Brian Schwalb, the Democratic attorney general in Washington, D.C., recently launched an investigation into conservative judicial activist Leonard Leo’s network, an effort Leo’s attorney says is a “politically driven” attempt at silencing the Republican activist and his associates.
Politico reported in August that Schwalb had opened a probe into Leo and his associated organizations. The investigation appears to have originated from a complaint from the left-wing Campaign for Accountability, which alleged Leo has enriched himself with consulting fees through his network.
Campaign for Accountability started as a project at the largest liberal dark money network in America managed by the D.C.-based for-profit Arabella Advisors consulting firm, which overlooks a behemoth web of groups and has a similar consulting fee arrangement to that of the targeted Leo for-profits and nonprofits.
Campaign for Accountability has also secured millions of dollars in funding from groups in the Arabella-managed network since it broke away and became a standalone entity.
Additionally, Schwalb’s deputy, Seth Rosenthal, has previous links to a left-wing judicial group that led attacks against two conservative Supreme Court justices. Leo, co-chairman of the Federalist Society, has consistently been in the crosshairs of Democrats over his role as former President Donald Trump’s judicial adviser.
“D.C. Attorney General Brian Schwalb has launched a politically driven fishing expedition in an effort to silence Leonard Leo and his associates,” Leo’s attorney, David Rivkin, told Fox News Digital.
“The D.C. Attorney General has no legal or factual grounds to launch this investigation, and the complaint itself is riddled with irony when you consider the source is the Arabella Advisors Network,” Rivkin said. “Any effort to weaponize our legal system for political purposes only serves to undercut real justice, something D.C. is sorely in need of given the rampant crime.”
Months before Schwalb’s investigation into Leo became public, The Guardian reported on a Campaign for Accountability complaint alleging Leo “misused” his network’s nonprofit cash by diverting $73 million to his for-profit companies, BH Group and CRC Advisors, for consulting services between 2016 and 2021.
The complaint appears to be the foundation of Schwalb’s probe, even though the Leo-linked groups are outside his jurisdiction, which The Guardian and Politico noted. Campaign for Accountability Executive Director Michelle Kuppersmith also told The Guardian her group sent the complaint to the IRS and Schwalb’s office, asking them to examine materials and revoke the tax-exempt status of the seven nonprofits linked 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 said at the time.
Kuppersmith’s group began as a network with a similar arrangement to Leo’s. Campaign for Accountability started as a project at the Arabella Advisors-managed Hopewell Fund before breaking away into a standalone nonprofit in 2017.
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The Arabella-managed groups also include the New Venture Fund, Sixteen Thirty Fund and Windward Fund. The funds, which combine to raise more than a billion dollars from anonymous donors annually, act as fiscal sponsors to dozens of liberal nonprofits by providing their tax and legal status to the nonprofits housed beneath them.
“Campaign for Accountability has no relationship with Arabella Advisors. The fact that we were briefly fiscally sponsored by Hopewell Fund nearly seven years ago is completely irrelevant to any of our work,” Kuppersmith told Fox News Digital. “Our mission is to call out wrongdoing wherever we see it, and we hope the IRS and the D.C. attorney general thoroughly investigate our complaint against Leonard Leo.”
Tax documents show another Arabella-managed nonprofit, the New Venture Fund, sent at least $2.2 million to Campaign for Accountability after it had broken away from the network. Between 2017 and 2020, the New Venture Fund cash passed to Campaign for Accountability accounted for between 15% and 89% of its total reported revenue each year.
Several individuals on Campaign for Accountability’s leadership team, including Kuppersmith, previously worked for Accountable.US, which the New Venture Fund had previously fiscally sponsored.
The group did not address questions about its millions in grants from the Arabella-managed funds after it broke away from the network.
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Campaign for Accountability’s complaint revolves around Leo’s alleged enrichment of himself with fees through his network, which is almost identical to that of Arabella Advisors and the funds it manages.
During the period that Campaign for Accountability said Leo benefited from the $73 million in consulting payments, Arabella Advisors raked in $190 million in fees from its four linked funds by providing administrative, operational and management services, according to a review of tax forms for each of the nonprofits between 2016 and 2021. The amount Arabella pulled in for its consulting services during that time is nearly $120 million more than was passed from the Leo-linked nonprofits to his for-profits.
Eric Kessler, a former Bill Clinton White House appointee who later served at the Clinton Global Initiative, founded Arabella Advisors and has been closely entangled with the four nonprofits funneling consulting cash to the for-profit for its services. Schwalb, who worked in the Justice Department during the Clinton administration, is now probing Leo’s groups but does not appear concerned with the Kessler-linked network.
“Arabella Advisors is home to hundreds of employees who are experts in the services we provide to our nonprofit clients, including HR, compliance, accounting and grants management,” Arabella spokesman Steve Sampson told Fox News Digital.
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“We regularly benchmark our fee structure to ensure that our clients are getting the best value, and our nonprofit clients continue to work with us because of the best-in-class services we provide,” Sampson added. “Arabella Advisors is not a funder, and we do not control how our clients spend their resources. Comparisons between our company and the services we provide and Leonard Leo, who prides himself on directing billions of dollars to partisan organizations he controls, are categorically false.”
Meanwhile, Campaign for Accountability’s complaint against the Leo-linked groups did not “provide any direct evidence of its accusations,” Politico wrote. Still, Schwalb’s office is now seeking documents from many of the organizations, according to a source with knowledge of the situation.
Schwalb and his deputy Rosenthal also previously worked at the Venable law firm, which has represented groups in the Arabella-managed network on matters including the New Venture Fund and Sixteen Thirty Fund.
Rosenthal also served as legal director of the Alliance for Justice, a left-wing dark money judicial group dedicated to “transforming courts,” from 2005 to 2006.
During Rosenthal’s time with the group, it attempted to derail Chief Justice Roberts’ confirmation over his ties to the Federalist Society, which Leo co-chairs. When Rosenthal was also with the Alliance for Justice, he opposed Justice Samuel Alito’s confirmation on political grounds, saying he was a “movement conservative” who would march “to the conservative drumbeat on about every single issue” in a 2005 Democracy Now! interview.
In recent years, the Alliance for Justice has undertaken initiatives to influence President Biden on judicial nominations, including with Supreme Court Justice Ketanji Brown Jackson.
A spokesperson for the D.C. attorney general’s office said the office can neither confirm nor deny the existence of any investigation as a matter of policy. The spokesperson did not address questions regarding the Campaign for Accountability’s complaint or Rosenthal’s previous work with the Alliance for Justice.
The D.C. attorney general’s office is not the only official in recent months that has set its sights on Leo.
Democratic senators Sheldon Whitehouse of Rhode Island and Dick Durbin of Illinois sent a letter to Leo and billionaires Paul Singer and Robin Arkley II in July demanding more information regarding a ProPublica report that Justice Alito “accepted and failed to disclose a luxury Alaskan fishing vacation” in 2008 with the two billionaires. Leo had allegedly organized the trip.
The senators asked for an itemized list of gifts and payments from Leo or groups he is associated with dating back decades and related to any Supreme Court justice he has associated with.
“To date, Chief Justice Roberts has barely acknowledged, much less investigated or sought to fix, the ethics crises swirling around our highest court. So, if the court won’t investigate or act, Congress must,” Whitehouse and Durbin said in a press release. “Answers to these questions will help the committee’s work to create reliable ethics guardrails at the court under Congress’s clearly established oversight and legislative authority.”
Leo’s lawyers responded by saying the Democrats’ request doesn’t comport with the First Amendment and other parts of the Constitution.
“For similar reasons, your inquiry cannot be reconciled with the Equal Protection component of the Due Process clause of the Fifth Amendment,” his lawyers said. “And regardless of its other constitutional infirmities, it appears that your investigation lacks a valid legislative purpose because the legislation the committee is considering would be unconstitutional if enacted.”
