WIRELESS FOUNDATION RECEIVES CTIA BOOST FROM CIBERNET SPINOFF
CTIA’s board gave a $13-million shot in the arm last year to the group’s Wireless Foundation, which the non-profit in turn has largely reinvested in a real estate transaction for the group’s new Washington hq. The Foundation’s decision to take a stake in the land deal was made “to create a predictable return on the endowment” created by the gift to the foundation, a CTIA spokesman said. “The CTIA board’s decision to fund the Foundation and the Foundation’s decision to purchase the land were 2 separate decisions.”
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The complicated transaction points to the complexities surrounding both Washington real estate deals and tax law governing private foundations, several sources said. The $13 million the CTIA board agreed to give the Wireless Foundation came from the $37 million CTIA received from the March 2003 sale of Cibernet, which was its wireless settlement arm, the spokesman said. CTIA members created the Wireless Foundation in 1993 as a non-profit entity. It runs programs on recycled phones, campaigns to collect phones for domestic violence victims and classroom phone donation efforts.
Resources for the Future (RFF), a think tank on energy and environmental issues, in Aug. granted a deed for the land to a limited liability company -- CM Land LLC. CM Land, which includes CTIA and the Foundation as members, acquired the land for $17.8 million, according to documents filed with the D.C. govt. D.C. gave a proposed 2005 assessment for the land of $15.3 million and a proposed assessment of $28.1 million for the building on it, for a total preliminary value for 2005 of $43.44 million, according to tax records.
CTIA sold Cibernet in March for $37 million to a group of private investors. The Bethesda-based, for-profit firm handles billing for domestic and international roaming between wireless carriers. The real estate transaction was seen as a financially responsible way for CTIA to reinvest proceeds from the Cibernet sale, a spokeswoman said. The Cibernet transaction also resulted in a $500,000 bonus in 2003 for former CTIA Pres. Tom Wheeler related to the successful spinoff, bringing his compensation package for the year to $2 million.
Before the $13 million donation, the Foundation was completely reliant on proceeds from the donated phone program to support operation, a CTIA spokesman said last week. The Foundation’s IRS Form 990 tax return for 2002, filed in Oct., showed total revenue of $16.9 million for the year ended May 31, most of which came from direct public support. For the 2002 tax year, the Foundation’s return showed total expenses of $5.8 million, leaving a surplus at that time of $11.1 million. The tax year would have ended before the real estate transaction involving the Foundation was carried out. The 2002 tax return indicated the foundation took in gross revenue of $23,050 from an industry fund-raising dinner, whose expenses were listed as $231,790, meaning the event resulted in a loss of $208,740. During the 2002 tax year, Wheeler received $42,000 in compensation as Foundation president.
“After the sale of Cibernet, the decision was made by the [CTIA] board to donate a portion of the proceeds to the Foundation,” the CTIA spokesman said. “The endowment was created to put the foundation on a solid financial footing and free it up to continue its good works without the pressure of fund-raising in a tough economic climate.” The Foundation in turn purchased a stake in the land which is part of the complex that CTIA now occupies on 16th Street NW in Washington, he said. “They made this investment in order to create a predictable return on the endowment,” he said. The spokesman said the decision by the board to fund the foundation and the foundation’s decision to purchase the land were separate. “When the board chose to fund the foundation there were no plans” on the land deal, he said: “The plans were not linked to the purchase of the land.”
In Aug., RFF -- which had owned the property that is now the site of CTIA’s hq -- signed a memorandum of repurchase option with CM Land, the Wireless Foundation and another LLC whose members also include CTIA and the Foundation. Wheeler, who at the time was still head of CTIA, heads CM Land. The CTIA spokesman said Wheeler submitted a letter of resignation last Oct. 28 as president of the LLC. The resignation was structured for Wheeler to leave Oct. 28 or when a successor to CM Land is named, whichever comes later, the spokesman said. “Our legal department is currently working through the governance process to name Steve Largent as head of the LLC,” he said. Wheeler announced last year he planned to leave the association by the end of 2003. He departed in Oct. after the group hired Largent, a GOP ex-congressman from Okla. and NFL Hall of Famer.
A change to the master purchase agreement filed with the D.C. govt. in Nov. was signed by Largent as head of CTIA and twice by Wheeler -- once as president of the Foundation and once as head of CM Land. The U.S. tax code includes proscriptions against self-dealing in which a non-profit charity is restricted from certain financial and other dealings with major donors. But the IRS makes distinctions between public charities and private foundations, several sources said. The Wireless Foundation is classified for tax purposes as a public charity, meaning it doesn’t have to refrain from acts of self-dealing or abstain from what the IRS calls “excess business holdings.”