Questions and concerns about the ISO and CERSC (Unredacted)

[Unredacted as of 12 February 2014; see our revised publication policy.]

The Center for Economic Research and Social Change (CERSC) is a 501(c)3 nonprofit organization legally independent of the International Socialist Organization (ISO), but to which ISO members have contributed significant time, money, and talent. The success of CERSC, especially its Haymarket Books project, is due in great part to ISO members. Some of us in the Renewal Faction, for example, have supported CERSC since its foundation in 2000. We have a sense of investment in the nonprofit, and consequently a sense that we ought to understand and influence its direction, especially as it intersects with the life of the ISO.

Through our experiences and a study of the publicly-available information about the finances of CERSC (available here), we have become concerned that the development of the nonprofit may be a force tending to undermine democratic accountability and control in the ISO. It occurs to us that the membership of the ISO ought to know much more about CERSC and the relationship between the ISO and CERSC given the contribution that the former makes to the latter. This document therefore poses a series of questions about the leadership, finances, and apparatus of the nonprofit. It concludes with further considerations of the importance of the questions we raise in the general context of the left today.

This document is based overwhelmingly on material available to the public–most of it filed with the state and/or federal government. In the rare instances where we use internal material, it is redacted for external publication.

The leadership

Unlike most nonprofits, CERSC does not identify its Board of Directors on its website, but the Board is named in the IRS Form 990 that the organization is required to file annually. As of this writing, forms are available up through the fiscal year ending August 31, 2012.

From its founding to 2002, the Board was: Ahmed S (President/Secretary); Lance S (Vice-President); and Sharon S (Treasurer). From 2002 to 2008, Paul D and Bill R were added as Directors. From 2008 to 2012, Anthony A was added as a Director. (Additionally, from 2010-2012, Lance S changed from Vice-President to Director.) Thus the CERSC Board consists entirely of ISO members; furthermore, all but one (Anthony A) is a member of the ISO Steering Committee.

As members of a democratic centralist organization, ISO members–including and especially leadership–must accept that their political activity is subject to the collective review and control of the membership. Yet comrades’ activities as CERSC directors have never been subject to any kind of detailed review, let alone control. Indeed, comrades are actively discouraged from debating CERSC matters at Convention on the basis that CERSC is “independent” of the ISO.

The existence of an independent nonprofit is desirable in many ways, both financial and political. However, the only way to guarantee the independence of a nonprofit run completely by ISO members is to release these members from accountability to the ISO. Yet given that CERSC, like most nonprofits, is not a membership organization, this leaves rank-and-file ISO members with no way to control or influence the actions of CERSC, even though the nonprofit controls or influences large quantities of comrades’ money and activity.

This leads to our first set of questions:

1. Do the comrades of the CERSC Board accept that, as ISO members, they are accountable to the ISO, including for their activities in CERSC?
2. Have the comrades of the CERSC Board considered inviting non-ISO members onto the Board in order to organically guarantee the nonprofit’s independent status?
3. Have the comrades of the CERSC Board considered integrating membership and democratic structures into CERSC itself?

The finances

CERSC is a major financial operation, taking in over $1.7 million in income in fiscal year (FY) 2012 alone. We are not moralists who believe that it is sinful to handle such sums of money; a publisher reaching broadly into the working class would need to handle that much and far more. However, as a left organization–one with a close relationship to the ISO, managed entirely by leading ISO members, and thus reflecting on us–CERSC clearly has a responsibility to conduct its financial operations in accordance with left principles. The nonprofit cannot adopt an “ends justify the means” attitude by which any speculation is justified if it brings more money to do “good works.” Since ends and the means are dialectically related, such an approach has the potential to influence the ISO’s politics in profound ways.

An embarrassing incident arose in mid-2011, when a number of people–most of whom appeared to be hostile to the ISO–discovered from CERSC’s FY2010 tax filing that the nonprofit had acquired $4,906 in Caterpillar stock in violation of the Palestinian Boycott, Divestment, and Sanctions (BDS) campaign that targeted the company for its role in supplying demolition gear to Israeli occupation forces. ISO members replied that the stock was a donation. This explanation was offered by Sharon S. In an email of June 23, 2011 titled “Disinformation campaign” sent to the ISO Notes list, she wrote:

CERSC did receive a donation of Caterpillar stock from a supporter. The donation, as reported in CERSC’s tax report, was in the sum of $5,000 which is less than .5 percent of CERSC’s annual budget. CERSC accepts donations from individual supporters whether in the form of stocks or checks. The donation of Caterpillar stock was made in 2009 and the stock was sold in 2010.

This account appears to be inaccurate, even though it came from the Treasurer of CERSC.

The CERSC tax filing for FY2011 lists a sale of 86 shares of Caterpillar stock for $7,655 on a cost basis of $4,906; clearly this is the stock in question, although it seems to have been acquired in 2010, not 2009 (see here, pg. 3). Yet the form indicates that the stock was acquired by purchase, not donation. (In case a typo was made, we checked the FY2010 form to see if there was a corresponding noncash donation. There was not, although the stock does appear in the list of corporate stock investments.) Going by the evidence of CERSC’s own filings, it appears that the nonprofit engaged in a speculative operation on Caterpillar stock for financial gain, in violation of the BDS campaign. (These facts were also reported by Pham Binh in an article written for North Star in mid-2013.)

In FY2012, CERSC again dealt in Caterpillar stock, although this time the stock was clearly donated and liquidated within the same fiscal year. This is arguably a reasonable way to enable donors to divest: the stock is sold quickly with financial advantages accruing to both donor and donee due to how the donation is treated under tax law. This likewise goes for the BP stock that CERSC received in FY2012, which Nurit M mentioned in her document in Pre-Convention Bulletin #9.

It is more questionable when stock is held for long periods of time, as this can no longer be considered an effective form of divestment since no downward pressure is put on the stock price. It would go against any active divestment campaign. For example, CERSC has held a large investment in Consolidated Tomoka Land Co. (CTO) since FY2006; it was valued at $57,600 at the end of FY2012. CTO is a real estate giant that owns, among many other things, “full or fractional subsurface oil, gas, and mineral interests of approximately 490,000 surface acres in 20 counties in Florida.” To continue to hold this stock would be in violation of the national fossil fuel divestment campaign.

CERSC cannot keep hundreds of thousands of dollars under the mattress or in an ordinary checking account. It may not be feasible to liquidate large stock donations immediately and all at once. And so on. However, given the political sensitivity of the issues involved, and the link to the ISO, it seems to us advisable for CERSC to consider developing a clear policy on investments.

This leads to our second set of questions:

1. Do the comrades on the CERSC Board consider themselves bound by divestment campaigns supported by the ISO?
2. Do the comrades on the CERSC Board believe that the Caterpillar stock incident was a violation of the Palestinian BDS campaign?
3. Has CERSC divested from its long-held investment in CTO so as to abide by the fossil fuel divestment campaign?
4. Would the comrades on the CERSC Board support the nonprofit adopting a clear and transparent investment policy?

Also pertaining to the issue of finances is the growing role of foundation grants in the funding of CERSC. Through FY2006, CERSC received little or no money from foundations; starting in FY2007, the amounts became significant, comprising nearly 15% of all CERSC income from FY2007-12, including over 22% of income in FY2012 (see here).

The increasing reliance of the nonprofit on foundations has not been at all discussed by the ISO membership, even though there are clear potential political impacts on ISO co-sponsored events such as the Socialism Conference. The 2007 book The Revolution Will Not Be Funded, for example, describes how foundation funding can exert a rightward, liberal pull on radical organizing (see here). Although accepting such money is not absolutely excluded, it seems to us that there must be clear and careful checks on the conditions and circumstances.

This leads to our third set of questions:

1. Will the comrades on the CERSC Board publish all grant applications (or other documentation) relating to awards from foundations?
2. Would the comrades on the CERSC Board support the nonprofit adopting a clear and transparent policy on accepting foundation awards?

The apparatus

In FY2012, CERSC spent $756,995 in total employee compensation, including $642,482 in wages and salary. Given the salaries of the three most highly-compensated CERSC employees (see here), one may conclude that CERSC has at least 18 people on staff. We do not have sufficient information about the scale and scope of CERSC’s operations to determine whether this number is reasonable; what concerns us primarily is the apparent coincidence of CERSC and ISO staff.

The three most highly-compensated CERSC employees are Ahmed S ($45,228), Eric R ($40,212), and Alan M ($37,400). These are not large sums by any means, but all three of these comrades play important roles as ISO staff in addition to their CERSC jobs. Ahmed S is ISO Treasurer and de facto National Organizer during Sharon S’s sabbatical; Eric R is a staff writer for Socialist Worker; and Alan M edits the newspaper. It seems, therefore, that comrades who assume critical jobs in the ISO are compensated mainly–perhaps entirely–through their CERSC positions.

We suspect that this “model” is general throughout the organization, entailing not just the Socialist Worker staff, but also the paid regional and district organizers of the ISO. Indeed, we recall at Convention 2013 that Steering Committee member Nicole C enjoined CERSC employees not to accept nomination for the national Disciplinary or Appeals Committees due to potential conflicts of interest. But if CERSC were truly independent of the ISO, how could there be a conflict of interest?

This coincidence of the ISO and CERSC apparatuses undermines democratic accountability and control in the ISO. The ISO’s paid organizers are ostensibly in the service of the ISO as a whole and the region/district they organize. However, if their material livelihoods are controlled by the CERSC Board, then that is to whom the organizers truly answer. ISO organizers aligned with the membership of their areas but at odds with the Steering Committee could find themselves dismissed as CERSC employees without any democratic recourse; alternately, organizers out-of-step with their area, yet loyal to the Center, may be retained against the wishes of the members.

Lee S admits as much in his reply to the Renewal Faction when he writes, “If a district voted to reject its assigned organizer, this would be a clear signal to the SC of an urgent problem.” He notably fails to say that the organizer would be dismissed, even though it would be impossible for the organizer to actually organize the district in such a situation. Indeed, all our recent experiences lead us to believe that all the “urgency” of the Steering Committee would be directed at the “wayward” district, as opposed to the discredited full-timer.

This leads to our final set of questions:

1. Who is the staff of CERSC, and what are their job functions?
2. Who is the staff of the ISO, and what are their job functions?
3. In the case where comrades are employed by both the ISO and CERSC, roughly what percentage of their work time does either job claim?

Conclusion

There is a general problem of “NGO-ization” on the international left. Some of our comrades believe that, because they or their leaders espouse Marxism, they cannot be affected by this phenomenon. This attitude is neither Marxist nor particularly congruent with common sense. We as human beings are much less conscious of and in control of our actions than we assume ourselves to be; in fact, we as individuals generally act much more, and often unconsciously, in reaction to or in harmony with larger objective features of our reality. Simply because we say we are materialists does not make us any less susceptible to the intrusions of material factors into our political ideas and practices. Rather, precisely because we are materialists, we insist on the closest scrutiny and democratic control over the means and methods of our organization.