AARP: The Bigger they are, the Harder they Fall

AARP The Bigger they are the Harder they Fall

Giant Spider. Image © Jordi Martorell/Flickr

The AARP Spider Web of Interconnected Companies is Designed to Shuffle Hundreds of Millions of Dollars Around while Serving AARP’s Self-Interested Purposes.

Their Real Owner, UnitedHealth Group, is Drooling for Even More Dough.

Why are people still joining AARP? Their name has crept into our national vocabulary. This is no accident. It baffles the mind how their massive propaganda machine has brainwashed America’s senior masses (eligibility age now dropped to 50!) into forking over their hard earned—and retirement—money to one of America’s biggest public “charities” whose primary beneficiaries are themselves.

We plan to peel back as many of these layers of disguise as we possibly can. Our intent is to expose a skillful scheme which is decades old and stronger than ever today.

Santa Fe, New Mexico, 8 June 2015
By Dr. James Goldberg, Author of The American Medical Money Machine: The Destruction of Healthcare in America and the Rise of Medical Tourism

AARP is a sophisticated organization with billions in total assets. They’re also a top lobbying group in Washington. AARP spends more than $200 million a year on advertising and promotion to keep their grasp on the throats of the public. They are really masters at this game.

Congress has tried to blow their scheme open for years. In March 2011 a lengthy investigative report, “Behind the Veil: The AARP American Doesn’t Know”, was published by Representatives Wally Herger (R-CA) and Dave Reicher (R-WA), who were seeking to address a range of improprieties that appeared to conflict with AARP’s tax-exempt status.

The document digs deep into the workings of the AARP that have since become only more confounding. Their efforts turned into political chaos on the House floor a month later, where the argument about the authorship of the report—not its content—became a political football. When that died down, a debate ensued, with vacuous answers provided by AARP.

As a follow-up to the hearing, in December 2011, The House Ways and Means Committee asked the IRS for an investigation into AARP’s royalty free relationships with several businesses. We have not been able to find the outcome of the IRS investigation, if there even was one. A call to Dave Reichert’s office has gone unanswered.

Sadly, the IRS appears to have let this Congressional complaint die quietly. Instead, AARP has grown and continues to grow, unchecked, into a mammoth conglomeration. In fact, the IRS joined with AARP in some “public interest” program.

Their practices are appalling. Numerous interrelated yet separate tax-exempt companies, listed here below, spin a mind-numbing web that makes it nearly impossible to decipher what’s transpiring. We are slowly unraveling their shenanigans. Within the last two years or so, the unholy alliance between AARP and UnitedHealth Group has finally been admitted and broadcast through slick advertising to its 40 million members.

AARP is also enjoying new financial windfalls and subsidies from Obamacare on top of grants from the US government and even strategic alliances with the IRS. Wow, it helps to have friends in high places.

They shamelessly use advocacy for the elderly as a sales tool. Hey, how can you argue with someone who is taking care of grandma? AARP enjoys tax-free sailing via their powerhouse of tangled relationships between parent and subsidiaries making it very difficult to decipher their competing agendas. Nevertheless, we will get to the bottom of this cesspool.

Social Welfare or Social Warfare?

As we know, in order to maintain tax-exempt status an organization must be operated exclusively for the promotion of social welfare and be primarily engaged in promoting the common good.

AARP operates seven tax-exempt companies we have so far discovered and are analyzing:

501(c)(3) Companies

  • AARP Foundation [EIN# 52-0794300]
  • AARP Institute [EIN# 52-0788950]
  • Legal Counsel for the Elderly [EIN# 52-1194741]
  • AARP Experience Corps [EIN# 26-3698436]

501(c)(4) Companies

  • AARP, Inc. [EIN# 95-1985500]
  • AARP Insurance Plan [EIN# 52-6069387]
  • AARP Chapters Group Return [EIN#  23-7377940]

The 501(c)(3) companies are public charities. The Foundation alone has received nearly $400 million in Federal grants since 2001 ($78 million in 2014). We are currently examining the 2013 Form 990 tax returns of all seven AARP EINs and will be reporting more current figures and their meanings shortly. We will be digging into their bylaws and previous tax returns. They need a thorough examination in order for us to get to the truth of their REAL inner workings.

AARP’s 501(c)(4) non-profits can lobby for legislation. These companies do not have to pay taxes, but they also cannot accept federal grant money. Also, donations made to these any of entities are not be tax-deductible. Keep in mind that (c)(4) is a classification usually reserved for civic leagues and social welfare organizations.

There are also several other AARP taxable, for-profit companies linked to the AARP brand.

Under one EIN are five real estate holding companies and one insurance captive [EIN# 95-1985500]:

  • AARP Properties LLC
  • AARP 650 F 2-3 LLC
  • AARP 650 F 4-5 LLC
  • AARP Carson Place LLC
  • AARP Watson Plaza LLC
  • AARP Andrus Insurance Fund LLC

Another three AARP companies we found:

  • Life Reimagined Institute for Innovation LLC [EIN# 46-2850578]. Assists people in transitioning their lives
  • AARP Financial Services Corporation [EIN# 52-1367607]. Another real estate holding company (C-Corp)
  • AARP Services, Inc. (consolidated) [EIN# 52-2141065]. Quality control and research (C-Corp)
Although Many Try, None can take Them Down

In 1994, AARP paid the IRS a settlement payment of $135 million in lieu of taxes, resolving an audit over tax returns for years 1985 through 1993 for failure to fully pay unrelated business income tax (UBIT) on its commercial activities.

Also in 1994, AARP agreed to pay the U.S. Postal Service $2.8 million to settle allegations that AARP improperly mailed health insurance solicitations at non-profit rates in 1991 and 1992.

In 1999, the IRS and AARP once again reached a settlement to conclude an IRS audit of the organization covering tax years 1994 through 1998. This time it was for revenues AARP received from licensing and selling its name and logo to insurance companies—clearly not tax-exempt income.

No jail time and a door prize of a billion dollars. Man, we’re in the wrong business!

I Swear to Tell The Truth

As mentioned above, the report Herger and Reichert wrote was the subject of an April 1, 2011 Capitol Hill Hearing where AARP CEO Barry Rand testified. But Rand mostly sat back and watched hyper-partisan behavior between the representatives, basically nasty accusations being tossed back and forth, as to how the report was funded and who authorized it. In other words, never mind what’s in the report; let’s just tear the thing apart altogether.

During the hearing, Rand confirmed that AARP has an “arrangement” where the AARP brand is lent to insurance companies, which constitutes a licensing agreement. On their tax filings, AARP lists these transactions as “royalty” payments.

Royalty income, which is excluded from unrelated business income under section 512(b) of the Tax Code, has often raised a number of questions, and there has been litigation. When pressed on this, Rand had a more nuanced way to explain the revenue, and why it’s tax exempt.

The AARP Insurance Plan (one of the (c)(4) companies listed above) is a Grantor Trust holding certain AARP group health insurance policies. The trust fund is a collection service where beneficiaries send their checks. After being collected, the funds are sent to the appropriate insurer (i.e., United, Aetna, Genworth).

Rand says that’s part of the administration that the trust has. In reality, AARP receives a commission of 4.95% on the policies. (We believe even more is paid by United to ARRP for serving as the sales arm of this insurance giant!) As the trust receives premium money, it holds the funds for up to three weeks to take advantage of the dollar float in order to earn interest before transferring payments to the insurance companies, interest income AARP doesn’t pay taxes on.

Royalty profits for the AARP are estimated to result in a windfall for AARP that exceeds over $1 billion during the next ten years. “The royalty fees associated with our contract or a contract that talks about, we are going to lend you our AARP logo if you do certain things associated with improving insurance products to our members and people 50-plus,” claims Rand.

Well on their way to that $1 billion windfall, AARP received $763 million dollars in royalty payments in 2013, an amount that equals 57% of their total income. So the Insurance Plan is just a collection process, right. How brilliant. How criminal?

No Oversight: The Sky’s the Limit

In September 2012, Senator Jim DeMint (R-SC) released a report, “Profits Before Principles: How AARP Wins When Seniors Lose” about AARP’s strong financial interest in keeping Medigap supplemental insurance premiums high. AARP earns nearly twice the amount of revenue from “Medigap” plans than it receives in membership dues. Avik Roy wrote a piece for Forbes about this in 2012 titled, “How the AARP Made $2.8 Billion By Supporting Obamacare’s Cuts to Medicare”.

DeMint’s report concluded, “though it purports to be a senior’s advocacy organization, AARP functions in many respects as an insurance conglomerate with a liberal lobbying arm on the side.”

A class action suit in Galveston, reported by the Sonoran News, is suing AARP and UnitedHealth for violation of Texas insurance law. And here’s what one former AARP employee had to say about their insurance dealings:

“The new arrangements with insurance companies create a tremendous number of potential conflicts for AARP, which is a powerhouse, perceived as the most import voice for older people. AARP will not be perceived as a truly independent advocate of Medicare if it’s making hefty profits by selling insurance products that provide Medicare coverage.” (Marilyn Moon, Former AARP Executive)

Charity Begins at Home

In reviewing the 2013 Form 990 for AARP, Inc. alone, we find they dished out $25.4 million in grants to some 187 worthy organizations. Those receiving amounts up to $25,000 include general support for the Red Cross, the National Academies Press and the Soledad O’Brien and Brady Raymond Starfish Foundation.

AARP also sponsors tons of fun stuff including soul fests, forever young senior balls and grandparent essay contents. But guess who the big bucks go to? That’s right. AARP’s Experience Corps received $2.35 million in grants and a $14.6 million grant went right over to the AARP Foundation. By the way, that $25.4 million represents barely 2 percent of AARP Inc.’s total 2013 revenue.

Do these paltry donations to obscure causes and organizations truly comply with the law in terms of being a tax-exempt charitable organization? Charity or blasphemy? Let’s see what a deep dive into their finances reveals.

Do you See a Pattern Here?

Recently, we’ve exposed the tax-exempt status of the Joint Commission and reported on the charity status revocation of Blue Shield of California. We’re not done talking about this abuse of power. The American population is the victim of these schemes. Our investigative train is just leaving the station! This story is like a metastasizing brain tumor that shoots its roots deep down and sideways, affecting everything it touches.

We’ll take an investigative kind of MRI of this suspected cancer so we can all get a clear understanding—based on all the information we can obtain. The Congress and the IRS may be for sale, but we don’t believe that the will of an informed public can be overcome even by the smoothest of operators. It our firm intention to untangle this web.

You might also be interested in Chris Jacobs’ October 11, 2018 article, How AARP Made BILLIONS Denying Care to People with Pre-Existing Conditions, with updates on this topic.