How Trump’s NASA Nominee Used a Nonprofit He Ran to Benefit HimselfTweet
This article, based on a POGO investigation, originally appeared in The Daily Beast.
Rep. James Bridenstine (R-Okla.) is a former Navy pilot with virtually no management experience in any large organization. But the Oklahoma Republican has been tapped by President Donald Trump to take over the National Aeronautics and Space Administration (NASA), a federal agency with a budget of $18.5 billion, 18,000 federal workers, and over 60,000 contract employees.
For this lack of technical experience—along with a skepticism of climate change and opposition to LGBT rights — Bridenstine has faced sharp criticism on the Hill. But another issue may soon end up complicating his nomination.
An investigation and review of public records by the Project On Government Oversight shows that, prior to his time in Congress, Bridenstine led a small non-profit organization into hefty financial losses. Some of the losses involved the use of the non-profit’s resources to benefit a company that Bridenstine simultaneously co-owned and in which he’d invested substantial sums of his own money.
Bridenstine, whose bid to be NASA’s next leader was advanced this week by Senate Majority Leader Mitch McConnell (R-Ky.), has vehemently denied mismanaging the non-profit: the Tulsa Air and Space Museum. His stake in the separate company, the Rocket Racing League, has been well known. But the fact that he was using the Museum’s resources to benefit that company has not previously been covered by the press and now raises red flags for tax law experts.
"This is a classic example of the use of a charity's assets for private benefit," said Marc Owens, an expert on tax law at the firm Loeb & Loeb and former head of the Internal Revenue Services's non-profit compliance division. "This could have jeopardized the Museum's status as a tax-exempt organization" under the IRS code since its resources were used to provide him a significant private benefit.
Evidence of Bridenstine’s self-dealing dates back to December 2008, when the Museum, under his leadership, put its own cash reserves on the line to bring the struggling Rocket Racing League — a company set up to race rocket-powered aircraft before live audiences — to an air show in Tulsa in 2010. It was the first and only air show the Museum ever organized. And though it was billed as a stop on the League’s 2010 “World Exhibition Tour,” there was no tour beyond Tulsa.
The show was a boost for Rocket Racing League, which had, to that point, disappointed investors and struggled with technological mishaps. At the event, the Rocket Racing League would have more than one racer in the air—one of whom was from Bridenstine’s own team. Using rocket-powered aircraft, pilots flew through virtual 3-D rings on an aerial race course that could be seen on a pilot’s display. The League aimed for a NASCAR-like experience for spectators.
But the air show was a financial loser for the Museum, costing it about $20,000 more than it generated, according to IRS filings. This, and other spending initiatives put the Museum—which typically had annual revenues around $1 million—$308,000 in debt in 2010. Two years earlier, it had run a surplus of $73,000.
A big chunk of the expenses associated with the air show are left undetailed by the Museum in its annual filing with the Internal Revenue Service. There were roughly $372,000 in payments related to the air show described only as “other direct expenses.”
On its 2010 annual filing with the IRS, the Museum checked “no” in response to a question whether it was a “party to a business transaction with… an entity” owned by an officer of the non-profit. And when asked by the Project On Government Oversight whether Bridenstine directed payments to his rocket team or the League, the Museum did not respond.
The League itself no longer exists, having gone out of business in 2012, the year Bridenstine was elected to Congress.
“Whether the Rocket Racing League was or was not paid directly by the Museum would be relevant to report,” Owens said. He added that not enough is known to say whether the Museum correctly answered the question. Regardless, the expenditures on the event itself appeared to be "a misuse of the charity's assets." since the event was organized “to benefit his company,” Owens said.
Bridenstine was pushed out of the Museum in August 2010, just months after the air show. His tenure as its executive director proved controversial when he ran for Congress in 2012, with some members of the Museum’s board publicly critical of him for his handling of the books.
“The finances and certainly the financial reporting were arguably the worst they had been in recent years,” board member and former petroleum executive Jim Bertelsmeyer told The Tulsa World. “While I respect Jim’s service to our Country as an aviator, I can’t imagine how he is qualified to run a Congressional District if, in my judgment, he can’t effectively manage our Air and Space Museum.”
In a statement, the chairman of the Museum’s board came to Bridenstine’s defense, praising the air show event and saying he was “not terminated” but “voluntarily resigned…in order to follow his orders in the Navy Reserve.”
Bridenstine’s congressional communications director said, “The concerns you have raised were used as a line of political attacks during the 2012 election cycle, and were fully refuted by the Tulsa Air and Space Museum and Planetarium Board.”
Bridenstine, however, left the Museum at the same time as two employees he’d hired—the financial controller and the director of marketing. Unlike Bridenstine, they were not members of the Navy Reserve. A source familiar with Bridenstine’s departure, who requested anonymity out of fear of angering Bridenstine, said that the board effectively requested their resignation.
A Move to the D.C.
Bridenstine was elected to the House of Representatives in November 2012. He brought with him the Museum’s former director of marketing, who is now one of his top congressional staffers and who would move over to NASA if he is confirmed.
Bridenstine was tapped to head NASA in the fall of 2017. And with NASA’s Acting Administrator’s looming retirement at the end of the month, pressure is building for someone to take NASA’s reins.
But the agency faces especially sensitive challenges regarding its spending, its watchdog wrote in November 2017, making it vital that the next administrator has a strong track record in running large organizations. And staff on the Senate Commerce Committee, which has jurisdiction over NASA, have asked Museum to provide information on its financial relationship with the League. So far, the Museum has been unresponsive.
What is publicly known is that Bridenstine’s relationship with the League dates back to 2006, when, according to the Greater Tulsa Reporter, he first bought shares in the privately-held company at a severely-discounted rate when he was still a Navy pilot. Bridenstine also assembled one of the league’s half-dozen teams, naming it after himself: Bridenstine Rocket Racing.
In a July 2008 article, before he started working at the Museum, The New York Times wrote that Bridenstine “was drawn to the challenge of a new kind of flying and what he saw as the financial opportunities of being involved with a sport from its inception.”
He told The Tulsa World that he sold four houses he owned in California and a ranchette in Nevada to raise the money to buy shares in the League. And he didn’t let go of them when he turned his attention to Congress. In 2012, as a candidate for the House, Bridenstine listed his ownership in the League as between $50,001 and $100,000, according to his financial disclosure form.
But the company was struggling financially. While the League brought in millions of dollars in venture capital, year after year, it had to delay plans to start exhibitions and races.
After attracting $5.5 million in investments in July 2009, it was under severe pressure to show substantial progress in its operations. That November, Bridenstine met with the League’s CEO to convince him to have an event in Tulsa, according to The Tulsa World. In February 2010, the Tulsa Museum announced it would partner with the League for the first exhibition flight of two rocket racers flying at the same time.
The goal, according to Space.com, was to "build up the league's fan base, in addition to perfecting operations and technologies, before the league's official launch in 2012."
Instead of officially launching in 2012, however, it filed for dissolution.
During a November 2017 Senate hearing on his nomination, Bridenstine was asked about the financial losses detailed in the Museum’s annual IRS filings.
He gave various answers. To Sen. Gary Peters (D-Mich.), he said, “there was a noncash loss from the depreciation of capital assets. And from a document based on that, [my political opponents] tried to accuse me of having lost money for the Museum, which is absolutely not the case.” An analysis done by congressional staff and obtained by POGO shows, in fact, the Museum ran large financial deficits under Bridenstine.
At the same hearing, Bridenstine gave Senator Bill Nelson (D-Florida), a different response: “We had a number of big, big projects that we were investing in. And yes, we had cash reserves to do that.”
Some of those projects, according to Bridenstine, included “an effort to acquire a retiring space shuttle for the City of Tulsa that would be at the Tulsa Air and Space Museum.” That effort failed.
The other big project, he said, was the 2010 air show.
Additional scrutiny over his past managerial record, could complicate Bridenstine’s nomination prospects. He has an array of backers, from former Speaker of the House and space aficionado Newt Gingrich to the conservative Family Research Council. But even his supporters have raised red flags about his resume.
In an 2017 email exchange between Gingrich and NASA consultant Charles Miller—which was obtained by POGO but first reported by Politico—Miller told Gingrich: “Assuming we get Bridenstine for Admin (fingers crossed), we are going to need a NASA Deputy Administrator that has Bridenstine’s back, and who has skills/strengths that offsets Bridenstine’s weaknesses.”
Miller wrote that Bridenstine does not have “significant knowledge and experience with how NASA works” or “Deep technical knowledge in aerospace systems.”
“Bridenstine has little” of either, Miller wrote.