Democratic Arabella dark money network faces IRS complaint over lining ex-Clinton aide’s pockets
Gabe Kaminsky
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Nonprofit groups in the largest Democratic-linked dark money network in the United States may have illegally “diverted substantial portions of their income and assets” to benefit the founder of the for-profit firm overseeing them, a watchdog says.
In 2005, Eric Kessler, a former White House appointee in President Bill Clinton‘s Interior Department, founded Arabella Advisors, a consultancy in Washington, D.C., heavily influencing Democratic politics through its management of the liberal nonprofit groups New Venture Fund, Sixteen Thirty Fund, Windward Fund, and Hopewell Fund. However, the four entities likely abused their tax-exempt status while paying Kessler’s firm over $228 million in seemingly above fair-market fees over the past two decades, according to the conservative watchdog Americans for Public Trust, which filed a complaint with the IRS on Tuesday and demanded an investigation.
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“Eric Kessler created one of the most complex and sophisticated dark money networks influencing U.S. politics and policy today,” Caitlin Sutherland, the executive director of the watchdog group, said in a statement. “Now, it appears as though he misled the IRS and may have illegally personally benefited by rerouting nonprofit cash back into his own pocket through Arabella Advisors.”
The 12-page complaint, which was sent to the tax-exempt organization division under the IRS in Dallas, comes after revelations based on Arabella’s internal employee handbook that the consultancy has exerted a significant level of control over New Venture Fund and groups the fund fiscally sponsors, according to the Washington Free Beacon. New Venture Fund, and others under Arabella such as North Fund, serve as umbrella groups for influential left-wing advocacy hubs that are not required to file tax forms with the IRS.
New Venture Fund was notably accused by multiple tax attorneys in July of potentially skirting federal law by apparently directing partisan activity for a “nonpartisan” voting rights group linked to Democratic activism called Secure Democracy. Charities such as New Venture Fund “are expressly prohibited from engaging in partisan campaign activity,” Jason Torchinsky, a partner at Holtzman Vogel specializing in election law and lobbying disclosure, told the Washington Free Beacon.
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The nonprofit groups under Arabella pocketed a combined $3.3 billion in 2020 and 2021, though the liberal dark money consulting firm came under the spotlight recently following a Politico report in May on how it laid off over 30 employees.
Between 2006 and 2021, New Venture Fund paid Arabella $166 million, Americans for Public Trust said in its complaint. From 2009 to 2021, Sixteen Thirty Fund paid almost $25 million to Arabella, which has received $11.9 million from Windward Fund and almost $25 million from Hopewell Fund, according to the watchdog.
“This is a meritless complaint from an organization that is obviously pursuing an agenda,” Steve Sampson, Arabella’s spokesman, told the Washington Examiner. “To be clear, Arabella Advisors is a business dedicated to making philanthropic work more efficient, effective, and equitable. We pride ourselves on helping our clients identify efficiencies, saving them tens of millions of dollars in operational costs and allowing them to focus their resources on their intended impact.”
In its complaint, the watchdog contrasted how the Arabella nonprofit groups described their purposes in organizing documents with the payments it says “appear solely intended to benefit private interests, specifically those of Mr. Kessler, who served as both a director and vendor to all four organizations.”
New Venture Fund has said it exists for “the protection and preservation of the environment for the benefit of the public” and to present “research on and public education regarding environmental preservation and protection,” while Sixteen Thirty Fund has said it exists in order to “provid[e] public education on and conduct[] advocacy regarding progressive policies,” according to the Americans for Public Trust complaint.
Windward Fund’s touted mission is to “raise public awareness about environmental conservation and protection domestically and globally,” and Hopewell Fund aims to “promot[e] the public good and achiev[e] lasting improvements to society,” the complaint noted.
“In assessing the extent of an improper private benefit, the IRS must balance the public benefit that could result against any private benefit conferred,” the watchdog said in its complaint. “Here, no public benefit is apparent, but the private benefit is clear. The transfer of $228,384,481 from the Kessler-Affiliated Nonprofits to Arabella in an indisputable private benefit for Arabella and its creator, Mr. Kessler. Because the Kessler-Affiliated Nonprofits directed their nonprofit resources back into Kessler’s private business, they are not operating exclusively for exempt purposes and their tax-exempt status should be revoked.”
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The complaint from Americans for Public Trust also comes months after the liberal watchdog Campaign for Accountability, a former Hopewell Fund project, called on the IRS to investigate nonprofit groups affiliated with the wealthy conservative activist Leonard Leo for allegedly violating federal law in connection to $73 million they sent to BH Group, LLC, and CRC Advisors, Inc., both of which Leo formed.
Americans for Public Trust has received major funding from DonorsTrust, a donor-advised right-leaning fund that in 2020 transferred over $20 million to the 85 Fund, one of the Leo-linked nonprofit groups included in the Campaign for Accountability’s complaint, tax forms show. Sutherland’s group identifies as an “independent organization dedicated to ensuring that no politician or political group is above the law.”