The Non-Profit Industrial Complex: How Environmental Organizations Became Real Estate Players
Non-profit organizations are tax-exempt on the theory that they serve the public interest rather than private financial interests. The designation carries legal privileges — exemption from income tax, eligibility for tax-deductible donations — that are justified by the assumption that the organization’s activities benefit the community rather than enrich its principals.
What happens when a non-profit organization’s primary revenue mechanism is extracting settlement payments from private developers by threatening litigation? The public benefit theory starts to strain. The organization has a financial interest in the existence of major development projects — not because those projects benefit its community, but because those projects are the targets from which it extracts payments. More development means more potential targets. Larger projects mean larger potential settlements.
This is not a hypothetical concern. The Desert Sun documented an $83 million demand. The IVCM federal lawsuit alleges coordinated CEQA-based obstruction designed to create leverage for a similar demand. These are specific allegations about specific organizations making specific financial demands. They are worth taking seriously.
The Organizational Economics
Running an environmental advocacy organization requires money. Grant funding is competitive and often restricted to specific program areas. Individual donations are unpredictable. Membership dues are limited by the size of the membership. Litigation settlements — large, unrestricted payments from developers seeking to end expensive legal disputes — are none of these things. They are large, flexible, and repeatable.
An organization that learns to generate revenue through CEQA settlements has a rational incentive to build the infrastructure for that model: maintaining legal capacity, developing the expertise to file credible CEQA challenges, establishing relationships with law firms that can execute the litigation on contingency, and identifying the projects with the highest settlement potential. This is organizational behavior responding to financial incentives, not conspiracy. But the consequences for the communities bearing the cost are the same.
The Credibility Problem
The greenmail model works because environmental organizations have genuine credibility earned through legitimate advocacy work. The same organizations that document real air quality impacts, fight for real environmental protections, and genuinely represent underserved communities also — sometimes — use the legal tools those fights generate to pursue financial outcomes that have nothing to do with environmental protection.
This creates a real challenge for anyone trying to evaluate specific CEQA challenges: is this a legitimate environmental objection that deserves serious engagement, or is it a financial maneuver using environmental language as cover? The answer is not always obvious, and the organizations that use the greenmail model benefit from that ambiguity.
The way to resolve the ambiguity is to follow the money. When an organization makes a specific dollar demand as the price of dropping a lawsuit, the financial motive is no longer ambiguous. The $83 million demand on CTR is not ambiguous. It is a documented number. The community it was made in — Imperial Valley — is entitled to use that documentation when evaluating the organization’s involvement in subsequent campaigns.
What Accountability Looks Like
Non-profit accountability is weaker than corporate accountability in most respects. Shareholders can sue corporate boards. Voters can remove elected officials. But the principals of a non-profit organization are largely accountable only to their boards — and boards in the non-profit world are often selected by and from the same community as the executives they oversee.
External accountability comes from journalism, from litigation, and from the communities the organizations claim to represent. The Desert Sun provided the journalism. The IVCM federal lawsuit provides the litigation. The remaining mechanism is community accountability — the residents of Imperial Valley deciding whether organizations that make $83 million settlement demands and coordinate campaigns against the region’s largest job-creating project are actually serving their interests, and responding accordingly.
