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Higher ed critic helped bankroll American Phoenix group, wants money back

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Hand out photo of Jeff Sandefer, Master Teacher with the Acton School of Business and entrepreneur. CREDIT: Courtesy of Moroch. Received 04/12/11 for xxxxSandefer.
Hand out photo of Jeff Sandefer, Master Teacher with the Acton School of Business and entrepreneur. CREDIT: Courtesy of Moroch. Received 04/12/11 for xxxxSandefer.

AUSTIN – A private foundation led by billionaire oilman and higher education critic Jeff Sandefer has given $200,000 in recent years to help bankroll a conservative nonprofit now at the center of a scheme to secretly film lawmakers and lobbyists, tax filings show.

Tax records for Sandefer's Ed Foundation, a philanthropic tax-exempt organization that spreads cash to dozens of causes, provide the first connection to a funding source for the group that over the last six months has strapped hidden cameras onto a band of operatives to track the state's political elite.

Reached for comment Thursday, Sandefer said he was not aware of the group's plan to secretly film lawmakers and was unhappy with his investment after he received no feedback on how the group was using his money.

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"I was unaware that they were planning to film politicians. Our intent was that they were going to train journalists," Sandefer said. "We were unhappy with a lack of progress in training journalists and asked for the money back. And we did not receive any money back."

In the last two weeks, the Austin-based American Phoenix Foundation's plans have exploded into public view after shifting its covert camera operation from Austin's most popular watering holes for politicos to the halls of the Capitol, touching of a firestorm of alarm and criticism from lawmakers and lobbyists. Foundation founders Joe Basel and his wife Hannah Giles say they have amassed some 800 hours of video of lawmakers and lobbyists, which they have turned over to conservative website Breitbart Texas. None of the videos have been released publicly.

According to its website, the foundation was formed in 2011 to train "journalists who relentlessly pursue truth with courage and creativity." Giles said the foundation has provided training to around 750 people and has worked with 69 universities.

One central question surrounding the group remains: who are its financial backers?

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As a 501(c)(3) tax-exempt organization, the American Phoenix Foundation does not have to disclose donors and has refused requests to do so, saying only that its source of money has stemmed from more than 11,000 small donors.

A private foundation like Sandefer's, however, must disclose all grantees and grant amounts on an annual filing to the IRS. Tax filings for Sandefer's foundation show $100,000 donations to the American Phoenix foundation in 2011 and 2013, the last publicly available information.

Sandefer, a board member of the Austin-based conservative think tank Texas Public Policy Foundation and one-time adviser to former Gov. Rick Perry, said Basel approached him for the 2011 grant. After the first $100,000, Sandefer said he received no indication from Basel how the money was being used. After he agreed to give the foundation a second $100,000 in 2013, he expected a progress report but received none.

"We did not get into specifics of what they were going to do. I never got that far. I never heard a specific plan to do anything," Sandefer said. "I have no legal right to ask for that, but I would like my (second) contribution returned."

State lawmakers who have been targeted by the secret videotaping operatives say they were not surprised to hear Sandefer's name as a potential major donor behind the group. Rep. Lyle Larson, R-San Antonio, said Sandefer's connection only heightened his suspicion that the group originally set out to target Republican House Speaker Joe Straus and his allies.

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"It's all about transparency," said Larson, who said he has been approached six times this week by American Phoenix operatives. "It's unfortunate that some of the fringe elements in our party continue to take this approach to what we're doing in the Texas House."

Sandefer has been a prolific political donor in recent years, contributing more than more $1 million to conservative candidates and political action committees since 2010. That includes more than $400,000 to a political action committee called Accountability First that took aim at Straus and his top lieutenants during last year's primary. Sandefer also gave $100,000 to state Rep. Scott's Turner's campaign to challenge Straus for the position of House Speaker.

The American Phoenix Foundation has said it is targeting Democrats and Republican in both chambers, and is looking to expose hypocrisy, corruption, even extramarital affairs. The group's founders say its employees spent months secretly filming lawmakers and lobbyists in numerous Austin bars and at fundraising events, but they have denied they are paid head hunters.

"You can't hire us to do a specific project," Basel said in an interview last week. "You can't ask us to go after a certain person. We don't allow directed donations."

Tax filings for several other groups required to list grants also show donations to the American Phoenix Foundation.

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A foundation run by former Texas Secretary of State and one-time state GOP chairman George Strake, a staunch Republican and former TPPF board member who has called for a more conservative House speaker, also gave the American Phoenix Foundation a total of $30,000 between 2011 and 2013 to help launch "training programs."

The State Policy Network, a national umbrella group for conservative think tanks that counts TPPF and the Texas Conservative Coalition Research Institute among its state members, gave a $25,000 grant to the Phoenix Foundation in 2012.

The Franklin Center for Government and Public Integrity also gave at least $25,000 that year. The center, based in Virginia, funds Watchdog.org, a site that has been critical of former UT-Austin President Bill Powers and other Sandefer opponents in its coverage of higher education issues.

Combined, the grants reflect at least $280,000 in funding to the American Phoenix Foundation over a three-year period.

Sandefer's foundation doled out nearly $5 million in grants in 2013, with the biggest chunk, more than $3.5 million, going to his Acton School of Business. He also gave to other Texas conservative groups like Texas Public Policy Foundation, Empower Texans and the blog site AgendaWise.

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The $100,000 grants from Sandefer's group represent some of the biggest checks American Phoenix Foundation has received in its five-year history. In 2011, for example, the $100,000 grant from Sandefer's foundation would have accounted for roughly one-third of all of the American Phoenix Foundation's reported income that year, tax filings show.

In a two-year period from Sept. 2010 to Sept. 2012, the group reported to the IRS it had raised a total of $484,000. It reported having $457 left in the bank by Sept. 2012.

Requests to review the group's latest tax filings repeatedly have been brushed off, despite a federal law requiring nonprofits to make such records available for public inspection upon request.

Sandefer has never sought elective office, but he once was one of the most influential men under the pink dome. A long-time friend and donor of then-Gov. Rick Perry, the ex-University of Texas adjutant professor drew widespread derision from the higher education community with his "Seven Breakthrough Solutions," a set of business-oriented policy recommendations for the state's public colleges and universities.

Other than a brief and controversial effort at Texas A&M to give teachers cash bonuses for good student evaluations, however, Sandefer's proposals largely have been rejected by higher education leaders.

What he did accomplish was to set off years of infighting at the University of Texas System, between those who supported Sandefer's approach and those that backed the flagship's president and its history of strong academic research. The feud continues to simmer, with new UT System Chancellor William McRaven now butting heads with regent Wallace Hall.

"He was the mastermind, supposedly, of the greatest attack on excellence in higher education in the history of our state," said Sen. Judith Zaffirini, a leading higher education policymaking and long-time critic of Sandefer's methods.

The Laredo Democrat said she did not understand why Sandefer or anyone else would get involved with the foundation that's been secretly filming lawmakers, staff and lobbyists.

"I think that's disgusting, that anybody would be willing to spend money and time and energy on such an effort," she added. "It sounds to me like there are a lot of people, or some people with a lot of money and not enough to do. Get a life."

Sandefer is well-known in the Capitol, but Basel and Giles failed to name him as a major backer of their efforts during an interview last week.

Asked about their largest donors, Basel said there was no one in Texas worth noting.

"We've gotten some bigger checks, but nothing sexy for the Texas story," Basel said.

On Thursday, Basel said Strake and Sandefer's "donations were for unrelated projects, years ago. I told you there was no one sexy who donated for this project. Sandefer and Strake both gave general support funds years ago, they aren't relevant to this project."

Just this week, the group updated its once-bare bones website to include a section on investigations it says it has undertaken into "rampant abuse and waste" at Texas' institutions of higher education.

The website's "higher education investigations" page cites just two schools: The University of Minnesota-Morris, where Basel received his undergraduate education, and UT-Austin. It claims records requests sent to UT-Austin were met with "egregious stonewalling," a statement the flagship's staff denies.

"We're continuing to look into this claim but, so far, UT Austin has found absolutely no record of any such request for information and no one on campus who remembers any such request," said UT-Austin Director of University Media Relations Gary Susswein.

Not long before the group shifted its operatives to the Capitol project, Basel decried the rising costs of college on social media and boasted that he owned "a company that is popping the higher education bubble."

Sandefer said he supports investigating waste and corruption, but was unaware of the foundation's plans regarding UT's Austin flagship: "I would have welcomed and do welcome any legitimate journalists' inquiries into UT-Austin or the legislature."

 

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David Saleh Rauf reports on politics from the Express-News' Austin bureau.

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