Dark Money

by Jane Mayer

  In summation, Gentry stressed to the donors, “So you can see, higher education is not just limited to an impact on higher education.” The students were “the next generation of the freedom movement,” he said. “The students that graduate out of these higher-education programs populate the state-based think tanks and the national think tanks.” And, he said, they “become the major staffing for the state chapters” of the “grassroots” groups. Those with passion were encouraged to become part of what he called the Kochs’ “fully integrated network.” At this point, he paused and said, “I got to be careful how I say this.” He paused again. “They populate our program.”

  The reason Gentry had to be careful was that the Kochs described their educational activities to the IRS as nonpolitical charitable work, qualifying them for tax breaks and anonymity. Yet what Gentry was describing could scarcely be more political. It was a full-service political factory. As he addressed the donors, cajoling them to “invest” more, he couldn’t resist adding further detail. “It’s not just work at the universities with the students,” he went on. “It’s building the state-based capabilities, and election capabilities, and integrating this talent pipeline. So you can see how this is useful to each other over time. No one else has this infrastructure. We’re very excited about doing it!”

  Evidently, the donors were enthused, too. By the time the summit ended on June 17, the Kochs had set a fund-raising goal of $290 million. It was an audacious and, at the time, unprecedented sum for any outside group to spend in a midterm election.

  “I know on the one hand this is crazy; $290 million is an extraordinary figure,” Gentry acknowledged, shortly before the final pledges were made. But he told the secret gathering, “We’ve come a long way from where we were seven or eight years ago.” He added, “You know, we’re trying to do this in a businesslike way for you all, because, literally, you all are our investors.”

  Eight days later, the Charles Koch Institute hosted what it called its Inaugural Well-Being Forum at the Newseum in Washington. Among the panelists was Professor James Otteson from Wake Forest. In an online essay, Charles explained that his foundation’s “Well-Being Initiative” aimed to “foster more conversation about the true nature of well-being.” Displayed prominently beneath his byline was a quotation from Martin Luther King Jr. No mention was made of King’s vision of well-being, which included labor unions, national health care, and government employment for those needing jobs.

  Among the five members on the advisory board to Charles Koch’s new Well-Being Initiative was Arthur Brooks, whose discovery that conservatives needed to be seen as more caring had deeply influenced the Kochs. By then, Brooks had moved beyond an earlier book he had written—which, like Mitt Romney, divided Americans into “makers” and “takers”—and turned out a new one that defined free enterprise as a path to happiness. Unhappiness, according to Brooks, “had a strong link” to “economic envy,” such as the kind of thinking that pushes for higher taxes on the very rich. The New York Times deemed Brooks’s theories on this print-worthy enough to publish in its opinion section. Evidently, the new well-being trope was gaining traction.

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  As they recast themselves in public as nonpartisan reformers, the Kochs’ increasingly aggressive private political machine geared up for the 2014 election. The ultimate prize was control of the U.S. Senate. If Republicans could capture the majority in the upper chamber and hold on to the House, they would dominate Congress, controlling the legislative agenda and creating a formidable roadblock to President Obama.

  But the Kochs had reached an important conclusion during their post-2012 autopsy. “They decided that the Republican Party’s infrastructure wasn’t worth a damn, and if they wanted it to be done better, they’d have to do it themselves,” said the Koch Industries employee who had described the company’s image problems during this period.

  It might seem a radical and troubling step for a couple of billionaire businessmen who had never been elected to any office, and had no formal allegiance to anything other than their massive, private multinational company, to decide to supplant one of the country’s two political parties. But in his interview with the Wichita Business Journal, Charles shrugged it off nonchalantly. Asked why he was so involved in politics, he likened himself to the golfer Lee Trevino, who, he said, explained his reason for winning tournaments by saying, “Well, somebody has got to win them, and it might as well be me.” Charles added, “There doesn’t seem to be any other large company trying to do this, so it might as well be us. Somebody has got to work to save the country.” Far from being some sort of evil Svengali, he said his primary role at Americans for Prosperity was this: “I write a check.” He added, “Listen, if I could do everything that’s attributed to me, I would be a very busy boy.”

  As the Kochs’ donor network poured a record amount of money into the 2014 midterm elections, Charles continued to portray himself, and probably to think of himself, as a disinterested patriot. In an op-ed piece in The Wall Street Journal that spring, he described himself as involved in politics only reluctantly and recently. Dating his activism to the founding of the biannual donor seminars, he asserted that he’d only been politically engaged for a decade. But after tallying up the $7 million or so that the Kochs had poured into politics more than a decade earlier, the nonpartisan fact-checking group PolitiFact judged his claim to be “false.”

  A longtime associate who declined to be named, exclaimed, “He has been trying since the 1970s to get his Libertarian Revolution going!” Charles might have started as a bookish idealist who disdained conventional politics, but at each step of the way he had learned from his failures and moved closer to the center of power. He was disciplined and methodical. After 2012, for instance, he had systematically studied not only his own side’s weaknesses but also the other side’s strengths. “He’s learned a lot from the Democrats, particularly about using grass roots,” said the associate. “For Charles, politics is another form of science—just dealing with people, not molecules.”

  Inside the Obama White House, as the 2014 midterm elections approached, David Simas, director of the Office of Political Strategy and Outreach, began to suspect that the Kochs had reverse engineered the data analytics that the Obama effort used in 2012. The implications, a White House official said, were, in a word, “huge.”

  Computers had transformed the business of winning elections into a rapidly changing high-tech competition for massive amounts of voter data. Realizing that its data operation had fallen woefully behind in 2012, the Koch network took serious remedial action. Freedom Partners, as the Koch donors now referred to themselves, quietly made a multimillion-dollar investment in i360, a state-of-the-art political data company, which then merged with the Kochs’ troubled data collection effort, Themis. Soon the operation had hired a hundred staffers and assembled detailed portraits of 250 million U.S. consumers and over 190 million active voters. Field workers for the Kochs’ many advocacy groups were armed with handheld devices on which they constantly updated the data. Their political operatives could then determine which voters were “persuadable” and bombard them with personalized communications aimed at motivating them to vote or to stay home.

  The Kochs’ development of their own data bank marked a pivotal moment in their relationship with the Republican Party. Until then, handling the voter files had been a core function of the Republican National Committee. But now the Kochs had their own rival operation, which was by many accounts easier to use and more sophisticated than that of the RNC. Several top Republican candidates started to purchase i360’s data, even though they were more expensive, because they were better. With little other choice, in 2014 the RNC struck what it called a “historic” deal to share data with the Kochs. But the détente was reportedly strained. By 2015, the acrimony had broken out into the open as Katie Walsh, the chief of staff at the RNC, all but accused the Kochs of usurping the Republican Party.

  In an extraordinary public rebuke, s
he told Yahoo News, “I think it’s very dangerous and wrong to allow a group of very strong, well-financed individuals who have no accountability to anyone to have control over who gets access to the data when, why and how.”

  Michael Palmer, the president of i360, punched back, saying, “We believe that a robust marketplace…is a healthy way to advance past the single monopoly model that has failed the Republican Party in recent presidential elections.” Having embraced the Kochs’ free-market ideology and their right to spend unlimited money, the Republican Party was now ironically finding itself sidelined and perhaps imperiled by the rapaciousness of its own big donors. Alarmed, a source “close to the RNC” told Yahoo, “It’s pretty clear that they don’t want to work with the party but want to supplant it.”

  If in 2012 the Kochs had rivaled the Republican Party, by 2014 they had in many ways surpassed it. “They’re building a party from outside to take over the party—they’re doing it by market segments—it’s like a business plan,” observed Lisa Graves, the head of the Center for Media and Democracy, a liberal watchdog group that studied the mechanics of political manipulation.

  Americans for Prosperity had expanded its ground game to 550 paid staffers, with as many as 50 in a single pivotal state like Florida, as Politico reported. Other Koch-backed advocacy groups, such as Generation Opportunity and the LIBRE Initiative, planted grassroots organizers wherever there were hotly contested elections. The Koch constellation also added Aegis Strategic, an organization that aimed to recruit and train candidates. This way the Koch network could avoid the kinds of flaky misfits who had plagued Republicans in 2012. As he watched their progress, Axelrod was impressed. “They aggressively corrected the problems they had last time with terminal foot-in-mouth disease,” he said. “It showed.”

  On November 4, 2014, the investors of the Koch network finally got their money’s worth. Election Day proved a Republican triumph. The GOP picked up nine seats in the Senate, winning full control of both congressional chambers. Beltway pundits proclaimed President Obama a “lame duck” whose presidency they said was, for all intents and purposes, over. From this point on, they predicted, he would be largely relegated to playing defense against conservatives’ efforts to roll back everything his administration had done before.

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  The election was as big a victory for ultrarich conservative donors as it was for the winning Republican candidates. As the Times noted, the conservative outside groups had “retooled and revamped” during the previous year and a half and emerged as the preeminent forces in the election. There had never been a costlier midterm election, nor one with more outside money. And the largest overall source fueling this explosion of private and often secret spending was the Koch network. All told, it poured over $100 million into competitive House and Senate races and almost twice that amount into other kinds of activism.

  Four years into the Citizens United era, the numbers were more numbing than shocking. The only suspense in each election cycle was the factor by which the spending had multiplied over the previous one. Mark McKinnon, a centrist political consultant who had advised both Republicans and Democrats, declared, “We have reached a tipping point where mega donors completely dominate the landscape.”

  A few of the biggest spenders were now Democrats, like the California hedge fund magnate turned environmental activist Tom Steyer. The $74 million he spent trying to elect candidates who pledged to fight global warming made him the largest disclosed donor in 2014. While this added some ideological diversity, it did nothing to dilute the concentration of wealth that now influenced elections. The 100 biggest known donors in 2014 spent nearly as much money on behalf of their candidates as the 4.75 million people who contributed $200 or less. On their own, the top 100 known donors gave $323 million. And this was only the disclosed money. Once the millions of dollars in unlimited, undisclosed dark money were included, there was little doubt that an extraordinarily small and rich conservative clique had financially dominated everyone else.

  “Let’s call the system that Citizens United and other rulings and laws have created what it is: an oligarchy,” declared McKinnon. “The system is controlled by a handful of ultra-wealthy people, most of whom got rich from the system and who will get richer from the system.”

  From the Republic’s earliest days, the wealthy had always dominated politics, but at least since the Progressive Era the public, through its elected representatives, had devised rules to keep the influence in check. By 2015, however, conservative legal advocates, underwritten by wealthy benefactors and aided by a conservative majority on the Supreme Court, had led a successful drive to gut most of those rules. It was no longer clear if the remaining checks on corruption were up to the task. It had long been the conceit in America that great economic inequality could coexist with great social and political equality. But a growing body of academic work suggested that this was changing. As America grew more economically unequal, those at the top were purchasing the power needed to stay there.

  Among the new power brokers, few if any could match the political clout of the Kochs. The reach of their “integrated network” was unique. One reflection of their singular status was their relationship with the new majority leader of the Senate, Mitch McConnell. Only a few months before assuming that position, McConnell had been an honored speaker at their June donor summit. There, he had thanked “Charles and David” and added, “I don’t know where we would be without you.” Soon after he was sworn in, McConnell hired a new policy chief—a former lobbyist for Koch Industries. McConnell then went on to launch a stunning all-out war on the Environmental Protection Agency, urging governors across the country to refuse to comply with its new restrictions on greenhouse gas emissions.

  Three of the newly elected Republicans who joined the Senate in 2014 had also attended the secret Koch meeting in June, where they, too, had gushed over their sponsors. The leaked tapes of the event caught Joni Ernst, for instance, who had previously been, by her own account, a “little-known state senator from a very rural part of Iowa,” crediting the Kochs with transforming her, like Eliza Doolittle, into a national star. “Exposure to this group and to this network and the opportunity to meet so many of you,” she said, were what “really started my trajectory.”

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  Charles Koch’s trajectory had been a longer climb, but it was hard not to marvel at how far he, too, had come from the days when he had haunted the John Birch Society bookstore in Wichita and teetered with the Freedom School and the Libertarian Party on the outermost fringe of political irrelevance. The force of his will, combined with his fortune, had made him one of the most formidable figures in modern American politics. Few had waged a more relentless or more effective assault on Americans’ belief in government.

  He and his brother had built and financed a private political machine that had helped cripple a twice-elected Democratic president and begun to supplant the Republican Party. Educational institutions and think tanks all over the country promoted his worldview, doubling as a talent pipeline. A growing fleet of nonprofit groups mobilized public opinion behind his agenda. The groups trained candidates and provided the technological and financial assistance necessary to run state-of-the-art campaigns. The money they could put behind their chosen candidates was seemingly limitless. Congressmen, senators, and presidential hopefuls now flocked to their secret seminars like supplicants, eager to please them in hopes of earning their support.

  Rare was the Republican candidate who wouldn’t toe the Kochs’ line. John Kasich, the iconoclastic governor of Ohio, prompted an angry walkout by some twenty donors at the Kochs’ April 2014 summit for criticizing the Koch network’s position against Medicaid expansion. In answer to Randy Kendrick, who had questioned his pro-Medicaid position, Kasich retorted, “I don’t know about you, lady. But when I get to the pearly gates, I’m going to have an answer for what I’ve done for the poor.” He added, “I know this is going to upset a lot of you guys, but we have to use government
to reach out to people living in the shadows.” The Kochs never invited Kasich back again.

  Donald Trump, the New York real estate and casino magnate whose unorthodox bid for the Republican nomination flummoxed party regulars, was also left off the Kochs’ invitation list. In August 2015, as his rivals flocked to meet the Koch donors, he tweeted, “I wish good luck to all of the Republican candidates that traveled to California to beg for money etc. from the Koch Brothers. Puppets?” Trump’s popularity suggested that voters were hungry for independent candidates who wouldn’t spout the donors’ lines. His call to close the carried-interest tax loophole, and talk of the ultrarich not paying its share, as well as his anti-immigrant rants, made his opponents appear robotically subservient, and out of touch. But few other Republican candidates could afford to ignore the Kochs.

  Among their most astonishing feats, the Kochs had succeeded in persuading hundreds of the other richest conservatives in the country to give them control over their millions of dollars in contributions, in effect making them leaders of a conservative billionaires’ caucus. Most of the other partners, as they called themselves, were silent. Their names rarely if ever appeared. When, in response to criticism, the Kochs invited the media to cover snippets of their summits, they insisted that the reporters agree not to name the other donors. Yet this secretive, unelected, and unaccountable club was changing the face of American politics.

  Charles Koch denied he had ever given any dark money. “What I give isn’t ‘dark.’ What I give politically, that’s all reported,” he told CBS News in a 2015 interview. “It’s either to PACs or to candidates. And what I give to my foundations is all public information.” Perhaps he believed it, but during the previous five years alone, he, his brother David, and their allies had contributed over $760 million to mysterious and ostensibly apolitical nonprofits such as the Freedom Partners Chamber of Commerce, the Center to Protect Patient Rights, and the TC4 Trust. From there the money had been disbursed to dozens of other nonprofits, some of which were little more than mailboxes, which had then spent the funds promoting the donors’ political interests both directly in elections, and indirectly in countless other ways. As for the transparency of Charles Koch’s foundations, two of them had made grants of nearly $8 million between 2005 and 2011 to DonorsTrust, whose stated purpose was to mask the money trail.