With Insurance Policy Comes Membership

By Jonathan Weisman
Washington Post Staff Writer
Sunday, July 23, 2006

In 2001, Jennifer B. Chace heard an insurance broker's pitch for a new insurance company marketing tax-free medical savings accounts. She jumped at the offer, but first, the broker told her, she would have to sign an application -- already filled out -- that would entitle her to a low group rate.

With that signature, Chace, a Florida dentist in the market for health insurance, unwittingly joined one of Washington's most prominent conservative organizations, Citizens for a Sound Economy, she would later testify.

"Before I showed you this form today, did you even realize that you signed a form that was an application for membership in Citizens for a Sound Economy?" her lawyer would ask during a 2004 deposition.

"I don't know what Citizens for a Sound Economy is," she replied.

Chace's experience has brought to light an obscure arrangement between a prominent Republican businessman, J. Patrick Rooney, and a free-market interest group that has netted the grass-roots organization hundreds of thousands of dollars and thousands of new members. Citizens for a Sound Economy -- now called FreedomWorks and headed by former House majority leader Richard K. Armey (R-Tex.) -- has netted more than $638,000 and about 16,000 members through the sale of insurance policies.

Officials from FreedomWorks say the insurance sales are just another way for grass-roots groups to garner members and are no different from the activities of such giants as AARP, the senior citizens lobby.

"This is one of several avenues through which nonprofits do their job," said Kent Lassman, vice president for strategy at FreedomWorks.

Critics see the effort as a way for political groups to inflate their membership rosters -- and their bottom lines -- by taking dues from people with no interest in the groups' politics.

"We have clearly concluded these folks had no idea what Citizens for a Sound Economy was," said Louis M. Silber, a lawyer involved in a Florida class-action suit against Rooney's firm. "They had no idea where their money was going."

Officials from Rooney's Medical Savings Insurance Co. did not respond to numerous telephone calls and e-mails.

Documents produced through the suit against Rooney's company show how FreedomWorks, a political group that made its name fighting for a flat income tax and questioning global warming, has joined the insurance business. Under the deal, proposed by Rooney in 2000, brokers for Medical Savings Insurance Co. sell high-deductible insurance policies and tax-free savings plans at a group discount to buyers who join the conservative political organization.

"We are pleased with your offer to benefit CSE and we are ready to go forward subject to alterations of the contract," Ann House Quinn, then vice president for development of Citizens for a Sound Economy, wrote to Rooney on Sept. 13, 2000.

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