By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
The old law requiring corporate financial disclosure was put into place in the 1970s, Cummiskey says, to battle rampant real-estate fraud.
"There was a feeling then that open government was an important thing for public," he says.
But business lobbyists, most notably the Arizona Chamber of Commerce and the National Federation of Independent Businesses, found an ally in Springer by complaining that the simple form caused too much paperwork and revealed confidential information to competitors.
"It's a one-page form, and this notion that this was a bureaucracy gone mad was overstated," say Cummiskey.
Since the law took effect this year and the Corporation Commission is now accepting year-end statements for 1997, the last year that financial records will be available for public inspection is 1996.
Anyone interested in learning about the for-profit subsidiaries owned by Jalma Hunsinger or the dozens of for-profit subsidiaries controlled by the Baptist Foundation of Arizona, for instance, won't find any annual financial statements records beyond the year 1996.
They simply won't exist.
Springer says she sponsored the law to protect Arizona businesses from having to expose financial information that could be accessible to competitors in states that did not require financial disclosure.
What about citizens?
"They can always ask the Better Business Bureau for help," she says.
But unsavory corporations don't usually register with the Better Business Bureau--and by the time a citizen seeks the help of the BBB, which has no regulatory authority, money may have already been lost.
Springer's law, coupled with a seven-year-old law that legalized "Limited Liability Corporations" (LLCs), leaves citizens with little hope glimpsing inside corporations in Arizona.
By the end of 1997, there were 25,000 LLCs registered with the Arizona Corporation Commission. LLCs are popular with business people because LLCs don't have to disclose anything--owners, officers, members, finances, not even the nature of the business. Yet they are still registered with the Corporation Commission and can do business in Arizona.
"Convicted felons can hide behind LLCs, and the Corporation Commission has no way of knowing," says Joann MacDonnell, director of the corporations division of the Arizona Corporation Commission. "If they admit they're Al Capone, that's fine, but if they refuse to disclose it and we have no proof, then we are not empowered to revoke their corporate status."
"We should put laws [requiring disclosure] like this back into place and strengthen them," says Cummiskey. "For the public's benefit."
In October 1989, televangelist Jim Bakker was sentenced to 45 years in prison for defrauding his flock out of $154 million through his PTL organization. In exchange for $1,000 payments, the faithful were promised vacation lodgings at a Christian theme park in South Carolina. Instead of investing the money in the vacation park, Bakker bought luxuries for himself and his family--a private jet, homes, limousines and an air-conditioned tree house for his children.
The faithful didn't get their vacations, and they didn't get their money back.
"He had no thought whatever of his victims," a judge said during Bakker's 1989 conviction, "and those of us who do have a religion are ridiculed as being saps for money-grubbing preachers or priests."
Bakker's sentence was reduced by an appellate court, and he served only four years in prison before being released.
The Bakker case sent shock waves through the Christian community, yet even today the IRS--and citizens--are usually unable to discern how religious foundations spend their money.
And even though religious charities get the bulk of gifts donated in the United States, antiquated tax laws make it nearly impossible for the IRS to monitor the approximately 90,050 church-related tax-exempt organizations in the nation.
All church-related organizations are required to follow the law, but it is more difficult for the IRS to catch them breaking it. Unlike other organizations that are exempt from paying income tax under rule 501-C-3, church-related non-profits needn't tell the IRS how they spend their money. Other, non-religious tax-exempt organizations, such as the Arizona Community Foundation, are required to file an annual Form 990, which discloses how money is spent and how much officers are paid.
The Form 990 is open to public inspection, so that people donating to charities will know how those dollars are spent--or misspent.
But with church-related organizations, the public--and the IRS--remain in the dark.
Federal tax regulations prohibit the IRS from routinely auditing the books of church-related organizations unless an IRS regional commissioner allows it.
The catch--before the commissioner can grant permission for an audit, he already has to know damning information exists in the very books that haven't been audited.
"Our ability to review their finances is very limited," says Marcus Owens, director of the exempt organizations division of the IRS. Owens says the IRS usually learns about possible tax violations in religious organizations from disgruntled former employees or from newspaper articles.
But few tax-policy reformers or politicos even know about the obscure law--or, if they do, want to reform it and make religious organizations more accountable.
There are no movements alive in Congress to change the way the IRS must deal with religious foundations.
Pete Sepp, vice-president for communications for the National Taxpayers Union, a 300-member Washington, D.C.-based tax research and lobbying group, says he wasn't aware that the IRS was restricted from investigating religious foundations.