In Aiding Poor, Edwards Built Bridge to 2008 By LESLIE WAYNE
John Edwards ended 2004 with a problem: how to keep alive his public profile without the benefit of a presidential campaign that could finance his travels and pay for his political staff.
Mr. Edwards, who reported this year that he had assets of nearly $30 million, came up with a novel solution, creating a nonprofit organization with the stated mission of fighting poverty. The organization, the Center for Promise and Opportunity, raised $1.3 million in 2005, and — unlike a sister charity he created to raise scholarship money for poor students — the main beneficiary of the center's fund-raising was Mr. Edwards himself, tax filings show.
A spokesman for Mr. Edwards defended the center yesterday as a legitimate tool against poverty.
The organization became a big part of a shadow political apparatus for Mr. Edwards after his defeat as the Democratic vice presidential nominee in 2004 and before the start of his presidential bid this time around. Its officers were members of his political staff, and it helped pay for his nearly constant travel, including to early primary states.
While Mr. Edwards said the organization's purpose was "making the eradication of poverty the cause of this generation," its federal filings say it financed "retreats and seminars" with foreign policy experts on Iraq and national security issues. Unlike the scholarship charity, donations to it were not tax deductible, and, significantly, it did not have to disclose its donors — as political action committees and other political fund-raising vehicles do — and there were no limits on the size of individual donations.
Mr. Edwards, a former North Carolina senator, set out to keep his political options open by promoting issues he cared about, like poverty.
"He wanted to learn, travel and be in a position to be a viable candidate," said J. Edwin Turlington, a Raleigh lawyer who was the manager of Mr. Edward's 2003 presidential exploratory committee. "He had the ability to raise money to fund his activities. He had a vision, and he knew it would take money."
Mr. Edwards mixed policy and politics in a way that allowed his supporters to donate to the causes he believed in — and to the organizations he had set up. He also set up two political action committees, something commonly done by politicians thinking of running for president.
But it was his use of a tax-exempt organization to finance his travel and employ people connected to his past and current campaigns that went beyond what most other prospective candidates have done before pursuing national office. And according to experts on nonprofit foundations, Mr. Edwards pushed at the boundaries of how far such organizations can venture into the political realm. Such entities, which are regulated under Section 501C-4 of the tax code, can engage in advocacy but cannot make partisan political activities their primary purpose without risking loss of their tax-exempt status.
Because the organization is not required to disclose its donors — and the campaign declined to do so — it is not clear whether those who gave money to it did so understanding that they were supporting Mr. Edwards's political viability as much or more than they were giving money to combat poverty.
The money paid Mr. Edwards's expenses while he walked picket lines and met with Wall Street executives. He gave speeches, hired consultants, attacked the Bush administration and developed an online following. He led minimum-wage initiatives in five states, went frequently to Iowa, and appeared on television programs. He traveled to China, India, Brussels, Uganda and Russia, and met with Prime Minister Tony Blair of Britain and his likely successor, Gordon Brown, at 10 Downing Street.
"He was not a U.S. senator; he had no office," said Ferrel Guillory, a political program director at the Center for the Study of the American South at the University of North Carolina. "So he set up a series of entities to finance his travel, to finance a political shop and to finance an issue shop. It all adds up to a remarkable feat of keeping a presidential candidacy alive without any of the traditional bases for it."
Mr. Edwards depended for his activities in large part on donations from supporters. In addition to the two nonprofit organizations, he created a leadership political action committee and a 527 "soft money" organization that also shared the same name: the OneAmerica Committee. These two committees each allowed donors to give more than the $2,300 per person limit in a presidential primary or general election, and, in some cases, to give in unlimited amounts.
From 2005, when he established them, through 2006, the committee and the soft money organization raised $2.7 million, most of which paid for travel and other activities that helped Mr. Edwards maintain his profile.
"It's a permanent campaign," said Meredith McGehee, policy director at the Campaign Legal Center, a nonprofit group based in Washington. "It's about shaking every money tree possible and finding every means to finance a permanent campaign. It's like having different checking accounts, with different rules, and the goal of keeping your name and agenda in the public eye."
The two foundations and the two political committees all shared an address in Washington and jointly raised around $4 million. Most donations to the political committees came from his core supporters, trial lawyers and unions, and in one case from an anonymous donor, who gave $250,000. Many donations ranged from less than $10,000 to $50,000. For example, Boyd Tinsley, the violinist and backup singer for the Dave Matthews Band, gave $50,000, as did the Service Employees International Union, whose organizing efforts Mr. Edwards has supported.
The Edwards campaign defended the activities of the nonprofit.
"One of the Center for Promise and Opportunity's main goals was to raise awareness about poverty and engage people to fight it," Jonathan Prince, deputy campaign manager, said yesterday. "Of course, it sent Senator Edwards around the country to do this. How else could we have engaged tens of thousands of college students or sent 700 young people to help rebuild New Orleans? It's patently absurd to suggest there's anything wrong with an organization designed to raise awareness about poverty actually working to raise awareness about poverty."
"Of course, some of the people who worked for Senator Edwards in the government and on his campaign continued to work with him to fight poverty and send young people to college," he added. "Perish the thought: people involved in politics actually trying to improve peoples' lives."
Mr. Edwards also developed mutually beneficial relationships with public and private institutions. He founded the Center on Poverty, Work and Opportunity at the University of North Carolina, which provided him with a platform. In return, he raised $3 million to sustain it. He was hired by the Fortress Investment Group, a New York hedge fund, to "develop investment opportunities," according to a 2005 Fortress news release. That led to meetings with such people as Chancellor Angela Merkel of Germany; Henry Kravis, founder of KKR, one of Wall Street's most successful investment funds; and the chief executives of General Electric, Citigroup, Coca-Cola and DaimlerChrysler.
"Fortress became a vehicle for foreign travel," Mr. Turlington said, "but it was also a way to spend more time with sophisticated financial people."
The Edwards campaign declined to disclose the amounts raised or spent by the two similarly-named nonprofit agencies — the Center for Promise and Opportunity and the Center for Promise and Opportunity Foundation — since their 2005 tax filings, which are the most recent to have been filed.
The Center for Promise and Opportunity Foundation, which started with $70,000 in 2005, gave out $300,000 in college scholarships in 2006, said Pamela Garland, the executive director of the College for Everyone Program that is part of the foundation. The center, often praised for helping poor students in Greene County, N.C., get into college, is on track to give out $476,000 this year, Ms. Garland said.
Mr. Edwards broke his ties to that charity once he announced his candidacy for president. "It's really just me now," said Ms. Garland, who began her job last May. She credited Mr. Edwards with devising the program, raising the money and speaking to high school students, using his own up-from-poverty story to inspire them.
At the same time, the larger nonprofit group had a more politically active agenda. Its directors included Mr. Turlington, the Raleigh lawyer; Miles Lackey, Mr. Edwards's former chief of staff; Alexis Bar, his former political scheduler; and David Ginsberg, Mr. Edwards's current deputy campaign manager.
The $1.3 million the group raised and spent in 2005 paid for travel, including Mr. Edwards's "Opportunity Rocks" tour of 10 college campuses, consultants and a Web operation. In addition, some $540,000 went for the "exploration of new ideas," according to tax filings.
Nonprofit groups can engage in political activities and not endanger their tax-exempt status so long as those activities are not its primary purpose. But the line between a bona fide charity and a political campaign is often fuzzy, said Marcus S. Owens, a Washington lawyer who headed the Internal Revenue Service division that oversees nonprofit agencies.
"I can't say that what Mr. Edwards did was wrong," Mr. Owens said. "But he was working right up to the line. Who knows whether he stepped or stumbled over it. But he was close enough that if a wind was blowing hard, he'd fall over it."
Of the explicitly political entities, Mr. Edwards' OneAmerica Committee 527 organization allowed donors to give without limitations. The money was transferred to his leadership political action committee. Leadership committees were initially created to allow prominent politicians to raise money for distribution to needy office-seekers. But Mr. Edwards spent the entire $2.7 million he raised for OneAmerica, including $532,000 raised by the 527, on himself, an increasingly common trend among politicians.