New Venture Fund’s financial support for Sher Edling could soon come under IRS scrutiny
A watchdog group is asking the IRS to investigate the left-wing dark money behemoth New Venture Fund (NVF) over its financial support for Sher Edling, a law firm leading several high-stakes climate change lawsuits against oil companies on behalf of dozens of Democratic states and cities nationwide. According to tax filings, in three years, the NVF has provided more than $8.4 million in grants to Sher Edling and has raised an additional $10 million that could be disbursed to the for-profit firm in the future.
In a complaint obtained by the Washington Free Beacon, the right-leaning American Accountability Foundation argued that the NVF’s support for Sher Edling violates federal law since it is not an activity that furthers its tax-exempt purpose and is instead “meant to financially benefit Sher Edling and its attorneys.” The watchdog noted that while the NVF says its funding is designed to support Sher Edling’s environmental programs, Sher Edling itself has said the funding is used to support the firm’s “general operations.”
“These ‘general operations’ potentially encompass a wide range of possible uses of NVF payments by Sher Edling lawyers—for example, to pay increased partner compensation or to fund the costs of litigation that has nothing to do with NVF’s exempt purpose,” the complaint states.
The watchdog’s complaint sheds light on the shadowy funding scheme that ultimately makes Sher Edling’s risky first-of-its-kind litigation possible. It also represents a potentially existential threat to that funding scheme—the watchdog is asking the IRS to revoke the NVF’s tax-exempt status, impose excess benefit transaction excise taxes, and levy penalties on the fund.
And the complaint could deliver a loss to many high-profile Democrats who have contracted Sher Edling and touted the litigation as a win in their fight to crack down on the oil industry and stave off cataclysmic global warming.
Overall, since its founding in 2016, Sher Edling has taken up such lawsuits against the oil industry on behalf of at least nine states and more than a dozen cities. The lawsuits, which remain ongoing, accuse companies like BP, Chevron, ExxonMobil, and Shell of causing global warming and bearing responsibility for damages stemming from hurricanes, tornadoes, heat waves, and other extreme weather events.
“The climate crisis is here, and the costs of surviving it are rising every day. Hawaii taxpayers should not have to foot that bill,” Hawaii governor Josh Green (D.) said earlier this year after hiring Sher Edling to sue several oil companies.
“There is no justice without accountability,” added Chicago mayor Brandon Johnson (D.) after his administration hired Sher Edling last year to lead an identical lawsuit.
Oil industry defendants have blasted the lawsuits as frivolous and a backdoor attempt to bankrupt the industry in pursuit of a green energy agenda. If just one of the lawsuits proves successful, the companies could be on the hook for hundreds of millions or even billions of dollars in damages.
As a tax-exempt nonprofit, meanwhile, the NVF isn’t required to disclose its donors. That allows it to serve as a pass-through entity and obscures the actual sources of the grant money given to Sher Edling.
The NVF is the largest of five funds that make up a billion-dollar nonprofit network managed by the Washington, D.C.-based consulting firm Arabella Advisors. The NVF has disbursed more than $230 million in management fees to Arabella Advisors since 2006.
“NVF funneled over $8 million to Sher Edling’s radical climate lawsuits under the flimsy guise of ‘general operations,’ defying IRS mandates that every dollar must serve a true charitable mission,” American Accountability Foundation president Tom Jones said in a statement to the Free Beacon. “If these slush fund schemes prove true, NVF’s nonprofit shield should be stripped and slammed with stiff penalties.”
The complaint, meanwhile, has wide ramifications for the NVF’s other tax-exempt activities. In addition to organizing support for Sher Edling, the group spent an eye-popping $593 million funding various left-wing initiatives in 2023, making it one of the largest nonprofits in the world.
