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 called Donors 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.
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.