News of the investigation comes as the nonprofit that was the subject of the complaint quietly moved in recent weeks from the Capital Area to Texas, according to documents filed in Virginia and Texas. For nearly 20 years, the nonprofit organization, now known as The 85 Fund, had been incorporated in Virginia.
Gabe Shoglow-Rubenstein, Schwalb’s director of communications, declined to confirm or deny the existence of the investigation, including whether the attorney general took any action in response to the complaint.
Schwalb, who took over in Januaryhas training in tax law and served as a trial lawyer in the tax division of the Department of Justice under President Bill Clinton.
Best known as Donald Trump’s “court whisperer” in the White House, Leo played a behind-the-scenes role in the former president’s three Supreme Court justice nominations and promoted them through his multimillion-dollar network of non-profit organizations. Trump chose his three Supreme Court picks, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett, from a list compiled by Leo. Most recently, Leo was the recipient of a $1.6 billion contribution, believed to be the largest political donation in US history.
He is also the co-chair of the Federalist Society, the academic arm of the conservative legal movement, for which he worked in various capacities for decades while building its donor base.
Although Leo gives few interviews, in mid-July he appeared on a two-part podcast with Maine Wire, a conservative news organization. Asked why he has become a “lightning bolt for criticism,” Leo cited his commitment to “defending the Constitution” and discussed the “long history” of dark money in American politics .
“It’s not for hiding in the shadows,” he said. “It’s because we want ideas to be judged on their own moral and intellectual strength.”
It did not address any allegations of potential misuse of the nonprofit tax law.
Real estate and other public records illustrate that the lifestyle of Leo and a handful of his allies took a lavish turn during the creation of the current ultra-conservative court, starting in 2016, in which he was tapped as an unpaid adviser to Trump. Citing the report, a progressive watchdog group asked the IRS and the D.C. attorney general a few weeks later to investigate whether the groups may be violating their tax-exempt status by “diverting” assets or income for personal use.
Anthony Burke, public affairs specialist for the IRS, declined to comment. “Under federal tax law, federal employees cannot disclose tax return information,” he said.
The Leo-aligned nonprofit Fund 85, which is registered as a tax-exempt charity, paid tens of millions of dollars to a Virginia PR firm it co-chairs in the two years since he left join the company, known as CRC. advisers
The report of the guard dog alleges that the total amount of money that flowed from Leo-aligned nonprofits to his for-profit companies was $73 million over six years beginning in 2016.
“Questions exist as to whether Leo’s affiliated nonprofits diverted a substantial portion of their income and assets, directly or indirectly, for the personal benefit of Leonard Leo,” the Campaign for Accountability’s complaint read.
“These payments were generally stated as being made in exchange for purported consulting, research, public relations or similar services. However, CFA has reasonable questions as to whether these purported services were actually provided or, if services were provided, whether payments made were substantially higher than fair market value,” said the complaint, which covers the period from 2016 to 2020.
POLITICO reported that a total of $43 million flowed into Leo’s company over two years, with most of it coming from The 85 Fund, a nonprofit run by his allies that has spent tens of millions of dollars over the past decade to promote Trump’s Supreme Court. selects, file briefs with the court and most recently used an alias for push for voting restrictions i blame the democrats of cheating in the 2020 elections.
It’s now run by Carrie Severino, a lawyer and former clerk to Justice Clarence Thomas who is listed as a director in the group’s most recent IRS filings, and is raising massive amounts of anonymous funds: $117 million by 2021.
In discontinuing the group in the state of Virginia, Severino’s new address is a virtual office suite in Fort Worth, Texas. shared by a “Two Men and a Truck” franchise The office building announces virtual and coworking spaces.
Further complicating the picture: In Texas, a new filing for “The 85 Fund” was filed on June 27 a different address in a different city than the one listed on the Virginia paperwork. It is also registered in Texas as a for-profit entity.
This location is a UPS store in a strip mall next to a restaurant called “Snooty Pig Cafe”. As POLITICO previously reported, The 85 Fund had been using a UPS box in DC’s Georgetown neighborhood as its main office address.
Beginning in 2016, Leo formed or helped reorganize two for-profit companies—CRC Advisors and BH Group—to provide millions of dollars in services for their aligned nonprofit organizations.
In those five years, BH Group brought in $15 million from non-profit organizations. However, unlike CRC, BH Group does not appear to have advertised itself as a consulting or public relations firm, or even to have a website. During part of that time, Leo was employed full-time as vice president of the nonprofit Federalist Society, raising questions about how he could reasonably have generated millions of dollars in consulting fees at once, the complaint says.
Fund 85’s move to the Fort Worth office building came days after POLITICO asked on June 30 about certain Leo allies who may have personally benefited from millions in anonymous donations that moved through Fund 85 over the last decade.
Some of the groups that receive contributions from Leo’s “dark money” network, in turn, have significant contracts with his company, CRC Advisors. This includes the Federalist Society, the nation’s preeminent conservative debate society where Leo was executive vice president and still serves as co-president. Between payments the complaint marked to the IRS and DC Attorney General is $3.1 million that the Federalist Society paid CRC in 2020-2021 for “media training.”
On July 7, a Leo spokesman provided an initial response to POLITICO’s inquiries about The 85 Fund, formerly known as the Judicial Education Project. That was the day the paperwork was filed with Severino’s signature “delivering” the Fund 85 letter to Virginia.
In the filing, Severino said the plan to move to Texas was adopted by a majority of the board on Dec. 8, 2022. It has three board members. In addition to Severino, they include Treasurer Gary Marx and President Todd Graves, according to the report the latest IRS documentation available
It’s not the only major conservative organization to move to Texas in recent years. The National Rifle Association, contesting several lawsuits from the attorneys general of New York state and Washington, DC, alleging violations of the nonprofit law, announced in early 2021 that it would move to Texas.
Yael Fuchs, who was a senior counsel in the New York case against the NRA, said Texas has limited regulation of charities, making it a more attractive legal environment for nonprofits. .
“This tactic will not deprive the regulator [DC] of jurisdiction over the past, but it could create some obstacles,” he said. They include complications in obtaining injunctions or obtaining evidence, “but there are ways around them,” said Fuchs, former chief of Charities Enforcement in the New York Attorney General’s Office.
Nor is it the first time a Leo-aligned group has changed operations following media scrutiny.
A separate Leo-aligned group that appears to have been involved in the 2017 sale of Republican pollster Kellyanne Conway’s firm disbanded last fall. three days later POLITICO asked if he helped facilitate the multibillion-dollar settlement while advising Trump on judicial nominees.
In his statement, Rivkin, the attorney for the groups targeted in CFA’s complaint, said CFA was connected to Arabella Advisors, a firm founded by Eric Kessler, the former appointee of Bill Clinton. Leo has long compared his business practices to Arabella’s.
Both Michelle Kuppersmith, CFA’s executive director, and Steve Sampson, a spokesman for Arabella, said their groups have no financial relationship. However, CFA was originally part of the Hopewell Fund, a non-profit organization to which Arabella provides administrative support. CFA split from Hopewell in 2017, both groups confirmed.
Arabella is a for-profit company that provides administrative, HR and accounting services to mostly philanthropic non-profit organizations, largely independently managed.
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