A major left-wing dark money group may have unlawfully directed partisan activity for a purportedly "nonpartisan" voting rights advocacy organization linked to Democratic activism, legal experts say.
The liberal charity New Venture Fund was bankrolling and controlling political activities for Secure Democracy, a 501(c)(4) elections nonprofit group that worked to expand mail-in voting and influence Republican policy in 2020 and 2021, according to the Washington Free Beacon. Multiple tax attorneys say this reported arrangement could spell legal trouble for New Venture Fund, which is managed by Arabella Advisors, a consulting firm in Washington, D.C., founded by ex-top Clinton administration official Eric Kessler.
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"It’s something the IRS should take a serious look at since charities 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 outlet.
The New Venture Fund, which pulled in almost $955 million in 2021 and disclosed $553 million in expenses, is often referred to as one of the most powerful liberal dark money groups because it fiscally sponsors other groups that do not have to file tax forms with the IRS. The fund's Voting Rights Lab had previously maintained control over the operations of Secure Democracy, while the lab's executive director, Megan Lewis, was approving "everything," according to a February 2020 internal document obtained by the outlet.
For instance, Lewis signed off in September 2020 for Secure Democracy to spend about $90,000 in ads taking aim at five Republican senators, the outlet reported, noting that the purchase was approved from Lewis's New Venture Fund email account.
"Since NVF appears to be directing the political expenditures of Secure Democracy, as a c3 they are doing indirectly what they cannot do directly. NVF is at risk of losing their tax-exempt status," Paul Kamenar, an attorney for the conservative watchdog National Legal and Policy Center, said.
The arrangement between New Venture Fund and Secure Democracy, however, had raised concerns among ex-Secure Democracy Executive Director Sarah Walker. In October 2021, she emailed a New Venture Fund lawyer alleging it was "fraught with compliance and potential legal ramifications" and putting both entities in "legal jeopardy," according to the outlet.
Shortly after, in November 2021, the New Venture Fund shut down Secure Democracy, the outlet reported. In turn, another entity called Secure Democracy USA was formed later that month in Washington, D.C., according to records.
Walker would go on to file a wrongful termination lawsuit in November 2022 against New Venture Fund, documents show. Her legal team also wrote a January 2022 letter to New Venture Fund communicating her notion that New Venture Fund illegally subsidized Secure Democracy.
"New Venture Fund supports a wide range of nonpartisan projects from across the ideological spectrum, appropriately uses funds, and complies with the law," a New Venture Fund spokesperson told the Washington Examiner. "Allegations to the contrary are false, and we are litigating them with the former NVF employee making these false claims."
Meanwhile, two former New Venture Fund staffers say that the charity altered employee time sheets to make it seem as if the North Fund, a separate Arabella Advisors-managed nonprofit group, that as a 501(c)(4) can be political, subsidized 2021 operations by Secure Democracy, according to the Washington Free Beacon. This fact is grounds for there to be an IRS investigation, Torchinsky said.
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"The attempt to retroactively involve a c4 in the spending is an indication that someone realized how risky the political activity is for the charity," Torchinsky told the outlet. "While nonprofits regularly file amendments, going back and changing time sheets after the books are closed and nearly 18 months prior is unusual to say the least."
The IRS declined a request for comment, telling the Washington Examiner that "federal disclosure laws make it illegal for any IRS employee to discuss any taxpayer’s or entity’s relationship with the agency."