IRS to Audit Nature Conservancy From Inside
January 17, 2004
By Joe Stephens and David B. Ottaway

Washington Post Staff Writers
Page A1
The Washington Post
Washington, DC
To submit a Letter to the Editor:
A team of IRS examiners will move into the global headquarters of the Nature Conservancy in Arlington to begin auditing the charity, the world's largest environmental organization.
A letter sent to the Conservancy by the Internal Revenue Service last month indicates that the audit will be of uncommon scope for a charity, tax specialists said. The memorandum proposes a preliminary meeting between four IRS examiners and the Conservancy's chief financial officer to discuss logistics, communications, telephone access, equipment and accommodations. The IRS will examine 2002 tax returns, the letter said.

"It is unusual," said former IRS commissioner Donald C. Alexander, now a private tax lawyer. "This is an extraordinary case.... It is an indication of a pretty strong audit."

Conservancy spokesman James R. Petterson said officials there have not been told the scope of the examination or its genesis. In a statement on the group's Web site, the Conservancy promised to cooperate fully and provide examiners with workspace, equipment and telephones "as needed." 

An IRS spokesman declined to comment. Alexander and other specialists said such an audit could take a year or longer. 

"If they go into General Motors, this is what they do," said attorney Sheldon Cohen, a former chief counsel and commissioner of the IRS. "This is a major audit, of consequence." 

Live-in IRS auditors have become a fact of life at some Fortune 500 conglomerates but remain rare at nonprofit corporations, the specialists said. The charity has assets of more than $3 billion and ranks as the eighth largest nonprofit of any type in the nation. 

The developments follow articles in The Washington Post over the past year that examined financial irregularities and conflicts of interest at the Conservancy. One story described alleged IRS code violations at a Conservancy project in Virginia, and another disclosed a dozen loans that the Conservancy extended to its employees. A $1.5 million home loan went to Conservancy board member and President Steven J. McCormick, who repaid the debt after he was questioned about it by a reporter. 

The stories also reported that the Conservancy had repeatedly bought land, added some development restrictions, then resold the properties at reduced prices to its trustees and other supporters. The buyers made cash gifts to the Conservancy roughly equal to the difference in price, thereby qualifying for substantial tax deductions.

In the wake of the stories, the Conservancy banned a range of practices, saying it would no longer lend money to insiders, sell land to trustees or drill for oil on nature preserve land. The charity is conducting a broad internal review of its management practices and says more changes are expected. 

The Senate Finance Committee began looking into the charity last year. Investigators have spent months sifting through internal Conservancy documents, debriefing whistle-blowers and weighing legislative reforms. 

The IRS letter says auditors will examine the Conservancy's fiscal 2002 tax return, which was filed on what is known as an IRS Form 990. Past Conservancy tax returns contained misstatements and omissions. 

For example, the Conservancy's 2001 tax return showed that the charity had lent the utility firm WEPCO, the Wisconsin Electric Power Co., $2.2 million. The lending was made in connection with a project aimed at protecting Central American forests and could have generated greenhouse-gas credits for the utility.

Conservancy officials later said the WEPCO loans totaled only $1.5 million. The rest of the money went to corporations whose names were mistakenly omitted from the filing, Conservancy Vice President Michael J. Coda said. 

"That has no relation to reality," Coda said of the IRS Form 990 filing, during a June 2002 interview in which he acknowledged the errors. 

Months later, the Conservancy filed its 2002 tax return -- which again showed that the loans to WEPCO totaled $2.2 million. 

A specialist in nonprofit corporations who reviewed the Conservancy's tax returns described them as confounding. 

"It stunned me," said the specialist, Peter Dobkin Hall, of Harvard University's Hauser Center for Nonprofit Organizations. "It's not exactly what I'd call a transparent organization. 

"I find that very peculiar. I couldn't find out a d_ _ _ thing about them. It was a brick wall." 

Internal Conservancy documents show that the organization's auditor has complained about problems that could lead to IRS scrutiny or, in the words of one memo, to "the possibility of public exposure." 

One internal audit report on a Conservancy project known as the Virginia Coast Reserve -- or VCR -- found numerous irregularities. Many financial transactions were improperly recorded, according to the March 2002 report, which is stamped "Confidential." The IRS was not told for years that the charity provided some employees with free housing and use of a car, lapses the report described as IRS violations. 

One Conservancy contractor, identified in the report as a Virginia farmer, received payments though his wife, the report said. 

"VCR negotiated [an employment contract] in the farmer's wife's name and issued an IRS Form 1099 [which reports miscellaneous income to the IRS] in her name and social number even though her husband performed all of the work under the contract," the report said. "VCR management wrote the contract in the wife's name so that the farmer could hide personal income."

Additional related reading (It would seem that The Nature Conservancy and its partners have found a LTCC - Long-Term Cash Cow):
AERC - The Association of Ecosystem Research Centers 

The Association of Ecosystem Research (AERC) brings together 39 U.S. research programs in universities and private, state and federal laboratories that conduct research, provide training and analyze policy at the ecosystem level of environmental science and natural resources management. These centers are located in 27 states. Their scientists, who number more than 500, conduct a major share of the ecosystem research in the United States. Although AERC is an association of professional scientists rather than environmental activists, its goals and interests complement those of conservation organizations. Both groups stress the environmental and societal need for wise management of natural resources; AERC scientists provide the scientific information necessary for informed management. Recognizing that the ecological problems confronting our society are large and the means of addressing them are not limitless, the founding institutions set up the AERC in 1987 to seek new ways to pool their scientific resources and undertake a comprehensive integration of their current knowledge. The goal of the AERC is to promote the optimal use of limited scientific resources in the search for solutions to complex, large-scale environmental problems.

Four areas of activity are advocacy, information, education and organization.


Advocacy: the AERC speaks for the needs and uses of ecosystem science to government agencies, Congress and advisory bodies.


Information: the AERC holds seminars and briefings on environmental topics and serves as a source of ecological data and findings relevant to resource management.


Education: the AERC promotes opportunities for training in new methods and in cross-disciplinary approaches and methods.


Organization: the AERC fosters collaboration among member institutions by coordinating initiatives and organizing workshops on topics of mutual interest. 
CAR - Core Area Research
CAR/LTER - Core Area Research in Long-Term Ecological Research
'Disturbance Patterns' -
Global Change Master Directory -
GCR - Global Change Research - (excerpted) The study of Global Change is particularly important as it is now clear that human social and economic activities around the world are having an impact that can be measured at the level of the entire Earth and its atmosphere, oceans, and land surface. Human activities are probably the most rapidly changing component among the major regulators of the Earth system, and may -- in the future -- play a dominant role in the regulation of global climate, global biochemistry, and the diversity and stability of global ecosystems. "Our planet and global environment are witnessing the most profound changes in the brief history of the human species. Human activity is the major agent of those changes -- depletion of stratospheric ozone, the threat of global warming, deforestation, acid precipitation, the extinction of species, and others that have not become apparent." - Excerpted from the 1989 report of the National Research Council, 'Global Change and Our Common Future' It is incumbent upon humans to understand how their actions have global effects, and to use that understanding to manage their impacts at the global effects, and to use that understanding to manage their impacts at the global as well as the local level. For this reason, Global Change Research is a high national and international scientific priority. LTER sites are windows to global change. As locations for long-term experiments, LTER sites illuminate interactions among the physical, chemical, and biological components of ecosystems through controlled manipulations. Research at LTER sites spans the range from relatively less-managed landscapes such as arctic tundras, to intensively managed cities and farmlands.
Relevant Links:

Kellogg Biological Station LTER Global Change Research

INTERNATIONAL COOPERATION is imperative for determining global change Examples of international cooperation include the GTOS NPP DEMONSTRATION PROJECT
LTER - Long-Term Ecological Research Project
OBFS - Organization of Biological Field Stations -
VCR - The Virginia Coast Reserve
VCR/LTER - The Virginia Coast Reserve Long-Term Ecological Research Project
Other Long-Term Ecological Research Projects
Long-Term Ecological Research (LTER) in Coastal Ocean Ecosystems
The US Fish and Wildlife Service with the assistance of The Nature Conservancy has inherited the role of stewardship for this globally ... If that URL doesn't work, try and work from that end.