What's Wrong with Right-Wing Grift?

A recent NY Times essay by Thomas Edsall reports on Leonard Leo's "Big Plans for America," which are, from the perspective of "barbarians, secularists and bigots" like me, appalling. Most of the essay is not about the plans' substance, however, but about the funds that Leo has at his disposal for turning them into reality and how he has been spending those funds. According to Edsall and the sources he cites, much of that spending is on fees to firms that Leo himself runs. Here are the key allegations (which I have no independent basis for either confirming or challenging):

The millions of dollars Leo has raised through his tax-exempt nonprofits have, in turn, flowed to profit-making consulting companies owned, in part or wholly, by him. In 2016, he created the BH Group, a for-profit consulting firm that is now defunct, which received at least $6.9 million from tax-exempt donor nonprofits run by him. Four years later, Leo formed CRC Advisors, also a profit-making consulting firm. Since then, two of his tax-exempt donor organizations, the 85 Fund and the Concord Fund, have paid CRC Advisors more than $77 million, according to reports filed with the I.R.S.

Edsall reproduces a question he posed to Leo by email: whether the payments "amount to self-dealing, in violation of tax law?" He also reproduces Leo's answer, which denies any wrongdoing and professes that the payments were for services rendered by the "over 100 best-in-class professionals" his current consulting firm employs. Those professionals, Leo's response goes on, "provide an unsurpassed level of value and impact through an all-encompassing suite of services, including program and events management, content creation, research, and all aspects of public affairs." Leo also contends in his email that the fees his firm charges are in line with, and actually lower than, what comparable firms charge for progressive causes.

It is clear from Edsall's essay that he is dubious of those rejoinders. Again, I have no independent basis whatsoever for evaluating either Edsall's (not-so-subtle) accusation or Leo's response. However, I do want to note that there's something of a contradiction in Edsall's column. I'll then use that seeming contradiction as a basis for answering the question that titles this blog post: what's wrong with right-wing grift?

Edsall, a liberal, is alarmed by Leo's substantive agenda--his "big plans for America." Given that, shouldn't Edsall be happy if it turns out that Leo is not actually providing value for fees but mostly enriching himself? Each dollar Leo pockets and spends on fine wine or expensive suits (if that is what he is doing) is a dollar not spent to turn America into Gilead. The Edsall column ends up as a muddle because it mixes discussion of Leo's effective work for far-right causes with accusations of skimming, which, if true, would mean Leo is not as effective in working for those far-right causes as one might worry.

As I've now indicated several times, I don't have any basis for evaluating Edsall's accusation. Because Leo is a Cornell Law alum, I've met him on several occasions, during which we've had cordial conversations. He appears to have expensive tastes but he's also clearly quite effective at what he does, which, from my perspective, is unfortunate. Thus, it strikes me as highly unlikely that Leo is skimming in any substantial way, if at all.

But suppose someone were skimming. Actually, we don't need to suppose. We have various prominent examples. Consider "We Build the Wall," an organization that raised money from Trump-supporting donors to . . . well . . . build a wall at the southern border. The founders of the We Build the Wall took in over $25 million and enriched themselves with a good portion of it. For their misdeeds, they were tried and convicted for fraud. Except for one of the principals--Steven Bannon--who was pardoned by the former Grifter in Chief because game recognizes game.

Are we supposed to feel bad that We Build the Wall didn't build the wall? No, of course not. Nonetheless, we can nonetheless conclude that the fraud was harmful. If Sam goes to Herbert's House of Carnage to buy an AR-15 and Herbert sells Sam what appears to be an AR-15 but is actually a cheap knockoff that is not an effective weapon, we can think that Herbert has unlawfully and wrongly defrauded Sam, even if we think that on balance the world is a tiny bit safer with one fewer effective semi-automatic rifle at large. Or to take a more extreme example, the murder of a very bad person is still murder, warranting punishment, even if the world is better off without the victim roaming the Earth.

The simple answer to the question "what's wrong with right-wing grift" is that it's wrong because it's grift. Or put another way, it's wrong because it's grift despite the fact that the grift diverts funds that would otherwise be used for malign purposes.

We might even go further. We might compare fraud to other forms of corruption. Shortly after Trump's election in 2016, I wrote a Verdict column identifying three sorts of harm arising out of Trump's corrupt self-dealing. The third such harm I identified is systemic:

Corruption is contagious. When greasing the palms of the rulers is the way to get ahead, even people who are inclined to play by the rules will have reason to cheat, if only to avoid being left behind. The effect then feeds on itself, and in turn undermines the entire economy.

A related dynamic operates with respect to fraud. As Adam Smith observed in both The Theory of Moral Sentiments and The Wealth of Nations, well functioning markets depend on trust. If you cannot trust that the loaf of bread you buy is actually made of wheat flour rather than sawdust, you will either need to invest a great deal of time monitoring the baker or you will end up laboriously baking all of your own bread. For repeat-player transactions, we can rely on merchants' interest in maintaining their reputations, but in a complex economy with numerous one-time interactions, consumers must depend on the existence of an effective legal system to deter and punish fraudsters. (This explains why purchasing illegal drugs is so dangerous. If you get baby powder instead of cocaine or, worse, fentanyl instead of heroin, you can't exactly report the fraud to the police, even if you survive the fentanyl.)

The same is true for transactions with non-profits. Some of the people who donated to We Build the Wall may have only ever donated money to right-wing causes. But many probably also donate to charitable causes in their communities, to their churches, and so forth. The experience of being defrauded--even in the purchase of an AR-15 or in donating to a racist project--will deter people from making all sorts of transactions, including worthwhile charitable projects. And news of the frauds will not only alert the public to the particular fraudsters but will generally undermine the sort of trust on which a robust economy and society more broadly depend.