.