Wednesday, July 20, 2011

Nonprofit and charitable contributions at Center of Pakistani "Spy" Allegation

Even if it is a rare occurrence, and even if domestic laws against political activities have never been fully explained, the involvement of NGO's in secret government foreign policy matters puts all NGO's at risk.  For example, an NGO operating in a theatre of war with the explicit or implicit assistance of one or the other warring parties, or both, inevitably causes the warring parties to look upon the NGO as something more than neutral noncombatants trying to mitigate the consequences of human madness.  So I was intrigued when I read the complaint recently filed against two Americans of Pakistani descent and learned that the nonprofit, Kashmir American Center, an organization described as a "not-for-profit dedicated to raising teh level of knowledge in the United States about the struggle of the Kashmiri people for self-determination." In essence, the complaint alleges that the KAC served as a front through which the Pakistani intelligence service, the ISI, attempts to shape domestic political opinion in favor of Pakistan's goals in the disputed Kashmir region.  I am not quite sure whether a tax exempt organization whose goal is to influence American grassroots and political opinion is contrary to 501(c)(3) is necessarily disqualified from tax exemption, but the complaint makes for intriguing reading regarding the seemingly nefarious uses to which nonprofit organizations can be put.  For example, the affidavit in support of the criminal complaint implies that the KAC allowed sympathetic "straw donors" to obtain charitable contribution deductions by funding the domestic operations of a foreign spy agency: 

Fai [a principal insider of the nonprofit organization] has received approximately $500,000 to $700,000 per year from the Government of Pakistan, and that the Government of Pakistan has funded Fai's operations through Ahmad. As further discussed below, I believe that the Government of Pakistan money is routed to Fai through Ahmad and a network of other individuals connected to Ahmad. I believe that much of this money is provided to Fai through contacts of Ahmad in the United States because Ahmad lives in Pakistan and is rarely in the United States. The evidence shows that Ahmad arranges for his contacts in the United States to provide money to Fai in return for repayment of those amounts in Pakistan. I believe that these other individuals assist Ahmad in routing money to Fai because doing so ostensibly enables them to take tax deductions deductions for the amounts that they transfer to the KAC as charitable deductions. I estimate that the total amount his funding network to Fai and the KAC since the mid-1990s is at least $4,000,000.

I suppose, though, that an NGO whose goal is simply to advocate for one position or another is nothing new and its views do not necessarily disqualify it from tax exemption or any of the other benefits of charitable nonprofit status, even if the organization is run primarily by a foreign intelligence agency.  That the question is debatable demonstrates the nearly unlimited extent to which "charitable" in 501(c)(3) can be stretched.  But what if the organization itself is an "agent" of a foreign government (under the statute that is the basis of the complaint) and fails to register according to federal law?  If the organization were an agent and had actually registered, could it still qualify for tax exemption?  Theoretically "yes" it seems to me. 





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