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Activists Question FreedomWorks’ Direction

The tea party may be in danger of losing one of its most powerful voices in Washington.

The abrupt resignation of FreedomWorks Co-Chairman and former House Majority Leader Dick Armey last month was the culmination of a monthslong battle over the group’s advocacy strategy and its gradual shift away from Capitol Hill.

As details of the internal squabble ricocheted through conservative circles this week, several prominent staffers headed for the exits amid accusations that FreedomWorks CEO Matt Kibbe was using the group’s resources to promote a book he wrote and profited from. Activists who had joined the organization when it first claimed the tea party mantel now are questioning its vision.

With Armey at the helm, FreedomWorks played a key role in pressuring House conservatives to oppose Republican leaders and legitimizing the tea party brand. But now, as Congress confronts the fiscal cliff, the group’s remaining leaders are touting a record fundraising year, brainstorming another book and making preparations to send Kibbe on a 30-city speaking tour.

Meanwhile, Speaker John A. Boehner, R-Ohio, ousted lawmakers the group championed, such as Reps. David Schweikert of Arizona and Justin Amash of Michigan, from high-profile assignments on the Financial Services and Budget committees, respectively.

“It’s much more about owning their fear back in their districts than bum-rushing their offices here,” said Adam Brandon, executive vice president of FreedomWorks, explaining the group’s strategy. “If you keep focusing on the Hill, you’re going to get stuck on these leadership fights.”

Unlike other tea-party-aligned groups, FreedomWorks until recently maintained a laser-like legislative focus.

“It’s becoming more about building the email list, marketing Matt Kibbe and his book and raising money online — a nonprofit that wants to be in business to be business,” one source inside the organization said. “There’s a Cold War brewing here.”

The organization spent the past year building a massive fundraising network that delivered more than $40 million to campaigns in 2012, according to Brandon, almost double what it raised the year before. The group spent half of this year’s haul on advertisements targeting congressional candidates. The remainder, which was raised through a pair of nonprofits, was spent on rallies and, sources said, buying thousands of copies of Kibbe’s book to “manipulate the best-seller list.”

The shake-up cost FreedomWorks its top grass-roots organizer, Brendan Steinhauser, two members of his staff, and Vice President for Government Affairs Max Pappas, who also managed the group’s super PAC.

Conservative activists say the departures threaten the future of the organization.

“How are you going to be able to target a message correctly if you don’t know the community?” asked Tito Munoz, who served as a liaison to the Hispanic community as part of FreedomWorks’ “Diverse Tea” program.

The group’s four-member board of directors has yet to comment on the dispute or announce who will replace Armey, who served as co-chairman since 2003. The remaining members include Kibbe; James Burnley, a partner at the law firm Venable and a former Reagan administration transportation secretary; Thomas Knudsen of Thomas Publishing Co.; and Richard Stephenson, head of the Cancer Treatment Centers of America. Former EU Ambassador and White House Counsel C. Boyden Gray serves as chairman of the board for FreedomWorks Foundation.

The tension hit a boiling point this summer when Armey was asked to sign off on a deal that Kibbe had secured to write a book, “Hostile Takeover,” according to sources familiar with the situation. Armey refused, concerned that the agreement was structured to personally benefit Kibbe, even though FreedomWorks employees helped write and market the book, which was released in June. Armey and others at the organization were worried that the arrangement could violate the group’s nonprofit tax status, those sources said.

If FreedomWorks employees or resources were used to write the book, the organization owns rights to that book by default, said Marcus Owens, a lawyer at Caplin & Drysdale, who for a decade directed the IRS division responsible for approving organizations’ charity status. Brandon said fundraising appeals featuring the book helped raise more than $355,000 for FreedomWorks, while Kibbe earned about $50,000 in profits from sales.

In early September, Kibbe and Brandon were placed on administrative leave. After they returned, staff email accounts were purged and Armey agreed to resign his role as chairman in exchange for an $8 million payout. Days later, Kibbe and Outreach Director Deneen Borelli were on the road for a multicity series of events on race relations that doubled as a book tour for both of them.

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