Friday, August 26, 2022

Opinion A $1.6 billion donation points to a bipartisan scandal. (Ruth Marcus, WaPo)

Ruthless plutocrats exposed by Deputy Editorial Page Editor Ruth Marcus in The Washington Post: 

Opinion A $1.6 billion donation points to a bipartisan scandal

Leonard Leo, at Trump Tower in November 2016, left his position of executive vice president of the Federalist Society in 2020. (Carolyn Kaster/AP) 

If, as the Supreme Court has decreed, money is speech, then $1.6 billion is one boatload of rhetoric.

That is the eye-popping sum — described as “the largest political advocacy donation in U.S. history” — that a little-known electronics magnate donated, tax-free, to a new nonprofit run by Federalist Society co-chair Leonard Leo.

There is so much wrong with this picture — even aside from how it supercharges the conservative Leo’s already-considerable influence on the country’s legal and political landscape. The gusher of cash in modern-day politics, much of it from undisclosed donors and not subject to ordinary contribution limits or reporting requirements, is a bipartisan scandal, one to which we have become dangerously inured.

When seven-, eight- and now 10-figure (10!) checks dominate the political discourse, when the public has little way of knowing who is funding messages and promoting candidates, the ordinary contest of ideas is skewed even more heavily in favor of the wealthy and powerful.

The mega-donation came from Barre Seid, a 90-year-old Chicago man who made his fortune in surge protectors and other computer equipment. First reported by the New York Times’s Kenneth P. Vogel and Shane Goldmacher, it took the form of shares in Seid’s company, Tripp Lite. The entire ownership of Tripp Lite was first transferred to a new entity controlled by Leo, the Marble Freedom Trust; then the company was sold last year to an Irish conglomerate.

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The structure of the transaction, evidently legal, allowed Seid to avoid paying capital gains taxes on the increased value of the company; ProPublica and the Lever, which jointly reported on the donation, estimated the savings — and, therefore, the taxpayer-subsidized benefit to Leo — at $400 million.

And that’s just the galling tax wrinkle. The real story — the real problem — is that $1.6 billion, and to understand why requires a quick history of campaign finance regulation and the emergence of “dark money.”

A half-century ago, in the aftermath of Watergate, lawmakers of both parties — imagine that — got together to enact new limits designed to reduce the influence of money in politics and to ensure that the public knew where the money that was spent to help elect candidates was coming from. Thanks to a hostile Supreme Court, an intentionally ineffectual Federal Election Commission and a similarly feckless Internal Revenue Service, that effort can now be declared an abject failure.

The IRS comes into the picture because an enormous amount of political spending is now being conducted through the vehicle of nonprofit groups organized under section 501(c)(4) of the tax code. These are supposed to be “social welfare organizations” but they are now routinely used for political spending and influencing elections, including directly advocating for or against candidates.

So long as that is not deemed their “primary purpose,” these groups, and Leo’s new Marble Freedom Trust is one of them, are permitted to engage in political activities. They do not have to disclose their donors or report much about how the funds were used; hence the term “dark money.”

On its tax filing, Marble Freedom Trust offered this fuzzy description of its mission: “to maintain and expand human freedom consistent with the values and ideals set forth in the Declaration of Independence and the Constitution of the United States.” It acknowledged that the money came from the “sale of gifted company and subsidiaries” but said it was withholding identifying information “to protect donor confidentiality.” We know that Seid is the benefactor, but that’s thanks to diligent reporting, not any legal mandate.

This end-run around transparency and contribution limits has been adopted with bipartisan gusto. Indeed, in recent elections, Democrats, who once decried dark money, have excelled at collecting and deploying it to maximum political advantage. A New York Times analysis found that “15 of the most politically active nonprofit organizations that generally align with the Democratic Party spent more than $1.5 billion in 2020 — compared to roughly $900 million spent by a comparable sample of 15 of the most politically active groups aligned with the G.O.P.”

A “single, cryptically named entity that has served as a clearinghouse of undisclosed cash for the left, the Sixteen Thirty Fund, received mystery donations as large as $50 million and disseminated grants to more than 200 groups, while spending a total of $410 million in 2020 — more than the Democratic National Committee itself,” the Times reported.

Enter Seid and his mega-donation. “It’s high time for the conservative movement to be among the ranks of George Soros, Hansjörg Wyss, Arabella Advisors and other left-wing philanthropists, going toe-to-toe in the fight to defend our constitution and its ideals,” Leo told the newspaper, referring to some of the Democrats’ big donors and allied groups.

It’s more than a bit rich for Leo to portray himself as the poor cousin here. He sits astride a deliberately opaque and interconnected multimillion — now billion — dollar ideological and political empire. Leo’s original mission was installing conservative Supreme Court justices and federal judges, but in recent years he has stepped aside from his day-to-day role at the Federalist Society and broadened his focus to transforming state courts, pushing for tighter voting restrictions and other conservative causes.

The Marble Freedom Trust filing reports disbursing almost $230 million in the year beginning May 2020, including $153 million to another Leo group, the Rule of Law Trust and $41 million to Donors Trust, a vehicle for anonymous contributions to conservative groups.

Leo, by the way, paid himself $350,000.

Opinion by 
Ruth Marcus is deputy editorial page editor for The Post. She also writes a weekly column.  Twitter

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