Editor’s Note: Our colleague Derek Fields co-authored this piece with Russ Greene.
The PepsiCo Foundation’s paperwork is notoriously indecipherable, but we have finally transferred its 2014 donations into legible and searchable spreadsheets. And this data suggests the PepsiCo Foundation may be directing its charitable donations to areas considering the most soda regulation.
The Russells’ Blog has covered Coca-Cola’s efforts to influence science and policy for years. Yet some have asked why we have focused so much on Coca-Cola and not PepsiCo. To be sure, we exposed the fatal hydration guidelines propagated by PepsiCo’s Gatorade brand. That said, PepsiCo’s malfeasance extends far beyond its famous sports drink.
One reason Coca-Cola receives more attention is that Pepsi does a much better job hiding its tracks. Take the PepsiCo Foundation’s 990, the document the nonprofit files with the IRS each year disclosing its financial information. Its small print and unclear font make it “virtually illegible,” as Julia Lurie observed in Mother Jones. To solve this problem, I spent months examining the PepsiCo Foundation’s payments before converting them into an organized, easily searchable database.
The PepsiCo Foundation has donated millions to health- and fitness-related organizations, just as Coca-Cola has. Like Coca-Cola, it has also donated millions to academics and their institutions. Our research also suggests that the Foundation may have directed its donations to influence politicians, however.
Cross-referencing the Foundation’s donations with soda regulation efforts reveals that the PepsiCo Foundation may have engaged in self-dealing. In this particular case, this term refers to illegally using a non-profit foundation to serve corporate interests.
The PepsiCo Foundation’s 990 is far less manageable than the Coca-Cola Foundation’s. Instead of hundreds of records, the PepsiCo Foundation’s 990 from 2014 contained 7,639 records to sort through. Determining which of these donations were related to health or education causes required first zooming in 400 percent to make the tiny font readable. Then I had to research each grant recipient online to determine whether they had connections to health and fitness (unless they were a well-known organization like the American Heart Association).
Earlier versions of the PepsiCo Foundation’s 990 were so blurry that they were utterly unreadable no matter how far one zoomed in. Thankfully Julia Lurie of Mother Jones badgered PepsiCo until they released a clear version of the document.
In 2014 the PepsiCo Foundation donated US$14,920,965.47 to health, fitness, and nutrition-related causes and organizations. You can see a spreadsheet of all those donations here. The Foundation also donated $15,890,572.55 to education or minority-related causes and organizations, and you can find a similar spreadsheet for that category here. The educational donations help PepsiCo build a relationship with academia, and academia in turn influences and conducts research for the health, exercise and nutritional sciences. The donations to minority-related causes and organizations are significant because soda consumption leads to chronic diseases such as diabetes, and these diseases have a disproportionately high mortality rate for minorities. Additionally, the 2014 990 contained a page showing future donation commitments, and PepsiCo had already pledged an additional $18,868,891.00 to health, education and minority-related causes. We have prepared a spreadsheet of those commitments here.
Self-dealing is broadly defined as “a situation in which a fiduciary acts in his own best interest in a transaction in the best interest of his clients.” This behavior would be illegal for the PepsiCo Foundation. While corporations are taxed extensively in the United States, nonprofit organizations are tax-exempt.
So, is the PepsiCo Foundation engaged in self-dealing? And should the IRS investigate it for using charitable donations to fight soda regulation? You be the judge.
Out of PepsiCo’s 7,639 donations in 2014, only 36 were over $100,000. The vast majority of their donations were relatively small two-, three-, and four-figure donations, mostly listed as “matching gifts”, or matching individual employee donations to organizations of their choice. Some of the larger six- or seven-figure donations were also listed as “matching gifts.” We’re not sure if some employees were feeling particularly generous and decided to donate several million dollars of their own money that PepsiCo was forced to match because of their employee donation policy, or if the document has some errors in it. Nonetheless, some of the large six- and seven-figure donations are not listed as “matching gifts,” but rather list a specific cause or program the grant recipient told Pepsi they’d use the money for. These designated purposes suggest that those donations were official PepsiCo Foundation donations, not merely employee-matching donations.
The PepsiCo Foundation directed those 36 large donations almost exclusively to areas that considered multiple pieces of sugar-sweetened beverage legislation between 2013 and 2015. Only 27 states in the country considered any bills related to sugar-sweetened beverages in that period.
Most of the states that did consider SSB-related legislation during 2013-2015 only considered four bills or fewer. Just six states considered eight or more pieces of soda-related legislation. And yet, this group, states that considered eight or more pieces of soda-related legislation, was the target for fully half of the PepsiCo Foundation donations for $100,000 and up.
Here is a spreadsheet of all 36 of those $100,000 or greater donations organized by state, paired with all the legislation related to sugar-sweetened beverages considered in each state from 2013 through 2015. Only five of those 36 large donations went to US states (and a Canadian province) that did not consider any anti-SSB legislation.
It’s also worth noting that five of those 36 large donations, totaling $2.35 million, went to California, which considered a few high-profile anti-SSB initiatives at the local level between 2013 and 2015. In addition to the eight statewide bills California considered, Berkeley, California, also passed Measure D in 2014, which levied a $0.01/ounce tax on SSBs. Additionally, San Francisco passed City Ordinance 100-15 in 2015, which requires a warning label on ads for sugar-sweetened beverages. This was only a year after the soda industry spent $10 million to defeat a soda tax in San Francisco. The San Francisco Ordinance is still tied up in appeals court by the American Beverage Association. And it just so happens that, in 2014, four out of the five large California donations the PepsiCo Foundation made went to groups in San Francisco. The fifth donation, of course, went to a group in Berkeley.
If PepsiCo did enlist its foundation to support its anti-regulation campaign, that would not be a first for Big Soda. As Politico reported, in Philadelphia, “it was widely believed the city dropped its bid for a soda tax after the beverage industry gave the Children’s Hospital of Philadelphia $10 million.” The beverage industry gave that donation through the American Beverage Association’s nonprofit, the Foundation for a Healthy America. PepsiCo is a member of the American Beverage Association.
It’s true that sugar-sweetened beverage legislation, such as taxes and warning labels, tends to be more common in liberal areas that also contain many charity headquarters. Yet the pattern also holds in traditionally conservative areas that aren’t typically thought of as global charity headquarters or bastions of regulation. It might make sense that New York would consider lots of sugary drink legislation and that there are many charities headquartered there. On the other hand, one might not expect Texas to consider a lot of regulation or have an extremely high concentration of charity headquarters. And yet both states considered much more legislation that most other states in the country between 2013 and 2015. Texas considered nine such bills, and New York considered 12 bills. Both Texas and New York received very generous donations from the non-profit PepsiCo Foundation.
You can also see a bias towards areas of high regulatory activity within a nationwide charity. For example, the United Way has chapters all over the country. And while many chapters across the country received small donations that appear to be employee-matching donations, the chapters that received large six- or seven-figure donations from the PepsiCo Foundation are all located in states that considered relatively high amounts of soda regulation. So did the PepsiCo Foundation just happen to favor the United Way chapters located in areas considering the most soda regulation?
It’s the IRS’s job to figure out whether this constitutes illegal self-dealing, or if it’s all a big misunderstanding. If the PepsiCo Foundation would like to clear its name, finally releasing legible tax forms would be a good start. But then again, that would also make it much easier to follow their tracks.