Center for Chesapeake Communities: EPA Establishes Tax-exempt Corporation to Do its Bidding

Center for Chesapeake Communities: EPA Establishes Tax-exempt Corporation to Do its Bidding
October 1, 1999



“The abuse of taxpayer dollars by groups who claim to be cleaning up the environment, as detailed in the audit [by the Environmental Protection Agency’s own Office of Inspector General (OIG)] is simply unacceptable,” observed Senator Kit Bond (R-Missouri).

The audit had found that EPA’s grant awards to the nonprofit Center for Chesapeake Communities (CCC) were “unjustified and improper,” and that “[EPA] created an appearance of preferential treatment that compromises the integrity of the [EPA-run] Chesapeake Bay Program.” The OIG also found that CCC had improperly awarded a contract to an EPA contractor, Redmond/Johnson, which had a conflict of interest because it had donated $2,300 for the Center’s original incorporation.

“It is my intent to determine if EPA’s grants mismanagement problem is one that affects the entire agency,” said Bond, who chairs the committee that oversees EPA’s budget and also serves on the Environment and Public Works Subcommittee, which handles legislation governing the agency’s operation. “I will use letters, hearings, or investigations to ensure that EPA acknowledges the depth of this problem, initiates prompt action to clean up this mess, and protects taxpayer-funded environmental clean-up efforts from future abuse.”



Target-rich Environment

A recently issued National Wilderness Institute (NWI) report confirms that Bond has picked a “target-rich environment” in which to launch his investigation. The report suggests Bond is likely to find more than simple abuse of power.

EPA engaged in an elaborate scheme to establish the CCC, a tax-exempt corporation the agency controlled. Using money it had paid to one of its for-profit contractors, Redman/Johnson, EPA created the nonprofit CCC and then funneled its Chesapeake Bay Program money through it, taking both funding and control away from the elected officials who had, until then, run the program.

Dr. Bonner Cohen, author of the NWI report and now a senior fellow at The Lexington Institute, described the evolution of the EPA scheme as follows:

Since its inception, the Chesapeake Bay Program had been run through a complicated but effective set of organizations under the control of state and local officials. The top decision-making organization in the effort to restore the Chesapeake Bay was the Executive Council, comprised of the governors of Virginia, Maryland, and Pennsylvania, the mayor of the District of Columbia, and the EPA administrator, each having one vote. Elected officials, not EPA, controlled the program.

In 1988, the Local Government Advisory Council (LGAC) was formed to give representatives of towns, counties, and other local government bodies a voice in the decision-making. Funding was handled by yet another group, the Washington Metropolitan Council of Governments, known as WashCOG, comprised of local representatives from around the bay.

In 1996, the LGAC heard a proposal that would have established another body, a non-profit 501(c)(3) corporation, to coordinate Bay restoration activities. LGAC members determined the nonprofit would simply duplicate efforts already underway, draining off restoration money with increased administrative costs.

The LGAC moved on September 18, 1997 to postpone indefinitely further action regarding the nonprofit corporation. Less than a month later, it learned that the nonprofit had already been incorporated by LGAC staff director Tony Redman, of the EPA contractor Redman/Johnson, and Gary Fisher. The nonprofit’s application for 501(c)(3) status had already been made to the Internal Revenue Service--without Executive Council authorization.



EPA Behind Birth of CCC

As it turns out, the CCC was not simply the random brain-child of an EPA contractor. “Allan and Redmond,” according to Cohen, “in defending their actions, have told other LGAC members that EPA encouraged and advised them to proceed without LGAC or Executive Council approval. According to Redman, it was EPA Region III Administrator Mike McCabe who suggested that the Bowie [Maryland] mayor [Gary Allen] become the CCC’s executive director. He and Redman also credit Bill Matuszewski, director of EPA’s Chesapeake Bay Program Office, with helping push the process along.”

Mindy Lemoine of EPA’s Chesapeake Bay Program Office wrote in an internal EPA memo dated September 3, 1997, “The Chesapeake Bay Program is eager to support the establishment of the Center for Chesapeake Communities. Establishment of such a nonprofit organization . . . will be one of the featured announcements of Administrator Browner at the 1997 [Executive Council] meeting on October 30,1997.” The announcement was later canceled.

Nevertheless, EPA money soon began flowing into the CCC, which became dependent on the agency for its financial survival. EPA made a $45,000 grant to the CCC even before it had secured its tax-exempt status. An additional $750,000, which had previously gone to WashCOG, was paid to the CCC and split with the Alliance for the Chesapeake Bay, a nonprofit organization that shares a common director with CCC.

EPA completed its takeover of the Chesapeake Bay restoration project, when it announced that all funding for Chesapeake Bay Program participants would go through the CCC. From that day forward, the Executive Committee and LGAC have been, for all practical purposes, out of the decision-making process.