Charities can be used to move 'dark' money that shapes public policy: report

David McAfee
May 6, 2023

'Businessman displaying a spread of cash' [Shutterstock]

Part of how political activists move their "dark" money is by using public charities and donor-advised funds, according to a recent report.

The subject of the report is Leonard Leo, the Federalist Society leader who has organized or bankrolled conservative efforts to take over the judicial system. Leo—who has also helped former President Donald Trump select judicial nominees—also reportedly arranged for Clarence Thomas' wife Ginni to receive tens of thousands of dollars for consulting work, all while intentionally keeping her name off the paperwork.

But how does Leo's money move? One way is by using an independent 501(c)(3) public charity, such as Schwab Charitable, according to Dan Petegorsky, who works on the Emergency Charity Stimulus project at the Institute for Policy Studies.

"With newly released tax filings from Schwab Charitable — one of the nation’s largest sponsors of what are called donor-advised funds — we have another major piece of information on how this 'dark money' moves," Petegorsky wrote in the opinion piece.

"During its most recently reported fiscal year (July 2021 to June 2022), Schwab made an enormous grant of $141.5 million to the 85 Fund, a key part of Leo’s burgeoning empire, formerly known as the Judicial Education Project. The 85 Fund is a 501(c)(3) public charity," he added.

The report notes that donor-advised funds, unlike private groups, are "not independent organizations that need to report their activities to the IRS and make those reports available to the public."

"Instead, they’re accounts set up under a 'sponsor' — in this case Schwab Charitable — a public charity that can house hundreds or even thousands of funds," according to the article. "And while those sponsors need to file annual reports with the IRS, they do not have to report which of those DAFs make which grants."

That makes them "ideal vehicles" to conceal the donors behind funding sources, according to the report.