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Congressman
Resnick
CONGRESSIONAL RECORD "Now let me briefly outline the charges I have made against the Farm Bureau. I have said- First, it is not the organization of farmers it clams to be. A substantial portion of its membership – possibly half – has no agricultural interest whatsoever. Second, it has misrepresented itself to the Internal Revenue Service in order to obtain a tax exemption, and to the clerks of both Houses of Congress. Third, it has used the American farmer to build one of the largest insurance and financial empires in the United States, whose insurance assets alone total over $1 billion dollars. Fourth, that the directors and officers of the American Farm Bureau Federation are also directors and officers of insurance companies directly controlled and owned by the various State Farm Bureaus. Fifth, that as a result of these interlocking directorates the Farm Bureau may be in violation of antitrust laws. Sixth, it has taken advantage of its tax-exempt status in order to expand its business activities which cover the fields of insurance, real estate, shopping centers, fertilizer, mutual funds, gas stations, oil wells, grain storage, petroleum refineries, and a considerable variety of others. A press account of the very recent purchase by the Alabama Farm Bureau of one of the Nation’s largest shopping centers, for $10 million, is attached. Seventh, that because of its widespread commercial interests the Farm Bureau has misrepresented its true nature in its dealings with farmers and in its statements to congressional committees. Eighth, that the Farm Bureau as a tax-exempt organization has improperly been competing in commercial activities with private taxpaying business concerns, thus enjoying unfair competitive advantages. Ninth, that the Farm Bureau has torpedoed the American farmer by posing as an organization representing his interests when, in fact, their widespread commercial activities – which include the operation of businesses which sell to the farmer and buy from the farmer – has put them in a position of representing a point of view which is antagonistic to the interests of the farmer. Tenth, that Farm Bureau commercial activities have generated funds which have found their way, illegally, into political and lobbying activities. It is interesting to note the importance of a public inquiry, and the salutary effect it can have. When John C. Lynn appeared before my subcommittee on June 21, he flatly refused to discuss the Farm Bureau's business activities. He refused to tell us how much insurance business they write, or who their insurance companies even are. However, the public spotlight has forced a change in this stoney attitude. Within the past 10 days, Roger Fleming - under increasing pressure from the press and even members of the Farm Bureau-has made some information on its activities available. True, he has been careful not to say much more than my investigations have already revealed, but it is a start, and definitely a break in the wall of arrogance that organization has erected around itself. The American Farm Bureau Federation and its individual State Farm Bureaus enjoy their status as tax-exempt agricultural organizations on the basis of their sworn statements to the Internal Revenue Service that in order to qualify for membership the individual must-and I quote directly from their statement to the IRS-"be engaged in carrying on a farm or farms, or have major agricultural interest." This sworn statement was flatly contradicted in testimony by Mr. Roger Fleming when he appeared as a witness on June 28 before the Subcommittee on Rural Development. I asked several times whether or not the Farm Bureau represents farm families. Mr. Fleming denied several times that they were "farm" families-choosing instead to refer to them as "member" families. Finally, at one point I asked him, "Are you saying that all your members are not farm families?" He replied, and I quote from the record: There are some members who are not farmers in most of the states. The states determine the eligibility requirement. It is different in each of the states represented on this Subcommittee. In other words, Mr. Speaker, the American Farm Bureau Federation has told the IRS and the Clerk of the House that its membership is limited to farm people; and Mr. Fleming turns around and tells my subcommittee that this is really not true because every State has the right to determine who may or may not join the Farm Bureau. And at no time are membership lists made available to Congress or the Internal Revenue Service to reveal occupational breakdowns of the membership. If we accept Mr. Fleming's statement at its face value, it is obviously a deliberate misrepresentation on the part of the Farm Bureau to have told the Internal Revenue Service that its membership is limited to agricultural interests. The individual State Farm Bureau organizations are guilty of the very same misrepresentation, since they also receive tax-exempt status from the Internal Revenue Service on the same basis as the national organization. Little wonder that the Farm Bureau is trying to shut me up. Let us look at Cook County, ILL. Cook County, dominated by the city of Chicago, has more Farm Bureau members than any other county in the United States. According to the Department of Agriculture there are 1,100 farms in Cook County. If 100 percent of the families living on farms belonged to the Farm Bureau, they would have only 1,100 members. But Cook County actually has 7,000 members. Where do they all come from? They are the blue collar and the white collar workers in the factories and offices of Chicago. They are also the fictional farm families the Farm Bureau tells Congress and the Internal Revenue Service that it represents. This is not only the story in Chicago. It is a national practice. This fact is clearly illustrated by a letter I wish to insert at this point from a gentleman from Indianapolis, Ind: Dear Sir: I note with interest the charges leveled by you against the American Farm Bureau Federation. Being a former Farm Bureau member and never having been a farmer in my life, I agree with much that you say. In my opinion, an investigation such as you suggest is long overdue. I was a member of the Farm Bureau in Bloomington, Indiana. My membership dues were taken along with my application and payment for an automobile insurance policy. At the time I was employed by the Franklin Manufacturing Division of Studebaker Corporation, a manufacturer of retail refrigeration products. Good luck with your investigation. The basis of most, if not all, of the Farm Bureau's far-flung commercial activities is its tax-exempt status under section 501(c) 5 of the Internal Revenue Code. Since the American taxpayer is helping to finance this economic imperialism, the American public has a right to know what it's all about, where the money comes from, where it is going, and whether all of these activities are indeed legal. In an effort to obtain answers to these questions, I wrote on June 29 to Sheldon Cohen, Commissioner of Internal Revenue, requesting an investigation of the tax-exempt status of the Farm Bureau. The complete letter is included at the end of these remarks. I pointed out that there was extensive evidence that Farm Bureau membership was open to any individual, regardless of occupation or interest, who purchased insurance and was willing to pay membership dues to join the Farm Bureau. We discovered, for example, that insurance agents openly advertise for customers, and we have seen advertisements in which these agents state that anyone can buy this insurance, whether a Bureau member or not. They sign him up when they make the sale. If the sale is big enough, the agents very often pay the nonmember's dues out of their own pockets in order to sell the insurance. I asked the Internal Rev3nue Service 18 specific questions probing the Farm Bureau's activities as a tax-exempt organization. For example- First, since anyone an join the Farm Bureau, do they still qualify as a tax-exempt organization under section 501 (c) 5? Second, in view of the fact that the State Farm Bureaus and Farm Bureau insurance companies customarily share the same offices, use the same staff, and have the same phone numbers, can they be truly regarded as separate entities? Third, is a tax-exempt corporation permitted to operate a commercial enterprise in competition with tax-paying free enterprise companies? Fourth, is it consistent with the purposes of a State Farm Bureau to organize an insurance company in a different Sate? I am happy to report that on July 7, Commissioner Cohen wrote advising me that the Internal Revenue Service will investigate the Farm Bureau. It seems that this announcement by the Internal Revenue Service, reported in the newspapers, was the final straw that impelled the Farm Bureau to pressure the Committee on Agriculture to take steps to silence me. I am sure that very few people and organizations enjoy the prospect of the Internal Revenue Service looking over their shoulder and examining their books. The Farm Bureau, in particular is violently opposed to such an inspection after years of unrestrained operation and complete freedom from supervision. The 13 American colonies fought the War of Revolution because they abhorred taxation without representation. The Farm Bureau has declared war against me because it wants to continue enjoying representation without taxation. One of the things I hope the Internal Revenue Service will look into are the interlocking directorships that characterize the Farm Bureau insurance structure. To begin with, with just one exception, every one of the 27 officers and directors of the American Farm Bureau Federation is an officer or director of Farm Bureau Mutual Fund, American Agricultural Mutual Insurance Co., and several Farm Bureau insurance companies in different States. The same tangled can of worms exists among various State Farm Bureaus. For example, in 1955, the officers and directors of the Farm Bureaus in Connecticut, Delaware, Maine, Massachusetts, New York, Pennsylvania, and Rhode Island got together, put up $1,210,000 and organized an insurance company in the State of New York called the Farm Family Mutual Insurance Company. What it really means, of course, is that every one of the more than 50 Farm Bureau insurance companies is controlled-via direct control or remote control-by the officers of the American Farm Bureau Federation. My preliminary investigations, as I have already pointed out, have uncovered vast additional areas that deserve investigation in greater depth. For example, probable antitrust violations and violations of the Lobbying Act. This was too much for the Farm Bureau and they decided to shut me up or, at the very least to undermine my effectiveness. The technique they chose was to pressure my own committee to take action that they hoped would discredit and humiliate me. Of course, it was necessary for an acceptable rationale-a smokescreen-to be developed for public consumption. And when questioned by the press, the gentleman from Kansas expressed the official line when he said, on TV, that I was chastised for being harsh and rude toward witnesses, and for refusing to yield to colleagues. Anyone who has been on Capitol Hill for more than one week can scoff at this shoddy and obviously insincere excuse. Congressmen never have and never should shy away from leveling harsh criticism at those they think deserve it- right up to the President of the United States, himself. Some of the most widely reported incidents here are those bitter exchanges between committee members and Cabinet officers and other department heads, and between members of the same committee. This is as much a part of politics in Washington as grunting is to wrestling. Early last week, at hearings of the Senate Subcommittee on Employment, Manpower and Poverty, the senior Senator from New York and the distinguished Secretary of Agriculture went at each other hammer and tongs, while the TV news cameras ground away so that this bitter exchange could be seen later that day by tens of millions of Americans. But no Senator accused his colleague of being rude, or questioned his right to get rough with the witness. And, remember, the witness was a member of the President's Cabinet. Although committee hearings are commonly punctuated by angry exchanges and heated arguments, never before have the members of any committee ganged up on their chairman in this manner. As I have just explained, even if this criticism were true it would not justify the committee's action. But, the fact is that the criticism is completely false. The records of these hearings, which are available for the inspection of any Member of this body, prove that every committee member has full opportunity to question every witness for as long as he wanted to. The record shows that in most cases, I yielded immediately upon request. In some cases, such as occurred during the discussion with Mr. Fleming, I refused to yield at the moment I was asked to because, as I told the committee member, I would not yield until I finished making the point I was trying to make. At the same time, however, I stated that my colleagues' would have every opportunity to question the witness once I finished. An examination of the record will show that before each witness was excused, regardless of his point of view, every member of the subcommittee was offered the opportunity to question him with no restriction on time. This was true even in the case of witnesses with whom I may have been sharp because I felt they were evading the question or not telling the truth. No questions remained unasked. However, these are not the main issues. The time has now come for us to turn the spotlight on the issue of overriding importance in this controversy. Shall the right of a Congressman to speak out, to inquire, to investigate, and if necessary to make accusations, be curtailed in any way? Or, stated in different terms, can a committee of Congress or any private citizen or organization dictate to any Member what he may or may not say? Shall we allow any organization to interfere with the cherished traditional right of each Member of this Body to inquire into the background and activities of individual or organization, regardless of those toes may be stepped on? The right of a Congressman to ask questions and to criticize has never before been challenged by the membership of this body. Why is it challenged now? Is there one Member here today who will be comfortable in the knowledge that if, in the future, his conscience should lead him to ask questions, he is in danger of being blitzed by the kind of massive retaliation we witnessed here last week? I, for one, do not think there is any organization in American life, whether it be private or governmental, that is so far beyond the reach of the law and so far beyond the reach of public opinion that its activities dare not be questioned. And I believe that if there is any chastising to de done, it should be directed not against Members doing their duty, but against those super lobbies who feel free to use their massive power against a Member of this House. Now an ominous new cloud has appeared on the horizon. The Farm Bureau seems determined to prevent the publication of the subcommittee hearings we have been conducting. In their letter of July 7, which I have already referred to as a blueprint to silence me, the following sentence appears: It has been suggested that the hearings be terminated forthwith and the report of the Subcommittee hearings not be published. The Farm Bureau claims not to support such action. But the fact is that only the Farm Bureau is doing the suggestion, since this idea never existed until it came up in their letter. I ask my colleagues in this House, and the people of the Nation, to watch for any attempt by this lobby to pressure the Committee on Agriculture into suppressing the report on these hearings. Why should the Farm Bureau want to prevent publication of the hearings of the Subcommittee on Rural Development? Bear in mind that these hearings went of for 5 weeks, and their purpose was to study the effects of Government programs on rural America. A very small part of the hearings was devoted to the Farm Bureau. The rest of the hearings were devoted to statements by Government officials, rural specialists, poverty workers, and rural people themselves-all describing present living conditions in rural America where most of our poverty is concentrated. Let us recognize that successfully preventing the publication of the hearings would serve the broader interest of the Farm Bureau very well. This arch-conservative organization, claiming to represent the interests of rural people, has constantly opposed all progressive legislation and programs in this field. According to its own statement to the subcommittee, it violently opposes all Federal efforts intended to alleviate poverty, raise wages, promote better health, improve education, fight water and air pollution, and promote community development in our rural areas. As many of the letters I have been receiving for the last several weeks reveal, the Farm Bureau has done more to prevent the economic and social advancement of rural Americans than any other organization in American life. During our subcommittee hearings we heard the terribly pathetic story about the misery of our migrant workers, and we heard about a rural community in Florida whose second largest industry is the manufacture of baby coffins. What has the Farm Bureau-which claims to be the voice of rural Am3rica-ever said or done about tragic problems like this? To the best of my knowledge, nothing at all. They have been more concerned with promoting high oil depletion allowances than with the deep cancerous problems eating away at e the vital organs of America-our rural areas. The Farm Bureau is entitled to its full share of blame for the fact that our rural areas are burdened with the most poverty, highest unemployment, least social and economic development, and poorest health facilities in the Nation. Their crime has not been mere indifference. Quite the contrary. They have intensively fought every attempt to correct these ills. If the Farm Bureau thinks its efforts to silence me are going to slow me down, it is very much mistaken. They have made me more determined than ever to find out what they have to hide, and how widespread their financial interests are. Who runs Congress, the people or the lobbyists? Have we compromised ourselves to such a degree that we can no longer act independently in accordance with our personal conscience and judgment? Is it possible that the passage of this resolution has made the entire committee vulnerable to charges of conflict of interest, since most of the members belong to the Farm Bureau? Farm Bureau influence in the Agriculture Committee is so strong that the administrative Assistant of one of the members of my subcommittee, immediately before joining the Congressman's staff, was for 5 years the legislative director of the Minnesota Farm Bureau. Let me also point out that one of our distinguished colleagues resigned from the A National Rifle Association expressly to avoid such a conflict. Consequently, I believe this to be a matter that should be brought before the House Ethics Committee, and I plan to do exactly that. Something is radically wrong when the Farm Bureau can mail a letter calling for what amounts to a virtual censure of a Member of Congress, and get exactly what it wants-within 48 hours and behind closed doors-all because a Member had the temerity to expose their far-flung commercial and financial activities. There is also disturbing evidence of improper relationships between the Farm Bureau and governmental and quasi-governmental agencies, like the Farmers Home Administration and Extension Service. I intend to divulge these improprieties at a later date. The gag resolution of the Agriculture Committee has disturbed many Americans, whose concern I think, was best summed up by the well-known Washington correspondent, Joseph McCaffrey, whose eloquent commentary included the following: We now have a Committee which is going to decide what Members of the House should say and what they should not say. The world is being made safe for democracy in a strange undemocratic way. This will prove to be interesting. It may be developed to such a point where a Member will never say anything until he has had his script cleared by a Congressional Committee. This, of course, will cut down on the ad-libs. But then some Members of Congress are pretty bad at ad-libbing, so we may be spared much pain. So big brotherism is now to become operating procedure on Capital Hill. Members will be told, by other Members, what they can say and what they can't say. This is a far cry from what the Founding Fathers had in mind when they met in Philadelphia in 1787 to draft the Constitution. Freedom of speech is precious. What is really sad is that the Members of the Committee apparently don't realize the shaft they sunk in the back of freedom. That is what is most disturbing. Congress of the United
States, House of Representatives, Washington, D.C., June 29, 1967 Dear Commissioner Cohen: As Chairman of the Subcommittee on Rural Development of the House Committee on Agriculture, I have been holding hearings on rural poverty. Among those testifying has been the American Farm Bureau Federation. Intensive investigation by my staff, following its testimony, has uncovered evidence which has convinced me that the Farm Bureau, far from being the organization of farmers and farm interests it claims to be ,k is actually a gigantic interlocking, nationwide combine of insurance companies and other businesses. Its insurance companies have assets totaling over $1 billion. Its life insurance companies alone have over $6 billion in force. The American Farm Bureau Federation and its State Farm Bureaus are listed with the Internal Revenue Service as tax-exempt organizations under Section 501 c 5 of the Internal Revenue Code. We have learned that in violation of their statement of membership policies filed with the Internal Revenue Service, their membership is not at all limited to persons "engaged in carrying on the operation of a farm or farms or who have a major agricultural interest." On the contrary, anyone who wishes to become a Farm Bureau member can do so regardless of his occupation or interests. Membership is used by the Farm Bureau as a means of expanding its insurance sales. There is also evidence of co-mingling of Farm Bureau and insurance company funds, facilities, and staff. And, there is a n elaborate network of interlocking directorates between the American Farm Bureau Federation and the various state insurance companies as well as among the Farm Bureau insurance companies among the various states. The American Farm Bureau Federation also operates its own insurance company and mutual fund company, having the same set of officers. I would like to relate one specific incident which I think raises an interesting question. At my direction, an individual purchased casualty insurance from a Farm Bureau insurance agent. She was told that, in order to do this, she would have to join the Farm Bureau and pay a membership fee. This was done and, in accordance with instructions from the agent, the check paying for membership in the Farm Bureau in that state was made out to "Farm Bureau Insurance." In connection with this very sketchy outline of Farm Bureau activities outside of the agricultural field, I am asking the Internal Revenue Service to conduct a full investigation and audit of the financial commercial and other activities of the Farm Bureau to determine what violations of the Internal Revenue Code may be taking place and to determine whether or not the American Farm Bureau Federation should be permitted to operate as a tax-exempt organization under Section 501C5. Specifically, I would like to have the answers to the following questions:
The evidence, Mr. Commissioner, is clear that the American Farm Bureau Federation is anything but the agricultural organization it claims to be on its tax-exemption application. Its principal activities are evidently financial and commercial, and , consequently, we believe that the statements it has made to the Internal Revenue Service regarding its membership and its purposes may well be untrue. All available evidence strongly suggests that the principle business of the Farm Bureau is insurance-not agriculture. We urgently request that the investigation of this organization be instituted promptly so that we can determine the facts. Sincerely yours, Joseph Y. Resnick, [From the Washington
(D.C.) Evening Star, July 10, 1967] IRS Decides To Probe Status
of Farm Bureau The Internal Revenue Service has decided to investigate the tax exempt status of the nation's largest and most influential agricultural organization-The American Farm Bureau Federation. The IRS decision, expected to be formally announced within the next few days, was made in response to a request from Rep. Joseph Y. Resnick, D.-N.Y., who has charged that the Farm Bureau "has as much right being a tax-exempt organization as General Motors does." Resnick's allegations were made late last month during little publicized but unusually vehement exchanges with a pair of high-ranking Farm Bureau officials testifying at two congressional hearings. Insurance business The angry exchanges at the second session were halted only after one representative invoked the seldom-cited House rule which prohibits committee meetings while the House is in session unless prior permission has been granted. The IRS probe is expected to center on Resnick's charge that the Farm Bureau, while claiming to be principally an agricultural organization, enjoys a tax exemption for a large and profitable insurance business. Resnick said last week that the American Agricultural Mutual Insurance Federation, "wholly owned and operated by the Farm Bureau, earned 574,241 in 1966 without paying a penny in federal income tax, real estate tax or investment tax." In addition, Resnick said that the Farm Bureau operates a wide variety of other tax-exempt business ventures, including a mutual fund, shopping centers, grain elevators, auto supply houses, farm implement businesses and similar enterprises. Called "insult" The Farm Bureau replied by charging that Resnick's attack was based on "an abundance of misinformation and lack of understanding." The organization said Resnick's statements were "an insult to every Farm Bureau member." The Farm Bureau said it would "welcome all investigation of all farm organizations in the country" and added: "The Farm Bureau is proud that over the years it has offered economic services to its members and that, most importantly, Farm Bureau members have retained control and ownership of the affiliates providing those services." With more than 1.7 million members in every state except Alaska the Farm Bureau has long been the country's most dominant agricultural organization. It has opposed federal price support programs and other government farm programs. It has generally taken a conservative political position, opposing federal spending on anti-poverty projects and other Great Society programs. Clashes with official Resnick's clash with the Farm Bureau was touched off June 21, during a hearing held by the House Agriculture Committee's subcommittee on rural development on the effect of government programs on rural poverty. John Lynn, the Farm Bureau's legislative director, was testifying, when Resnick mentioned, in passing, "the many other people living in rural America today to whom your fine organization sells insurance." Lynn replied: "If you are insinuating that the Farm Bureau is primarily an insurance agency-" He was interrupted by Resnick, who charged: "I am not insinuating it. I am stating it." Lynn: "Well, it is not so. For the record, it is not so." Resnick: "For the record, I am stating it." Data refused The exchange ended when Lynn rejected a request from Resnick, the subcommittee chairman, to provide for the hearing record the figures on how much insurance the Farm Bureau Issues. On June 28, Roger Fleming, the Farm Bureau's secretary-treasurer and its second ranking official behind president Charles B. Shuman, appeared before the subcommittee and engaged in a similar verbal duel with Resnick. Resnick refused to yield to two subcommittee members, Representatives John M. Zwach, R-Minn. And George A. Goodling, D-Pa., for questioning of Fleming. At that point the subcommittee was forced to adjourn because another member noted that the House was in session. Resnick stepped up his attack later, charging the Farm Bureau with "masquerading before Congress, the nation and the American farmer as a farm organization deeply and exclusively devoted to promoting the best interest of the American farmer, when in reality this organization is a gigantic interlocking nationwide combine of insurance companies with total assets of more than $1 billion." Called "service" Charging that the granting of membership "is simply a device for selling insurance and other services." Resnick said he "had someone buy Farm Bureau insurance who has never been closer to a farm than Columbus Circle in New York." Resnick also described as "a fraud" the statement filed by the Farm Bureau with the clerk of the house describing its lobbying interests as covering "primarily the fields of legislation affecting agriculture directly." Similarly, Resnick said, the Farm Bureau made "false statements" to the IRS when seeking a tax exemption by claiming that its membership consisted of farmers and persons "having a major agricultural interest." He said the Farm Bureau has affiliations with 51 casualty and life insurance companies, the National Food Conference Association and Farm Bureau Mutual Funds, Inc., with assets of $5.3 million. He also cited the recent $10 million purchase in Birmingham, Ala., of the largest enclosed-mall shopping in the Southeast by a group of Farm Bureau-affiliated insurance firms. The Farm Bureau described as "the best example of his ignorance" Resnick's statement that the largest county Farm Bureau was in Cook County, Ill., which also includes the city of Chicago. The Farm Bureau said Cook County has "some of the best farmers in the nation," who sell more than $16 million worth of agricultural products yearly from 100,000 acres of farmland. Resnick replied that census figures list 3,532 men, women and children on farms in Cook County, while the Farm Bureau claims 6,997 family memberships in the county. Fleming, in his testimony, acknowledged that "there are some members who are not farmers in most of the states," adding: The states determine the eligibility requirement, it is different in each of the states." |