Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (45 page)

Secrecy permeated every level of the operation. One former Koch executive, Ben Pratt, who became the chief operating officer of the voter data bank, Themis, used a quotation from Salvador Dalí on his personal blog that could have served as the enterprise’s motto: “
The secret of my influence is that it has always remained secret.”

Robert Tappan, a spokesman for Koch Industries, defended the secrecy as a matter of security, because “
Koch has been targeted repeatedly in the past by the Administration and its allies because of our real (or, in some cases, perceived) beliefs and activities concerning public policy and political issues,” overlooking decades of secrecy from the John Birch Society onward.

This consolidation of power reflected the overall national trend of increasingly large and concentrated campaign spending by the ultra-wealthy in the post–
Citizens United
era. The spending, in turn, was a reflection of the growing concentration of wealth more generally in America. As a result, the 2012 election was a tipping point of sorts. Not only was it by far the most expensive election in the country’s history; it was also the first time since the advent of modern campaign-finance laws when outside spending groups, including super PACs and tax-exempt nonprofit groups, flush with unlimited contributions from the country’s richest donors, spent more than $1 billion to influence federal elections. And when the spending on attack ads run by nonprofits was factored in, outside spending groups might well have outspent the campaigns and the political parties for the first time.

The Koch network loomed as a colossus over this new political landscape. On the right, there were other formidable donor networks, including the one assembled by Karl Rove, but no single outside group spent as much.
On its own, in 2012 the Kochs’ network of a few hundred individuals spent at least $407 million, almost all of it anonymously. This was more than John McCain spent on his entire 2008 presidential bid. And it was more than the combined contributions to the two presidential campaigns made by 5,667,658 Americans, whose donations were legally capped at $5,000.
Politico
’s Kenneth Vogel crunched the numbers and discovered that in the presidential race the top 0.04 percent of donors contributed about the same amount as the bottom 68 percent.
No previous year for which there were data had shown more spending by fewer people. The staggeringly lopsided situation made 2012 the starkest test yet of Louis Brandeis’s dictum that the country could have either “democracy, or we may have wealth concentrated in the hands of a few,” but not both.

The Kochs’ growing clout was evident in a confidential internal Romney campaign memo dated October 4, 2011. Romney, like virtually every ambitious Republican in the country, was angling for David Koch’s support. The memo described him plainly as “
the financial engine of the Tea Party,” although it noted that he “denies being directly involved.”

Romney, it revealed, had hoped to woo Koch in a private tête-à-tête at the billionaire’s beachfront mansion in Southampton, New York, over the summer. But to the campaign’s dismay, Hurricane Irene had washed the meeting out. With the Iowa caucuses looming, and Chris Christie out of the race, Romney tried again in the fall.

Shortly after the memo was written, Romney took two controversial campaign stances that were guaranteed to please the billionaire brothers. First, he reversed his earlier position on climate change. In his 2010 book,
No Apology
, Romney had written, “I believe that climate change is occurring—the reduction in the size of global ice caps is hard to ignore. I also believe that human activity is a contributing factor.” When he hit the campaign trail in June of 2011, Romney reiterated this view and stressed that it was “important for us to reduce our emissions of pollutants and greenhouse gases that may well be significant contributors to the climate change and the global warming that you’re seeing.” But at a rally in Manchester, New Hampshire, in late October, he suddenly declared himself a climate change skeptic. “My view is that we don’t know what’s causing climate change on this planet,” he said. “And the idea of spending trillions and trillions of dollars to try to reduce CO
₂
emissions is not the right course for us,” he declared. By the time he accepted the Republican nomination in Tampa the following summer, Romney treated the notion of acting on climate change as a joke. “President Obama promised to begin to slow the rise of the oceans. And to heal the planet,” he mocked. “My promise is to help you and your family.”

A week after first reversing himself on climate change, Romney skipped a campaign event attended by every other Republican presidential candidate in Iowa in order to speak at Americans for Prosperity’s annual Defending the American Dream summit in Washington.
There he delivered a keynote address that could have passed as an audition for David Koch, who was in the audience. Romney had governed Massachusetts as a northeastern moderate, but now he unveiled a budget plan reminiscent of Paul Ryan’s.

Soon afterward, Romney proposed to cut all income tax rates by one-fifth. According to the nonpartisan Tax Policy Center, Romney’s proposal would save those in the top 0.1 percent an average of $264,000 a year, and the poorest 20 percent of taxpayers an average of $78. The middle class would get on average $791. Romney also proposed other items high on his donors’ wish lists, including eliminating estate taxes, lowering the corporate tax rate, and ending taxes owed by companies that had shipped operations overseas. Taken as a whole, the Tax Policy Center said the proposal would add $5 trillion to the deficit over the next decade. Romney said he would make up the difference by closing unspecified tax loopholes.

Charles Koch often described his support for slashing taxes as motivated by a concern for the poor. “
They’re the ones that suffer” from “bigger government,” he argued in an interview with his hometown paper. Yet there was no getting around the fact that the numbers added up to a disproportionately huge gift to the already rich. “
These guys all talk about the deficit, but there’s not a single tax benefit for the wealthy they’ll get rid of,” Dan Pfeiffer, Obama’s former communications adviser, later pointed out. “What really made them furious,” he said, “was when we started talking about closing the loopholes for private jets!”

If these policy shifts were designed in part to win the Kochs’ support, they succeeded. By July, David Koch not only embraced Romney but threw a $75,000-per-couple fund-raiser for him at his Southampton estate. Romney and Koch were described as exuding a “
confident glow” as they and their wives descended the stairs following a private half-hour chat before the other guests arrived. A few weeks later, Romney chose Ryan as his running mate. The pick was opposed by Romney’s campaign consultant, Stuart Stevens, and proved baffling to Obama because of the unpopularity of Ryan’s extreme budget plan. But conservative donors, including David Koch and his wife, Julia, had lobbied for Ryan. It was one more indication that an invisible wealth primary was shaping the discourse and the field long before the rest of the country had the chance to vote.

With two of the largest fortunes in the world at their disposal—together worth an estimated $62 billion by 2012—Charles and David Koch were perfectly positioned to take advantage of the growing importance of money in American politics. Yet the presidential campaign still proved difficult for them to manage. With the eclipse of the party professionals by outside funders, virtually any novice with enough cash, including other donors in their own circle, could now disrupt the process.

As the presidential race began, Sean Noble was arguing to anyone in the Koch fold who would listen that it was time to “pull the trigger” on Newt Gingrich. The former Speaker of the House from Georgia had reinvented himself as a long-shot Republican presidential candidate. Even some of the conservatives who had been part of Gingrich’s revolution in the House in the 1990s were privately begging the Koch operatives to act before Gingrich did irreparable damage to the other Republican candidates and the party. Gingrich was a brilliant force of entropy, dazzlingly eloquent on some occasions, utterly daft on others, and ruthlessly destructive to anyone in his path. For him, politics was total war, and he had the scars to prove it.

In preparation, Noble’s firm quietly produced what it hoped was a lethal television ad using footage from a 2008 ad showing Gingrich sitting on a dainty love seat with Nancy Pelosi, agreeing that they needed to fight global warming. On the Republican side, it would have proved pure poison. But Noble couldn’t get authorization to air it. The hesitation appeared related to the addition of Sheldon Adelson, the enormously wealthy casino mogul, to the Koch circle.

Sheldon Adelson, whom President George W. Bush once reportedly described as “this crazy Jewish billionaire, yelling at me,” wasn’t exactly the Kochs’ type. He was a hard-right foreign policy hawk who was focused on ensuring the security of Israel. He had been a Democrat, but he shared the Kochs’ antipathy toward labor unions, Obama, and redistributive income taxes. “
Why is it fair that I should be paying a higher percentage of taxes than anyone else?” he once complained. Perhaps more important, with a fortune estimated in 2011 at $23.3 billion, the seventy-eight-year-old chairman of the Las Vegas Sands Corporation brought a lot of chips to the table. He could potentially increase the power of the Koch donor network exponentially. The Kochs had repeatedly invited Adelson to join their group but gotten nowhere. So when he finally showed up for the first time at their January 2012 summit in Indian Wells, California, they were not eager to trash his favorite candidate, who happened to be Gingrich.

“There were a lot of them who were pretty unhappy with Sheldon,” a Koch confidant says, “but Newt pushed all his buttons.”
The odd couple had been friends for decades, bonding in the 1990s when Gingrich helped Adelson prevail in a bitter war to keep his casino operation, unlike the others in Las Vegas, union-free. They also shared a deep commitment to Israel’s hard-line conservatives, especially its prime minister, Benjamin Netanyahu, with whom an associate says Adelson often spoke several times a week. Adelson had lavished millions of dollars on Gingrich during his precipitous ups and downs. Calling himself “just a loyal guy,” Adelson continued that support after Gingrich was forced to resign from office in 1999 amid ethics charges and an insurrection within his own ranks. Long after the center of political gravity had shifted elsewhere, Adelson continued to loan Gingrich his private jets and contributed nearly $8 million to the nest of ventures that kept Gingrich employed.

But there was one touchy Israel-related issue on which the old friends disagreed. Adelson had long sought clemency for Jonathan Pollard, the Jewish American spy convicted of passing state secrets to Israel, who was serving a life sentence in federal prison. In the past, Gingrich had called Pollard “one of the most notorious traitors in U.S. history” and scuttled a Clinton-era deal to release him. If freed, Gingrich warned, Pollard might “resume his treacherous conduct and further damage the national security of the United States.” But in December 2011, as Gingrich was heading into the Iowa caucuses in desperate need of cash, he switched his position. In an interview with the Jewish Channel, he announced that he now had “
a bias in favor of clemency” for Pollard.
Within weeks, Adelson donated $5 million to Gingrich’s sputtering campaign, which otherwise in all likelihood would have fizzled out.

Adelson’s cash temporarily revived Gingrich, unleashing a chain of unintended consequences. The pro-Gingrich super PAC used the casino magnate’s money to purchase more than $3 million in advertising time in South Carolina. Then it aired a half-hour video called “King of Bain: When Mitt Romney Came to Town” that eviscerated Romney as a greedy, “predatory corporate raider.” After the video was attacked, Gingrich called on the super PAC to take it down but not before he amplified the message by denouncing Bain Capital, the private equity company that Romney had co-founded, as “rich people figuring out clever ways to loot a company.”

No left-winger could have made the case against high finance more convincingly. Romney became the face of “vulture capitalism,” which was depicted as heartlessly cannibalizing what was left of the country’s middle class. When Gingrich was finished with Bain, he went on to demand that Romney release his tax returns. As Noble had feared, the consequences of Gingrich at full throttle were disastrous for the Republicans.

Gingrich’s attack on capitalist excess was underwritten by one of the richest men in the world whose international gambling empire was at that moment under federal criminal investigation for laundering money and foreign corrupt practices. Eventually, according to court testimony, Adelson’s company paid a $47 million out-of-court settlement in the money-laundering case for failing to report a $45 million transfer of cash it made on behalf of a Chinese-Mexican businessman who was under investigation for drug trafficking. In another case, Adelson’s former chief executive officer accused the mogul’s subsidiary in Macao of consorting with organized crime figures and making excessive payments to a local official that might breach laws prohibiting U.S. citizens from engaging in corrupt practices overseas. Adelson described the allegations as “
delusional and fabricated.” But the legal cloud did little to enhance the image of the Koch network or the GOP. Instead of shoring up the Republican ticket, big money tainted the brand, prolonged the primaries, pushed the candidates to adopt their donors’ pet issues, and, all in all, did the Democrats’ work for them.

Romney did nothing to mitigate the “Richie Rich” caricature. After insisting that “corporations are people” and saying, “I like being able to fire people,” he revealed details of a $250 million blind trust crammed with offshore investments in tax havens ranging from Switzerland to the Cayman Islands. His description of the $374,000 he made in speaking fees in 2010 as “not very much” sealed his image as hopelessly out of touch with ordinary Americans. The snapshot showing how the 1 percent lived became more toxic still when, under pressure from Gingrich, Romney released his tax returns, revealing that he had paid an effective tax rate of 14 percent on income of $21.7 million. It was less than half the rate paid by many middle-class wage earners. Gingrich trounced Romney in South Carolina, winning his first primary and proving that while the American public admired success, it also believed in fairness.