Donor-Advised Funds: How Special Interests Use Foundations to Move Dark Money
Part 3 on the Need to Make Foundations Transparent
A herbicide company pays $25,000 to a pro-GMO plant biologist’s university for six months of travel expenses and the activist world goes crazy with death threats and a New York Times front-page exposé. Tort law firms pay over one million a year to an organization of discredited activist scientists trying to doctor a set of studies that will help the law firms manufacture lawsuits against herbicide companies and no one raises an eyebrow.
What’s the difference?
The law firms paid off the researchers via foundations that use donor-advised funds – a tool that allows foundations to receive donations from interest groups that they then earmark to recipient organizations the donor advises them on. Why don’t donors provide funding directly to the organization they wish to support? Because foundations allow total anonymity for their donor-advised funds (and they are still tax deductible).
If foundations wanted to be transparent, they would stop the dark, donor-advised funds (but they earn a nice commission from any funds they wash, rinse and move on while promoting a larger donation bottom line for themselves). If authorities wanted to make foundations transparent, they would ban this process of special interests using foundations to distribute hidden money.
This is Part 3 of the Firebreak series on the need to make foundations transparent. Part 1 showed why the rules need to change and how some foundations are misusing the present system, pulling strings from the shadows. The second part looked at how fiscal sponsors have been used to create a wall of fog to distance the foundations from the activist campaigns they are funding. This final part looks at how donor-advised funds allow interest groups to abuse and profit from this moral / fiscal loophole in foundation management.
The Dark Donor-Advised Fund Beneficiaries
There are many sectors using donor-advised funds, each of them benefits in different ways from the non-transparency. This helps to understand how limits on the abuse can be applied. The Firebreak has been reporting on how certain interest groups have been using this deception tool to their advantage, but with every exposé, more abuse is revealed.
NGOs
The Firebreak introduced the abuse of donor-advised funds with an exposé on the American NGO, US Right to Know. This small anti-industry, pro-transparency group was, early on, criticized for being largely funded by like-minded interest groups like the organic food industry lobby and anti-vaccine organizations. But over the years, most of their funding shifted into foundations that offer anonymous donor-advised funds.
US Right to Know demands that industry must be transparent, but they don’t want us to know who is hiding behind the donor-advised funds they receive, and which interest groups are pulling the strings behind the NGO’s campaigns. For example, many of the foundations are community-based funds (San Diego, Western North Carolina and Chicago - the last should be called a “Trust” and not a “Foundation”) that do not have any direct interest in what US Right to Know does, except, perhaps, that they have dark, donor-advised funds so it is likely that an interest group wanting the activist group to do some work for them is likely aligned with these foundations. A lot of “perhaps” and “likely” terms there because the US Right to Know does not feel that we have a right to know. Then there is the Adadevoh Memorial Fund, a Nigerian fund set up in honor of a health-care worker who died treating Ebola patients. How is this group in Nigeria interested in the work of an American anti-industry, conspiracy-driven NGO?
Can anyone take these clowns seriously when they spout off on the need to be transparent while most of their funding is deliberately dark?
Tort Law Firms
What happens when a group of tort law firms extort $11 billion from Bayer on a shaky link between glyphosate and one type of cancer? With a corral of herbicide experts, the answer is that you create some research linking herbicides to another disease you can then sue the pesticide industry for. Lawyers from Wisner Baum and Weitz & Luxenberg worked with an opportunistic agricultural economist, Chuck Benbrook, to create the Heartland Health Research Alliance (HHRA) to channel funds, indirectly, to a group of activist scientists who used it to fund research offices in their universities.
The Heartland Study gathered herbicide levels in urine samples taken from pregnant women and are now waiting to correlate it to any neonatal or children’s health issues that may arise in the coming decades. The study was designed to find victims, not to do relevant research. If the research could associate any cases, the law firms are ready and able use the data and victims to litigate against the pesticide companies. Ka-ching!
The HHRA started out with direct sponsorship from law firms that did well from the glyphosate settlement but given the obvious conflicts of interest, chose the donor-advised fund approach to darken the special interest funding. They started by using the Franciscan Health Foundation (see image below), but given the number of research integrity violations of this campaign group (see the Firebreak exposé), they likely had to switch to a more compliant foundation, the last being the Chicago Community Trust. Now we are completely in the dark as the new HHRA management stopped declaring who was managing their donor-advised fund. The last IRS Form 990 declared over 1.1 million dollars but that the donor information was “restricted”. Legal advice: excellent; ethical advice: egh!
Tort law firms can also use donor-advised funds to hide client funding. Imagine a law firm supporting the Heartland Study has a client they might prefer to not have on their books. In lieu of an invoice, they can ask the problem client to donate to a foundation with their fund, and to donate in the law firm’s name. They have not only erased any evidence or link with the client, the whole dog and pony show is tax deductible and everyone goes home feeling virtuous.
Academics
Universities have learnt how to create donor-advised funds to raise money and finance research with having to be publicly aligned with controversial actors. Bennington College in Vermong is not well-known for its academic prowess, but they hired an activist, Judith Enck, who is as an adjunct at Bennington (she used to work for the EPA). Judith is running Beyond Plastics from within the university and any group that would benefit from stricter legislation against plastics can donate to the university, specifying Beyond Plastics on the check. In doing so, they can secretly fund an anti-plastic lobby campaign (while getting a tax deduction and feel good about themselves … just ask Michael Bloomberg).
Media
The Lighthouse Reports has been running a global media attack on a small news monitoring consultancy based on its report funded by the Oak Foundation. The foundation has a donor-advised fund so the question should be: Who paid the Oak Foundation $800,000 to have Lighthouse Reports attack this group? The Miller Firm has used one of the Lighthouse Reports accomplices, Carey Gillam, for many years (in particular when they needed someone to disgrace a rogue lawyer threatening their glyphosate honeypot, Tim Litzenburg). Gillam claims a box of confidential court documents, instrumental in her investigation, were mysteriously left on her doorstep one morning. This firm definitely benefited from Gillam’s work here as they have a large interest in lawsuits against Syngenta on paraquat that were struggling with poor scientific evidence. But without transparency though, any link between the Miller Firm and the Lighthouse Reports campaign via the Oak Foundation is left to speculation.
Foundations
Donor-advised funds are free money for foundations, not only with the fees they charge the donor, but that they can claim the support in their foundation’s name without tapping into their capital reserves. The Chicago Community Trust, a name that keeps popping up in this series, donated $1.6 billion in 2023. $1.4 billion of those grants were donor-advised funding (so not their money). None of that funding had to respect any rules of transparency.
So it didn’t take much for a few opportunists to go out and create their own foundations to exploit this special interest discretionary influence market. Several British philosophers created the Effective Altruism approach, tapping into the tech world (and not just their billionaires) to show that the right algorithms can produce more efficient giving. To market to the right donors, they created a bouquet of foundations and fund managers under the Effective Ventures umbrella. See the Firebreak assessment of this evolution in the “business of philanthropy”.
They created a cult attracted to an unbridled capitalism of giving (earn more to give more) that, according to a Time Magazine report, exploited a lot of young, vulnerable people. One particular fan was Sam Bankman-Fried, a one-time Effective Ventures board member, who raided the accounts at FTX and Alameda Research to “share the wealth”. Five billion dollars went unaccounted for in the FTX scandal, but as the image above shows, US Right to Know got at least $360,000. So did a lot of other NGOs, I suppose (but these numbers are not public so we can only suppose).
__________
The idea that foundations are created only to distribute other people’s money is an indication that the nature of philanthropy and charity has changed beyond recognition. This series started with an attempt to dispel the widely held perception that foundations are seen as a public good. I have used the term “Foundation Capitalism” to explain this monumental shift.
I am no longer impressed when an NGO or media organization claims foundation funding.
I am no longer in awe when a person refers to his or her philanthropy.
I no longer trust foundations or think they are acting for the good of humanity.
I strongly feel we need to limit this abuse of funds, influence and power and stress the importance of demanding that foundations commit to full transparency.
Recommendations
To try to introduce transparency for foundations, the recommendations here are quite easy to make, but harder to implement.
Stop all donor-advised funds. Of course, given the fees and opportunities involved, they will just call it something else so more needs to be done.
Remove the anonymity option. Any donation a foundation receives needs to have the name of the source of the funds published.
Eliminate the tax deductibility benefit for third party donations. If philanthropists want to donate to a charity, they should donate directly to the organization. A foundation should not be considered as the charity and too often these groups have been set up as non-profits to simply funnel other people’s money.
Monitor the foundations to ensure that the donations they are receiving and the groups they are supporting are relevant to the objectives, location and scope of the foundation. That a transparency pressure group like US Right to Know pretends that a donation from a Nigerian fund is legitimate has made a mockery of the entire process.
We can assume that policymakers could easily implement these transparency recommendations. Except … that as foundations are becoming more politically active, I cannot imagine politicians would stand up and demand changing a system that would allow them to receive funds from anonymous donors. And like the problem of making the fiscal sponsorship scheme more open, the pro-transparency NGOs who should be applying pressure, are all also on the donor-advised take.
The fraud, deception and control of the political narrative will therefore continue. But at least we know how this influence and power is coming from the foundations hiding in the shadows.