For many, particularly the GOP members of the House Ways and Means Committee, the name Arabella Advisors has become synonymous with political “dark money.”
Arabella defines itself as a philanthropy consulting firm, but Republican House members see something more sinister. Each year, Arabella helps guide more than $5 billion in gifts and impact investments so that donors — including foreign billionaires like Hansjörg Wyss — can funnel money through some of the firm’s clients, like the Sixteen Thirty Fund and the New Venture Fund, in hard-to-trace ways that support left-leaning nonprofits. House members have held a series of hearings in which witnesses warned of the “sprawling empire” of dark money led by Arabella and have introduced legislation they say is designed to shine a light on money in politics.
Like conservative donor networks, such as those created by Charles Koch and Leonard Leo, Arabella’s clients benefited from the U.S. Supreme Court’s 2010 Citizens United ruling, which allowed donors to flood money anonymously to nonprofit social welfare groups, or 501(c)(4)s, that can support candidates in a limited way as long as their work is not coordinated by a campaign. While 501(c)(3) charities can help people register to vote and hold voter education sessions, they are not permitted to advocate on behalf of candidates.
Eric Kessler, the founder of Arabella Advisors, blames the Citizens United ruling for injecting billions of dollars into the political process. He supports the Disclose Act, a measure pushed by Democrats that would require so-called dark money 501(c)(4) nonprofits to disclose their donors. While he sees a need for policy changes, Kessler is adamant that Arabella is a service provider rather than a moneyed, hidden hand in politics.
Kessler remains a board member and minority owner of Arabella. He sold the majority of the business in 2020 and stopped serving in an executive or management role at that time. He recently spoke with the Chronicle about how the work of Arabella compares with conservative donor networks — spoiler alert: he says it is quite different — and about how Arabella came to be such a force in progressive philanthropy.
This interview has been edited for clarity and brevity.
Arabella has grown into a mammoth philanthropy consultancy. When you started, what did you sense that donors needed?
I had seen a lot of donor money used wisely and a lot of donor money used less wisely. In the dot-com era, before the recession, there was great optimism, a lot of new wealth being created, and a lot of wealth being transferred. I made a bet that the folks making wealth were making it differently than their parents did. In different industries, with different rules, different playbooks. I knew that if an entrepreneur had built their wealth doing things totally differently than the generations before them, it seemed plausible that they would use their money in different ways as well.
I looked at who else was out there to provide services to those donors. Nobody struck me as very innovative, and nobody struck me as or leaning into what the future of philanthropy was going to be. There didn’t seem to be an entrepreneurial perspective or look at what these new wealth generators would need to pursue their goals.
When you say that you saw some money being given less wisely, what do you mean?
Well, if you think back to the early 2000s donors, big foundations were just starting to think about strategy — like having a strategy was a relatively new thing for the vast majority of donors. Many family philanthropists were working off the same list of 10 nonprofits that their parents had grown up writing checks to every year.
What did these donors actually want?
Small family foundations were looking for operational efficiency. So Arabella started with an outsourced family foundation management solution, which was unique at the time. Big foundations were just grappling with how to evaluate their grant making in a way that was both transparent and transformative. The biggest foundations in the world were just hiring their first evaluation officers. It was the early stages of foundations and philanthropists thinking about the corpus of their assets and putting that to work through impact investing. Those two words hadn’t been put together. It was just a very rare concept and not a reality for 99.9 percent of the donors at the time. So that’s where we started.
Fast forward to the present: Arabella’s more known for its political sway than for providing services to family foundations. Did you foresee it becoming a force in civic life and in policy? Did you anticipate Arabella being seen as the liberal Koch network?
I do not speak for Arabella as a company. The premise of the question isn’t something that I really relate to. The people who suggest Arabella has political sway misunderstand the nature of the business. Arabella is an analyst. We are an operations provider. We provide compliance services to donors, including fiscal sponsor entities. Arabella has never sought to have political sway, and I don’t believe that we do.
Our clients have political sway, and our clients need help evaluating the impact of their work, or clients need help analyzing their options, or our clients need help with compliance to make sure that the grant making they do follows all rules and regulations.
Do you consider your clients part of a network that could be identified as an Arabella network in the same way that there is a network surrounding Charles Koch or Leonard Leo on the conservative side?
I don’t think that there is a reasonable comparison between the work that Arabella does and the work that the Koch brothers or others do. Arabella was not founded around an ideological mission. We didn’t say, “Here’s how we want the world to be and we’re going to go convince people to pursue that agenda.” It’s only natural that, among our clients, there are ones who collaborate together and come together and share ideologies, but our client base is not inherently political or even policy-oriented. The firm has hundreds of clients, and those clients have thousands of donors, and it represents a great diversity of viewpoints.
What do you think about the term dark money and does it apply to Arabella?
I opposed the Citizens United decision in 2010 that created this. And I wish it were reversed now. I support the Disclose Act, which would go a long way, even as a first step toward overturning the mistake in American politics, which is the conservative-led Citizens United decision. I’m in favor of campaign finance reform for all — evenly across the board — and I think that we should have a new playbook and a new set of rules for everybody.
Critics, including Republicans on the House Ways and Means Committee, believe wealthy donors use intermediaries supported by Arabella to obscure their identities. Doesn’t that erode public trust?
There is good reason for some donors to want to remain private. Some of it is faith-based and some of it is security-based. Nonetheless, I support the Disclose Act. And I don’t know the extent to which donor privacy has been a leading factor in public sentiment.
Aren’t voter registration drives and get-out-the-vote efforts supported by Arabella clients designed to benefit Democrats?
Arabella as a firm is not involved in partisan politics. We provide services to clients and help them comply with laws and regulations. At the same time, it does strike me, as an individual, that almost everything in society has become political. I think that’s unfortunate.
I think that anything that seeks to engage citizens in its government — and how it works from registering to vote, participating in public hearings, and showing up and being a part of our democracy — is a good thing. I do think that there is a dividing line between some forms of public engagement and capital-P politics and election campaigns. That’s determined by laws and regulations, and if there’s more clarity that’s needed there, I’m all for it.
Do you see any momentum for change in Congress? Could the inquiries made by the House Republicans result in policy changes?
Members of Congress across the aisle are talking about undisclosed donors and the role of money in politics. That’s a good thing. But they approach it from very different perspectives, and I don’t know if they’re getting closer. I do hope, as we look at election campaigns with a record amount of spending, both by the campaign and outside parties, that something triggers cooler heads to prevail. The way the system operates now is this is not good for anyone, particularly voters.
I don’t think the demonization of Arabella or its donors will be the trigger that creates reforms. I think the inaccurate and at times defamatory demonization of me and the firm that I founded is in part what draws us apart. Beyond some creative headlines and defamatory statements, I don’t really see how anybody benefits from this.
If anyone thinks that I or Arabella make decisions for the biggest foundations and philanthropists in the world and that they do what we tell them to do, that’s laughable. It just isn’t what the firm is or what we do. It’s a sideshow and a distraction created by folks with a very clear political mission.
Conservative philanthropist Leonard Leo has repeatedly said Arabella is his model. What do you make of that?
I don’t spend much time thinking about Leonard Leo. I don’t know anything about him beyond what I read in the papers. My understanding from what I’ve read is that he set out decades ago to reshape the American judicial system to reflect his deeply conservative values.
I’ve founded an award-winning company that helps nonprofits pursue their goals. And it works with blue chip foundations around the world. We’ve won every business award that there is for for a consulting company. We’re not getting political awards. We’re not touted for successfully driving politics. That isn’t what we do.
Throughout the nonprofit world, there’s been a growing dependency on larger donors. Is this a problem?
From the beginning, I was really encouraged by the investments made by many of the largest donors to evolve the practice of philanthropy and provide more transparency and information and opportunities for engagement by a broad range of funders.
Those middle donors are still there. I don’t think they’ve gone away. Increasingly, they’re using donor-advised funds and other legal structures for their philanthropy for efficiency. That makes it harder for people to access, but I don’t think they’ve gone away. Also, the largest foundations and largest philanthropists have gotten larger and they’re more present in the news. I think it’s more of an information challenge than a “where did they go” challenge.
