An elderly, ultra-secretive Chicago businessman has given the largest known donation to a political advocacy group in U.S. history — worth $1.6 billion — and the recipient is one of the prime architects of conservatives’ efforts to reshape the American judicial system, including the Supreme Court.
Through a series of opaque transactions over the past two years, Barre Seid, a 90-year-old manufacturing magnate, gave the massive sum to a nonprofit run by Leonard Leo, who co-chairs the conservative legal group the Federalist Society.
The donation was first reported by The New York Times on Monday. The Lever and ProPublica confirmed the information from documents received independently by the news organizations.
Our reporting sheds additional light on how the two men, one a judicial kingmaker and the other a mysterious but prolific donor to conservative causes, came together to create a political war chest that will likely supercharge efforts to further shift American politics to the right….
The creators of the Marble Freedom Trust shrouded their project in secrecy for more than two years.
The group’s name does not appear in any public database of business, tax or securities records. The Marble Freedom Trust is organized for legal purposes as a trust, rather than as a corporation. That means it did not have to publicly disclose basic details like its name, directors and address.
The trust was formed in Utah. Its address is a house in North Salt Lake owned by Tyler Green, a lawyer who clerked for Supreme Court Justice Clarence Thomas. Green is listed in the trust’s tax return as an administrative trustee. The donation does not appear to violate any laws.
Seid’s $1.6 billion donation is a landmark in the era of deregulated political spending ushered in by the Supreme Court’s 2010 Citizens United decision. That case, along with subsequent changes and weak federal oversight, empowered a tiny group of the super rich in both parties to fund groups that can spend unlimited sums to support candidates and political causes. In the last decade, donations in the millions and sometimes tens of millions of dollars have become common.
Individuals could give unlimited amounts of money to nonprofit groups prior to Citizens United, but the decision allowed those nonprofits to more directly influence elections. A handful of billionaires such as the Koch family and Soros have spent billions to achieve epochal political influence by bankrolling networks of nonprofits.
Even in this money-drenched world, Seid’s $1.6 billion gift exceeds all publicly known one-time donations to a politically oriented group….
illionaires tend to craft intricate estate plans to pass the family business to the next generation, fortified from taxation and protective of their vision. The apparently childless Seid didn’t have that option, but starting in April 2020, he set in motion a plan to make sure his fortune would go toward his favored causes.
That month, the Marble Freedom Trust was created, and Seid subsequently transferred his 100% ownership stake in Tripp Lite to the trust, according to the documents reviewed by The Lever and ProPublica.
In February 2021, Tripp Lite filed its annual reports with the state of Illinois as it had done for decades. But this time, Seid’s typewritten name had been crossed out as an officer of the company. Added as an officer, written in by hand, was Leonard Leo.
A Tripp Lite subsidiary in Nova Scotia, Canada, similarly removed Seid as a director and added Leo as a director in March 2021, according to disclosure filings.
Then, later that same month, Eaton Corporation, a large publicly traded company, acquired Tripp Lite for $1.65 billion.
The transactions appear to have been carefully sequenced to reap massive tax savings. Selling a company that has grown in value after decades of ownership is treated the same way for tax purposes as a person selling a share of stock. If the property has grown in value, capital gains taxes are due when it is sold.Give A Gift Subscription
But Seid transferred Tripp Lite to the Marble Freedom Trust, a nonprofit that is exempt from income tax, before the electronics company was sold. As a result, lawyers say, Seid avoided up to $400 million in state and federal income tax, preserving those funds for Leo’s operation.
“If the person who had owned the stock had sold the stock himself, he would’ve been taxed on the appreciation in the stock,” said Ellen Aprill, a tax law professor at Loyola Marymount University. “Whereas if you give it to the 501(c)(4), there’s no charitable deduction for giving the money, but you avoid the tax on all of that appreciation.”
Political advocacy nonprofits like the Marble Freedom Trust are formally called 501(c)(4) social welfare organizations, after the section of the tax code. Informally, they are known as dark-money groups because donors can remain secret, in contrast to the public disclosures required of gifts to political campaigns or super PACs. While they can spend money directly advocating for or against candidates in political campaigns, such spending cannot be their primary purpose.
In giving to such a dark money group, Seid also avoided another federal levy, the gift tax, thanks to a change signed into law by President Barack Obama in 2015.
There’s a reason why giving money specifically to a trust might have been attractive for an older and ideological donor such as Seid. The founding documents that lay out how the trust will spend money can be harder to change than the governing documents of a corporation, according to Lloyd Hitoshi Mayer, a professor at Notre Dame Law School.
Mayer added that while corporations usually have at least three directors, trusts can have just a single trustee in charge of the organization’s activities.
Leo is the trustee and chairman of the Marble Freedom Trust. In other words, Leo is now in charge of the massive sum of money.