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 status. But SPLC has neither been tried nor convicted, so the DAFs are letting a hostile administration’s mere accusation of wrongdoing become an excuse to block funding. The $326 billion of money that DAFs hold is part of the lifeblood of nonprofits. The actions of these DAFs directly undermine democracy by excluding a group the administration has targeted and potentially denying funding to other targeted groups. That’s true whatever you think of SPLC.

If there’s a nonprofit that could weather this, it’s SPLC, with its $786 million endowment. I don’t give to them because I think other groups are more impactful for the money they spend. But if the Trump administration and its enablers can do this to SPLC, they can do it to far smaller and more vulnerable nonprofits. For instance, they could target nonpartisan voter engagement groups, drying up funding (including pledged contributions) at the point when these groups need it the most to engage citizens in democracy. Damaging attacks on nonprofit funding also don’t have to come from the federal Department of Justice. Under Fidelity’s criteria, attacks could come from state governments as well, with potential targets including either conservative or liberal groups depending on which party runs a particular state.

But ordinary citizens have the power to change this. The campaigns that got ABC to reinstate Jimmy Kimmel offer a model. This issue has less visibility, but for the nonprofits it could affect is equally critical. If we have money in a DAF, our calls or emails could well make the difference. Schwab told me that they’d been getting lots of critical responses. But even if we don’t have a DAF, nearly 60% of us have retirement or other investment accounts, with most housed at the major affiliated brokerages. So we can reach out as well, threatening to switch our investments to brokerages that don’t empower authoritarian initiatives, like TIAA-CREF (at least for now Merrill Lynch-Bank of America is still putting through grants as well), and, if we have DAF’s, transfer them to ones that haven’t banned SPLC contributions, like Amalgamated Bank, Impact Assets, or Daffy. A group of socially responsible investment advisers have created a sign-on letter. New York’s historic Riverside Church just divested $12 million from Vanguard. A long-time activist friend created a leavefidelity.com site with cut and paste templates to send to the companies involved.

The goal is to echo what people did in the Kimmel situation when they boycotted the channels, advertisers, and theme park properties of national ABC-Disney and local Sinclair and Nextstar stations. People also protested in front of affiliated ABC stations—something they could do at the headquarters of the relevant brokerage houses. While DAFs are technically separate entities, they share investment management, administration, and the parent brand, which offers them as an incentive for clients. So we’re far from powerless.

The job of the brokerage houses is not to police client giving. Their affiliated DAFs need to allow donations to all legitimate nonprofits, whether or not the Trump administration—or any administration—agrees with what they do.