Politics & Policy

Dark Money

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The Left’s unprincipled campaign against philanthropic privacy.

‘The shadow of ‘dark money’ haunts the midterms,” warned the Washington Post in a headline on September 2. Two days later, the Huffington Post chimed in with a headline of its own: “It’s Time to Name the 2014 Midterms the Dark Money Election.” The stories that followed were utterly predictable: pious condemnations of the role of money in politics, with dutiful references to Charles and David Koch, the libertarian brothers whose affiliated groups support Republican candidates.

The notion of dark money was first introduced in a 2010 report from the Sunlight Foundation, a nonprofit group that calls for greater transparency in government. Originally, the term referred to funds of undisclosed origin being used to influence elections. It has since morphed into a term of art employed by the Left to describe any undisclosed gifts to right-leaning public charities. While donors are within their legal rights to remain anonymous, the implication is that something nefarious is afoot.

If you’d like a case study on why anonymity matters, look no further than Brendan Eich. Newly minted last March as CEO of the dotcom giant the Mozilla Corporation (which he had co-founded), Eich was forced to resign after only ten days because of pressure from gay-rights activists. His crime? A $1,000 donation back in 2008 to the campaign for California’s Proposition 8, which held that marriage should be defined as being between a man and a woman. Incidentally, Barack Obama publicly held the same view back then.

But this is not an issue of gay or straight, liberal or conservative. One man’s “dark money” is a more sensible man’s philanthropic privacy. Philanthropic privacy has long been a cherished part of American civic life, and philanthropists, whatever their political stripe, should be allowed to remain anonymous.

The person who knows this best may be Whitney Ball, president and CEO of DonorsTrust. DonorsTrust allows benefactors to give to their favorite think tanks and other nonprofit organizations under the cloak of anonymity — and as a result, Ball and DonorsTrust have become favorite villains of the Left. Last year, Mother Jones called DonorsTrust “the Dark Money ATM of the Conservative Movement,” noting that “the groups funded by DonorsTrust more or less pursue the same agenda — eliminate regulations, kneecap unions, shrink government, and transfer more power to the private sector.” The left-of-center British newspaper The Guardian has DonorsTrust pegged as a “secretive funding network” that “distributed millions to anti-climate groups.” And, in a 2011 report, the left-of-center think tank Center for American Progress branded Donors Capital Fund, an arm of DonorsTrust, one of the “top seven contributors to promoting Islamophobia in our country.”

DonorsTrust was founded in 1999 by a small group of donors and nonprofit executives with the common agenda of “promoting our free society as understood in America’s founding documents.” The organization helps wealthy philanthropists manage the logistics of their giving and be sure that their gifts are helping to advance the cause of liberty.

Donors run the full spectrum of the Right, from libertarians to conservative traditionalists, and their grants are a testament to the vibrancy of American civic life. Some have been disbursed to surprising organizations such as the weed-legalization outfit Marijuana Policy Project and a group that seeks reform of sentencing for drug offenses, Families against Mandatory Minimums. Ball estimates that 70 to 75 percent of gifts go to public-policy organizations. The balance goes to more conventional charities such as hospitals, religious institutions, art museums, schools, and homeless shelters. The single largest gift went to the Foundation for Jewish Camp, Ball said.

But what of the serious claim that DonorsTrust plays a unique role in obscuring the sources of funding for right-wing endeavors? It does, in fact, dispense funds to other 501(c)(3) organizations on behalf of anonymous donors. But while foundations are required by law to disclose where they spread their largesse, individual donors need not disclose their gifts to any 501(c)(3) charity. In other words, the philanthropists who utilize DonorsTrust could remain private simply by giving directly to their favored organizations. DonorsTrust does not invest them with any legal privileges they wouldn’t have otherwise.

#page#Ball explained that DonorsTrust operates as a vehicle called a donor-advised fund. “I like to think of it as sort of a charitable bank account,” Ball said. “When an account holder makes a donation to a donor-advised fund, they lose control over it. The money, technically speaking, belongs to DonorsTrust.” Donors do have the right to make recommendations as to where the money should go, which Ball says are honored in most cases as long as the recipient organization is a registered 501(c)(3). When asked for an instance in which a donor’s wishes might not be honored, Ball gave the radical-environmentalist organization Greenpeace as a specific example of a group DonorsTrust would not give to. “We won’t make donations to organizations that are seeking to expand the size and scope of government,” said Ball, “as we were established to help donors protect their charitable intentions to promote liberty.”

While DonorsTrust confers no legal privileges, it does offer several advantages to its account holders. Philanthropists can make their donations without having to navigate the legal and financial complexities of establishing their own foundations. As an added benefit, donors to public charities — 501(c)(3)s, including donor-advised funds — are given better tax treatment than donors to private foundations; they are allowed to deduct a greater percentage of their gross income.

DonorsTrust also protects donor intent, a hot-button issue for donors who have learned that, if they established a foundation of their own, their heirs could easily put it to purposes very different from theirs upon their demise. Upon his 1977 resignation from the board of the Ford Foundation, Henry Ford II wrote that the charity founded by his father, Edsel, and his grandfather Henry was “a creature of capitalism,” and lamented, “It is hard to discern recognition of this fact in anything the foundation does.” DonorsTrust gives money only to causes that advance liberty; one informal litmus test Ball uses for potential recipients is how much of their funding they receive from government. She rejects most organizations for which the figure is more than 25 percent. Additionally, she requires donors to devise a sunset plan through which their donations will be depleted within around 25 years after their death.

Ball thinks that transparency advocates are confusing or deliberately conflating donor-advised funds with organizations affected by Citizens United v. Federal Election Commission, a landmark 2010 Supreme Court ruling that broadened the rights of 501(c)(4) organizations to spend money in political races. Unlike their (c)(3) cousins, (c)(4)s are allowed to directly fund political-campaign activities, but their donors are not given tax breaks. “People on the left talking about disclosure often conflate (c)(4)s and (c)(3)s; (c)(4)s are political and we are not. Every community foundation operates how we do,” said Ball.

Readers of outlets like The Guardian and Mother Jones might be left with the impression that the practice of so-called “dark money” is unique to the Right. However, there are plenty of other donor-advised funds ranging ideologically from politically Left — like the Tides Foundation — to politically neutral — like funds run by financial-services giants Vanguard and Fidelity. That is to say nothing of donors who choose to give directly to conventional 501(c)(3)s without disclosing their donations.

The Tides Foundation’s coffers handily exceed those of DonorsTrust. A look at the most recent IRS form 990 for DonorsTrust reveals that it took in around $47.5 million in 2012 and that the related Donors Capital Fund took in almost $57 million. This roughly matches the Tides Foundation’s almost $94.5 million in income. But that’s just one of Tides’ arms. It also pulled in almost $3 million via the affiliated Tides, Inc., almost $18 million through Tides Network, and over $86 million through Tides Center. Good luck trying to get any of these entities to disclose their anonymous donors, though. They did not respond to several inquiries. “If you’re going to call what we do ‘dark money,’ you’d have to apply that label to Tides,” said Ball, “but the Left doesn’t ever call Tides ‘dark money,’ because they agree with what they’re doing.”

Suzanne Goldenberg, a reporter for The Guardian, says the difference between groups such as DonorsTrust and ones such as Tides is that conservatives are wrong and liberals are right. “There’s something really different here and that comes into play, in that these organizations being supported by DonorsTrust are actually working to spread information that is factually incorrect, that is untrue. You know, it’s as if you’re sort of funding groups to go around saying, ‘Oh, you can get the HIV virus from toilet seats.’ You can’t draw this equivalence here. These organizations were funded for the express purpose, many of them, of spreading disinformation,” Goldenberg claimed on the left-wing TV program Democracy Now!

#page#Yet the hypocrisy is beside the point. This is really a dispute over the value of donor privacy, no matter what the politics involved. “So-called ‘dark money’ illuminates our society,” writes Adam Meyerson of the Philanthropy Roundtable, a nonpartisan organization dedicated to protecting donor intent. He points to the 1958 Supreme Court case of NAACP v. Alabama, in which the Court unanimously ruled that if the civil-rights organization were forced to disclose its membership, supporters might be subjected to “economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility,” thereby restraining “their right to freedom of association.” Meyerson extended this justification to philanthropic privacy, reminding critics of both DonorsTrust and Tides that “the right to privacy enjoyed by contributors to donor-advised funds is no different than the right to privacy that governs the overwhelming majority of charitable giving.” Meyerson listed some of the reasons donors might wish to remain anonymous, including “to protect themselves from unwanted solicitations, to protect their children from knowledge of their family’s wealth,” and most resoundingly to protect their “freedom to support controversial organizations without fear of reprisal or ostracism” like NAACP donors of old.

DonorsTrust’s benefactors describe a variety of reasons for wishing to remain private. “Rich Simpson,” the head of a foundation with an interest in education reform, says he does not want his friendships clouded. If his giving were in the open, he would be frequently hit up for money by pals whose favorite charities put them up to it. And in any case, he stressed, privacy is something that should be afforded to everyone. “This is my money,” said Simpson. “This isn’t Sarah’s or Mary’s or Fred’s. We all like privacy. That is one of the reasons they have doors on bedrooms!” Simpson invoked a uniquely American perspective on freedom of association. “The Founding Fathers believed that, generally speaking, we were to be left alone,” said Simpson. “I don’t think we came over here with the mindset that we would have some sort of benevolent dictator looking over our shoulders to see what we are doing.”

“Joe Katz” told me that his first large anonymous donation was a six-figure gift to his synagogue. “I didn’t want everyone to think that I was a big shot entitled to special treatment,” he said. Later, he established a family foundation. “The whole point of this was to get my kids involved and encourage charitable impulses in the next generation,” said Katz. “To my horror, people could Google and see my kids, the amount of money in the foundation, and when I saw that on the Internet it totally scared me for my kids’ safety.” Katz also cited the medieval Jewish philosopher Moses Maimonides, who posited that the more anonymity there is between donor and beneficiary, the more righteous the act.

Scott Banister, a tech investor and a libertarian who supports the Marijuana Policy Project, believes the Left intends to suppress speech by tying conservative giving to controversial figures. He pointed to an article in a Montana newspaper about DonorsTrust’s donation to the Mountain States Legal Fund, a donation made at least partly with his money. The paper repeated reporting from Mother Jones to the effect that DonorsTrust is widely linked to the oft-maligned Koch brothers. “The reality is that I have no idea whether the Koch brothers are giving to Mountain States Legal Fund. But I certainly am. They’ve basically converted my donation into a Koch-brothers donation. And that’s not cool,” he said.

Simpson agreed that the Left has become intolerant of dissenting viewpoints. “Any discussion around ‘dark money’ is somehow secondary and irrelevant to fundamental freedom of speech,” he said. He expressed distress at the spate of speaking invitations recently withdrawn on college campuses, the banished speakers ranging from former secretary of state Condoleezza Rice, to former Berkeley chancellor Robert Birgeneau, to women’s-rights advocate Ayaan Hirsi Ali. “This is a woman of incredible personal and intellectual courage,” said Simpson. “And I would think my liberal friends would be shocked beyond words.”

The Left is virtually unique in its use of “dark money” as a cudgel to beat down opposing speech. Conservative TV host Glenn Beck decried the Tides Foundation’s anonymous donations, but his argument never gained traction. Most conservatives believe Tides should be allowed to give as it sees fit, despite the Left’s unprincipled assault on philanthropic privacy. It is as if left-wingers think they should be allowed to establish rules that apply only to conservatives. It is heartening, though, that philanthropists continue to give to their favorite causes even as they are attacked. This is a testament to the genius of American civic life.

— Bill Zeiser is a Ph.D. student at Hillsdale College. Follow him on Twitter, @BillZeiser.

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