Ohio Attorney General Mike DeWine has just opened a new investigation of Battelle Memorial Institute.
Battelle was created in 1923 as a corporation formed under the laws of the State of Ohio. Today, Battelle operates as a tax-exempt organization pursuant to section 501 (c) (3) of the Internal Revenue Code, and yet it represents one of the largest private scientific contractor and intellectual property sales organizations in the world.
“People are now beginning to ask the tough question, if Battelle Memorial Institute is really a charitable non-profit enterprise,” said John Hnatio President of Projectioneering LLC. Projectioneering LLC is a small company that recently requested that Ohio Attorney General Mike DeWine open an investigation of predatory and anticompetitive conduct by Battelle.
This is not the first time Battelle Memorial Institute has fallen under scrutiny for violating its tax exempt status.
In 1969, Franklin County Probate Judge Richard Metcalf questioned whether Battelle was operating as a non-profit charitable organization. Ohio State Attorney General Paul W. Brown then sued Battelle. In 1975, Battelle paid out $80 million in penalties.
The Internal Revenue Service (IRS) then questioned whether Battelle should keep its tax-exempt status. Battelle lost its tax exempt status and was forced to pay tens of millions of dollars in back taxes.
In 1997, BMI entered into an agreement with Ohio Attorney General Betty Montgomery to devote more of their revenues to charitable contributions in order to regain their tax-exempt status. In 2001, Battelle regained their non-profit 501(c) (3) status only after agreeing to operate under the supervision of the Attorney General of the State of Ohio. Under the arrangement Battelle must comply with the Ohio statutes and laws governing non-profit corporations.
Looking at some statistics about Battelle, it is not surprising that people are starting to ask some tough questions. In 2012, Battelle reported assets of $1,273,610,617 to the IRS with an income of $5,246,838,271.
Battelle is among the biggest contractors to the U.S. Government. In 2013, Battelle had 2,332 contracts with Federal agencies including the Department of Defense, the Department of Energy, and Health and Human Services , totaling $2,119,843,049.96
As part of its business plan, Battelle acquires and maintains a huge portfolio of patented ideas and other intellectual property to sell for profit. Battelle uses their stable of scientists and engineers to patent inventions and reduce these ideas to practice creating trade secrets. It then sells the resulting intellectual property to the highest government or private sector bidders to make money.
Battelle is also supported by a venture-capital fund called Battelle Ventures, which funds spinoff companies that use Battelle’s intellectual property to make profits. Battelle sells off these successful spin off companies that use their intellectual property to the highest government and commercial bidders as a source of revenue.
“This doesn’t sound like a non-profit to me,” said Bruce Becker, President of FoodQuestTQ LLC, another small business victim of Battelle’s predatory and anticompetitive conduct.
But what may be most revealing is the amount of money Battelle spends on lobbying. From 1989 to 2014, Battelle spent more than $8,970,000 on lobbying. In 2012 alone, BMI spent $739,740 on lobbying efforts that included the Department of Health and Human Services, the parent agency of the FDA. Lobbying by 501(c) 3 organizations is strictly limited to educational purposes only. “So, how do you think Battelle is spending all of this lobbying money? Maybe it’s to keep all that government contract money flowing into their coffers,” Hnatio added.
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