Donor-Advised Funds Banning the Southern Poverty Law Center Threaten Democracy
We know the Trump Department of Justice has threatened individuals they consider political opponents. Echoing authoritarian regimes worldwide, they’re now indicted Southern Poverty Law Center, or SPLC.
In response, major Donor-Advised Funds (DAFs), including Vanguard, Fidelity, and Schwab, have prevented clients from donating to SPLC, cutting the organization off from funding without even a shred of due process. If the DAFs follow this precedent, it could eliminate a key source of funding for any nonprofits this—or any future—administration chooses to attack.
The funds claim their action is necessary because, according to the administration, it constituted fraud for SPLC to have paid hate group informants. But federal and state law enforcement agencies have known about the infiltrations for years, using information they provided to help secure indictments and convictions. So the charges are spurious.
Fidelity justified its actions by citing a policy of pausing DAF giving if an organization “is being investigated for alleged illegal activities… such as terrorism, money laundering, hate crimes or fraud,” or if “state and federal agencies” are investigating a charitable organization. Schwab’s fund quietly removed SPLC from its list of eligible nonprofits, and a representative read me similar boilerplate, saying the fund was deciding on next steps.
If the Trump administration and its enablers can do this to SPLC, they can do it to far smaller and more vulnerable nonprofits.
The danger is far larger than the SPLC case. The listed criteria would let federal or state authorities cripple any nonprofit they choose, simply by launching an investigation. The organization doesn’t have to be convicted, or even indicted. They just have to be investigated, which makes this a perfect way to target political opponents. The administration has already issued a memorandum promising investigations of groups that promote “anti-fascism,” “anti-Christianity,” or “hostility” toward “traditional American views on family, religion, and morality.” It’s threatened Wikipedia, the Vera Institute for Justice, and the governmental watchdog Citizens for Responsibility and Ethics in Washington, not to mention major universities. All the federal government, or even a state government, would need to do to launch a DAF freeze is to open an official public investigation. And these major DAFs would then block the targeted organization from receiving funding.
The implications aren’t confined to the Trump administration. Under this precedent, Democrats holding power could do the same to disfavored nonprofits. Just launching an investigation would cut off a significant part of a targeted organization’s money flow. The defunding or banning of targeted NGOs is exactly what Vladimir Putin did in Russia, Viktor Orbán in Hungary, Recep Tayyip Erdoğan in Turkey, and Nicolás Maduro in Venezuela. It’s a classic way to eliminate opposition and consolidate power. And the anticipatory compliance of Vanguard, Fidelity, and Schwab is the exact kind of response that empowers would-be dictatorships, whatever their politics.
If a nonprofit is convicted of fraud or money laundering, it’s of course legitimate to remove or suspend their 501(c)(3) nonprofit........
