by Jane Mayer
“We got our clocks cleaned in 2012,” Fink began. “This is a long-term battle.” The challenge, he said he had learned, was that the country was divided into three distinct parts. The first third already supported the Kochs’ conservative, libertarian vision. Another third, the liberals, whom he referred to as “collectivists,” using the old John Birch Society term, were beyond the Kochs’ reach. “The battle for the future of the country is who can win the hearts and minds of the middle third,” Fink said. “It will determine the direction of the country.”
The problem, he said, was that free-market conservatives had lost the all-important “middle third.” This segment of the American population tended to believe that liberals cared more about ordinary people like themselves. In contrast, he said, “big business they see as very suspicious…They’re greedy. They don’t care about the underprivileged.”
Assuming that he was among friends, Fink readily conceded that these critics weren’t wrong. “What do people like you say? I grew up with pretty much very little, okay? And I worked my butt off to get what I have. So,” he went on, when he saw people “on the street,” he admitted, his reaction was, “Get off your ass and work hard, like we did!”
Unfortunately, he continued, those in the “middle third”—whose votes they needed—had a different reaction when they saw the poor. They instead felt “guilty.” Instead of being concerned with “opportunity” for themselves, Fink said, this group was concerned about “opportunity for other people.”
So, he explained, the government-slashing agenda of the Koch network was a problem for these voters. Fink acknowledged, “We want to decrease regulations. Why? It’s because we can make more profit, okay? Yeah, and cut government spending so we don’t have to pay so much taxes. There’s truth in that.” But the “middle third” of American voters, he warned, was uncomfortable with positions that seemed motivated by greed.
What the Koch network needed to do, he said, was to persuade moderate, undecided voters that the “intent” of economic libertarians was virtuous. “We’ve got to convince these people we mean well and that we’re good people,” said Fink. “Whoever does,” he said, “will drive this country.”
Fink was brutally honest about how unpopular the right-wing donors’ views were. “When we focus on decreasing government spending,” he said, and “decreasing taxes, it doesn’t do it, okay? They’re not responding, and don’t like it, okay?”
But, he pointed out, if anyone in America knew how to sell something, it should be those in the Koch network. “We get business—what do we do?” he asked. “We want to find out what the customer wants, right? Not what we want them to buy!”
The Kochs’ extensive research had shown that what the American “customer” wanted from politics, alas, was quite different from their business-dominated free-market orthodoxy. It wasn’t just that Americans were interested in opportunity for the many, rather than just for themselves. It also turned out, Fink acknowledged, that they wanted a clean environment and health and high standards of living, as well as political and religious freedom and peace and security.
These objectives would seem to present a problem for a group led by ultrarich industrialists who had almost single-handedly stymied environmentalists’ efforts to protect the planet from climate change. The extraordinary measures that the Kochs and their allies had taken to sabotage the country’s first program offering affordable health care to millions of uninsured citizens might also seem to be problematic. Their championship of tax breaks for heirs, hedge fund managers, offshore accounts, and other loopholes favoring the rich, along with their opposition to welfare, the minimum wage, organized labor, and funding public education, also would seemingly fly in the face of the middle third’s interest in widening opportunity.
These political problems would seem to have been compounded by new statistics showing that the top 1 percent of earners had captured 93 percent of the income gains in the first year of recovery after the recession.
But rather than altering their policies, those in the Koch network, according to Fink, needed a better sales plan. “This is going to sound a little strange,” he admitted, “so you’ll have to bear with me.” But to convince the “middle third” of the donors’ good “intent,” he said, the Koch network needed to reframe the way that it described its political goal. What it needed, he said, was to “launch a movement for well-being.”
The improved pitch, he said, would argue that free markets were the path to happiness, while big government led to tyranny and fascism. His reasoning went like this: Government programs caused dependency, which in turn caused psychological depression. Historically, he argued, this led to totalitarianism. The minimum wage, he said, provided a good example. It denied the “opportunity for earned success” to 500,000 Americans who, he estimated, would be willing to work for less than the federal minimum standard of $7.25 per hour. Without jobs, “they’ve lost their meaning in life,” said Fink. This, he warned, had been “a very big part of the recruitment in Germany during the ’20s.” Thus, he argued to an audience that included many of the country’s billionaires, minimum wage laws could be described as leading to the kinds of conditions that caused “the rise and fall of the Third Reich.”
Freedom fighters, as Fink labeled the donors, needed to explain to American voters that their opposition to programs for the poor did not stem from greed, and their opposition to the minimum wage wasn’t based on a desire for cheap labor. Rather, as their new talking points would portray it, unfettered free-market capitalism was simply the best path to human “well-being.”
Charles Koch had expressed similar sentiments in a recent interview with the Wichita Business Journal. In it, he said, “The poor, okay, you have welfare, but you’ve condemned them to a lifetime of dependency and hopelessness.” Like Obama, he said, “We want ‘hope and change.’ But we want people to have the hope that they can advance on their own merits, rather than the hope that somebody gives them something.” In the same interview, Koch described, without any self-consciousness, how he had recently promoted his son, Chase, to the presidency of Koch Fertilizer and how at “every step, he’s done it on his own.” The possibility that his son, like he and his brothers, Richard Mellon Scaife, Dick DeVos, and the Bechtel boys, to name just a few in his network, might have benefited from a job in the family’s business or a huge inheritance, rather than having been “condemned…to a lifetime of dependency and hopelessness,” because “somebody” had given “them something,” seemed not to have crossed his mind.
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To “earn the respect and good feeling” of those whose support they needed, Fink went on to explain during his talk, the Kochs would also form and publicize partnerships with unlikely allies. This would counteract critics who claimed they were negative or divisive. For instance, he told the donors, they were going to hear about the Kochs’ partnerships with the United Negro College Fund and with the National Association of Criminal Defense Lawyers, the latter of which they had been financially supporting for several years. Later that afternoon, in fact, Fink was joined in another panel discussion, titled “Driving the National Conversation,” with Michael Lomax, president of the United Negro College Fund, along with Norman Reimer, executive director of the National Association of Criminal Defense Lawyers. Fink explained that by reaching across the partisan divide, the Kochs could present their group as offering America “a positive vision.” He said it would demonstrate that “the other side creates divisiveness, but we solve problems.”
There were in fact more than a few connections between the defense bar and the Koch network. A surprising number of the donors had been ensnared in serious legal problems. Not only had the Kochs faced environmental, workplace safety, fraud, and bribery allegations; many others in their group had legal issues too. At that moment, Renaissance Technologies, the hedge fund co-directed by Bob Mercer, who had become an increasingly active member of the Koch network, was still under investigation by the Internal Reve
nue Service for avoiding more than $6 billion in taxes between 2000 and 2013. In a 2014 Senate inquiry, Democratic senator Carl Levin denounced the company’s accounting as a “pretty stunning bit of phony and abusive tax machinations.” A company spokesman acknowledged the complicated tax avoidance scheme but maintained it was “appropriate under current law.”
Meanwhile, SAC Capital, Steven Cohen’s huge hedge fund, had been under criminal investigation for years while its managing director, Michael Sullivan, belonged to the Koch network, performing as a featured speaker at one seminar. In the end, neither Cohen nor Sullivan was charged with criminal wrongdoing, but after eight SAC employees pleaded guilty to or were convicted of insider trading, the government accused Cohen of turning “a blind eye to misconduct” and in a settlement slapped his firm with a $1.8 billion fine, the largest such fine in history.
In his own remarks at the donor summit, Reimer described the criminal justice system as “overly abusive, overly inclusive” and suggested that “there probably isn’t a single person in this group who doesn’t have a friend, a relative or a co-worker, a neighbor, someone you care about who hasn’t been caught up in the criminal justice system in this country.” He was closer to the mark than he probably knew.
As hoped for, these bipartisan moves soon stirred positive headlines outside the Kochs’ tight circle, creating exactly the kind of image overhaul they had in mind. Obama’s senior adviser, Valerie Jarrett, surprised those familiar with the Kochs’ full record by inviting Mark Holden, the general counsel of Koch Industries, to meet with her and other top officials about the issue in the White House, enabling the Kochs to appear above “divisiveness,” just as Fink had planned. Particularly effective was their joining an alliance for criminal justice reform with a number of progressive groups, including the Center for American Progress. Washington’s premier liberal think tank regarded the partnership as a means of adding financial and political clout to the cause of poor and minority inmates. But the Kochs had long had other kinds of perpetrators in mind. The platform of the Libertarian Party in 1980—the year David Koch ran on its ticket—called for an end to the prosecution of all tax evaders. The Kochs also objected vociferously to the many environmental crimes with which they had been charged.
Holden acknowledged in an interview that the Kochs became active in criminal justice reform when the Clinton Justice Department charged Koch Industries in 2000 with environmental crimes. “It was hell,” recalled Holden. He said Charles Koch saw the prosecution as “government overreach” and grew concerned more generally about the issue.
But far from an abusive prosecution of the powerless, the 2000 case was initiated by the Koch employee in Corpus Christi, Texas, who blew the whistle on the company for trying to cover up the fact that it was, as she put it, “hemorrhaging benzene”—a known carcinogen—into the air. This was the case that David Uhlmann, the prosecutor and later law professor, had described as “one of the most significant cases ever brought under the Clean Air Act.” The company was not falsely accused. It paid a $20 million fine, thereby avoiding jail time for its employees. The ability of the Kochs to spin this fifteen years later into a campaign for bipartisan, populist social reform—one aimed at weakening the government’s prosecutorial powers—was a masterful bit of self-promotion.
Holden, who had been a jail guard early in his career, spoke feelingly in public about the country’s over-incarceration of underprivileged prisoners. Whether the Kochs truly shared his views or merely saw criminal justice reform as a means of weakening the government’s hand against corporate crime, and whitewashing their own image, remained to be seen. Skeptics pointed out that the Kochs continued to support numerous candidates—including Scott Walker, whom David Koch named in 2015 as their favorite presidential candidate until he dropped out—who had records on criminal justice issues that completely belied the Kochs’ professed concern. They also noted that the Kochs only championed a corporate campaign against “check the box” forms, requiring job seekers to disclose prior criminal convictions, after Koch Industries got in trouble with the federal government for failing to reveal its own criminal record.
Nonetheless, the $25 million grant from Charles’s foundation to the United Negro College Fund just before the June 2014 summit began was winning them positive headlines. “Increasing well-being by helping people improve their lives has long been our focus,” said Charles in a prepared public statement about the donation.
His use of the new buzz phrase “well-being” seemed almost offhand. But during another session at the summit that June, a speaker explained to the donors just how deliberate and politically disarming the term was. James Otteson, a conservative professor of political economy at Wake Forest University, called it “a game changer.” In fact, he told the donor group that he was planning to build a “well-being” center at Wake Forest, where he already was executive director of the BB&T Center for the Study of Capitalism.
One anecdote, he said, illustrated “the power of framing” free-market theories as a movement to promote well-being. He recounted that a colleague, whom he described as a prominent “left wing political scientist” who “rails” against Republicans and capitalism, had been so entranced by the idea of studying the factors contributing to human well-being that he had said, “You know, I’d even be willing to take Koch money for that.” Upon hearing this, the donors laughed out loud. “Who can be against well-being? The framing is absolutely critical,” Otteson exclaimed.
The idea of sugarcoating antigovernment, free-market ideology as a nonpartisan movement to enhance the quality of life had clear advantages. And Otteson’s success at penetrating academia with the approach was especially encouraging to the group. The growing emphasis on academia as a delivery system for the donors’ conservative ideology and as a long-range strategy to change the country’s political makeup was, in fact, another major focus of the donor summit.
As the Olin and Bradley Foundations had demonstrated, and as Charles Koch’s early blueprint for advancing libertarianism showed, winning the hearts and minds of college students had long been a core strategy on the right. That weekend, Kevin Gentry, the conference’s emcee, who was vice president for special projects at Koch Industries and vice president of the Charles Koch Foundation, described academia as “a great investment” and “an area—for this group—this seminar network—that is a significant competitive advantage” and an important component of the Kochs’ ambitious designs.
As Ryan Stowers, vice president of the Charles Koch Foundation, recounted to the donors, in the 1980s, when Charles Koch and Richard Fink first tried to use Hayek’s model of production as a means of manufacturing political change, it seemed far-fetched to try to convert academia into a source of free-market ideology. There were so few free-market scholars in America, Stowers said, that Charles could barely find enough to hold a conference. But with “courage, investment, and leadership,” from Charles and the other donors, he said, “we’ve built a robust, freedom-advancing network” of nearly five thousand scholars in some four hundred colleges and universities across the country.
A breakthrough, Stowers related, was the creation of some two dozen privately funded academic centers, the flagship of which was the Mercatus Center at George Mason University. As a 2015 report by one of the nonprofits connected to Art Pope explained, private academic centers within colleges and universities were ideal devices by which rich conservatives could replace the faculty’s views with their own. “Money talks loudly on college campuses,” it noted. As an example, the report profiled the trailblazing record of John Allison, the former Cato Institute chairman, who had overseen grants to sixty-three colleges when running the BB&T bank. All of these programs were required to teach his favorite philosopher, the celebrator of self-interest Ayn Rand.
But as earmarked grants proliferated, controversy over academic freedom grew, increasing the need for slicker marketing. By 2014, the various Koch foundations alone were funding pro-corporate programs at 2
83 four-year colleges and universities. At Florida State University, where a Koch foundation grant in 2008 gave the foundation a say on faculty hires, criticism erupted into a public fight. Students complained that the Koch influence was nefarious and omnipresent. Jerry Funt, an undergraduate, said that in the public university’s introductory economics course, “We learned that Keynes was bad, the free-market was better, that sweatshop labor wasn’t so bad, and that the hands-off regulations in China were better than those in the U.S.” Their economics textbook, he said, was co-written by Russell Sobel, the former recipient of Koch funding at West Virginia University who had taught that safety regulations hurt coal miners. The textbook, which Funt described as arguing that “climate change wasn’t caused by humans and isn’t a big issue,” had been given an F by an environmental group. But when critics raised objections, the Kochs defended their purchase of influence over public universities as merely providing “fresh” college thinking.
The Kochs were also directing millions of dollars into online education, and into teaching high school students, through a nonprofit that Charles devised called the Young Entrepreneurs Academy. The financially pressed Topeka school system, for instance, signed an agreement with the organization which taught students that, among other things, Franklin Roosevelt didn’t alleviate the Depression, minimum wage laws and public assistance hurt the poor, lower pay for women was not discriminatory, and the government, rather than business, caused the 2008 recession. The program, which was aimed at low-income areas, also paid students to take additional courses online.
At the June summit, Stowers stressed to the donors that this “investment” in education had created a valuable “talent pipeline.” Assuming the thousands of scholars on average taught hundreds of students per year, he said, they could influence the thinking of millions of young Americans annually. “This cycle constantly repeats itself,” he noted, “and you can see the multiplier effect it’s had on our network since 2008.”