Tragedy 2: The"Non-profit" Sanctimony Source Code

New Orleans non-for-profit public school - Ruby Bridges 1960 - Happy Birthday
Do not mistake "margins" for greed.   Having a margin, or "profit", on a transaction is like insurance.  Someday you will have another transaction... an unintended loss, or a call for help. Your margin allows you to have a positive impact on other peoples lives (employees, creditors, family).  Things don't always go as planned.  There is no place that's more true than Africa.

In the words of an old chum at the University of Arkansas, here's how most of us see wealth.
'I see dollars kind of like I see calories.  When I see a person who doesn't get enough calories, who's skinny and weak, it makes me uncomfortable.  It's unattractive.   When I see someone who's getting more calories then they need, I kind of see it like an obese person.  It's unattractive.   I like to be around healthy people who make enough money.' - Bertrand X?, friend at U of A
But there is an entire group of people who think "profit" is "likely bad".  They are anti-globalist.  And they often seek out a once-obscure federal tax statute to "certify" business partnership.

"Your company is for profit.  I work for a non-profit.  You shouldn't charge me recycling fees."  

I made more money working for non-profits than I have made running a small business, and I have helped more disadvantaged people with my business than I helped working in the not-for-profit sector.  I'll demonstrate that later.   But using a tax code to predict environmental outcomes was a key ingredient in the decade's "e-waste tragedy".  I'm not going to attack non-profits, but the belief that the tax status is necessary or sufficient to predict best behavior will attract wolves in sheeps' clothing.

Why do people attach a moral fetish to a federal corporate income tax filing statute?  What's with the obsession over corporate filings, as an indicator of morality? Why are some people more suspicious when I take my personal savings, buy a truck, drive it for income, and pay taxes on that income?  What makes a federal tax category more "honest" and more "trustworthy" than a small business?

My thesis is that the belief acts as a disincentive for agents of conscience to take business classes, and if they later want to enter business, they start with a disadvantage.  If you tell a million college students with consciences that "business is bad", they look for jobs in the non-profit sector, surrounding themselves with like-minded 'believers'.  The effect is bad for non-profits, bad for business, and creates an entire class of people on both sides who are almost oblivious to the situation in Africa.

Abusive executives gravitate to the easy money in every society, and the sharpest elbows in emerging markets are found in government, especially when a rich natural resources contract is available (oil, gold, copper, timber, etc.).    Bullyboy culture is at the core of the resource curse, and its antibodies are small businesspeople, reuse, and the tinkerers blessing.  Sadly, this is a near opposite of what my generation has been trained to believe about "trust".

In emerging markets, I learned to trust small businesses most, and when trying to decide how to "give back" to Africa, I found business people were often my betters or my equals, which is the best foundation for a long term relationship.

Net Impact gets it, and the next generation of college students seems less inured to judging each others resumes based on their employers federal tax statute.

Still, the people who have been setting the agenda for Africa and "e-waste" have been people of my generation.  Lingelbachs, Lindseys, Pucketts, Westervelts, Smiths, Schneiders, Tonettis, Cassells, Rubinsteins, Davises, Kyles, Cades, Lynches, etc. grew up in a league where business played mean, exploited resources and people, and referees calling foul on business were considered more heroes than the players on the turf.  Most actually think Dell and HP manufactured CRT monitors (nope), failing to understand that true factory "takeback" will lead to the same people that were buying most of the used CRTs in China and Southeast Asia in the first place.

The environmental theory was that business is responsible for pollution (rather than consumption). But few referees had actually played in the "business" league.   When business was represented in drafting the "rules", it was usually a huge business with paid lobbyists. Europe's WEEE laws were drafted by billion dollar conglomerates, NGOs, and professors.   Joe Benson's ilk were not at the table.

We tried to represent small tinkerer businesses, labelled "the informal sector" by the professors.  I submitted 30 pages of advice on the "WEEE" Guidelines, shared with small business owners in Malaysia, Egypt, Mexico, Peru, which had key phrases such as "elective upgrade".  The Executive Summary of these comments is available on the web, was shared with the ICRS Refurbishers Group, and turned in to John Myslicki (who tragically was dying of cancer during the final months of the PACE committee).

The primary concern is the ignorance of "Elective Upgrade".    This is where a facility in a non-OECD nation has technical ability which surpasses the ability of the exporting nation, and is already recognized in the PACE under "warranty returns".  What isn't well understood is that the factories which make computers (like monitors) are not owned by the OEMs and that in addition to taking back under warranty, they purchase back PCs for refurbishing for sale in the "white box" market.  Just one factory we work with normally buys 5,000 computers or monitors per day, and even if the PC or monitor is working, will replace and upgrade parts to make it better, work elsewhere, or work longer.  - Retroworks de Mexico testimony submitted to PACE

5,000 monitor per day refurbisher, 1500 employees, an original contract manufacturer for major OEMs, defined out of WEEE 

Unfortunately, not one word of the 30 pages of peer reviewed (techies) comments were used in developing the Guidelines used by Interpol.    The NGOs and huge corporations used pictures of children and fake statistics ("75% waste" in Africa claimed by BAN in writing, "80%" claimed in Asia... from the same source?) to draft guidelines that require plastic wrapping on a pallet, and give the plastic wrap more "weight" in determining "likely disposal" than the shipper having taken the time to individually identify loose TVs by make, model and year of manufacture, or from the process Benson used to remove units in the UK prior to shipping.

Misleading "stats" circulated on Basel Action Network letterhead to Basel Convention Parties 2008

The "NGOs" at the table were allowed to participate in StEP and other "consensus" rule developing bodies without paying the steep fare.    They were invited and allowed, and Joe Benson was not, because Benson lacked "charitable tax status".   That's like drafting NBA rules without any actual basketball players participating... NBA rules developed by short white Europeans and Americans without skills in reuse or repair.

Tax Code:

So Joe Benson went to jail not for dumping, but for violating "guidelines" developed by non-exporters to prevent 75%-80% dumping.   The descriptions of the "informal" sector were trusted because Basel Action Network claimed it had the right USA tax code.

The primary problem we had in participating in groups like StEP and PACE was the same as the small businesses in Asia and Africa faced.... The membership was "for profit" or "non profit".    WR3A is a registered non-profit (NGO), but we were not "501-c(3)".  So we were told we had to pay the same fees to participate as HP, Dell, or Umicore.  Charities however (like Willie Cade's) could participate without charge.    And that distinction was ridiculous for African, South American, and Asian small business.   Even the term "informal sector" is a joke among people in the repair and reuse business, it's a term created by professors to describe businesses that can't pay $5000 to participate in their conferences and discussions.

The absence of testimony submitted by WR3A members demonstrates how the tax code effectively kept representatives of businesses like Joe Benson's BJ Electronics, or PT Imtech, or Net Peripheral, or Medi-Com, or Retroworks de Mexico, from contributing to the EU "Guidelines".   As a result, these brown-skinned geeks lost businesses, or went to prison, without any evidence of dumping or Basel Convention violations.  Benson was effectively asked to "prove" that his exported material was among the 91% good found by the Manhart study, and was "presumed" to be 75%-80% bad based on "common knowledge".

That is the real E-Waste Tragedy.

Tax-coded "trust" is especially suspicious when the "non-profit" is promoting legislation (RERA, Basel Ban Amendment, federal procurement) in violation of the very charitable tax code..

Source Code for Sanctimony:

From the IRS website on section 501-c-3:
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.

In 2015 or 16, your obedient blogger will cross a threshold.   Someday soon, for the first time, I will have worked more than 50% of my career in the "for profit" sector.  This means I got most of my paychecks, in the past, either from state or federal government (MA DEP, US Peace Corps) or from the following category of corporation identified in 26 U.S.C. law:
501(c) organization, also known colloquially as a 501(c), is a tax-exempt nonprofit organization in the United States. Section 501(c) of the United States Internal Revenue Code (26 U.S.C. 501-(c)(3)) provides that 29 types of nonprofit organizations are exempt from some federal income taxes. Sections 503 through 505 set out the requirements for attaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.

Ten most feared words in Africa - "I govern e-waste in Europe, and I'm here to help"

Being rich doesn't make you bad, being poor doesn't make you bad.  The tax codes, created for Christian churches and Jewish synagogues, and other charitable associations, was created to protect the types of associtiations observed by Alexis de Tocqueville in 1831 (Democracy in America).

"It is clear that if each citizen, as he becomes individually weaker and consequently more incapable in isolation of preserving his freedom, does not learn the art of uniting with those like him to defend it, tyranny will necessarily grow with equality.
"Here it is a question only of the associations that are formed in civil life and which have an object that is in no way political.
"The political associations that exist in the United States form only a detail in the midst of the immense picture that the sum of associations presents there.
"Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fĂȘtes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate. Everywhere that, at the head of a new undertaking, you see the government in France and a great lord in England, count on it that you will perceive an association in the United States.
"In America I encountered sorts of associations of which, I confess, I had no idea, and I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely."
(De Tocqueville is da man, by the way, and the inspiration of bloggers everywhere.  Just take an hour to read different quotes of his online, you don't have to read the whole book on Democracy to get the insight.)

In "A History of the Tax Exempt Sector:  An SOI Perspective" (2008) Ansburger /Ludlum /Riley/ Stanton document how American associations documented by de Tocqueville began to be recognized in federal tax codes.   The incentive to "protect the sheep from taxes" began as early as 1894.   And as recently as 1969 the IRS tried to to "clean the nest" of wolves in sheep clothing, especially "member-serving" associations which were clearly not on the same page as the Red Cross (or Red Crescent).

Donations to the KKK were tax-deduction, and the clash between "belief" organizations and civil rights / employment law continue to create Supreme Court case fodder to this day.   Do the Boy Scouts have to admit girls?  Does a donation to the Catholic Church's defense fund for lawsuits against a child molesting priest qualify as a charitable gift?   How many billions of dollars are claimed on tax forms for "donations" of Apple Macintoshes and Pentium II computers to Goodwill and Salvation Army?  How many scrap PCs are reported as a donation of the original purchase price?

If you want to come up with rules for football/soccer or basketball, do charities deserve more say than coaches and players?

The "E-Waste Tragedy" is not about tax codes.  But there is a repeated bump I hit with journalists, professors, researchers, and citizens of conscience over the Basel Action Network's ridiculous - and rather specific - claims over the trade in used computers to Africa.    Reporters over the age of 45 grew up with a distrust of "for profit" and a bias for "non-profit".   Thirty years ago the question was, "how do we take away the 501-c3 status of a charter school that won't admit colored children?" or, "how do we revoke the 501-c3 status of the Ku Klux Klan?"

If BAN was making numbers up, wouldn't the IRS catch them in the annual tax reporting?  Um no.  No the IRS would not.

What the IRS does provide are form 990s.

Surprise.  The Executive Director of BAN earns more than Hamdy, more than Wahab, more than Mariano, more than Fung.

People in their 20s, who grew up with church scandals and NRA ads, might ask the better question.  Why does anyone think that a petition not to pay taxes was a measure of morality, honesty, and trust in the first place?

Let's grant that the Charity Sector tax code made sense originally in the 1800s.

That the associations already formed and observed by de Tocqueville would be recognized as serving a quasi-governmental welfare function (hospitals) made complete sense.

The morality, however, predated the tax law... the statute didn't create the morality.  And it never seemed quite thought through how federal tax employees would issue sanctimony licenses, or measure ongoing organizational moral turpitude.

Decades ago, the federal government smiled upon hospitals, giving them a special tax status, so they didn't have to pay income tax on their donations.  Makes more sense than taxing the hospital and then having to tax fund health care, right?  But having created the non-tax and charity 501-c category, how do the feds monitor who moves into the category, and how they use their status as their organizations evolve?  Do the feds monitor it at all?  As we see NGOs clearly and openly lobby for legislation to benefit their members, on the home page of their websites, using photos of black teens carrying wire on their heads, do we somehow trust the association more than we trust the integrity of all of its collective, for profit, members?

Here's where the scales of justice swing with yours truly.   I've worked almost exactly half my professional life in the non-profit sector.  But when I speak up for an imprisoned African born TV repairman - Joe Benson - sitting in English prison cell for violating a "guideline" drafted upon bogus, ficticious, scandalously specific lies ("75% of exports to Africa are waste" - BAN circular to Basel Convention delegates, see part III), I keep hearing people say "BAN is a non-profit" or that "you are a for profit".  Benson's prosecutor referred to African waste imports as "common knowledge".  They shifted the burden of proof on Benson to prove his exports were NOT waste based on ten years of smoking turds of facts vomited upon journalists by a guy in Seattle whose paycheck comes from Big Shred.   It's probably the grossest case of "Charitable Industrial Complex" and "Great White Savior", "Poverty Porn" and "Parasites of the Poor" that I've ever seen.   And the racially charged marketing of the "anti-export cause" is jaw dropping.

The "gaze" on Agbogbloshie continues to be the real tragedy.  That's the opinion of Heather Agyepong, and the opinion of Eric Emmanuel Prempeh Nyaletey, and many "hurricanes".

Environmental Injustice is most likely in Africa to be the result of Environmental Malpractice by Europeans.  Forcing Africans to mine raw materials, but not allowing Africans to recycle or repair the goods made of those raw materials, forces shorter product lifespans and higher costs of ownership, and denies Africa its "Tinkerers Blessing".  What does that have to do with charitable tax codes?

It's always frustrating to admit that the above statement is "the opinion of business".  Even if I don't export any more, I am a "businessman".   Vermont and R2 make it really difficult to export, and the USA is no longer the Saudi Arabia of reuse - Chinese cities like Shanghai now export more used product than the USA does.  So it's not my actions or my self interest that make me less credible.  It's the IRS tax statute.

I pay taxes, therefore I'm less believable than the guy who makes twice as much money and doesn't pay taxes.

So I sit here this weekend morning pondering the moment I became less credible.

So... Not including my pre-18 years (working as a janitor and often sole white boy at U of A student union night crew), I worked mostly in the non-profit sectors (501-c3 and government) from 1980-2001.  Four of those years were part time (about 15-20 hours per week) during college, but you can count 1984-2001 solidly as non-profit sector, 7 years as a regulator and ten at two 501-c3 NGOs.  Ah, but for 2 of those years I also worked as consultant (the 1999-2001 charity was unable to pay my agreed full time salary).  So round it off to 4 years of non-full-time (laborer for colleges and universities), 15 years for not-for-profit, and 2 years as a "tie game".

I started my Vermont company in 2001. I paid to incorporate "American Retroworks Inc." the week I was let go by the charity, one of the managers cut from payroll.  So in March 2015, I guess I'll still be a little short of 50% of my years in "for profit", I'm still mostly non-profit experience.   But I'm pretty sure if you count the hours per week up, I can make the threshold.  Dollars earned?  Non profit and regulator income wins, hands down.

My MBA concentration was in non-profit and public management program at Boston University, and so I read a lot about non-profit and not-for-profit theory.

So, having anointed my expertise, here's the gist.

The whole "non-profit sector", as a measure of trust, is a fallacy.    

Ok, whoa, don't jump to the comment section yet.   There is definitely a self-selection process which recruits "agents of conscience" into the non-profit and government sector.  The fact I spent my first 15 years gainfully employed in GOs and NGOs attests to my generation's belief in the non-profit sector, and like any self selecting group, we have a lot of pride and trust invested.  And the reverse was also true... during the 1960s and 70s, a whole lot of agent-of-conscience hippies shunned the "Mad Men" careers.  Not many self-respecting hippies wanted to climb the corporate ladder at Walmart or McDonalds or Pepsico.   And consequently, my 1980s generation didn't meet many agents of conscience in the recruiting office.

So people in their 40s-60s, like myself, Jim Puckett, Ted Smith, Shiela Davis, and a whole-lotta-Europeans (where employment in the government sector is a higher percentage of GDP), were professionally weaned on the milk of mutual admiration.   We all were legitimately, earnestly, worried about Earth, about what human consumption and economic growth were doing to endangered species, and what planet we'd be leaving to a generation yet to be born.

We were all exposed to the three sacred texts of 1960 - Rachael Carlson's "Silent Spring", Harper Lee's "To Kill a Mockingbird", and Vance Packards big-business-conspiracy investigation, "The Waste Makers".   We all read Noam Chomsky, and we probably all agreed to the "negative check-off" donations for MPIRG, VPIRG, CalPIRG and MassPIRG.   Ralph Nader was someone we looked up to.

The analogy I would make is to my grandparents generation, and their attendance at Ozark churches.   Whatever I think of Pentacostal evangelicalism today, I'm aware that in the context of the unpaved roads of the Ozarks, people of conscience prayed, and people without consciences either didn't pray or faked it.   The Ozarks of Missouri and Arkansas, like Kentucky, were "Borderland Rebellion" territory in the civil war.  The most prominent slave owner in Taney County Missouri (my roots) was a woman who never married and had one male "slave" her own age.  I'm pretty sure they lived in a one room home.  You do the math.

If my grandparents wanted to be around people with a conscience, they were more likely to meet those people in church, even if they knew not everyone in church was equally sinful.  And Negroes and Sikhs and Hari Krishnas were so unfamiliar they may as well have been from Mars.

What church was to my grandparents, the non-profit sector was to the later boomers.  If we got together at a reunion, the folks who worked in civil rights, or defending the poor, or resisting globalization, or saving chimpanzees, or living the Peace Corps life, did the most talking.  The lawyers?  Well, the more money the lawyer made, the less they talked about their work...  It was the public defenders and charity lawyers who did the bragging.

So that's a long way of saying why I found myself in the non-profit sector for the first 15 years of my full time employment, and why I have so many friends there, and tend to hang out with the government and non-profits at E-Scrap conferences.  But over the past 15 years, I've gotten kind of tired of losing rank in the sanctimonious pecking order of doo-gooders.

In Part X of Tragedy, I plan to interview myself (since PACE and StEP and INTERPOL wouldn't).  Here's a preview. 

Q:   Robin, you used to work in the non-profit sector.  But for the past 15 years, haven't you been a for profit?  Have you joined "the dark side" of the recycling force?

A:  Yep, I own a company now, and it's a c-corporation.  I was fired from a charity, and bought a used Penske truck (without pressure testing the engine, mistake #1).   I bought it with some leftover money from a second mortgage my wife and I took on the house.   And honestly, there was just no time to do the 501-c(3) paperwork.   I accept that those decisions placed my opinions under the shadow of "greed"

No comments: