May 7, 2024 - Economy

When is a charitable donation securities fraud?

Illustration of a hand peeling back the Goldman Sachs logo to reveal the underside of a hundred dollar bill.

Illustration: Aïda Amer/Axios

Donor-advised funds (DAFs) are tax-efficient ways to empower individuals to give money to causes they support — and they're charities in their own right that are responsible for all the donations they make.

Why it matters: That tension is causing real problems — including a new securities fraud accusation against Goldman Sachs. (Goldman denies any instance of securities fraud. More on that below.)

Driving the news: In a letter sent to the SEC, Goldman Sachs is being accused of securities fraud by the National Institute for Workers' Rights, asserting that an affiliated DAF, Goldman Sachs Gives, gave money to causes that work against Goldman's stated diversity goals.

The big picture: The DAF in question runs funds that come from Goldman employees, which means that one or more of those employees first gave money to Goldman Sachs Gives, and then asked GSG to donate some of that money to certain right-wing causes.

  • An individual donation from the employee to the charity would be unproblematic. Coming from Goldman Sachs, however, it runs counter to the bank's stated positions.

Zoom in: In 2022, GSG donated $175,000 to Students for Fair Admissions, America First Legal, the Center for Renewing America, and the American Accountability Foundation.

  • Those organizations, affiliated with conservatives Edward Blum and Stephen Miller, are opposed to the pro-diversity agenda that Goldman stands behind.

State of play: NIWR claims that Goldman Sachs Gives is effectively part of Goldman Sachs, and that by undermining its own diversity goals, Goldman was misleading investors when it proclaimed its commitment to those goals.

  • Goldman "need to own the contributions they're making," Jason Solomon, the director of NIWR, tells Axios.

For the record: Goldman Sachs spokesperson Tony Fratto told Axios that when it comes to DAF donations, "we can't police the politics and ideology of our workforce," and that Goldman's corporate donations to initiatives like One Million Black Women dwarf all employee donations to the far-right funds.

  • While Goldman can and does bar donations to some entities — The People's Forum, for instance, fell off the list after Oct. 7 — "you don't want us making broad ideological decisions," per Fratto.

The bottom line: Goldman has its own DAFs in large part to be able to make impressive claims about how much money the firm, along with its clients and employees, gives to charity.

  • By taking control of the narrative (and the DAFs), however, it also ends up being held accountable for a very broad range of donations.
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