Dark Money

by Jane Mayer

  Most of the big donors fighting the campaign-finance restrictions were conservatives, but a few extraordinarily rich liberal Democrats belonged to this rarefied club, too. In 2004, Democratic-aligned outside groups spent $185 million—more than twice what the Republican outside groups spent—in a failed effort to defeat George W. Bush’s reelection. Of this, $85 million came from just fourteen Democratic donors. Leading the pack was the New York hedge fund magnate George Soros, an opponent of the U.S. invasion of Iraq who regarded President Bush as such a scourge that he vowed he would spend his entire $7 billion fortune to defeat him, if the result could be guaranteed. With the help of Democratic operatives, Soros funneled more than $27 million into the outside spending vehicle of choice that year, known as 527 groups. It was the same year that Republicans used the same mechanism to fund the “Swift Boat” attacks on John Kerry. Prior to Citizens United, such schemes were legally dubious at best. The Federal Election Commission ruled that the gargantuan outside spending schemes violated campaign-finance laws and imposed hefty fines on both the Democratic and the Republican perpetrators. Afterward, Soros remained active in ideological philanthropy, spending hundreds of millions to support a network of human rights and civil liberties groups, but he largely withdrew from spectacular campaign contributions.

  If the DeVoses expected a “return on our investment” in the Madison Center, as Betsy had put it, they got one in the Supreme Court’s Citizens United decision. It “was really Jim [Bopp]’s brainchild,” Richard L. Hasen, an expert on election law at Loyola Law School in Los Angeles told The New York Times. “He has manufactured these cases to present certain questions to the Supreme Court in a certain order and achieve a certain result,” said Hasen. “He is a litigation machine.”

  Bopp agreed. “We had a 10-year plan to take all this down,” he told the Times. “And if we do it right, I think we can pretty well dismantle the entire regulatory regime that is called campaign finance law.”

  Such a statement would have seemed ludicrous just a few years earlier, and in fact, in the beginning, no one took Bopp seriously. With his shaggy gray Beatles haircut and his dogmatic legal style, not to mention his extreme views, he was literally laughed at by one federal judge. At the time, he was arguing that a hyperbolic film attacking Hillary Clinton, who was running for president, deserved the same First Amendment protection as newscasts aired by CBS’s 60 Minutes. The film, a screed called Hillary: The Movie, had been produced by Citizens United, an old right-wing group with a history of making vicious campaign ads. The question, as the Supreme Court interpreted it, was whether Hillary: The Movie was a protected form of speech or a corporate political donation by its backers, which could be regulated as a campaign donation.

  Case by case, financed by wealthy donors who treated the cause as a tax-deductible charity, Bopp had battered away at the foundation of modern campaign-finance law. He had succeeded in part by using the liberals’ language of civil rights and free speech against their own practices. The tactic was intentional. Clint Bolick, a pioneer in the conservative legal movement whose group, the Institute for Justice, had received start-up funds from Charles Koch, had argued that the Right needed to combat the Left by asserting appealing “counter-rights” of its own. Thus Citizens United was cast as the right of corporations to exercise their free speech. As conservatives had hoped, the argument disarmed and divided the Left, even attracting the support of traditionally liberal champions of the First Amendment.

  While polls consistently showed that large majorities of the American public—both Republicans and Democrats—favored strict spending limits, the key challenges that led to dismantling the laws were initiated by an extraordinarily rich minority: the Kochs and their clique of ultra-wealthy conservative activists.

  A close look at the SpeechNow case, for instance, the lower-court decision following quickly on the heels of Citizens United, leads right back to the same people. There was no organization called SpeechNow until several libertarian activists invented it solely for the purpose of challenging the spending limits. The suit was the brainchild of Eric O’Keefe, among others, the Wisconsin investor who had been a libertarian ally of the Kochs since working in David’s 1980 vice presidential campaign, which called for the end of campaign spending limits.

  Leading the suit was Bradley Smith, a bright and radically antiregulatory lawyer who co-founded the conservative Center for Competitive Politics. He was a proponent of zero public disclosure of political spending and didn’t disclose his funders, but IRS records showed that in 2009 his center enjoyed support from several conservative foundations, including the Bradley Foundation. Smith’s career illustrated the way that the fortunes of conservative philanthropists cultivated and nurtured talent like his. He had been a scholar at Charles Koch’s Institute for Humane Studies before becoming the most outspoken foe of finance restrictions ever to chair the Federal Election Commission, the federal agency charged with policing campaign spending. His patrons for this key post were Mitch McConnell and the Cato Institute. As he acknowledged, “I would not have been an FEC commissioner if not for Cato’s efforts to promote me on the Hill.”

  Also essential to the SpeechNow suit was the Institute for Justice, the group founded with Charles Koch’s seed money. The litigation, meanwhile, was underwritten heavily by Fred Young, a libertarian retiree in Wisconsin who made tens of millions of dollars by selling his father’s firm, Young Radiator Company, after outsourcing the jobs of unionized workers to non-union states. Young served on the boards of the Koch-backed Reason Foundation and Cato Institute and was yet another regular attendee at the Kochs’ donor summits.

  In 2010, Young took full advantage of the newfound freedom to spend. He contributed 80 percent of the money spent that year by SpeechNow.org’s super PAC, all of which paid for television ads targeting Wisconsin’s Democratic senator Russ Feingold. Feingold was a particularly symbolic target. He had been the Senate’s premier supporter of strict campaign spending laws. Standing on principle, he urged outside groups not to spend on his behalf. That fall, he went down to defeat.

  In the view of defenders, Citizens United and its progeny did not represent the black-and-white contrast of progressives’ nightmares so much as it clarified gray areas. But this alone was extremely important. By flashing a bright green light, the Supreme Court sent a message to the wealthy and their political operatives that when it came to raising and spending money, they now could act with impunity. Both the legal fog and the political stigma lifted.

  Soon, the sums pledged at the Koch donor summits began to soar from the $13 million that Sean Noble raised in June 2009 to nearly $900 million at a single fund-raising session in the years that followed. “This Supreme Court decision essentially gave a Good Housekeeping seal of approval,” acknowledged Steven Law, president of American Crossroads, the conservative super PAC formed by the Republican political operative Karl Rove soon after the Citizens United decision.

  Critics, though, including Obama, saw the change as far more consequential. In his 2010 State of the Union address, Obama made headlines by denouncing the Court’s decision, saying that it “reversed a century of law that I believe will open the floodgates for special interests—including foreign corporations—to spend without limit in our elections.” In response, the associate Supreme Court justice Samuel Alito Jr., who attended the address, was seen shaking his head and mouthing the words “not true.”

  Another consequence was that the Citizens United decision shifted the balance of power from parties built on broad consensus to individuals who were wealthy and zealous enough to spend millions of dollars from their own funds. By definition, this empowered a tiny, atypical minority of the population.

  “It unshackled the big money,” David Axelrod contends. “Citizens United unleashed constant negativity, not just toward the president, but toward government generally. Presidents before have been under siege, but now there is no longer the presumption that they are acting in the public interest. There�
��s a pernicious drumbeat.” After the ruling, he said, “we felt under siege.”

  CHAPTER TEN

  The Shellacking: Dark Money’s Midterm Debut, 2010

  As donors gathered in Palm Springs at the end of January for the first Koch summit of 2010, the desert air was full of optimism. “It was just a week or two after the special election in Boston,” one participant recalled. “Feeling was running pretty high.”

  A torrent of contributions from undisclosed donors had helped deliver the surprise election of Scott Brown in Massachusetts earlier that month, making him the first Republican elected to the Senate from the liberal state in thirty-eight years. Organizing much of the cash from behind the scenes had been Sean Noble, who was by then on the payroll of the Kochs. Early on, when many others dismissed Brown as a hopeless long shot, Noble had decided that the payoff would be so rich that backing him was worth the gamble. Brown’s victory was calamitous for Obama. By filling the seat that had long been held by Ted Kennedy, the legendary Democrat who had died in August, Brown transformed the balance of power in Congress. The Democrats still held the majority in the Senate, but their loss of one seat crippled their power in one key way. Just as Obama was desperately trying to pass a final version of his health-care bill, it deprived the Democrats of the sixty-vote minimum necessary to overcome a Republican filibuster. The Democrats were left without the numbers necessary to bring the bill to a new vote. Brown’s triumph appeared to be the Affordable Care Act’s downfall.

  Brown hadn’t won without a lot of help. The numbers told part of the story. Although Brown was a low-profile Republican state senator best known for posing nude for Cosmopolitan magazine, he had unexpectedly outspent his Democratic opponent, Martha Coakley, by roughly $8.7 million to $5.1 million during the six weeks after the primaries. An unusual amount of this, almost $3 million, had come from shadowy out-of-state nonprofit groups funded by undisclosed donors. Two of the most active of these dark-money groups, the American Future Fund and Americans for Job Security, had received large infusions of cash from the mysterious “social welfare” group that Noble had registered the spring before, based at an Arizona post office box. For months, the post office box otherwise known as the Center to Protect Patient Rights had been filling with fistfuls of secret cash from Randy Kendrick and other members of the Koch network in an uphill battle to stop the passage of the Affordable Care Act. Noble had redirected much of this money into the front groups spending against Coakley in the Massachusetts special election. The hope was that if Republicans could turn one Senate seat, they could block the health-care bill and mortally wound Obama. So when the plan worked, Brown’s win electrified the donors. Many felt that they had personally turned the tide on Obamacare. “We thought we had it won!” the seminar participant recalled.

  Obama had been so flummoxed by Brown’s election that at a White House senior staff meeting the next morning he had beseeched his staff accusingly, demanding to know, “What’s my narrative? I don’t have a narrative!” His administration’s momentum had been buried in outside money.

  Lifting the donors’ spirits further was the Supreme Court’s Citizens United ruling, which had been handed down on January 21, two days after Scott Brown’s victory in Massachusetts, and shortly before the Kochs’ summit. Brown’s race now seemed a promising dress rehearsal for even more outside money, which the Court had ennobled as free speech. So as the self-described “investors” came together to plan for the 2010 midterm elections, they were in a buoyant mood.

  Sean Noble, looking dashing with a tan, had been elevated by then from merely moderating a panel at the June 2009 summit six months earlier to now speaking on one. His congressional staff job and unpaid student loans were remnants of the past. As the Web site of his political consulting firm proclaimed ebulliently, “It’s not what you know but who you know.”

  The panel discussion was titled “The Opportunity of 2010: Understanding Voter Attitudes and the Electoral Map.” Noble spoke optimistically about the health-care fight, which he believed had awakened a national rebellion. Joining him on the dais were three other men, each representing aspects of the underground political operation that would rout the Democrats in the year ahead.

  The best known of the panelists was Ed Gillespie, a top national political tactician who had become the chairman of the Republican National Committee in 2003 at the age of forty-one. Gillespie had made a fortune in lobbying, estimated at as much as $19 million. He was a former Democrat, and the firm he co-founded, Quinn Gillespie & Associates, was bipartisan, more concerned with making deals than political purity. Its clients ranged from Enron, the huge energy company that went scandalously bust, to a health-care group promoting individual insurance mandates akin to those that Obama’s opponents called treasonous. The son of an Irish immigrant, Gillespie, according to Capitol lore, had started out parking cars and worked his way up to the top of Washington’s booming influence-peddling industry by dint of his easy affability and quick political instincts.

  As soon as the Court handed down its Citizens United decision, Gillespie grasped its promise. Within weeks, he set out to Texas with his fellow Bush White House alumnus Karl Rove to pitch deep-pocketed oilmen at the Dallas Petroleum Club on a plan to fund a new kind of shadow political machine. Instead of giving just to the Republican Party or its candidates and having the size of their donations limited, the high rollers could now legally funnel limitless amounts of cash to “outside” organizations that Rove and Gillespie were about to create, the two operatives explained. These new groups would act as the privatized auxiliary force Rove had been dreaming of for years. Rove told the moneymen, “People call us a vast right-wing conspiracy, but we’re really a half-assed right-wing conspiracy. Now,” he emphasized, “it’s time to get serious.”

  Even before the Citizens United decision, Gillespie had been busy. While many other conservatives were despondent during the early months of the Obama administration, when the president’s approval ratings were stratospherically high, Gillespie had come up with an ingenious plan to exploit the only opening he could see. With Obama dominating Washington, Gillespie looked to the states. He knew that 2011 was a year in which many state legislatures would redraw the boundaries of their congressional districts based on a new census, a process that only took place once a decade. So he put together an ambitious strategy aimed at a Republican takeover of governorships and legislatures all across the country. Capturing them would enable Republicans to redraw their states’ congressional districts in order to favor their candidates. While the mechanics of state legislative races were abstruse and deadly dull to most people, to Gillespie they were the key to a Republican comeback.

  “It was all conceived sitting in Ed’s office in Alexandria, Virginia…it was entirely his vision,” Gillespie’s associate Chris Jankowski later told Politico. “It seems like an obvious strategy now, but you have to turn back the clock to realize how demoralized we all were…He was saying, ‘Here’s something smart we can do.’ ”

  Gillespie called the plan “REDMAP,” an acronym for the Redistricting Majority Project. To implement it, he took over the Republican State Leadership Committee (RSLC), a nonprofit group that had previously functioned as a catchall bank account for corporations interested in influencing state laws. All he needed was enough money to put REDMAP into action. By the end of 2010, with the help of million-dollar donations from the tobacco companies Altria and Reynolds, as well as huge donations from Walmart, the pharmaceutical industry, and rich private donors like those at the Koch summit, the RSLC would have $30 million, three times its Democratic counterpart. “It was three yards and a cloud of dust,” Gillespie later recalled of his scramble for money. “It was a constant working, and working, and working,” especially at honeypots like the Koch summit.

  Joining the panel with Noble and Gillespie was a short, balding figure with a seemingly inexhaustible command of political minutiae. With his North Carolina drawl and his glasses slipping down his nose, he mig
ht be mistaken for a southern shop clerk. But James Arthur “Art” Pope was actually a shop owner, in fact the multimillionaire chairman and CEO of Variety Wholesalers, a family-owned discount-store conglomerate with hundreds of outlets stretching up and down the mid-Atlantic and the South. Pope was also a charter member of the Koch network. A longtime friend and ally, he shared Charles’s passion for free-market philosophy and credited a summer program he attended at the Cato Institute with exposing him to conservative icons like Hayek and Ayn Rand. After graduating from the Duke School of Law in 1981 and taking over his family’s private company, he began to transform the Pope family foundation, which had assets of nearly $150 million, into a remarkable political force.

  In the previous decade, Pope and his family and the family foundation had spent more than $40 million in efforts to push American politics to the right. In addition to regularly attending the Kochs’ secret planning summits, he served on the board of the Kochs’ main public advocacy group, Americans for Prosperity, as he had on its predecessor, Citizens for a Sound Economy, and had joined forces with the brothers on numerous other political enterprises. Tax records showed that Pope had given money to at least twenty-seven of the groups supported by the Kochs, including organizations opposing environmental regulations, tax increases, unions, and campaign spending limits. Pope, like the DeVos family, was a supporter of the James Madison Center for Free Speech. Indeed, Pope’s role in his home state of North Carolina was in many respects a state-sized version of the Kochs’ role nationally. While he wasn’t well-known outside the state, his growing influence at home had led the Raleigh News & Observer to begin calling him “the Knight of the Right.”