JERUSALEM—A U.S. non-profit that has received State Department funding scrambled last month to create a new legal entity in the aftermath of a congressional letter suggesting its efforts to unseat Israeli Prime Minister Benjamin Netanyahu may violate tax law, the Washington Free Beacon has learned.
The PeaceWorks Network Foundation—a nonprofit linked to Obama campaign figures and also known as OneVoice—was identified in a January letter authored by U.S. lawmakers as having funneled money to campaign-related activities in the upcoming election despite being incorporated as a 501(c)(3) organization. Such organizations are forbidden from engaging in foreign or domestic political campaign activities.
PeaceWorks moved to create a new organization that could engage in such electoral activities after the letter was issued, new documents obtained by the Free Beacon show. The new organization, named PeaceWorks Action Inc., was incorporated in Delaware in February 2015.
However, multiple sources familiar with the controversy said the establishment of that new organization would not shield the earlier activities of the original 501(c)(3) organization from U.S. law.
"This isn’t difficult. If you do something illegal, like [OneVoice’s Israel-based campaign] V15 did, you can’t erase that illegality by suddenly deciding to comply with the law," said one D.C. based source familiar with a congressional inquiry into OneVoice’s activities, which was first reported by Fox News late last week.
At issue in that inquiry is whether OneVoice received State Department funding for its political activities.
The Free Beacon reported in January on a letter by Sen. Ted Cruz (R., Texas) and Lee Zeldin (R., N.Y.) that said the State Department funded V15, which is active in Israel and spending millions of dollars to unseat Netanyahu.
The State Department replied that the grants provided to OneVoice expired before the election. However, sources told the Free Beacon that State Department funds might still have been used for the current campaign.
"If U.S. State Department funds received in 2014 were not held in segregated accounts, an issue which has yet to be addressed, then taxpayer dollars could have been mingled with the money that was spent on these campaign efforts, possibly before and after the reported termination date of the U.S. State Department grants," according to a finance expert who would only speak on background due to the controversial nature of the issue.
Cruz and Zeldin sent a follow-up letter to the IRS earlier this month requesting information about these and other potential violations.
The State Department has found itself engulfed in this controversy in recent months as a result of multiple Free Beacon reports outlining OneVoice’s activities in the Israeli election.
Netanyahu hinted at the controversy earlier this month when he told an Israeli television station that supposed "governments" were backing a campaign to elect his replacement.
Fox News reported that a source familiar with the investigation said the Senate is "looking into ‘funding" by OneVoice Movement."
The State Department and OneVoice did not return requests for comment by press time.