Dark Money

by Jane Mayer

  Six months later, immediately after Santelli’s rant, Eric Odom reactivated the “DontGo” list. He fired off a call to action to the same ten thousand hard-core conservative insiders whose contact information he and Bluey had compiled. Odom also formed what he called the Nationwide Tea Party Coalition with other activists, including operatives from Dick Armey’s group, FreedomWorks, and the Kochs’ group, Americans for Prosperity. AFP quickly registered a Web site called TaxPayerTeaParty.com and used its network of fifty-some staffers to plan rallies across the country.

  As the operatives linked forces online, they set a date for the first national Tea Party protests, February 27. That day, more than a dozen protests were held in cities across the country. The organizers claimed 30,000 participants, but the crowds in many places were still sparse. But on April 15, when there was a second series of “Tax Day” Tea Party rallies across the country, the numbers had increased tenfold, to 300,000.

  The Heritage Foundation, the Cato Institute, and Americans for Prosperity provided speakers, talking points, press releases, transportation, and other logistical support. Lee Fang, a blogger for the progressive Web site ThinkProgress, was among the first to question whether the movement was organic or synthetic “Astroturf.” He noted that Americans for Prosperity was suddenly planning protests “coast to coast,” while FreedomWorks seemed to have taken over a local rally in Florida. Not everyone liked the top-down control of the protests. “Americans for Prosperity annoyed some of the Tea Partiers,” recalls the libertarian blogger Ralph Benko. “These people drove up, opened the door, put T-shirts on them, then took pictures and sent them to Charles [Koch] saying, ‘See? We’re doing great things with your money.’ ”

  Thomas Frank, author of What’s the Matter with Kansas?, had stopped by to see an early Tea Party rally in Lafayette Square, across from the White House, in February 2009. “It was very much a put-up job,” he concluded. “All the usual suspects were there, like FreedomWorks, ‘Joe the Plumber,’ and The American Spectator magazine. There were also some people who had Revolutionary War costumes and ‘Don’t Tread on Me’ flags, actual activists, and a few ordinary people,” he said. “But it was very well organized by the conservative groups. Back then, it was really obvious that it was put on, and they’d set it up. But then it caught on.” Frank argues that “the Tea Party wasn’t subverted,” as some have suggested. “It was born subverted.” Still, he said, “it’s a major accomplishment for sponsors like the Kochs that they’ve turned corporate self-interest into a movement among people on the streets.”

  While the Kochs were continuing to profess no involvement, Peggy Venable, a spunky veteran of the Reagan administration who had been on their payroll as a political operative in Texas since 1994, becoming the head of the Texas chapter of Americans for Prosperity, gushed about her role in the movement. “I was a member of the Tea Party before it was cool!” she said during a conversation at a Koch-sponsored political event called Defending the American Dream, in Austin. As the Tea Party movement took off, she described how Americans for Prosperity had helped to “educate” the activists on policy details. She said they had given the supporters what she called “next-step training” after their rallies so that their political energy could be channeled “more effectively.” The organization also supplied the angry protesters with lists of elected officials to target. Venable, who spoke without first checking with the Kochs’ public relations representatives, happily said of the brothers, “They’re certainly our people. David’s the chairman of our board. I’ve certainly met with them, and I’m very appreciative of what they do.” She added, “We love what the Tea Parties are doing, because that’s how we’re going to take back America!”

  Venable honored several Tea Party “citizen leaders” at the summit. The Texas branch of Americans for Prosperity gave its Blogger of the Year Award to a young woman named Sibyl West. Writing on her Web site, West described Obama as the “cokehead in chief” and speculated that the president was exhibiting symptoms of “demonic possession (aka schizophrenia, etc.).”

  During a catered lunch at the summit, Venable introduced Ted Cruz, a former solicitor general of Texas and future senator, who told the crowd that Obama was “the most radical president ever to occupy the Oval Office” and had hidden from voters a secret agenda—“the government taking over our economy and our lives.” Countering Obama, Cruz proclaimed, was “the epic fight of our generation!” As the crowd rose to its feet and cheered, he quoted the defiant words of a Texan at the Alamo: “Victory, or death!”

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  No organization played a bigger early role than FreedomWorks, the estranged sibling of Americans for Prosperity, which was funded by donations from companies like Philip Morris and from billionaires like Richard Mellon Scaife. “I’d argue that when the Tea Party took off, FreedomWorks had as much to do with making it an effective movement as anyone,” said Armey.

  In looking back, Armey gave particular credit to a young aide named Brendan Steinhauser, the group’s director of state and federal campaigns, who created a Web site immediately after Santelli’s rant that provided all kinds of practical advice to supporters. It counseled them on how to plan rallies and what issues to protest, with Obama’s stimulus spending high on the target list. He also suggested slogans and signs and sponsored a daily conference call with over fifty Tea Party activists around the country to coordinate their efforts. Soon FreedomWorks was providing a professional support team of nine for the operation. Armey recalled that Steinhauser “spent hours and hours on the phone with people who’d found the FreedomWorks Web site. The other guys at FreedomWorks were laughing at him” in the beginning, he said. But Armey described how Steinhauser organized the inchoate anger into a mass political movement. “He told them what to do. He gave them training. If it hadn’t been for FreedomWorks, the Tea Party movement would never have taken off,” Armey later said.

  The fact that Armey was himself a Washington insider belied the notion that the Tea Party movement was anti-elitist. Armey had spent eighteen years in Congress and was reportedly paid $750,000 a year as a lobbyist at the law firm DLA Piper, which represented corporate clients such as the pharmaceutical giant Bristol-Myers Squibb. But billionaire backers were useful. They gave the nascent Tea Party movement organization and political direction, without which it might have frittered away like the Occupy movement. The protesters in turn gave the billionaire donors something they’d had trouble buying—the numbers needed to lend their agenda the air of legitimacy. As Armey put it, “We’d been doing this lonely work for years. From our point of view, it was like the cavalry coming.”

  FreedomWorks, it was later revealed, also had some hired help. The tax-exempt organization quietly cemented a deal with Glenn Beck, the incendiary right-wing Fox News television host who at the time was a Tea Party superstar. For an annual payment that eventually topped $1 million, Beck read “embedded content” written by the FreedomWorks staff. They told him what to say on the air, and he blended the promotional material seamlessly into his monologue, making it sound as if it were his own opinion. The arrangement was described on FreedomWorks’ tax disclosures as “advertising services.”

  “We thought it would be a useful tool if it was done in moderation, but then they started doing it by leaps and bounds,” Armey recalled about the arrangement. “They were keeping it secret from their activists and supporters,” he alleged. “They were creating an illusion that they were so important this icon, this hero of the movement, was bragging about them. Instead of earning the media, they were paying for it.”

  Beck, whose views were shaped by W. Cleon Skousen, the fringe theorist whose political paranoia had inspired the John Birch Society, reached a daily audience of some two million, disseminating the ideas of early conservative extremists like Fred Koch on a whole new scale. Frank Luntz describes the impact as historic. “That rant from Santelli woke up the upper middle class and the investor class, and then Glenn Beck woke up everyone else. Glenn Be
ck’s show is what created the Tea Party movement,” he said, adding, “It started on Tax Day 2009, and it exploded at town hall meetings in July. You can create a mass movement within three months.”

  Another factor was Obama’s aversion to confrontation and hot rhetoric, which resulted in largely milquetoast messaging about Wall Street. Unlike Franklin Roosevelt, who blamed the “money changers” for the Great Depression in his first inaugural address, Obama’s public utterances were muted. In a matter of weeks, critics argued that he had ceded the mantle of populism to his Tea Party opponents. “In an atmosphere primed for a populist backlash, he allowed the right wing to define the terms,” John Judis observed in the liberal New Republic magazine.

  Despite Steinhauser’s efforts to police the Tea Party’s signs for racism and other expressions of hate, within two months of Obama taking office, the streets and parks were filling with rallies at which white protesters carried placards reading, “Impeach Now!” and “Obama Bin Lyin’.” Obama’s face was plastered on posters making him look like the Joker from the Dark Knight films, his skin turned chalk white, his mouth stretched almost to his ears, and his eye sockets blackened, with a zombielike dead gaze, over the word “Socialism.” A for-profit Internet activism company, ResistNet, featured a video titled “Obama = Hitler” on its Web site. One protester at a February 27 rally, who said he was with the group, carried a sign calling Congress slave owners and taxpayers “the Nigger.” Obama’s image was also photoshopped to look like a primitive African witch doctor, with a bone stuck through his nose.

  Fink, the Kochs’ political lieutenant, professed to be discomfited by the racism. But David Koch echoed the specious claims that Obama was somehow African in his outlook, even though he was born in America, abandoned by his Kenyan father as a toddler, raised mainly in Hawaii by his American mother, and had never set foot on the African continent until he was an adult. In a revealing later interview with the conservative pundit Matthew Continetti, David nonetheless disparaged Obama as “the most radical president we’ve ever had as a nation” and opined that the president’s radicalism derived from his African heritage. “His father was a hard core economic socialist in Kenya,” he said. “Obama didn’t really interact with his father face-to-face very much, but was apparently from what I read a great admirer of his father’s points of view. So he had sort of antibusiness, anti–free enterprise influences affecting him almost all his life. It just shows you what a person with a silver tongue can achieve.”

  Bill Burton, who is biracial himself, believes that “you can’t understand Obama’s relationship with the right wing without taking into account his race. It’s something no one wants to talk about, but really you can’t deny the racial factor. They treated him in a way they never would have if he’d been white. The level of disrespect was just dialed up to eleven.”

  By the end of Obama’s second month in office, Newsweek ran a tongue-in-cheek cover story asserting, “We are all socialists now,” and even the lofty New York Times picked up the right wing’s framing of Obama as outside the American mainstream. In a presidential interview, the paper asked whether he was a socialist. Obama was apparently so stunned he had to contact the Times afterward to fully answer. “It was hard for me to believe that you were entirely serious about that socialist question,” he said, noting that it was under his predecessor, George Bush, a Republican, not “under me that we began buying a bunch of shares of banks. And it wasn’t on my watch that we passed a massive new entitlement, prescription drug plan, without a source of funding.”

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  As Obama was put on the defensive about the economy, another line of attack was stealthily attracting the attention of many of the same wealthy financial backers. At the Kochs’ secretive January summit in Palm Springs, one of the group’s largest donors, Randy Kendrick, posed a question. Her shoulder-length cascades of frosted hair and flashy jewelry made her an unlikely-looking rabble-rouser, but Kendrick was an outspoken lawyer who had abandoned the women’s movement decades earlier for the Goldwater Institute, a far-right libertarian think tank in Phoenix, where she was on the board of directors. She and her husband, Ken, the co-owner and managing general partner of the Arizona Diamondbacks baseball team, had the kind of fortune that made people take note.

  Earl “Ken” Kendrick, who hailed from West Virginia, had made many millions on Datatel, a company he founded that provided computer software to colleges and universities. He subsequently bought into the Woodforest National Bank in Texas, a private bank that was in 2010 forced to refund $32 million and pay a $1 million civil fine to settle charges of usurious overdraft fees. Hard-core economic and social conservatives—except for the state subsidies that paid for the Diamondbacks stadium and brought public transit to the field—the Kendricks were horrified by the election of Obama. They were charter members of the Kochs’ donor network, having written at least one seven-figure check. Their generosity had been a two-way street. They had supported institutions that the Kochs favored, such as the Institute for Humane Studies and the Mercatus Center at George Mason University. The Kochs had meanwhile supported the “Freedom Center” at the University of Arizona that they founded, where the Kendrick Professor of Philosophy taught “freedom” to college students.

  Now Randy Kendrick wanted to know what the group planned to do to stop Obama from overhauling America’s health-care system. She had read the former Democratic senator Tom Daschle’s 2008 book, Critical: What We Can Do About the Health-Care Crisis, and was alarmed. She warned that Daschle, who favored universal health-care coverage, likely reflected Obama’s thinking. Daschle was expected to become Obama’s secretary of health and human services. If the new administration adopted a plan of the kind Daschle was floating, she said it would kill business, hurt patients, and lead to the biggest socialist government takeover in their lifetimes. She was adamant. Obama had to be stopped. What was the plan?

  Kendrick spoke with passion. Her interest in the issue was both political and personal. She argued that the choice of private health care had saved her from spending the rest of her life confined to a wheelchair after a leg injury. She had initially been told that because she suffered from a rare disorder, she couldn’t risk surgery. But a specialist at the renowned Cleveland Clinic had found a successful treatment. She survived the surgery and was now an active mother of teenage twins. “Randy was convinced that if America had government health care like Canada or Great Britain, she would be dead,” a friend who asked not to be identified confided.

  It was a powerful testimonial, and the donors at the Koch seminar were deeply moved. But the Obama administration had never proposed government health care like that in Canada or Great Britain. Reached later, after the implementation of Obama’s Affordable Care Act, Donald Jacobsen, professor of molecular medicine at the Cleveland Clinic Lerner College of Medicine, who cared for Kendrick, recalled her as a generous donor but dismissed as nonsense her argument that Obama’s health-care plan ever threatened treatment of the kind that she received. “I can assure you that ‘Obamacare’ did not diminish our research efforts in any way,” he said. “However, the sequestration efforts of the right-wing conservatives and their Tea Party colleagues have hampered progress in medical research. The National Institutes of Health is suffering greatly, and it is very difficult for all investigators to obtain funding. You can’t blame the Affordable Care Act, but you certainly can blame the Republicans.”

  Nonetheless, when Kendrick finished her emotional pitch, there was an awkward silence from the Kochs, according to two sources familiar with the meeting. The Kochs of course opposed the expansion of any government social program, including any potential universal health-care plan. But the sources said they hadn’t focused much on the issue. They had assumed the health-care industry would fight its own battles, in its own interest, so they hadn’t thought they’d need to step in. Instead, the Obama administration had cut deals with much of the health-care industry, winning much of its support. “They were unprepa
red on the issue,” said one of the sources.

  Despite their later reputation for orchestrating opposition to Obamacare, it was actually Kendrick, not the Kochs, who first led the way. She and a handful of other multimillionaires had recently helped fund an unsuccessful effort to prevent Arizona from “coercing” citizens into buying government-run, or any other kind of, health-care coverage. But Kendrick was not giving up. She was strong-minded and accustomed to getting her way. When she appeared every few weeks at the think tank, a former colleague recalled, “they would often line up and hand her a bouquet of flowers, like a queen.”

  After the defeat in Arizona, Kendrick vowed to take her fight national. “Who do I have to give money to?” she asked Sean Noble, a Republican political operative in Arizona who had become her de facto personal political consultant. Kendrick demanded to know, “What organizations are doing this?” according to an account written by Eliana Johnson for National Review.

  At Kendrick’s request, Noble surveyed the field and found virtually no organization set up in early 2009 to take aim at Obama on the issue. Or at least none that was a 501(c)(4), the IRS code for a tax-exempt “social welfare” group that can participate in politics so long as it’s not the group’s primary focus. Unlike conventional political organizations, such nonprofits can hide the identities of their donors from the public, reporting them only to the IRS. Noble knew these so-called dark-money groups were especially appealing to wealthy individuals who wanted to influence politics without public attention, like the members of the Koch network.

  Noble had attended Koch seminars with his former boss, John Shadegg, a staunchly conservative Republican congressman from Arizona whose father, Stephen, had been Barry Goldwater’s campaign manager and alter ego. For over a decade, Noble had worked for Shadegg, eventually becoming chief of staff of the congressman’s Arizona office. In 2008, however, Noble decided to go out on his own, opening a political consulting firm, Noble Associates, at his home in Phoenix. Kendrick, who had been a major supporter of Shadegg, was a prized client. She and Noble had worked closely for years. He hadn’t been invited to the January Koch meeting where she held forth, but she called him afterward for help. As he set up his business, her interest in launching a crusade against health-care reform, and her entrée into the Koch network, presented a lucrative opportunity.