Politico's Fake News About Leonard Leo

If that conservative scoundrel and Clarence Thomas benefactor Leonard Leo is deriving improper private benefit from tax exempt organizations to which he contributes, as Politico reported last week, I sure don't understand what the ultimate tax goal might be.  And I teach this stuff, so I should know.  Maybe somebody else can explain it.  Here is what Politico reported:

A key advocacy group in conservative judicial activist Leonard Leo’s network paid millions to his consulting firm, a new filing shows, the latest example of Leo’s web of nonprofits sending money to his business amid government scrutiny of his dealings. The Concord Fund, a Virginia-based nonprofit, paid $6 million to Leo’s firm CRC Advisors between July 2022 and the end of June 2023 for “Consulting,” according to the filing, provided to POLITICO by the left-leaning watchdog group Accountable.US. The revelations of the large sum transferred to Leo’s firm come amid mounting questions around Leo’s advocacy activities and whether he has stood to gain financially from nonprofit groups pushing a conservative agenda around the country.

. . . 

In recent years, Leo, co-chairman of the Federalist Society’s board, has amassed outsized influence in conservative legal circles, advising former President Donald Trump on judicial picks. That role has also brought added scrutiny to his financial activities.  He also obtained a massive $1.6 billion gift from the businessman Barre Seid to fund Leo’s agenda through a group called the Marble Freedom Trust. The Marble Freedom Trust, which counts Leo as a trustee and chairman, has transferred tens of millions of dollars to the Concord Fund. The Concord Fund has also paid millions to Leo’s for-profit business. Between July 2022 and the end of June 2023, the Concord Fund, also known as the Judicial Crisis Network, received about $52.8 million. Between May 2022 and the end of April 2023, Marble Freedom Trust reported giving $55.5 million to the Concord Fund.

When a billionaire finances an exempt organization, only to have that organization turn around and obtain goods and services from the billionaire's for-profit business, does it make sense that the billionaire would do so for personal enrichment and tax avoidance?  It seems to me the billionaire would have been better off just spending the money in his for-profit in the first place and generating an equal  -- and unlimited -- amount in trade or business expense deductions.  What am I missing?

Maybe Leo is using an exempt organizations to generate darkness by which to obscure the source of political funding for fascist causes.  But that effort sure isn't working here. I'm just confused by Politico's insinuation.  Maybe if I crunched some numbers at each part of the suspected step transaction I might see a scam. The insinuation would make more sense if Leo started a nonprofit that attracted donations from people everywhere and then he used those donations to buy goods or services from his for-profit business.  But it doesn't look like that is what Leo is doing, either.  

If Politico's purpose was just to expose Leo's fascist agenda -- funding Ron DeSantis' elevator cowboy boot collection, for example -- the story would have been clearer had it just reported those facts.  Here is a sample in that regard:

The Concord Fund gave $8.8 million to Susan B. Anthony Pro-Life America, a leading anti-abortion group, along with $3 million to Protect Women Ohio Action, a group that was fighting the constitutional amendment in Ohio that enshrined abortion access. The amendment ultimately passed. The Concord Fund also gave $6 million to the Republican Governors Association and $4 million to the Republican Attorney Generals Association. It gave an additional $3 million to a group that was backing the Republican candidate for Kentucky governor, David Cameron, who ultimately lost.

The large gift to the Republican Attorneys General Association is notable, in part, because a number of Republican attorneys general have also questioned Schwalb’s inquiry into Leo. The Concord Fund also gave $500,000 each to a Florida political committee then called Friends of Ron DeSantis and a nonprofit founded by former Vice President Mike Pence called Advancing American Freedom. It also gave $300,000 to a nonprofit founded by former presidential candidate and U.S. ambassador to the U.N. Nikki Haley.

I think Politico is using an unfounded insinuation of improper private benefit to bootstrap an argument that the causes Leo the fascist supports are illegitimate in a legal sense.  I wouldn't mourn Leo's soul burning in a hot place, but I don't see anything violating 501(c)(3) here yet.

darryll k. jones