Constantine Cannon Represents the Center for Media and Democracy in new IRS Whistleblower Complaint against American Legislative Exchange Council

ALEC peddled campaign software to members despite 501(c)(3) status; Seeing illegality, a legislator and ALEC internal whistleblower turned them in

On behalf of the Center for Media and Democracy (CMD), the law firm Constantine Cannon LLP today filed a complaint with the IRS Whistleblower Office against the nonprofit American Legislative Exchange Council (ALEC), alleging ALEC has brazenly engaged in political campaign intervention in violation of its 501(c)(3) tax-exempt status by offering political campaign software to conservative legislators under the guise of providing “constituent service” software.

According to the submission, ALEC has been providing this sophisticated voter management and campaign software—created and run by Republican operatives and linked directly to the Republican National Committee’s voter files—since at least 2016. Its blatantly illegal abuse of its nonprofit status is just the latest activity the organization has undertaken over the past decade to lobby for legislation or to support political campaigns despite its 501(c)3 status, which requires ALEC to refrain from all activity that would advance political campaigns or legislation.

The submission details the partisan use of so-called “ALEC CARE” software, which was developed by Republican operative Ned Ryun and political software firm VoterGravity specifically to assist in Republican and conservative campaigns. The campaign software was then “white-labeled” as constituent software for ALEC, in order to disguise its true purpose. By ALEC’s own admission, the services provided to Republican legislators through the use of CARE software added up to a value of more than $6 million per election cycle, none of which were unreported as campaign contributions.

ALEC’s actions came to the attention of CMD through an ALEC Legislative Member, who recognized the illegality of the ALEC scheme. The Legislator became a whistleblower and provided screen shots of ALEC training videos and other incriminating evidence. The submission is also supported by documents obtained through CMD’s own investigation and open records requests.

“No amount of disguise or window-dressing can hide ALEC’s brazen disregard of laws related to its tax-exempt status,” said Eric Havian, a partner at Constantine Cannon and head of the firm’s whistleblower practice group. “ALEC has abused its tax-exempt status for a decade or more. I can only hope that we have not become so accustomed to fraud in plain sight, and that the IRS will finally take action to stop taxpayers from subsidizing ALEC’s partisan electioneering and lobbying.”

Among the campaign-related features of the ALEC CARE software, according to a YouTube Introduction to the product, are “geomapped walklists,” “Door Knocks,” “Voter Data” and an unique “Strikelist” feature designed to alert campaigns as to who has voted on election day. According to a VoteGravity blog post, “this enables the campaign to contact any supporters who haven’t voted yet and track strike list progress as it happens.”

“There is no universe in which ALEC CARE’s features could be considered constituent service,” said Max Voldman, an associate at Constantine Cannon. “This is campaign software, plain and simple, and as such an illegal contribution to these campaigns in violation of ALEC’s 501(c)(3) tax-exemption.”

In the filing, CMD urges the IRS to strip ALEC’s 501(c)(3) status and pay fines related to the violations. CMD is also filing campaign finance complaints with the appropriate oversight agencies in 15 states.

The Center for Media and Democracy press release can be found here. The IRS submission is available here, with a full list of exhibits here.

About Constantine Cannon LLP

With offices in New York, Washington, D.C., San Francisco and London, Constantine Cannon LLP is one of the largest whistleblower practices in the United States. The firm’s team of dedicated whistleblower lawyers represent whistleblowers under federal and state False Claims Acts as well as the whistleblower programs of the IRS, SEC, CFTC, DOT, and others.

Constantine Cannon also has deep expertise in practice areas that include antitrust and complex commercial litigation, government relations, securities, and e-discovery. The firm’s antitrust practice is among the largest and most well recognized in the nation. Constantine Cannon’s experience spans multiple industries, including healthcare, banking, electronic payments, insurance, high tech, telecommunications, the Internet, and government contracting.