Thursday, December 31, 2020

UPDATED: Frank J. Hanna's Strange Secret

Update, January 6, 2021: Please see my follow-up article in Where Peter Is for more on this story. 

EWTN's firing of radio host Gloria Purvis this week further exposed what many observers have already known about the international Catholic media network: partisan politics plays an outsize role in determining which voices are heard there and which ones are silenced. In the words of Christopher Lamb, "it is Fox News under a Catholic cover."

To better understand what has happened to EWTN and, by extension, to the mainstream of the pro-life Catholic nonprofit world—a world I was part of for many years as an employee of the Cardinal Newman Society and Americans United for Life, and as a frequent EWTN guest—I did a deep-dive into the finances of one of its major donors, Frank J. Hanna III. What I discovered should concern every Catholic and particularly those who, like myself, are appalled by how the Catholic pro-life movement—whose goal of ending abortion I fully support—has been hijacked by people who elevate Trump while deriding the Holy Father

A Fortune Made Through Subprime Credit Cards

Frank J. Hanna, a member of the Legion of Christ's lay arm Regnum Christi who is a close associate of Napa Institute founder Tim Busch (with whom he serves on several boards, including Napa's) and a longtime friend and donor to Newt Gingrich, is one of the richest men in Atlanta. His fortune in 2005 was worth more than $500 million; today it is worth perhaps twice as much. 

One can gain an idea of Hanna's philanthropic interests by looking at the boards on which he has served. In addition to EWTN and the Napa Institute, Hanna's current or recent board memberships include the Acton Institute, Catholic University of America, the Fellowship of Catholic University Students (FOCUS), the Ethics and Public Policy Center, the Federalist Society, the Papal Foundation, the Pontifical North American College, and Sophia Institute Press (publisher of Taylor Marshall's anti-Francis conspiracy screed Infiltration). 

Hanna is not known for simply signing checks and letting his recipients call the shots. According to a 2007 profile in Philanthropy magazine, he has a strong reputation for hands-on involvement: 
Among the organizations he supports, Hanna has made it his constant practice to search for opportunities to leverage the group’s influence. “Frank is one of those board members who continually asks hard questions of us,” [Acton Institute President Father Robert] Sirico explains. “He looks beyond the enthusiasm for a project and wants to know hard facts about how influential an idea or program will be—not how many books we will publish, but how many people will read the information. He wants bang for the buck, and is highly strategic in his thinking.”
Hanna began his career as a corporate attorney before entering the financial world in the late 1980s as an executive at Nationwide Credit, which was founded by his father. He and his brother David in 1996 founded CompuCredit, a financial company that offered subprime credit cards to consumers who had poor credit ratings. Those who sign up for subprime credit cards are often low-income and are disproportionately African-American.

In June 2008, the U.S. government charged CompuCredit with deceptive marketing practices. PBS journalist Bill Moyers reported that the company teamed up with a payday lenders' lobbyist, the Community Financial Services Association, to "[co-opt] several prominent civil rights organizations to bolster their efforts to fend off stricter regulation"—see screenshot at right from a transcript of Moyers's report.

Ultimately CompuCredit agreed to provide $114 million in restitution to consumers, without admitting wrongdoing. It changed its name in 2012 to Atlanticus. Today Hanna is no longer part of its leadership, though he remains a major shareholder in the company. 

The Solidarity Association: Donating to the Legion of Christ and Beyond

Hanna began to exert his monetary influence in the Catholic world in the early 1990s through his involvement with the Legion of Christ and its lay movement Regnum Christi, which he continues to support through donations to such Legion-associated organizations as Divine Mercy University, the Pontifical Institute Notre Dame of Jerusalem Center, and the Lumen Institute. (He made the news in 1999 when he was a key figure in the Legion's hostile takeover of the Donnellan School, a private, independent Catholic school in Atlanta.)

The main philanthropic organ that Hanna uses to make his donations is the Solidarity Association. He founded it as an Association of the Christian Faithful by decree of Archbishop John Francis Donoghue in the early 2000s to fund the now-defunct Solidarity School. At its peak in the late 2000s, the Solidarity School gave an English-language immersion education to about ninety children from Spanish-speaking households whose parents "mostly [worked] in construction or fast food, as maids, or [as] day laborers." 

Today, the Solidarity Association's website* states that the nonprofit gives ongoing support to more than two dozen Catholic nonprofits, including not only EWTN and FOCUS but also the Catholic University of America's Busch School of Business (to which Hanna gave $250,000 in 2015).

The Solidarity Association is highly unusual among U.S. Catholic foundations that give to multiple recipients (as opposed to supporting a single hospital or school), in that it does not make its financial information public. Apart from the list of donation recipients that it provides on its website, its activities are completely opaque.

How can a Catholic nonprofit operate so darkly? Isn't it required by law to report its donations as well as other details such as its board members and assets? To understand how the Solidarity Association evades scrutiny of its finances, it is necessary to take a brief excursion into the peculiarities of U.S. tax law for religious nonprofits.

A Means to Avoid Accountability

Normally, a U.S. foundation is required to file an IRS Form 990, which provides the public with information about its financials, their governance, and the recipients of their donations. However, the Form 990 requirement is waived for certain religious nonprofits, which can include not only churches but also official nonprofits associated with them, such as hospitals and schools.

In the case of the Catholic Church, the IRS permits the U.S. Conference of Catholic Bishops to determine which Catholic nonprofits are official and which are not. This permission comes through what is known as the "USCCB group ruling," as detailed in a FAQ on the USCCB website (the screenshot below is from page 3). 

 Upon determining that a nonprofit deserves official status, the USCCB grants the nonprofit a listing in the Official Catholic Directory. If the nonprofit meets certain other qualifications, it may then use its Official Catholic Directory listing to prove to the IRS that it is exempt from having to file a Form 990.  (This 2012 Catholic News Service article sheds light on the relationship between the USCCB and the privately owned OCD.)

Since Hanna founded the Solidarity Association under episcopal decree as a specifically religious association funding a religious school, he was able to gain for it an Official Catholic Directory listing. Armed with this listing, he sought and received an exemption from the IRS from having to file a Form 990. 

A document on the USCCB website gives details (on page 7) on how to file for such an exception—the relevant part of it is in the screenshot at left. It says "a school included in the USCCB group ruling that otherwise meets these requirements [for exemption from filing Form 990] will automatically be considered [by the IRS] 'affiliated with a church.'" 

And so, thanks to the exemption Hanna gained through listing his foundation in the Official Catholic Directory and meeting the additional requirements, Solidarity Association has never filed a Form 990 and so has never publicly disclosed its finances. Its listing on the nonprofit-information site Guidestar (free registration required to view) states, "This organization is not required to file an annual return with the IRS because it is a church." Guidestar further states that the Solidarity Association is listed with the IRS as a "Specialized Education Institutions/Schools for Visually or Hearing Impaired, Learning Disabled." This is apparently because the school's mission included providing special education.

But the Solidarity School closed in 2017, and today it does not appear that the Solidarity Association funds any school whose primary mission is special education. In fact, the Solidarity Association has drifted far from the mission under which it was listed in the Official Catholic Directory and granted its Form 990 exemption. It now funds a wide variety of nonprofits,* including many such as the Cardinal Newman Society, Sophia Institute Press, and EWTN that, although Catholic-run, have ideological biases that at times run counter to Church leadership and even (in the case of Sophia and EWTN at least) Pope Francis. So it is not clear on what basis the Solidarity Association has managed to retain its Official Catholic Directory listing. And since the USCCB historically has failed to police whether organizations listed in the directory have remained on mission, it's possible that the Solidarity Association no longer qualifies to be listed and thus no longer qualifies for its exemption from filing Form 990.

With that said, even if the Solidarity Association does still qualify for an Official Catholic Directory listing, just because an organization doesn't have to disclose its finances doesn't mean it can't do so. There are many official Catholic nonprofits that do not have to file a Form 990 but choose to do so in order to exhibit transparency. Given the Napa Institute's strident calls for the laity to lead the Church in promoting accountability and transparency, it is mystifying that Hanna, as a Napa board member, would take advantage of the same shields that Napa criticizes for enabling financial abuses.

An Unaccredited "University"

If Hanna were willing to enact the transparency and accountability that Napa promotes, he could shed some light on how he uses the Solidarity Association to fund the online-only Pontifex University, of which he is vice chancellor.

Pontifex University is unaccredited, a not-insignificant fact that its website buries under paragraphs boasting that it is approved by Atlanta's (now-former) archbishop and recognized by a Georgia state commission (which has nothing to do with accreditation). It charges students $9,175 for a “Master of Sacred Arts” degree and, “depending on exemptions for prior credits or qualifications,” up to $16,800 for a “Th.D.” The university's website also notes that its master’s program “may be audited for 30 monthly payments of $100.”

In 2019, Pontifex University used its “doctoral” program to give Christopher West, president of the Theology of the Body Institute, a seemingly appropriate qualification to oversee Pontifex’s “Masters of Sacred Arts with Specialization in the Theology of the Body.” Its website now lists the popular speaker and author as “Dr. Christopher West, Fellow and Professor of Theological Anthropology who earned his doctorate in theology (Th.D.) at Pontifex University.”

If visitors to Pontifex’s website are inspired to support the institution, the site accepts donations through the Solidarity Association, which it says it applies to “scholarships for prospective and existing students.” The donation page emphasizes that “Solidarity Association is recognized as having charitable status … by virtue of its inclusion in the Official Catholic Directory.”

Hanna is thus using the Solidarity Association's listing in the Official Catholic Directory to legitimize what is effectively a diploma mill. Pontifex University manufactures its own unaccredited "ThD"'s such as "Dr." Christopher West and then employs them to lead courses that result in degrees that are not worth the paper they are printed on. I say this not to discount the genuine expertise that West and other Pontifex professors (many of whom have legitimate doctorates) possess, but rather to point out that Pontifex, on an institutional level, fails to meet the standards of academic integrity that a Catholic university should meet.

The Secret Purchase of a Top Catholic Property

Given how prominently the Solidarity Association's Official Catholic Directory listing features in Pontifex University's marketing, it is clear that the listing—and the freedom from transparency that it provides—is very important to Hanna. This brings me to the most curious part of his story—a strange secret that has remained hidden from the public eye until now.

Normally, Hanna openly publicizes his connections in the Catholic world. His business website* lists thirty-six organizations that he supports. He started a YouTube channel to share a clip of him meeting Pope Benedict XVI. In 2014, however, Hanna, through lawyers, used a pair of shell companies, Honeycomb Ventures LLC and Treasured Works LLC, to acquire the most important data set in the American Catholic world—and he shielded the purchase from the public eye. Even more surprisingly, he has not to this day revealed his ownership of the data set.

He bought the Official Catholic Directory.

Given that Hanna has never publicized his ownership of the directory, discovering the truth requires a bit of digging.** But the trail of ownership is clear:

  • Until recently, a GoDaddy WhoIs search (see screenshot at left) showed that Hanna's company, Hanna Capital, owned NRP Direct's website. Today that same search yields only a private registration (meaning that the owner chooses not to be known); however, there remains online evidence that Grayson owns NRP-associated websites in association with another Hanna company, HBR Capital.
  • Addresses for Treasured Works, which owns NRP Direct, and for Honeycomb Ventures, which purchased the Official Catholic Directory's trademark, trace back to Hanna Capital’s office.
What does owning the Official Catholic Directory do for Hanna? At the very least, it gives him proprietary rights to the most comprehensive and detailed data available on U.S. Catholics—including names, locations, and contact information for every bishop, pastor, priest, parish, school, and religious-education director in the country. The directory’s website boasts that its database “is an essential resource for marketers, fundraising campaigns, and new product introductions to this targeted audience.” 

Why the Secrecy?

Why, then, would Hanna keep his ownership of the Official Catholic Directory a secret, given how such ownership only adds to his already formidable influence in the world of Catholic nonprofits?

I don't know.

But I find it disturbing that Hanna owns the very company by which, through his foundation's listing in the directory, he is able to avoid the transparency that he—as part of the Napa Institute—claims the Church should practice.

Updated January 2, 2021, 1:50 a.m. EST, to include screenshots from USCCB documents and to make the language concerning the Form 990 filing exemption more exact.

Updated January 2, 2021, 4:55 p.m. EST, to include Hanna's membership in Regnum Christi.

Updated January 2, 2021, 11:47 p.m. EST, to include additional details about CompuCredit.

Updated January 3, 2021, 1:08 p.m. EST, to include a link to the 2012 article on the USCCB's relationship to the Official Catholic Directory.

*Since this article was published, Frank J. Hanna III has revamped his websites to remove the names of organizations he supports. The links to those pages in this article have been updated with links to archived versions to show how the sites appeared at the time the article appeared. 

**At some point between the date this blog post appeared and May 26, 2021, the OCD updated its website, as I noted in the following tweet: