Top Democratic Operatives Were Quietly Pulling the Strings at a Voting Rights Group. Lawyers Say They May Have Broken the Law.

The shady scheme implicates the Left’s largest dark money network, Arabella Advisors

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July 10, 2023

In the months before the 2020 elections, the New Venture Fund had a problem.

The dark money behemoth, an arm of Arabella Advisors’ sprawling nonprofit network, was looking to challenge red-state voting laws that curtailed mail-in voting, but staffers were keenly aware of the hurdles they would face making inroads with Republican lawmakers.

They embarked on a project to take control of a 501(c)4 nonprofit, Secure Democracy, and lobby Republican lawmakers—and run ads against them—on voting rights issues from behind the veil of an ostensibly nonpartisan group.

For a time, they gained traction. In 2020 and 2021, Secure Democracy pushed lawmakers in over 20 states to expand mail-in balloting and other liberal voting initiatives. Those lawmakers were seemingly unaware that they were being influenced by political operatives working at the highest levels of the Democratic Party. New Venture Fund, after all, is the largest branch of the multibillion-dollar Democratic dark money clearinghouse controlled by Arabella Advisors.

"Every lawmaker at the state level was misled," a former New Venture Fund employee involved in Secure Democracy’s lobbying operations, who requested anonymity due to fear of professional retaliation, told the Washington Free Beacon.

That tactic, lawyers say, may have put the charity on the wrong side of nonprofit tax laws. In October 2021, the New Venture Fund dismissed a senior executive who blew the whistle internally, arguing that the group was illegally using charitable resources to direct Secure Democracy’s 501(c)4 political activities. New Venture Fund abruptly shut down Secure Democracy a month later.

This story is based on a trove of internal New Venture Fund records obtained by the Free Beacon that suggest the group ran roughshod over tax laws in an effort to influence Republicans to change voting laws before and after the 2020 elections. Legal experts and watchdog groups said the New Venture Fund’s apparent use of charitable resources to direct Secure Democracy’s partisan political activity provides grounds for the IRS to investigate New Venture Fund and potentially strip it of its charity status.

The New Venture Fund operates hundreds of liberal projects that present themselves to the public as grassroots initiatives. The charity pays a hefty fee to Arabella Advisors, a for-profit business, to manage and provide legal compliance for its projects, according to a New Venture Fund employee handbook obtained by the Free Beacon.

But interviews with five former New Venture Fund employees involved in the Secure Democracy arrangement raise questions about Arabella’s commitment to the law.

The group of New Venture Fund employees pulling the strings at Secure Democracy came from a team within the New Venture Fund that worked on one of the organization’s legitimate projects, the Voting Rights Lab. Led by former Everytown for Gun Safety executive vice president Megan Lewis, Voting Rights Lab billed itself as a nonpartisan organization that tracks election-related legislation in states across the country. But behind the scenes, former employees told the Free Beacon, they were working away at Secure Democracy.

And the New Venture Fund’s control of Secure Democracy was absolute. Lewis approved "everything" the 501(c)4 group did both internally and externally for "organizational consistency," according to a document outlining internal processes dated Feb. 4, 2020.

Under New Venture Fund’s direction, Secure Democracy embarked on "under-the-radar battleground state campaigns" in the leadup to the 2020 elections to "prevent interference" from Republican lawmakers concerned about widespread mail-in ballots, records obtained by the Free Beacon show. Secure Democracy lobbied in North Carolina, Georgia, Wisconsin, and other critical battleground states, the records show. Among the GOP officials the group lobbied: the now famous Georgia secretary of state Brad Raffenspberger, who did not respond to a request for comment.

But Secure Democracy never publicly disclosed its ties to New Venture Fund because it would have hurt their ability to engage with GOP lawmakers and voters on both sides of the aisle, four former staffers told the Free Beacon.

"There were so many discussions about how Secure Democracy had to remain pristine and separate, and there could not be any illusion of a link between the two," said a former employee. "One of the reasons was because they obviously wanted to appear unbiased and influence voters."

Emails reviewed by the Free Beacon also reflect New Venture Fund’s efforts to conceal its ties to Secure Democracy. Former Secure Democracy communications director Jay Riestenberg told the head of another left-wing organization in July of 2021 that New Venture Fund’s control of the group "is not publicly advertised for strategic reasons."

New Venture Fund also controlled Secure Democracy’s hiring decisions. Secure Democracy launched in 2018 and operated with a small pool of no more than eight part-time employees on its payroll, all of whom were simultaneously employed by New Venture Fund.

"I applied for a position that was listed as Voting Rights Lab. It was only later in the interview process I was told you’re going to be on the Secure Democracy side," a former staffer said.

Lewis and other senior New Venture Fund employees who ran Secure Democracy were compensated solely by the charity rather than by Secure Democracy.

It’s not uncommon for charities to partner with other 501(c)4 nonprofit groups. But Secure Democracy financial records reviewed by the Free Beacon and accounts from three former New Venture Fund employees indicate that the charity had no formal cost-sharing agreement with Secure Democracy in 2020 and 2021. The lack of such an agreement, which is typical in partnerships between 501(c)3 charities and 501(c)4 groups, meant no legal guardrails were in place to prevent New Venture Fund’s charitable resources from subsidizing Secure Democracy’s political activities.

"I think they’re sort of skating on thin ice," said nonprofit attorney Alan Dye. "The IRS could take the position that the 501(c)4 is acting as the agent of the charity. And since that includes activity the charity could not itself engage in, that’s a problem."

Several legal experts said New Venture Fund may have crossed a legal red line as it directed Secure Democracy’s partisan political activities, given that charities are prohibited from engaging in partisan political activism.

In one instance, Secure Democracy had to seek Lewis’s approval before running nearly $90,000 in political ads against five Republican senators in September 2020, emails reviewed by the Free Beacon show. But that campaign, according to Secure Democracy’s attorney David Mitrani, needed to be logged as political spending.

Despite Mitrani's advice, Lewis approved the ad purchase from her New Venture Fund email account. That exchange, according to former IRS Tax Law Specialist Patrick Sternal, may be evidence of unlawful activity.

"Theoretically, the prohibition on charity intervention in political campaigns is absolute, meaning that any amount of political activity could lead to revocation," Sternal said.

Nonprofit tax attorneys Jason Torchinsky and Paul Kamenar urged the IRS to investigate New Venture Fund’s use of charitable resources to advance Secure Democracy’s political activity.

"Since NVF appears to be directing the political expenditures of Secured Democracy, as a c3 they are doing indirectly what they cannot do directly. NVF is at risk of losing their tax-exempt status," said Kamenar, an attorney with the National Legal and Policy Center watchdog group.

"It’s something the IRS should take a serious look at since charities are expressly prohibited from engaging in partisan campaign activity," added Torchinsky.

The extent of New Venture Fund’s control over Secure Democracy was of particular concern to former Secure Democracy executive director Sarah Walker, who emailed New Venture Fund general counsel Andrew Schultz on Oct. 28, 2021, expressing her fears that the arrangement was "fraught with compliance and potential legal ramifications," and put her, Secure Democracy, and New Venture Fund in "legal jeopardy."

Walker now alleges she lost her job for blowing the whistle on the group’s mismanagement. She retained a high-powered legal team that included former independent counsel Ken Starr and filed a wrongful termination lawsuit in federal court in November 2022. Her legal team informed New Venture Fund of their belief that the charity had illegally subsidized Secure Democracy to the tune of more than $10 million.

"New Venture Fund, and any project they manage, are expressly prohibited from engaging in any political activity," said Americans for Public Trust executive director Caitlin Sutherland. "Not only do these records show careless and sloppy bookkeeping, but also seem to indicate a pattern of flagrant violations of the rules governing nonprofits."

By that time, however, New Venture Fund and Arabella Advisors had already started their attempt to shield the charity from IRS scrutiny.

On Nov. 5, 2021, Schultz, the New Venture Fund general counsel, sent a letter informing Secure Democracy he had instructed the charity’s staff to refrain from interacting with Secure Democracy employees. Also around that time, Walker alleges New Venture Fund booted her from her Secure Democracy email, according to her wrongful termination lawsuit.

This left Secure Democracy’s small pool of part-time employees in a lurch.

"Suddenly Sarah disappeared. And then who we worked for became very unclear," a former Secure Democracy lobbyist told the Free Beacon. "We started receiving conflicting information about who we worked for and who of our colleagues we were allowed to work with."

New Venture Fund then moved to shut down Secure Democracy and replace it with a new group, Secure Democracy USA, formed in Washington, D.C., on Nov. 17, 2021.

Smith, the Secure Democracy board chair, and Schultz, the New Venture Fund general counsel, signed a contract on Dec. 1, 2021, agreeing to disburse Secure Democracy’s assets to New Venture Fund and Secure Democracy USA. New Venture Fund also agreed to pick up the tab for Secure Democracy’s outstanding bills.

"The most damning thing in this sordid story is the way the Arabella empire shuttered Secure Democracy within weeks of the whistleblower’s warning," said Capital Research Center president Scott Walter. "The powers-that-be must have feared possible damage to the billion-dollar-a-year New Venture Fund, Arabella’s crown jewel."

A former New Venture Fund employee involved in the transaction said Secure Democracy's abrupt shutdown was directly related to the legal implications of New Venture Fund’s control of the organization’s political activity.

"It was determined that there were compliance issues," the former staffer said.

New Venture Fund went on to alter employee timesheets to make it appear that another Arabella Advisors offshoot, the North Fund—a 501(c)4 nonprofit that can legally engage in political activity—had subsidized Secure Democracy’s work in 2021, two former staffers said.

The staffers said they received orders from Eva Keller, an Arabella Advisors employee, around March 2022 to modify timesheets for their colleagues that worked with Secure Democracy the prior year.

"It was all just kind of haphazard," one of the former staffers said.

Sometime later in 2022, the two former employees said, the North Fund billed Secure Democracy USA hundreds of thousands of dollars for the work it supposedly provided to Secure Democracy the previous year. The figure was based on the modified New Venture Fund timesheets.

"The number I saw on a budget sheet was between $630,000 and $700,000," one of the former employees told the Free Beacon.

The modification of time sheets so long after the fact is highly unusual and warrants an IRS investigation, legal experts told the Free Beacon.

"The attempt to retroactively involve a c4 in the spending is an indication that someone realized how risky the political activity is for the charity," said Torchinsky, the nonprofit attorney. "While nonprofits regularly file amendments, going back and changing time sheets after the books are closed and nearly 18 months prior is unusual to say the least."

Secure Democracy’s IRS tax returns for its 2020 and 2021 tax years also contain curious discrepancies. The group’s attorney regularly instructed employees during those years to categorize work as partisan political activity, emails reviewed by the Free Beacon show. But Secure Democracy told the IRS that it engaged in no political activity whatsoever.

"It is certainly odd that they had internally flagged activity as political, and then reported nothing on the 990," said Sternal, the former IRS Tax Law Specialist.

New Venture Fund cut ties with the Voting Rights Lab project in June 2022 because of the compliance issues surrounding its control of Secure Democracy, two former staffers said.

"It was because of the Sarah matter," one source said. "It didn’t make any sense to keep them under their umbrella."

Voting Rights Lab is now a project of SD Foundation, a charity Lewis launched in August 2022. SD Foundation got its start thanks to a $4.8 million cash injection from New Venture Fund, according to an IRS tax exempt application obtained by the Free Beacon.

A New Venture Fund spokesperson told the Free Beacon that the charity complies with the law.

"New Venture Fund supports a wide range of nonpartisan projects from across the ideological spectrum, appropriately uses funds, and complies with the law," the spokesperson said. "Allegations to the contrary are false, and we are litigating them with the former NVF employee making these false claims."

Secure Democracy USA did not return a request for comment.