The SPLC is going down

And that is almost certainly a good thing but it is going to have many ramifications

Disclosure: A lot of this post is based on Patrick McKenzie (patio11)’s¹ recent Bits About Money article and I’m going to be quoting from it extensively. It’s very long and if you do as I did and follow many of the documentary links to confirm will take several hours to read. But if I were, hypothetically, a DoJ AG who was charging the SPLC with Banking Fraud and wondering what else to charge them with, or I were the IRS or a Republican congressional staffer, I’d be reading it and taking copious notes about people I’d like to talk to and email etc. records I’d be asking financial institutions if they have copies of (spoiler alert - they do have those copies backed up in multiple places).

The SPLC Fraud Prosecution

The TL;DR of the first part of the BAM article is that the SPLC is going to be found guilty of bank fraud because there’s no “we did it for good causes” exception to laws criminalizing lying on banking forms / to bankers and the President and Chief Executive officer of the SPLC, wrote to a bank stating that:

Pursuant to the discussion we had earlier this week, please let this correspondence serve as confirmation that the accounts listed below were opened for the benefit of Southern Poverty Law Center operations and operated under the Center’s authority. The following accounts are listed below:

…

That is to say admitting that when those accounts were created the people who asked for them to be created lied on the forms about the use of the accounts and completely failed to mention that they were for the benefit of the SPLC.

Patrick also points out that the fraud on donors charges, while a bit of a stretch, are by no means unprecedented in financial circles (my emphasis below):

Many commentators, including the government itself, have made this indictment mostly about the fraud against donors. Many believe that argument to be a stretch. I agree, unreservedly. As a connoisseur of this genre, I have read few documents which are simultaneously so far from the conventions while adding so little new to the canon.

It is a stretch that the government routinely makes and wins in other contexts. Matt Levine has collected several hundred examples of the genre, which he calls Everything Is Securities Fraud. That genre is, succinctly, “If you run a for-profit corporation, and have raised money from outside investors, and anything at all goes badly, and you did not describe exactly that thing to the investors as a risk, you have arguably defrauded your investors.” The government is comfortable making that argument and wins it routinely.

If everything for profit share issuing organizations do that is wrong is securities fraud then it follows that anything non-profits do similarly is donor fraud. Given the right jury (coincidentally we note the prosecution is in Alabama not Washington DC) guilty verdicts seem quite likely on all charges to date.

That’s not the interesting part. The interesting part is what else the SPLC might be charged with, who else might be charged along side them and what other government agencies such as the IRS might feel obliged to do as a result.

Free Speech and Choosing Your Customers

The rest of the article documents the SPLC’s involvement in the twitter files and related censorship attempts and documents (with, sadly, less direct evidence than one might like) how the SPLC and related entities attempted to freeze people and entities they didn’t like out of the financial system. Why is there less evidence? Let me quote:

Meeting notes were frequently kept, and sometimes widely circulated, as is the routine practice in industry. The meetings were documented on calendar invites (often with full participant lists), shared docs, attachments, emails, and other contemporaneous records. In the ordinary practice of industry these primary documents distribute themselves promiscuously into secondary documents; think of an email being screenshot to paste into a PowerPoint to discuss the response in a meeting. Records exist on conservatively hundreds of systems and can be accessed by many more than 10,000 people.

No employee of an industry participant I have spoken to, familiar with the contents of the meetings, was willing to provide quotes for publication with their name and corporate affiliation attached.

Their reasoning included not being authorized to disclose private information, fear for their personal and corporate reputation, future career consequences for leaking, personal consequences for being identified adjacent to national political controversies, in some cases fear for their physical safety, and in some cases unwillingness to betray a cause they personally support.

If this sounds a bit like how people react when asked about the actions and requests of their local Mafia/Yakuza organized crime syndicate then don’t worry, that’s not the only way that the SPLC is involved in things that sound like organized crime running protection/blackmail rackets.

To back up a second. Over the past few decades the SPLC leveraged itself into a unique position in the financial services area by providing a trusted list of extremist organizations. It has in fact got into a position where it and the US Treasury’s OFAC are used in similar ways by financial institutions in making decisions about accepting new customers, transferring money and so on. That is not in itself evil, not even when it also denigrates financial services organizations that do not use it as a screening element, but it sets the stage.

Relatedly, ever since the Pharmaspammers were taken down by being debanked² certain groups have wanted to repeat the process for other groups they disagree with (e.g. firearms manufacturers, anti-abortion activists). There is, however, a big difference between the people selling blue pills that may or may not be viagra and which come from mysterious countries overseas and these other groups/industries. Specifically the blue pill merchants are breaking several laws in various legal jurisdictions. Firearms manufacturers and retailers (for example) are part of a legal regulated industry and, in the US, generally protected by the second amendment.

Many of the other persecuted groups are in fact protected by the first amendment, which in fact appears to by why the groups sought to cause them financial troubles because directly attacking them would run afoul of said first amendment. Not that they worried too much about the first amendment either as it happens, but they certainly preferred to work through proxies.

Note, even in a world of the first amendment and as someone who believes in Freedom of Speech, there is a role for cracking down on some speech. Fraudulent inducements, fake ads, criminal offerings and, in some circumstances, lies are all things that governments prosecute/individuals seek legal redress from and which all kinds of entities can decide that they wish not to be associated with and thus refuse business with the people making them. That’s reasonable. The question is how do you determine whether X is an organization/individual who is a fraudster or inciter to violence or who just voices opinions that upset people.

For many large corporations the decision on who they should do business with was largely outsourced to the SPLC as Jeff Bezos admitted in congressional testimony.

“We use the Southern Poverty Law Center data to say which charities are extremist organizations. We also use the U.S. Foreign Asset Office [sic] to do the same thing.”

As Patrick notes, effectively the SPLC was trusted equally to the US Treasury Department by Amazon in this regard, and I have absolutely no doubt at all that Amazon was doing almost the same as the vast majority if not all major US corporations including all financial ones. However as Patrick also notes, if/when the SPLC is found guilty of bank fraud then many institutions (especially, but not just, banks) will be looking for an alternative:

Now, a quiz: do you think Compliance at a bank is neutral on “Can the bank delegate transaction-level decisioning authority, in any part of the business, however small, to an entity under federal indictment for bank fraud? Does the answer change if they are convicted of bank fraud?”

No! Compliance will not let you do that! Not because they are worried about the integrity of the blacklist. An accused bank fraudster has the final say to approve money movement out of a regulated financial institution. That is very likely intolerable to Compliance.

What happens next? Well, remember, when you bought the data product, you were also buying someone anticipating your concerns before you even voice them and preparing options before you ask. Jeff Bezos’ words echo in San Francisco today: Does anyone know another option?

There is a market opportunity here in fact.

Back to the SPLC.

Why Expand and Fund Extremism?

To a large degree it seems to me that it can be explained by a combination of Upton Sinclair’s comment about getting people to understand things and variations on Pournelle’s Iron Law of Bureaucracy and Parkinson’s Law of Bureaucracy.

Fundamentally, if the SPLC says that hate is down, extremism is diminished and so on, then the donations decline and all the jobs go away. Pretty much no organization has ever voluntarily disbanded when the problem it was founded to solve has gone away - think e.g. of the Polio charities - and the SPLC is not going to be the first. That partly explains why they funded the extremists and why they were happy to push known falsehoods about Charlottesville (as well as fund one of the organizers)

But it’s more than that. The SPLC has been so successful in fundraising over the years that it now has close to $1B in assets stashed away in various places - much overseas for some reason. That is a problem as was pointed out somewhere (I have lost the link) because the SPLC is in danger of breaching the IRS regulations regarding the amount of donations vs assets. If it does breach that limit it will be forced to become a private foundation instead of a public charity. Doing so would massively impact the taxable nature of subsequent donations and the taxable nature of its own operations.

It is quite possible that just having the prosecutions announced will lead to this in fact because (see above) corporate compliance departments are going to insist that the corporation defer donations until the SPLC is found innocent. In addition to the bad publicity and potential risk of securities fraud (see above) in doing so, donating to an organization that is subsequently found guilty of bank fraud is something that the IRS will query the tax write-off for. In the same vein major managers of Donor Advised Funds have stopped allowing their customers to donate to the SPLC for exactly those reasons:

“The organization has had allegations and/or charges brought against them for activities that may call into question their ability to carry out their tax-exempt charitable purpose,” Vanguard Charitable told customers. “If we become aware an organization has been charged with a crime by state or federal authorities, we pause grant-making while the matter is pending.”

It is unclear to me how many organizations and individuals will be willing to continue donating to the SPLC if they don’t get the tax benefit, but I’m going to stick my neck out and predict that charitable income for the SPLC is going to drop precipitously while it is facing these charges. In order to maintain public charity status the IRS requires no more than two years out of five to be out of compliance, AIUI.

This puts the SPLC in a fascinating legal/financial bind. On the one hand if innocent it needs to be found not-guilty fast so as to get donations back quickly, on the other, if it is guilty it needs the trial to be delayed, the verdict to be appealed, and do everything it can to delay final judgment and sentencing because final judgment is likely to be fatal to the organization as all its juicy assets are seized and it loses all IRS non-profit status. It must be noted that even in cases where defendants plead guilty, final verdict and sentencing can take well over a year so it doesn’t have a lot of time to clear its name if it can.

Seeing how the organization reacts in court filings rather than press-releases is going to show whether it believes it can clear its name and/or plead down to a less damaging charge or not. That of course also depends on whether the DoJ is planning additional prosecutions, which I consider to be likely. My guess is the SPLC is going to delay and obfuscate and take the IRS hits, with the hope that in January 2029 a Democratic president and congress can pass a law or issue waivers that allow it to resume.

That’s a bet. It assumes a number of things, including that state AGs from Republican states don’t get in on the prosecution act because even if federal issues go away, many of the reasons why donations would fall remain present if the SPLC is charged by various states. I will be entirely unsurprised if Alabama’s AG doesn’t have some minion looking at the federal documents and seeing if there aren’t state crimes that can be prosecuted. I understand that federal law takes precedence, but compliance departments will not be happy with a situation where the SPLC’s home state is prosecuting it even if it has skated on the federal side.

And that’s just on the current set of federal charges. As the saying goes

“wait… there’s more!”

Leveraging Trust

We already knew from the twitter files that the SPLC and associated entities were pressuring internet companies to censor views they objected to back in 2017 and that things got progressively worse during the covidiocy and the start of the Biden residency. What Patrick brings to the table is that these entities had a very expansive view of what was an “internet company” and even more expansive concepts of appropriate response.

It started in 2017, with the SPLC and another non-profit informally coordinating. It intensified and formalized in 2018, under SPLC co-leadership. It escalated sharply in 2020 and 2021.

The campaign had two main components. The first was public advocacy and communications work. The second, less visible but more consequential, was a series of meetings with industry. Hundreds of meetings. With a specific target set of companies.

The campaign’s declared aims were three. To convince those companies to censor more communications the coalition characterized as hate. To blacklist organizations and individuals the coalition characterized as promulgators of hate or violence. And to interdict the flow of funds to those blacklisted parties.

The coalition claimed to be non-partisan. Be on the lookout for mentions of “non-partisan,” because it is a word the coalition understands differently than I do.

The coalition calls its targets “Internet companies” and relies on government, media, and the public to not read the fine print. In it, they define Internet company mendaciously to include banks, credit card processors, and any other financial infrastructure their enemies could touch. The coalition was going after posts, but it was also and primarily going after money. I will use the language “industry participants” going forward to identify who they met with.

Industry participants included Facebook, Twitter, JPMorgan Chase, Visa, Mastercard, and many other firms.

If you find it hard to understand why, say, Visa, Mastercard or JP Morgan would be considered an “internet company” then join the club. I do note that all of these played a part in the ending of the pharmaspammers, and as I said earlier, I am quite sure that the SPLC & co looked at that successful ad hoc campaign and decided to try and copy it.

I’m trying not to make this a simple copy paste of Patrick’s article so you’ll have to go and read it to learn how that the SPLC coalition proselytized its views to the “internet companies” it engaged with. You can find that many of the people in the financial organizations were increasingly upset at the threats made when there was push back and that the coalition employed negotiating positions and techniques not a million miles away from those employed by President Trump when he has the upper hand. Only with more smugness and intolerance for alternative points of view.

You have to imagine that this might have caused a certain degree of resentment. As noted above, you can be quite sure, however, that all the surrounding emails, power point presentations and so on are archived. A DoJ prosecutor, state AG or even congressional subcommittee could issue subpoenas for them and find them handed over with a degree of alacrity that might surprise the non-profit entities. I’m just reading between the lines of Patrick’s article but paragraphs like the following do not suggest that the charities made friends

Industry participants recount the tone of the meetings differently, and as varying over the meetings. Some meetings were strained-but-professional. Sometimes the coalition participants were described as demanding and “hectoring.” Industry participants report abusive remarks towards their companies and to the people in the meeting.

Industry participants were repeatedly told that if they did not accede to demands they would be profiting from evil, complicit in the death of innocents, or benefitting from white supremacy. The innocents claimed to be at risk were often specifically identified as black, including during a period of intense societal concern for the lives of black Americans specifically. Industry participants were told that they wanted this. That they were taking “blood money”. Industry participants repeatedly felt personally attacked, in ways and using language not normative in their professional experience.

I can imagine certain parts of certain organizations praying for a comeuppance for their tormentors.

Based on something Patrick wrote on X a couple of weeks ago, I would expect that a search of archived pages for the charitable organizations and activist groups themselves to provide all kinds of corroborating details that document the conspiracy and, quite possibly, document intent to commit what could be considered crimes. At the very least those documents may turn out to provide sufficient probable cause evidence to allow for search warrants, subpoenas and so on that can then build the case for prosecution.

As noted above regarding bank fraud, statutes about blackmail, tortuous interference, causing business or reputational harm and so on do not have “it’s OK if good guys do it” clauses. If I were the Alliance Defending Freedom or a number of other similar organizations I suspect that I might have a claim on some counts against not just the SPLC but other charitable organizations and against specific individuals. This would apply to organizations and individuals who were debanked or had loans refused or other financial problems. Unlike SARs, which banks are forbidden from disclosing to affected customers, if the debanking etc. was caused by a campaign by the SPLC then the bank can certainly disclose this, and the surrounding documents that show that they were pressured to do so by non-governmental organizations threatening them.

Assuming there are multiple victims this could potentially lead to RICO prosecutions because the difference between Alexei or Guido telling a bank employee that they might want to close a certain account or have their children kidnapped is not far removed from a blue-haired non-binary person with a nose ring telling bank employees that they’ll be subject to a twitter storm that gets them fired unless they close a certain account. It does require more than one such incident, but from the way I’m reading Patrick’s article, some of the NGO employees had a reputation for threats and it is highly likely that those threats were documented and the documents archived. With the political climate now very much changed, those hypothetical threats may now result in raids, prosecutions and all the other difficulties that the SPLC and co caused “conservative” organizations during the Biden residency. As people observed, in some ways it doesn’t matter whether these activities result in convictions, the process itself is the punishment. if as part of the process accounts are frozen and computers are seized then the process may effectively bankrupt the victim. Normally I’d have concerns about this, but I also have a strong sense that “what goes around comes around” is fitting.

End Goals

As I said in the title. I don’t think the SPLC will survive. If the SPLC as a legal entity survives, I very much doubt the resulting entity will have the same clout as the current one and it is likely to have forfeited most of its assets and its reputation. But that is just the start.

If the entities the SPLC worked with are prosecuted in addition to named individuals then many of the same donation / tax exemptness issues that the SPLC already faces could apply to these other organizations as well. If the IRS decides to remove or modify the tax-exempt status of these organizations too it may well cause significant pain to the “liberal” or “progressive” cause in the USA. And that’s before anyone starts following the money trails back. Because if a non-profit is perceived as acting in violation of the rules then an immediate logical next question is whether donors to that non-profit knew. And even if they didn’t having to prove it is likely to be expensive and time consuming (see process is the punishment above). Freezing the assets of major foundations who are suspected of involvement would cause a lot of other charitable bodies to run short of resources.

This ignores the other aspect that Patrick digs up: the documented interference in political campaigns. That is yet another thing that charities are explicitly forbidden to do if they want to retain their tax exempt status. As he says at then end

As a former 501c3 CEO myself, I am aware of the requirements to maintain tax-exempt status. This is of paramount importance to charities. You can save yourself some legal bills quickly with the IRS’s Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations :

“Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.”

501c4 organizations have similar considerations. Consult your lawyer.

It seems to me that Trump 2.0 has found the first, loosest thread. Pulling on that could well unravel a whole tapestry of related charities, foundations and donors who have been involved in activities incompatible with their tax exempt status. Especially when what is discovered from the SPLC related investigations are combined with the existing money trails documented by DataRepublican and allies and with evidence released by the Trump administration’s Task Force to Eradicate Anti-Christian Bias

I see no sign that Trump 2.0 will not keep digging and I expect all kinds of other misbehavior to emerge and be prosecuted. This is just the tip of the iceberg.

1. In the spirit of full disclosure I have personally met Patrick, we had a very nice chatty lunch in Tokyo a few years ago. The dry wit that he employs in his articles is also present in person.

2. I had a peripheral role in this and it is one reason I was originally in favor of CISA until I saw how it became used as a tool by the SPLC and allies. A central trusted government list of internet infrastructure used by criminals would be great, if you can be sure that (modulo occasional unintentional false positives), everything on it is in fact criminally connected. One of the reasons why the battle against pharmaspam moved to the financial was that the financial sector has extensive ways to collaborate against fraudsters which the internet as a whole does not.