As Joe Kennedy considers run, Chávez ties loom

Over the past four years, Citizens Energy Corp., the signature nonprofit founded by Kennedy in 1979 as a political launching pad, has grown from a local charity serving 10,000 Massachusetts homes a year into a national effort delivering free fuel to 200,000 households in 23 states.

And Kennedy, a former US representative, has relied almost exclusively on Chávez, a vociferous critic of the US government, for that growth.

Since 2005, Citizens’ 877-JOE-4-OIL campaign has been sustained by the oil fields of Venezuela. Chávez, who controls the industry there, has delivered crude oil at no charge to a Citizens affiliate, which has resold it and used the money to pay for oil deliveries to America’s poor. In the past two years, Citizens has been given 83 million gallons of crude by Chávez and sold it for $164 million - money used to fund almost its entire philanthropic mission.

Now, as Kennedy considers stepping into what is certain to be a contentious contest for the state’s first US Senate vacancy in more than 25 years, he will also almost certainly have to consider how his stewardship at Citizens would play in a campaign. In addition to forging increasingly close ties with Chávez and Citgo Petroleum Corp., an oil company controlled by the Venezuelan government, Kennedy has used the proceeds of Chávez’s donated oil to fund millions in advertising for the heating oil charity - $16 million over the last two winters alone. Those ads, in turn, prominently feature Kennedy, often personally delivering Chávez-funded oil to needy recipients.

There are many in politics who believe that in a state as liberal as Massachusetts, with a philanthropy as respected as Citizens, that the Chávez connection would not amount to a significant obstacle for Kennedy.

“I don’t think you’re going to persuade the public that Citizens Energy and delivering free oil to people who can’t afford it is a bad thing. I really don’t think that’s going to stick,’’ said William F. Weld, a Republican and a former governor of Massachusetts. “[Kennedy’s] not loony left at all, and I think he could be very good in office.’’

But in a taste of what Kennedy might expect from a Republican opponent in a general election, or even a conservative Democrat in a primary, one operative said the issue could be pivotal in a campaign.

“If Joe were to become a candidate, he would have to answer some very uncomfortable questions about his personal and business relationships with Hugo Chávez,’’ said Eric Fehrnstrom, a Republican political consultant and adviser to Mitt Romney, the state’s former governor. “Chávez is not a friend to the United States, and he has used his PR machinery and oil to spread anti-American propaganda - and played Joe Kennedy for a very convenient stooge.’’

For Kennedy, the philanthropy is but one component of his efforts at Citizens, which has a for-profit energy affiliate delving into such diverse pursuits as wind farms on Native American reservations and development of power transmission lines. Citizens advertises that it “seeks to use market opportunities to help the poor and needy,’’ but the reality is that donations made with Chávez’s help account for nearly all of Kennedy’s trademark home heating program, according to Citizens’ tax filings.

The Citgo name in Massachusetts is most often associated with its giant neon landmark in Kenmore Square. The company is controlled by Chávez, who is often criticized as an authoritarian leader who repeatedly lashed out at George W. Bush while he was president, going so far as to call him a “devil’’ on the floor of the United Nations.

While Chávez’s stance on poverty is admired by some on the left, Human Rights Watch has accused him of discriminating against political opponents, harassing human rights advocates, and stifling both the media and the courts. The Anti-Defamation League has accused him of making anti-Semitic remarks.

Kennedy, the chief executive of Citizens, has repeatedly defended his ties to Citgo by asserting that he had invited all of the other major oil companies to participate in his program - and only Chávez agreed to take part. In December 2007, he said, “I’ll never be in the tank to Hugo Chávez.’’ Kennedy has justified the relationship by saying that the major beneficiaries of Chávez’s largesse are the downtrodden, and said that he wished the United States would demonstrate as much leadership and concern for the poor at home as it does in other parts of the world.

“Some people say it’s bad politics to do this,’’ Kennedy said in one of the Citizens TV ads that ran last winter. “I say it’s a crime against humanity not to because no one, no one, should be left out in the cold.’’

Kennedy was not speaking to media last week as he mulled whether to run for the Senate seat left vacant after the death of his uncle, Edward M. Kennedy, but he made his top deputy available to the Globe.

In a typical Citizens ad, Kennedy’s words are delivered over black-and-white images of vulnerable citizens, including the elderly and children, suffering in the cold, followed by full-color images of Kennedy carrying a hard hat as he steps up to make an oil delivery.

“He’s creating a Joe Kennedy brand that’s friendly and community-service-oriented,’’ said Gloria Boone, who teaches advertising at Suffolk University. “You know, the average guy.’’

Peter F. Smith, chief operating officer at Citizens, said the organization routinely features Kennedy in its advertising to maximize publicity for the program. “He’s a prominent individual, and a very big part of the Citizens Energy brand and our image,’’ he said. “It’s appropriate to put your best foot forward in terms of letting people know about a program that’s available to them.’’

Smith also defended the program’s ad budget as appropriate for the size of the program. And he defended Kennedy’s salary - $545,000 in 2007, according to tax documents - by noting that most of it is funded by a for-profit Citizens affiliate and approved only after Citizens board members examine an outside consultant’s report on the salaries of other executives with similar responsibilities. Citizens received an extension on its 2008 filing, and Smith declined to provide any update in Kennedy’s compensation.

“Joe’s compensation, as a matter of fact, is kept well within the 75th percentile of the executives that come back in the report,’’ Smith said.

As for the role of Chávez in financing Citizens’ work, Smith pointed the Globe to Kennedy’s past comments on the issue.

Since its inception in 1979, Kennedy has structured Citizens to fund its charitable activities through a number of for-profit ventures undertaken by affiliated organizations. And over time, Kennedy and his late brother, Michael, who ran the organization while Kennedy was serving in Congress, shuffled and reshuffled the deck of its for-profit, and nonprofit, activities several times.

To cite two of several examples, when Michael ran the operation, from about 1987 to 1999, Citizens and its affiliated organizations moved into energy trading and the sale of discount pharmaceuticals; the firm is no longer in either business.

Today, almost all of Citizens’ activities are managed through three affiliated organizations:

■ Citizens Energy Corp., the nonprofit that serves as an umbrella for Kennedy’s nonprofit and for-profit activities. According to its 2007 tax filing, the most recent available, the organization had $68 million in assets and made $108,000 in charitable donations.

It also spent $1.4 million providing natural gas home heating assistance to households in Ohio, Pennsylvania, and Kentucky; $285,000 to cover the heating bills for about 100 homeless shelters in Massachusetts and Rhode Island that do not heat with oil; and an estimated $1 million annually in a partnership with Distrigas that allows eligible Massachusetts households to claim a $150 discount on their gas bills.

■ Citizens Programs Corp., the nonprofit that manages Kennedy’s charitable home-heating program. Of the $100 million in oil proceeds it received through the Citgo donation in winter 2008, it spent $72.1 million on oil assistance for the poor, according to tax filings. Other major expenses include an $11.6 million advertising budget and a $4.6 million management fee paid to Citizens Energy.

■ Citizens Enterprises Corp., the for-profit company that oversees Kennedy’s related business ventures and covers most of his salary. Kennedy is the head of this company.

Although details of Kennedy’s for-profit activities are not well-known, Smith described them as economically successful, and the prime reason for the steady growth of Citizen Energy’s assets over the past three decades. “The fact that Citizens has had financial success over the years is the reason we’ve been able to provide stability and consistency to the programs we run,’’ he said.

The for-profit activities include the development of utility-scale wind farms in the United States and Canada, many of them on reservations; the development of high-voltage transmission lines; and innovations in energy efficiency and conservation.

Smith said he did not know whether Kennedy supports the project to erect a wind farm in Nantucket Sound but described him as an enthusiastic backer of wind energy.

“Citizens Energy and Joe are very big advocates and supporters of wind power, and we think there are a lot of very good sites in the United State to develop wind farms, and to do it in a cost-effective way that can bring power to the market at very competitive rates,’’ he said.

Meanwhile, Latin American specialists say that Citizens’ programs have been a potent weapon in Chávez’s “petro-diplomacy,’’ as he has sought to build support at home and abroad. With large oil donations both in the United States and in smaller Latin American and Caribbean countries, he has been able to increase his influence in the region and increase his standing in international organizations.

“Chávez is a showman,’’ said Peter Hakim, president of the Inter-American Dialogue policy group in Washington. “It’s a way of, first of all, tweaking the United States. Here is an undeveloped country that is able to assist poor people with needs in the United States.’’

But that comes at a cost to his own people, who earn an average of $8,300 per year, said Ricardo Hausmann, a minister in the Venezuelan government before Chávez took power.

“It would be very awkward to imagine that in a democratic society, the average Venezuelan would vote to subsidize somebody significantly richer than they are,’’ said Hausmann, who now directs Harvard’s Center for International Development.

As for a possible Kennedy campaign for Senate, Thomas P. O’Neill III, a Kennedy friend and Boston government relations executive, said Kennedy’s connection to Chávez would resonate only with the “extreme right.’’

“His personality, his public service, his family history, and his personal history would all supersede that,’’ O’Neill said.