Brian Schwalb, the Democratic attorney general in Washington, D.C., has recently initiated an inquiry into the network associated with conservative judicial activist Leonard Leo. Leo’s attorney has characterized this investigation as a politically motivated attempt to stifle the Republican activist and his associates.
In August, Politico reported that Schwalb had launched an investigation into Leo and the organizations linked to him. It appears that this investigation was prompted by a complaint from the left-leaning Campaign for Accountability, alleging that Leo had financially benefited from consulting fees within his network.
Campaign for Accountability originally operated as a project under the management of Arabella Advisors, a for-profit consulting firm in D.C. overseeing various liberal entities. This firm has a similar consulting fee structure to the one it criticizes in Leo’s for-profit and nonprofit organizations.
Furthermore, it’s noteworthy that Schwalb’s deputy, Seth Rosenthal, has previous affiliations with a left-wing judicial group that targeted two conservative Supreme Court justices. Leonard Leo, who serves as the co-chairman of the Federalist Society, has consistently drawn the attention of Democrats due to his role as former President Donald Trump’s judicial adviser.
David Rivkin, Leo’s attorney, conveyed to Fox News Digital, “D.C. Attorney General Brian Schwalb has initiated a politically motivated investigation in an attempt to silence Leonard Leo and his associates. The D.C. Attorney General lacks legal or factual grounds for launching this investigation, and the irony is evident when you consider that the source of the complaint is the Arabella Advisors Network. Any effort to misuse our legal system for political purposes undermines genuine justice, which is greatly needed in D.C. given the prevailing crime issues.”
Months before Schwalb’s investigation into Leo became public, The Guardian reported on a complaint filed by Campaign for Accountability, alleging that Leo had “misused” nonprofit funds by diverting $73 million to his for-profit companies, BH Group and CRC Advisors, for consulting services between 2016 and 2021. Notably, the Leo-linked groups are outside Schwalb’s jurisdiction, as noted by The Guardian and Politico.
Campaign for Accountability’s Executive Director, Michelle Kuppersmith, indicated that her group had sent the complaint to the IRS and Schwalb’s office, urging them to examine the evidence and reconsider the tax-exempt status of the seven nonprofits connected to Leo.
“We’re hopeful that the IRS and/or the D.C. AG will take up this complaint and use the evidence that we’re presenting, which is very carefully thought out and laid out in legal language with all of the relevant statutes that we believe are being violated, along with a lot of the background to provide the evidence as to why,” Kuppersmith stated.
Campaign for Accountability initially operated within the Arabella Advisors-managed Hopewell Fund before becoming an independent nonprofit in 2017. Arabella’s managed groups also include the New Venture Fund, Sixteen Thirty Fund, and Windward Fund, which collectively raise substantial amounts from anonymous donors each year, providing fiscal sponsorship to numerous liberal nonprofits.
Kuppersmith clarified, “Campaign for Accountability has no connection with Arabella Advisors. The fact that we were briefly fiscally sponsored by Hopewell Fund nearly seven years ago is entirely irrelevant to our work. Our mission is to expose misconduct wherever we find it, and we hope that the IRS and the D.C. attorney general thoroughly investigate our complaint against Leonard Leo.”
Tax records reveal that another Arabella-managed nonprofit, the New Venture Fund, contributed at least $2.2 million to Campaign for Accountability after it had separated from the network. This funding accounted for a significant portion of Campaign for Accountability’s annual revenue between 2017 and 2020.
Several members of Campaign for Accountability’s leadership, including Kuppersmith, had previously worked for Accountable.US, which had been fiscally sponsored by the New Venture Fund. However, the group did not address inquiries regarding its funding from the Arabella-managed funds following its separation from the network.
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Campaign for Accountability’s complaint revolves around Leo’s alleged enrichment through fees within his network, a structure quite similar to that of Arabella Advisors and its managed funds. During the period when Campaign for Accountability claimed Leo had benefited from $73 million in consulting payments, Arabella Advisors reportedly earned $190 million in fees from its four associated funds for administrative, operational, and management services between 2016 and 2021. This amount considerably exceeded the funds passed from Leo-linked nonprofits to his for-profit entities.
Arabella Advisors, founded by Eric Kessler, a former Bill Clinton White House appointee, has maintained close ties with the four nonprofits channeling consulting fees to the for-profit entity. Despite the scrutiny on Leo’s groups, Schwalb’s investigation does not appear to encompass the Kessler-linked network.
Arabella spokesman Steve Sampson stated, “Arabella Advisors employs numerous experts in the services we provide to our nonprofit clients, including HR, compliance, accounting, and grants management. We regularly assess our fee structure to ensure our clients receive top-notch services. Our nonprofit clients continue to partner with us due to our exceptional service quality. Arabella Advisors is not a funder, and we do not dictate how our clients allocate their resources. Comparing our company and the services we provide to Leonard Leo, who is known for directing significant funds to partisan organizations he controls, is simply inaccurate.”
Campaign for Accountability’s complaint against Leo-linked groups reportedly lacks direct evidence to support its accusations, as per Politico. Nevertheless, Schwalb’s office is reportedly seeking documents from many of these organizations, according to an insider.
Furthermore, Schwalb and his deputy, Rosenthal, have backgrounds at the Venable law firm, which has represented groups associated with the Arabella-managed network, including the New Venture Fund and Sixteen Thirty Fund.
Rosenthal had also served as the legal director of the Alliance for Justice, a left-leaning dark money judicial group focused on “transforming courts,” from 2005 to 2006. During his tenure there, the Alliance for Justice aimed to impede Chief Justice Roberts’ confirmation due to his ties to the Federalist Society, an organization co-chaired by Leo. Rosenthal also opposed Justice Samuel Alito’s confirmation on political grounds during his time with the Alliance for Justice.
In recent years, the Alliance for Justice has undertaken efforts to influence President Biden on judicial nominations, including those of Supreme Court Justice Ketanji Brown Jackson.
The D.C. attorney general’s office adheres to a policy of neither confirming nor denying the existence of investigations. The office has not addressed queries regarding Campaign for Accountability’s complaint or Rosenthal’s prior involvement with the Alliance for Justice.
Schwalb’s office is not the sole entity that has targeted Leo in recent months. Democratic senators Sheldon Whitehouse and Dick Durbin sent a letter to Leo and billionaires Paul Singer and Robin Arkley II, seeking more information in response to a ProPublica report that Justice Alito had allegedly “accepted and failed to disclose a luxury Alaskan fishing vacation” with the two billionaires in 2008, an event purportedly organized by Leo.
The senators requested a detailed list of gifts and payments from Leo or groups associated with him dating back decades and related to any Supreme Court justice he has interacted with. They argued that Chief Justice Roberts has not adequately addressed ethics concerns within the Supreme Court, necessitating congressional oversight.
Leo’s lawyers responded by asserting that the Democrats’ inquiry violates the First Amendment and other constitutional provisions. They contended that the investigation lacks a valid legislative purpose because the proposed legislation would be unconstitutional if enacted.