This story originally appeared in Politico Mar. 1, 2023.
https://www.washingtonpost.com/national-security/2023/03/01/fbi-dispute-trump-mar-a-lago-raid/?utm_source=pocket_saves

POLITICO

Legal

Dark money and special deals: How Leonard Leo and his friends benefited from his judicial activism

The Federalist Society co-chairman’s lifestyle took a lavish turn after he became Donald Trump’s adviser on judicial nominations.

By Heidi Przybyla

03/01/2023 04:30 AM EST

A network of political non-profits formed by judicial activist Leonard Leo moved at least $43 million to a new firm he is leading, raising questions about how his conservative legal movement is funded.

Leo’s own personal wealth appeared to have ballooned as his fundraising prowess accelerated since his efforts to cement the Supreme Court’s conservative majority helped to bring about its decision to overturn abortion rights. Most recently, Leo reaped a $1.6 billion windfall from a single donor in what is likely the biggest single political gift in U.S. history.

Fundraising reports for 2022 have yet to be filed but spending by Leo’s aligned nonprofits on his for-profit business in 2020 and 2021 demonstrates the extent to which his money-raising benefited his own bottom line. And it shows how campaign-style politics — and the generous paydays that go along with it — are now adjacent to the Supreme Court, the one U.S. institution that’s supposed to be immune to it.

A POLITICO investigation based on dozens of financial, property and public records dating from 2000 to 2021 found that Leo’s lifestyle took a lavish turn beginning in 2016, the year he was tapped as an unpaid adviser to incoming President Donald Trump on Supreme Court justices. It’s the same period during which he erected a for-profit ecosystem around his longtime nonprofit empire that is shielded from taxes. Leo was executive vice president of The Federalist Society at the time.

The for-profit and nonprofit entities share more than just Leo’s involvement: The same longtime ally managing the books for two of his new leading nonprofits, Neil Corkery, is also chief financial officer of Leo’s for-profit company, POLITICO confirmed in IRS filings. One of those nonprofits paid the for-profit $33.8 million over two years.

“That’s a classic type of situation the IRS looks into if it appears you [via a nonprofit] are shoveling money to yourself in a for-profit context,” said Philip Hackney, an expert on tax law and charities who worked in the Office of the Chief Counsel at the IRS.

Leo’s Virginia-based CRC Advisors — a political consulting firm that was created in 2020 and for which he is chairman — declined to say what services it provided for the $43 million payments.

POLITICO also asked CRC how much of the millions in spending since 2016 by his aligned nonprofits Leo has kept for himself and about concerns by ethics experts that the lack of disclosure underscores the need for greater transparency around the court. Leo did not respond to multiple requests for comment. CRC also did not comment on Corkery’s role.

“CRC Advisors puts its clients’ money to work more effectively than any other enterprise of its sort and we are blessed to be able to have this kind of impact in our country,” the company said in a statement.

A web of nonprofits

The majority of CRC’s payments came through The 85 Fund, a rebranded dark money group that Leo has said he plans to use to fund conservative causes nationwide. Corkery and his wife, Ann, founded and ran the nonprofit under a different name for more than a decade, during which time Leo directed funds toward it. Such nonprofits are exempt from taxes and not required to disclose donors. It is now run by Carrie Severino, a former law clerk to Justice Clarence Thomas.

The official address for The 85 Fund, which has appeared for at least ten years on paperwork registering dark-money groups associated with Leo, is Suite 268 of a building in the Georgetown neighborhood of DC. It houses a UPS store, where an employee said there are no suites, only mailbox rentals.

Corkery “possesses the organization’s books and records” for The 85 Fund and Leo’s Marble Freedom Trust, which received the $1.6 billion, according to IRS filings. The two groups appear to have no websites, logos or official phone numbers other than Corkery’s in federal filings.

For more than a decade the Corkerys have also been board members or treasurers of organizations aligned with Leo that spent on campaigns opposing same-sex marriage and abortion rights and promoting judicial appointments.

CRC did not disclose Corkery’s CFO position in its annual report — which the state requires for “all principal officers” — or in incorporation filings in the state of Virginia. Corkery is listed as a CRC “beneficial owner” in company paperwork filed in Washington DC.

Both Hackney, the former IRS official, and Marcus Owens, who began working at the IRS under President Gerald Ford and directed the IRS’s division on tax-exempt organizations for a decade under Presidents George H.W. Bush and Bill Clinton, said the broader concern is whether federal tax laws are being abused, and that depends on whether the nonprofits are paying CRC fair market rates for whatever services are rendered.

“It’s an extraordinary amount of money for a fairly intangible or indistinct product or service,” said Owens.

“That’s where the big problem is going to lie, in whether the goods and services were real and whether they were provided at no more than fair market value,” said Owens, who helped design and enforce federal programs for exempt organizations. Excess payments can trigger penalties and even revocation of tax exempt status, he said.

In its 2020 IRS filing, the 85 Fund stated it did not “engage in any excess benefit transaction.”

Trump’s ‘judge whisperer’

The payments to CRC over two years from Leo-aligned nonprofits represent an increase over the already significant $15 million a separate Leo for-profit entity, known as BH Group, took in over four years during Supreme court nomination public relations campaigns beginning in 2016.

The spending by Leo-aligned non-profits on his for-profit businesses coincided with changes in his personal lifestyle and finances. IRS and other public records between 2016 and 2020 show a major expansion of Leo’s personal wealth that coincided with the start of his work for Trump and the creation of his own for-profit entity called BH Group. Both happened in 2016.

Over the two decades before he became Trump’s “judge whisperer,” Leo had maintained a largely middle-class lifestyle directing one of Washington D.C.’s many nonprofit organizations.

Since 2016, however, his recent wealth accumulation has included two new mansions in Maine, four new cars, private school tuition for his children, hundreds of thousands of dollars in donations to Catholic causes and a wine buyer and locker at Morton’s Steakhouse, according to POLITICO’s review of public records.

At least two of Leo’s former Federalist Society colleagues — who were also bringing in hundreds of thousands of dollars from Leo’s aligned groups while working for the society — now work at CRC.

“If millions of dollars in dark money are sloshing around, it makes it really easy for people on the inside to take a cut,” said Ciara Torres-Spelliscy, a professor and expert on money in politics at Stetson University College of Law. Political consultants for political candidates often reap significant profits. “That behavior is, unfortunately, now showing in the judicial nominating process,” she said.

“There are all sorts of dimensions in which you could reform the courts, but putting more transparency around the money that’s going into judicial appointments would be a good place to start,” said Torres-Spelliscy.

There are no campaign finance laws or ethics rules governing the Supreme Court and its nine justices serving lifetime terms. Justices have chosen to make annual disclosures on outside income, though those forms have been criticized for having serious gaps.

Questions for the Federalist Society

The court’s 2022 decision overturning half a century of the federal right to abortion was widely seen as a victory for the conservative legal movement led by Leo.

Trump picked his court nominees from a list drawn up by Leo, who then served as his unofficial adviser in the White House. A constellation of outside groups affiliated with Leo poured tens of millions of dollars in anonymous donor funds into promoting those nominees — Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett — thereby cementing a new conservative majority for the next generation.

In its statement, CRC likened itself to political consultants on the left that work with progressive nonprofits and foundations.

The Federalist Society did not respond to a request for comment. An educational institution that has for decades expressly rejected inserting itself into political campaigns, the Federalist Society remains exempt from taxes because “it is organized exclusively for charitable, educational and scientific purposes,” according to its IRS filings.

Founded in 1982 as a safe harbor for conservatives in academia, the Federalist Society has fought to preserve its brand as the premier debating society for conservatives, said Steven Teles, a Johns Hopkins University political science professor who authored a book on the rise of the conservative legal movement. Rampant fundraising and political activism have been strictly off limits.

“Having gone through all of the early history of the Federalist Society, I don’t think anybody looked at this and thought ‘there’s a racket there,’” said Teles. “They wanted to create something that was so high-minded and so principled that, in a way, it would also make dominant liberalism look bad, mainly by showing how much more intellectual they were.”

Steven Calabresi, Leo’s fellow co-chairman, and President Eugene Meyer have sought to “keep distance” from Leo’s activities, said Teles, including by granting leaves of absence for Leo around his advocacy work, he said. Still, the Federalist Society has become financially intertwined with Leo, receiving $5.6 million in grant money from The 85 Fund in 2020.

In an interview, Calabresi said he didn’t know anything about Leo’s work beyond the confines of the Federalist Society.

“I personally don’t believe that Leonard is motivated by greed,” he said. “I think Leonard is motivated by ideology and ideas. I do think he likes to live a high-rolling lifestyle, but I don’t think he’s in the business because of the money.”

Meyer did not respond to a request for comment.

Flying too high?

The 57-year-old Leo has been depicted in news reports as a deeply religious man driven by his personal and spiritual beliefs, mainly his Catholic faith. He attends mass daily. Allies liken him to a philanthropic middle man. But his relatively recent lavish lifestyle illustrates the millions of dollars that helped make a court that’s becoming an epicenter of the nation’s intensifying culture wars.

Hackney, the former IRS official, said that while there’s no explicit prohibition on conflicts of interest in U.S. tax law, IRS investigations are typically triggered when an individual creates a nonprofit that then pays a for-profit that “makes them very wealthy,” he said.

Hackney cited the chief executive of the National Rifle Association Wayne LaPierre as a cautionary tale. In 2020, the New York attorney general brought a lawsuit against the NRA alleging LaPierre and others used NRA assets for their own benefit in violation of nonprofit laws. While the case is unlikely to go to trial, the NRA has seen a steep decline in donations and is facing insolvency.

“He basically flew too close to the sun. That’s the question for Leonard Leo. Is he flying too close to the sun?” said Hackney, now associate professor of law at the University of Pittsburgh School of Law.

“In the case of somebody like Leonard Leo, he’s obviously been very successful in what he does, so what you pay him is hard to put a value on,” he said. Also, a key issue in LaPierre’s case is that the NRA board was allegedly presented with false information.

Leo left his post as executive director of The Federalist Society in 2020 to begin CRC Advisors, though he remains a co-chairman.

Between 2000 and 2016, Leo earned somewhere between $125,000 and $435,000 annually, according to Federalist Society IRS filings. His wife, Sally, has listed her occupation as “homemaker,” and a review of public records did not find major assets other than his home prior to 2016.

Before purchasing his McLean, Virginia, home in 2010 with a fixed-rate loan from the Federal Housing Administration, Leo listed a three-bedroom rental apartment in Arlington as his mailing address, according to a 2006 filing with the Federal Election Administration.

One month after Leo formed his BH Group in 2016, Trump released an updated list of conservative jurists who were suitable candidates for nomination to the Supreme Court that included Neil Gorsuch. Leo was the first person from Trump’s team to reach out to Gorsuch in December of 2016.

Thereafter, Leo’s personal wealth appears to have skyrocketed in tandem with major victories on the road to an ultraconservative court.

Weeks after Justice Anthony Kennedy announced his retirement, in August of 2018, Leo paid off the mortgage on his home in Virginia after making numerous renovations.

Just months after that — and one day before the Senate took a controversial procedural vote clearing the way for Kavanaugh’s appointment to replace Kennedy — Leo bought a second home, a $3.3 million mansion in Mount Desert, Maine.

The affluent seaside village is a haven for a number of heirs to Gilded Age oil, industrial and banking barons like the Rockefellers and Morgans. The seller was an heir to chemical giant W.R. Grace chairman and CEO J. Peter Grace.

It was there he hosted a controversial fundraiser for Sen. Susan Collins, the Maine Republican whose vote for Kavanaugh was considered decisive. A year later, on July 3, 2019 — and about a month after the Washington Post first revealed the 11-bedroom mansion’s existence — that mortgage too was paid in full, according to a lien discharge record. Following apparent improvements, the home was assessed for $4.4 million in 2022.

Meanwhile, in 2021, the same P.O. Box used to purchase Leo’s first mansion was used to buy another home about a mile away in Mount Desert for $1.65 million. This one was purchased from an heir to the financier and philanthropist Richard K. Mellon.

During that same period, Leo and his wife, Sally, became “Stewards of Saint Peter,” a designation given to those pledging more than $1 million to Vatican initiatives, sponsored events and made multiple additional donations ranging from $10,000 to $75,000 to Catholic charitable causes and $75,000 to a COVID relief fund in Maine.

Leo also acquired a wine locker at Morton’s Steakhouse and hired the chief steward at the Trump International Hotel as his wine buyer, according to the book, “Supreme Ambition.”

A widening circle of friends

Leo has maintained close ties to at least one Supreme Court justice, Clarence Thomas. During a 2017 award ceremony, Thomas’s wife, Virginia, gave Leo an award and called him “a mentor” during a ceremony at Trump Hotel.

“He has many hats … he doesn’t really tell all that he does,” said Thomas, though Leo is “an amazing cook, he knows food and wine.”

Justices are not subject to the same conflict of interest rules as members of Congress, the executive branch and other U.S. judges.

But Leo’s close relationship with the Thomases raises questions about his access to other justices he campaigned for, now that they are issuing the rulings his donors desire, said Kyle Herrig, president of Accountable.US, a non-partisan progressive group that investigates corporate influence in politics.

Many of Leo’s closest associates have also taken in significant sums from his network, in many cases via their own self-run entities.

Leo’s friend Ronald Cass — Leo was best man at his wedding — is listed along with his wife as the sole officer of The Center for the Rule of Law, a nonprofit registered to their home address.

The nonprofit, which was created in 2006 and described as an independent “center of international scholars analyzing rule of law issues,” doesn’t have much of a footprint. The only website that purports to represent it — it contains a “chairman’s statement” from Cass and is cited in at least one university law journal — appears to either be inactive or hacked, given a series of links at the bottom of the page to erotic websites. Cass is also president of his own legal consulting business, Cass & Associates, PC in Virginia.

Cass’s group received $2.9 million between 2017 and 2019 from Leo’s 85 Fund for consulting, according to IRS filings. The main evidence of work Cass’s group did for The 85 Fund is a 2016 amicus brief in an immigration-related case. During Gorsuch’s nomination process, Cass also authored newspaper columns pressing for his confirmation.

Cass and his wife, Susan, did not respond to two emailed requests for information on what consulting services were provided.

Leo associates also made significant money while still working full time for the nonprofit Federalist Society.

Maria Marshall, previously Leo’s director of operations at the Federalist Society and a former scheduling director for Collins, is listed as the sole officer of YAS LLC, which is registered in Washington and received $775,000 over three years from the Leo-connected Rule of Law Trust while Marshall worked at the Federalist Society.

CRC Advisors president Jonathan Bunch received $1.54 million for “consulting” for the Rule of Law Trust in 2018, the same year the Federalist Society listed him as working 40 hours a week with a salary of $156,625, according to the group’s IRS filing. Both Bunch and Marshall, who joined Leo’s CRC Advisors fulltime in 2020, did not respond to requests for comment on these side businesses.

On the second day of hearings to confirm Justice Amy Coney Barrett in October of 2020, Bunch closed on a $1.285 million waterfront home on the Chesapeake Bay.

The wealth accumulation of Leo and a small circle of associates shows how they benefited from the making of the court’s current conservative majority, said Herrig.

“His lifestyle upgrade was made possible by using his network of nonprofits to pour money into his for profit consulting firm,” he said. “This raises serious questions about how he will spend the $1.6 billion from a rightwing billionaire.”