June 24, 2012

It’s been fun to be the “tinfoil hat conspiracy theory” guy for the past week or so. It’s easy to dismiss the Goldwater “coincidences” as nothing more than that, even in the face of simple logic. One only has to go back to the original bankruptcy filing by Goldwater board member Jerry Moyes to see the connection between the Goldwater Institute and Moyes were strong then, they remain strong now. Remember the leaked document eventually attributed to Moyes’ lawyers? Remember the initial lawsuit filed by Goldwater against the City of Glendale (CoG) almost immediately and to the direct benefit of Moyes’ position in the bankruptcy proceedings? There are many more “coincidences”, and they continue.

The other pet peeve I’ve been harping on with my tinfoil tirades is the hypocrisy of a 501(c)(3) corporation, benefiting mightily from being tax exempt and paying their staff members well, yet suing CoG and others for what they characterize as subsidizing private entities. We’ve discussed the Suns and Diamondbacks being well represented on the Goldwater board and the distinct lack of pursuing any government subsidies from which they benefit.

My theory that other pro sports being represented within the Goldwater old boy network looks suspicious considering the zeal with which the Insititute is pursuing the death of the Phoenix Coyotes has been seen as just another crackpot idea, even by friends of the Coyotes. Maybe, I don’t have all the facts, I just see consistent patterns that are hard to deny.

Why didn’t Goldwater pursue Mesa using their “gift clause” toy over their $100M stadium gift to the Chicago Cubs? Is it because Jeff Flake is the representative in Mesa and also a contributor of people and philosophy to Goldwater in between his fact-finding trips? Nah, that’s impossible.

Today we’ll visit some other Goldwater supporters and run through their financial benefits from government subsidies, these are direct subsidies (legal of course), not just a 501(c)(3) tax benefit.

Goldwater Philosophy

The stated purpose of the Goldwater Institute is ostensibly to protect the constitutional rights and privileges of citizens, not specifically Arizona citizens. From their web site:

Founded in 1988 with the blessing of the late Senator Barry Goldwater, the Goldwater Institute’s mission is to advance freedom and protect the Constitution.

As a non-profit organization funded solely by individual donations, we stand on principle, not politics. Headquartered in Phoenix, Arizona, we believe in the power of the states to restore America to the founding principles that made it a beacon of opportunity, prosperity, and freedom.

We research and develop ideas that help states use their constitutional powers to protect their citizens’ liberties. And when governments overstep their constitutional authority, the Goldwater Institute defends citizens in court.

Nobody will argue the right of anybody in our United States to mobilize and pursue their philosphy with whatever resources are at their disposal, including Goldwater. As a dad who has had five kids go through the Cave Creek Unified School District, I can say that we have had direct interference from Goldwater with what the majority of our people felt was an excellent and legal use of a school bond issue.

While Goldwater (GWI) is based in Arizona, their stated mission is to protect the rights of all citizens of the United States, yet their concentration on local issues belies that statement. The conservative bent of GWI attracts like minded individuals, of course, just as liberal minded individuals would support liberal organizations. It’s the American way. The problem is the, dare we say it, hypocrisy of GWI pursuing “government subsidies” while many (if not all) of their board of directors and most generous supporters have amassed significant wealth by taking advantage of the same thing.

Consider the following two GWI proponents of litigation against Glendale and the Coyotes based on perceived subsidies from the city to a private enterprise.

John Norton

John R. Norton III, his family and his companies have made significant and important financial and other contributions to Arizona, nobody can question their generosity and philanthrophy. John and his family and companies have had a positive impact on the state of Arizona, I am not questioning that and applaud the generosity.

Besides being a GWI board member, the Norton family provided a $1 million grant to the Scharf-Norton Center for Constitutional Litigation (a GWI entity), which is now suing the City of Glendale.

The JR Norton Company is in the agriculture business. Their products include strawberries, cantaloupe, honeydews, citrus, asparagus, cotton, wheat, alfalfa, cattle feeding (hay). They also have ranching operations.

JR Norton owns or is affiliated with several other companies. Cotton, Norton, and Stevenson Consulting, Inc. is a management and financial services business started in 1992 specializing in agriculture, agribusiness, real estate, and venture capital investment. Norton is affiliated with Stevenson Family Farming, L.P. and Desert Trailways Mutual Water Company. I don’t have the resources to discover and investigate the financials of these companies, but clearly the main focus of Norton’s business and his source of wealth is agribusiness. Norton, and thus Goldwater by dint of donations and grants from Norton and companies, has most assuredly benefited directly or indirectly from agricultural subsidies.

Norton was President Reagan’s Deputy Secretary for Agriculture in 1985-1986. JR Norton ostensibly opposed agricultural subsidies but did nothing to eliminate or reduce them. In fact, subsidies increased during his tenure. While we know that a Deputy Secretary really doesn’t have the juice to get a job like reducing the subsidies for a group as politically powerful as agribusiness, I am of the opinion that to verbally oppose something while still reaping huge benefits from same is hypocritical at best. (see http://www.downsizinggovernment.org/agriculture).

I understand that litigation is a natural part of doing business. There is no indication, really, that Mr. Norton is dishonest or culpable in any fashion. We’re looking at the disparity between one’s philosophy in business and the philosophy espoused by people one associates oneself with.

In 1983, the JR Norton Company was brought to court for its violation of the California labor code as it relates to the right of union workers. See here and here.

While a Director at the Apollo Group, and Chairman of its Compensation Committee, Mr. Norton was among Apollo Group executive mentioned for “fuzzy accounting” in an action against them by the Louisiana Municipal Police Employees’ Retirement System for backdating of stock option grants. See here and here and here.

From publicly adamant opposition to government subsidies it is clear for example that Goldwater also supports school choice, and school finance via school vouchers.  John Norton is a board member of New Directions Institute for Infant Brain Development (NDI). NDI is a member of the Arizona Children Association, a nonprofit that accepts both private and government funding. Goldwater favors charter schools over public schools. In Arizona, however, as in many other states charter schools receive public funding, government receives all of its funds from taxes and/or bonding.  It would seem the “limited government” argument in this case is, well, selective rather than limited. Picking and choosing in this fashion has been referred to as “situational ethics”.

Mr. Norton was also a director with Shamrock Foods Company, a subsidiary of Shamrock Farms which is the largest dairy company in the Southwest. Shamrock Farms and Shamrock Foods are owned by another Goldwater board member Norman P. McClelland (see below) and his family for another node in the old boys network. Six Degrees of Separation from Kevin Bacon, anyone?

Norman McClelland

Norman P. McClelland is another influential Arizonan and powerful Goldwater Institute backer. He has made huge financial contributions to Arizona, especially to educational institutions, including a $19-million building at the University of Arizona that carries his name. He supports political campaigns with $102,100 of his contribution in the 2008 election year going to mainly Republican causes. In 2007 he also contributed $1 million to Goldwater’s Scharf-Norton Center (which, it appears, he later borrowed back). Other publicly available records show him donating $4800 to John McCain’s campaign in 2010, $2,400 to Jeff Flake’s campaign, and $10.000 to Rick Renzi (who is now federally indicted for include conspiracy, wire fraud, money laundering extortion and insurance fraud.)

Shamrock Farms also receives significant government subsidies, thus Goldwater is also reaping these benefits by virtue of large donations available because of the extra cash people and companies have received from our tax dollars.

Goldwater’s tax return (2009 GWI 990) for 2009 shows a loan in the amount of $1.2 million dollars to Shamrock Farms. There is no further detail on when the loan was made or what it was for. The balance due on the loan at the time of tax return filing was $950,000, I have yet to be able to obtain later returns so whether the loan has an outstanding balance will remain a mystery for now. I am assuming the loan was unsecured, but have no idea if it was interest free or low interest or “normal” interest. It does indicate, however, that Mr. McClelland obviously has very significant influence on Goldwater. To assume he has no influence on the direction in which Goldwater will proceed would be naive, wouldn’t it? I mean, if Mr. McClelland said, in a board meeting or over lunch, to Darcy or Clint “Hey, you guys, since John and I have been lining our pockets for years with government subsidy money, maybe we should find another direction for the Institute to pursue lest we look hypocritical.”, they would have to listen, wouldn’t they?

Farm Subsidies Don’t Count, Sports Subsidies Do

The economic literature showing the economic benefits of subsidizing sports team, stadiums, and even huge events like the Super Bowl, the Olympic Games, and World Soccer Cup, are nearly always lower than the costs. However, societies do not invest in public projects for economic profits alone. Quality of life questions are hard to answer, hard to legislate and impossible to adjudicate. So, because sports are “only games”, they will always be the first target for cuts and scrutiny because it’s easy to dismiss them as frivolous expenditures. Maybe that’s even true in some cases.

This is the angle that makes the opposition to the Glendale/Phoenix Coyotes sale incomprehensible as influential members of the Goldwater Institute have benefited solely at the public’s expense with no investment back to the “community”. The farm subsidies they have received over the years simply benefited the company/owner.   If either of these men were asked about receiving farm subsidies…how much?…how long?…the question would undoubtedly go unanswered. In fact, the numbers/dollars are not publicly available, or at least I wasn’t able to find them with my limited skills and resources. I believe it would take a lawsuit or heavy media pressure for public record to get the numbers, obviously we all know that a schmo like myself would soon be outspent and outlawyered if I raised even a basic request or suit. However, there’s little doubt that these men have been receiving considerable subsidies for years. Consider the evidence below.

The State of Arizona has been receiving farm subsidies for decades now. There have been up to 28,000 recipients of about $1.4 billion in farm subsidy over the 1995-2009 years alone. Well over $25 million of that amount have gone to milk and other dairy products and services, in the process surely benefiting Shamrock Farms, Shamrock Foods Company, JR Norton Company, and their affiliates. See the Farm Subsidy Database where the data can be manipulated by state, county, and congressional district.

Moreover, direct subsidies to agriculture are not the only subsidies; huge government projects like dams and canals which deliver water to agriculture, such as the Hoover Dam are indirect subsidies to agriculture as well. Obviously any entity making money with agriculture in a desert environment is highly dependent on a reliable source of water in a normally nearly water free environment. So, government water.

The agriculture from which the associates and directors of the Goldwater Institute made their old money has depended on government support for decades, as Harry Ayer shows (click here). Although it’s fallen to around 12% now, in 1983 total federal farm subsidy was 48% of net farm income. In fact, during the 1980-2001 years, “subsidies reached record or near-record proportions,” according to Harry Ayer (same document above). Most payments went to large beef, hay, fruit, and vegetable producer in which both Shamrock Farms and JR Norton Company have huge stakes, given their relatively large size in Arizona and the Southwest (click here) and then (click here) and then (click here). The evidence is overwhelming. Arizona federal politicians have served the state well in this regard. In 2006 the Washington Post reported that the U.S. government paid out $95 billion in agricultural subsidies in one year, enough that some dairy farms were selling milk at prices far below production costs, and made up the difference from subsidies (http://farm.ewg.org/, http://www.washingtonpost.com/wp-srv/nation/interactives/farmaid/).

If agricultural subsidies can be defended, why is a stadium subsidy from the City of Glendale to the prospective Phoenix Coyotes buyer in question? The answer undoubted lies in partisan politics, the old boy network and, yes, maybe even a personal vendetta than in the facts alone. Consider this; litigation will cost the city government (or the very Glendale taxpayers the Goldwater Institute claims to protect) …millions. Some of those millions would go, in the unlikely event of a Goldwater win, directly into the pockets of Goldwater.

We’ll be looking around at more Goldwater Institute board members, contributors and employees as time goes on.

Since they’re fond of cute catch phrases like “Let the sunshine in” or “I think you need another cupcake”, I submit they begin to consider one of my personal phrases:

“If you’re going to talk the talk, you have to walk the walk.”

 Credit for research and some writing gratefully given to Anonymous. Anonymous, you da man!

Top programs in Arizona receiving agricultural subsidies, 1995-2009**

** Crop totals are an estimate. In the data received by EWG for 2009, USDA does not differentiate Direct Payments or Counter-Cyclical Payments by crop as in previous years. EWG allocated the region’s Direct Payments by crop for the 2009 calendar year using the proportion of that crop’s Direct Payments in 2008. Number of recipients receiving Direct Payments for that crop was not estimated. Due to the way Counter Cyclical Payments are made – EWG was not able to allocate Counter Cyclical Payments to crops. Also included in the crop totals are the crop insurance premiums as reported by the USDA Risk Management Agency for that crop. The crop insurance premium is the amount of money that is calculated by USDA to make the program actuarially sound. Crop insurance premium subsidies are available at the county, state and national level.

Sources: http://www.nhschoolreform.org/Media%20Kit/EXAMPLE_Charter%20School%20Funding%20in%20Arizona.pdf , http://www.coyoteblog.com/coyote_blog/2005/09/fight_arizona_p.html,

Suggested Website on subsidies

Interactive summary of subsidy in Arizona: http://farm.ewg.org/region.php?fips=04000

Ken Cook’s analysis of agricultural subsidies in the USA: http://farm.ewg.org/summary.php

Farm subsidy primer: http://farm.ewg.org/subsidyprimer.php

Crop insurance: http://farm.ewg.org/cropinsurance.php