Investment firm charities offer anonymity to ‘hate group’ donors

Last month, Expert Investor ran a story that detailed how Vanguard’s philanthropic wing, in 2018 and 2019, made donations to the David Horowitz Freedom Center (DHFC) in the US, despite that organisation being deemed a far-right hate group by the Southern Poverty Law Center (SPLC).

As we published on 16 September, Vanguard Charitable donated $180,000 in those years to the DHFC, which has organised yearly events involving speakers such as Katie Hopkins and Tommy Robinson. The UK arm of Vanguard said that while Vanguard Charitable was founded by the company in 1997, it operated as ‘an independent entity’. This was despite sharing still similar branding. Vanguard said that the foundation was ‘cause neutral’ and donated to any non-profit organisation that met all US IRS standards.

After our story was published, and was picked up on our sister titles International Adviser and Portfolio Adviser, we started to work on this follow-up.

Offer of anonymity

While expanding our net, we came across this 2019 piece from Sludge, who had looked into this issue before us (Expert Investor became aware of the DHFC and Vanguard Charitable through a different route).

Sludge found: “Donors Trust, Fidelity Charitable Gift Fund, Schwab Charitable Fund, and Vanguard Charitable are donor-advised funds (DAFs) that provide individual donors with accounts and contribute their money, attributed to the funds, to the nonprofits of the donors’ choice. These kinds of funds allow donors to keep their charitable money in one place and to save on taxes. They also help these donors keep their names secret by eliminating paper trails at the Internal Revenue Service (IRS) and the organisations receiving the funds that could tie them to their donations.”

It went on: “A Sludge analysis of recent tax filings shows that, from mid-2014 through 2017, these four donor-advised funds combined to give nearly $11m to 34 groups that the Southern Poverty Law Center (SPLC) considers to be hate groups, according to its 2017 hate map. These hate groups include 12 anti-LGBT groups, 12 anti-Muslim groups, eight anti-immigrant groups, one white nationalist group, and one radical traditional Catholic group.”

Considerable sums

Sludge’s story ran two years ago, but it provided useful background in our follow-up work. That publication found Vanguard Charitable had paired the following grants with the following organisations in the financial years 2015, 2016, and 2017

1. Alliance Defending Freedom – $383,200.
2. American Freedom Defense Initiative (also known as Stop Islamization of America) – $60,000
3. Californians for Population Stabilisation – $100,000
4. Center for Immigration Studies – $8,000
5. Center for Security Policy – $380,000
6. The David Horowitz Freedom Center – $448,500
7. The Family Research Council – $8,200
8. The Federation for American Immigration Reform – $500,000
9. The Immigration Reform Law Institute – $50,000
10. Proclaiming Justice to the Nations – $375,000
11. The VDARE Foundation – $10,000

If you are unfamiliar with these groups, here is a rundown of what they do/have done:

1. The Alliance Defending Freedom “[…] is a legal advocacy and training group that has supported the recriminalization of sexual acts between consenting LGBTQ adults in the U.S. and criminalization abroad; has defended state-sanctioned sterilization of trans people abroad; has contended that LGBTQ people are more likely to engage in paedophilia; and claims that a ‘homosexual agenda’ will destroy Christianity and society.”
2. The American Freedom Defense Initiative has been called an anti-Muslim hate group by the Southern Poverty Law Center. It organised a competition in Texas in 2015 to draw pictures of the prophet Muhammad.
3. The Californians for Population Stabilisation hired a neo-Nazi as its Director for Public Affairs, firing him as soon as the news was revealed.
4. The Center for Immigration Studies has “[…] gone on to become the go-to think tank for the anti-immigrant movement with its reports and staffers often cited by media and anti-immigrant politicians. CIS’s much-touted tagline is “low immigration, pro-immigrant,” but the organization has a decades-long history of circulating racist writers, while also associating with white nationalists.”
5. The Center for Security Policy “[…] has gone from a respected hawkish think tank focused on foreign affairs to a conspiracy-oriented mouthpiece for the growing anti-Muslim movement in the United States.”
6. The David Horowitz Freedom Center is run by a man who “[…] has since the late 1980s become a driving force of the anti-Muslim, anti-immigrant and anti-black movements.”
7. The Family Research Council “[…] often makes false claims about the LGBTQ community based on discredited research and junk science. The intention is to denigrate LGBTQ people as the organization battles against same-sex marriage, hate crime laws, anti-bullying programs and the repeal of the military’s ‘Don’t Ask, Don’t Tell’ policy.”
8. The Federation for American Immigration Reform’s “[…] leaders have ties to white supremacist groups and eugenicists and have made many racist statements. Its advertisements have been rejected because of racist content. FAIR’s founder, John Tanton, has expressed his wish that America remain a majority-white population: a goal to be achieved, presumably, by limiting the number of nonwhites who enter the country.”
9. The Immigration Reform Law Institute, according to Bloomberg, “[…]  works as a public interest law firm dealing with the legal rights, privilege, and property of US citizens from damage caused by unlawful immigration. IRLI represents United States citizens in litigation, specifically to defend their civil rights.”
10. Proclaiming Justice to the Nations was only removed the SPLC’s list of hate groups earlier this year.
11. The VDARE Foundation “[…] regularly publishes articles by prominent white nationalists, race scientists and anti-Semites.”

Pattern of bahaviour

With this information, we went back to the 990 forms from our previous story. We found that, in 2018 and 2019, Vanguard Charitable continued to make donations and grants to nine of these 11 organisations. These included:

1. Alliance Defending Freedom — $211,000 total in 2018 and 2019
2. Californians for Population Stabilization – $200,000 in 2018
3. Center for Immigration Studies – $1,000,000 in 2018
4. The David Horowitz Freedom Center – $180,000 in 2018 and 2019
5. The Family Research Council – $5,000 in 2018.
6. The Federation for American Immigration Reform – $900,000 in total in 2018 and 2019
7. The Immigration Reform Law Institute – $25,000 in 2019
8. Proclaiming Justice to the Nations – $225,000 in total in 2018 and 2019.
9. The VDARE Foundation – $59,797.65 in total in 2018 and 2019.

Vanguard Charitable is not the only DAF doing this, but they are arguably the one with the most-recognisable name. Sludge named others, though, including Fidelity Charitable, which calls itself ‘the nation’s top grantmaker, distributing $9.1bn to charities in 2020’.

Of Fidelity Charitable, Sludge said, “The fund donated nearly $4.9m to 31 hate groups over the 2015 to 2017 fiscal years.”

Expert Investor was unable to independently confirm whether Fidelity Charitable had made these donations, but Sludge has stood by its story.

Not industry-wide

While Vanguard Charitable and Fidelity Charitable are not the only DAFs doing this, the problem is seemingly not endemic. Sludge, in its reporting, found no hate groups within the grants and funds supplied by the Goldman Sachs Philanthropy Fund. It was the same story with AmazonSmile.

We also reached out to both Goldman Sachs and AmazonSmile. Tim Hobden from Amazon UK Corporate Communications sent us this official statement: “Charitable organisations must meet the requirements outlined in our participation agreement to be eligible for AmazonSmile. Organisations that engage in, support, encourage, or promote intolerance, hate, terrorism, violence, money laundering, or other illegal activities are not eligible. If at any point an organisation violates this agreement, its eligibility will be revoked. Since 2013, Amazon has relied on the US Office of Foreign Assets Control and the Southern Poverty Law Center to help us make these determinations.”

So, it is apparent that Vanguard Charitable could do something about the money funnelling through to far-right hate groups in the US, but is choosing not to.

Commercial concerns

Expert Investor reached out to Alex Kotch, who lead the original reporting on Sludge. Kotch is currently a senior investigative reporter for the Center for Media and Democracy. He said in an email: “Vanguard and most of the other major DAFs have shown no interest in taking responsibility for funding hate groups, nor have they changed any of their policies since my reporting began. These commercial DAFs are worried that their clients will abandon them if they become more selective about which organisations they fund, even hate groups. The cost of this profit-based decision is that all kinds of hate groups are flourishing, in large part due to anonymous donations through Vanguard, Fidelity, and other DAFs.”

The most-troubling aspect of this story is the anonymity that comes from donating through a DAF. A 2013 piece by Mother Jones says of this: “Donors Trust [another DAF] allows wealthy contributors who want to donate millions to the most important causes on the right to do so anonymously, essentially scrubbing the identity of those underwriting conservative and libertarian movements.”

There is a lot that Vanguard Charitable could do to improve how its operates as a DAF. It could work with organisations like the SPLC to vet and filter the organisations it gives grants to. It could make a statement saying that it will not donate to these groups, or similar, in the future. It could be more open and transparent where all its funding comes from.

“I also want to make it clear,” wrote Kotch to Expert Investor, “that once a donor puts money in their DAF account, that DAF legally owns the money and can do whatever it wants with it. The board of the DAF typically approves or denies recipients that the individual donors have requested. These DAFs/their boards are completely responsible for funding hate. Smaller DAFs/community foundations have enacted anti-hate policies, but the biggest ones—the largest ‘charities’ in the US—refuse to do so.”

Much of this story stinks, but the overall stench is one of hypocrisy. Sludge’s reporting makes clear that at least two anti-LGBT groups received funding from Vanguard Charitable in 2015, 2016, and 2017. Our reporting found that both received further funding in 2018, and one received more funding in 2019.

But on 22 June this year, Vanguard Charitable posted on its Twitter account: “Happy Pride Month! Every June, LBGTQIA+ communities come together all over the globe to celebrate. Significant progress toward equality for the LGBTQIA+ community has been made, but a long road to equality is still ahead. #Pride.”

Last month, we said that the worst that could be said about this situation is that it was hypocrisy. This is hypocrisy.