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The Dirty Little Secrets of Non Profits

In 2009, a network of online media outlets began popping up in state capitals across the nation, each covering the news from a clearly conservative point of view. What wasn’t so clear was how they were funded.

“The source is 100 percent anonymous,” said Michael Moroney, a spokesman for the Franklin Center for Government and Public Integrity, the think tank that created the outlets.

In fact, 95 percent of Franklin’s revenue in 2011 came from a charity calledDonors Trust, according to Internal Revenue Service records.

Conservative foundations and individuals use Donors Trust to pass money to a vast network of think tanks and media outlets that push free-market ideology in the states — $86 million in 2011 alone. The arrangement obscures the identity of the donors wishing to keep their charitable giving private, especially “gifts funding sensitive or controversial issues,” according to the group’s website.

The $6.3 million donation to the Franklin Center was the second-largest gift made in 2011 by the group, a tax-exempt “public charity” that takes tax-deductible donations from donors “dedicated to the ideals of limited government, personal responsibility, and free enterprise,” according to its website.

Donors Trust includes 193 contributors, the majority of whom are individuals. “A lot of donors are flying totally under the radar,” says president and CEO Whitney Ball.

Donor-advised fund

Since its founding in 1999, Donors Trust and its affiliated organization, Donors Capital Fund, have distributed nearly $400 million, becoming major vehicles for tax-exempt giving from wealthy conservatives such as billionaire industrialist Charles Koch.

Koch is among an exclusive pool of donors who have used Donors Trust as a “pass-through,” says Marcus Owens, the former director of the IRS Exempt Organizations Division, now in private legal practice. “It obscures the source of the money. It becomes a grant from Donors Trust, not a grant from the Koch brothers.”

Ball helped found Donors Trust in 1999 as a “donor-advised” fund. Donors can open an account and protect their identity from the public and even the recipient of their grants.

In addition, donor-advised funds offer contributors an extra level of control over where their money ends up, which seeks to remedy what Ball sees as the tendency for foundation money to “drift left.”

This was a chief concern of Daniel Searle, the late philanthropist and pharmaceutical executive who was one of Donors Trust’s early board members.

In 1998, with help from Donors Trust co-founder and board chairman Kim Dennis, Searle established an endowment called the Searle Freedom Trust, now worth $114 million, which has in turn given generously to Donors Trust.

‘Great guys’

The Searle Freedom Trust is one of dozens of conservative foundations that have given tens of millions of dollars to Donors Trust from 2001 to 2011. Among the group’s donors is the Knowledge and Progress Fund, a Wichita, Kan.-based foundation run by Charles Koch.

The foundation gave almost $8 million to Donors Trust between 2005 and 2011.

Where those funds ended up is a mystery, though some Donors Trust recipients, including the Mercatus Center and the Institute for Humane Studies based at George Mason University in Virginia, have also received major funding from foundations set up by Charles Koch and brother David.

Nearly half of the revenue for David Koch’s Americans for Prosperity Foundation came from Donors Trust in 2010, in the form of $7.6 million in grants.

Representatives for the Koch foundations did not return calls for comment.

Before Donors Trust, Ball was the director of development for the libertarian Cato Institute, which Charles Koch was instrumental in founding.

“We think they’re great guys,” she says of the Kochs, “but if they weren’t around, we’d still be successful.”

At a private Koch fundraising meeting in the summer of 2010, Donors Trust hosted cocktails and dessert for what Ball called a “target-rich environment” of wealthy donors.

Several wealthy conservatives who have attended Koch fundraising parties have Donors Trust accounts, including Amway co-founder and longtime booster of conservative causes Richard DeVos; hedge fund billionaire Paul Singer; and Philip Anschutz, owner of the conservative Examiner newspapers.

Dozens of other major conservative philanthropies have Donors Trust accounts, including the Lynde and Harry Bradley Foundation, the John M. Olin Foundation and the Coors family’s Castle Rock Foundation, according to IRS records….”

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