Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right

The Dark Side: The Inside Story of How the War on Terror Turned into a War on American Ideals

Strange Justice: The Selling of Clarence Thomas

(with Jill Abramson)

Landslide: The Unmaking of the President, 1984–1988

(with Doyle McManus)

Copyright © 2016 by Jane Mayer

All rights reserved. Published in the United States by Doubleday, a division of Penguin Random House LLC, New York, and distributed in Canada by Random House of Canada, a division of Penguin Random House Canada Ltd., Toronto.

www.doubleday.com

DOUBLEDAY
and the portrayal of an anchor with a dolphin are registered trademarks of Penguin Random House LLC.

Cover design by John Fontana Cover illustrations: (seal) © George Nazlis / Alamy; (money bag) In-Finity / Shutterstock Library of Congress Control Number: 2015957180

ISBN: 978-0-385-53559-5 (hardcover) ISBN: 978-0-385-53560-1 (eBook)

eBook ISBN 9780385535601

FOR BILL HAMILTON:

Everyone needs an editor,

but not everyone is lucky enough to marry one.

Thank you for always being there with just the right words.

We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.

—Louis Brandeis

On January 20, 2009, the eyes of the country were on Washington, where over a million cheering celebrants crowded the National Mall to witness the inauguration of the first African-American president. So many supporters streamed in from all across the nation that for twenty-four hours they nearly doubled Washington’s population. Inaugurations are always moving celebrations of the most basic democratic process, the peaceful transfer of power, but this one was especially euphoric. The country’s most famous and iconic musicians, from the Queen of Soul, Aretha Franklin, to the cellist Yo-Yo Ma, gave soaring performances to mark the occasion. Celebrities and dignitaries pulled strings to get seats. Excitement was so feverish that the Democratic political consultant James Carville was predicting a long-term political realignment in which the Democrats “will remain in power for the next forty years.”

But on the other side of the country during the last weekend in January 2009, another kind of gathering was under way, of a group of activists who aimed to do all they could to nullify the results of the recent election. In Indian Wells, a California desert town on the outskirts of Palm Springs, one polished sports utility vehicle after the next cruised down the long, palm-lined drive of the Renaissance Esmeralda Resort and Spa. Stepping out onto the curb, as bellboys darted for the luggage, were some of America’s most ardent conservatives, many of whom represented the nation’s most powerfully entrenched business interests. It would be hard to conjure a richer tableau of the good life than the one greeting them. Overhead, the sky was a brilliant azure. In the distance, the foothills of the Santa Rosa Mountains rose steeply from the Coachella Valley, creating a stunning backdrop of ever-changing hues. Velvety green lawns stretched as far as the eye could see, meandering toward a neighboring thirty-six-hole golf course. Swimming pools, one with a man-made sandy beach, were surrounded by chaises and intimate, curtained pavilions. As dusk fell, countless tea lights and tiki torches magically lit the walkways and flower beds.

B
ut inside the hotel’s dining room, the mood was grim, as if these luxuries merely highlighted how much the group gathered there had to lose. The guests meeting at the resort that weekend included many of the biggest winners during the eight years of George W. Bush’s presidency. There were billionaire businessmen, heirs to some of America’s greatest dynastic fortunes, right-wing media moguls, conservative elected officials, and savvy political operatives who had made handsome livings helping their patrons win and hold power. There were also eloquent writers and publicists, whose work at think tanks, advocacy groups, and countless publications was quietly subsidized by corporate interests. The guests of honor, though, were the potential political donors—or “investors,” as they referred to themselves—whose checkbooks would be sorely needed for the project at hand.

The group had been summoned that weekend not by the leader of a recognized opposition party but rather by a private citizen, Charles Koch. In his seventies, he was white-haired but youthfully fit and very much in charge of Koch Industries, a conglomerate headquartered in Wichita, Kansas. The company had grown spectacularly since its founder, Charles’s father, Fred, had died in 1967, and he and his brother David took charge, buying out their two other brothers. Charles and David—often referred to as the Koch brothers—owned virtually all of what had become under their leadership the second-largest private company in America. They owned four thousand miles of pipelines, oil refineries in Alaska, Texas, and Minnesota, the Georgia-Pacific lumber and paper company, coal, and chemicals, and they were huge traders in commodity futures, among other businesses. The company’s consistent profitability had made the two brothers the sixth- and seventh-wealthiest men in the world. Each was worth an estimated $14 billion in 2009. Charles, the elder brother, was a man of unusual drive, accustomed to getting his way. What he wanted that weekend was to enlist his fellow conservatives in a daunting task: stopping the Obama administration from implementing Democratic policies that the American public had voted for but that he regarded as catastrophic.

Given the size of their fortunes, Charles and David Koch automatically had extraordinary influence. But for many years, they had magnified their reach further by joining forces with a small and intensely ideological group of like-minded political allies, many of whose personal fortunes were also unfathomably large. This faction hoped to use their wealth to advance a strain of conservative libertarian politics that was so far out on the political fringe as recently as 1980, when David Koch ran for vice president of the United States on the Libertarian Party ticket, it received only 1 percent of the American vote. At the time, the conservative icon William F. Buckley Jr. dismissed their views as “Anarcho-Totalitarianism.”

The Kochs failed at the ballot box in 1980, but instead of accepting America’s verdict, they set out to change how it voted. They used their fortune to impose their minority views on the majority by other means. In the years since they were trounced at the polls, they poured hundreds of millions of dollars into a stealthy effort to move their political views from the fringe to the center of American political life. With the same foresight and perseverance with which they invested in their businesses, they funded and built a daunting national political machine. As far back as 1976, Charles Koch, who was trained as an engineer, began planning a movement that could sweep the country.
As a former member of the John Birch Society, he had a radical goal. In 1978, he declared, “Our
movement
must destroy the prevalent statist paradigm.”

To this end, the Kochs waged a long and remarkable battle of ideas. They subsidized networks of seemingly unconnected think tanks and academic programs and spawned advocacy groups to make their arguments in the national political debate. They hired lobbyists to push their interests in Congress and operatives to create synthetic grassroots groups to give their movement political momentum on the ground. In addition, they financed legal groups and judicial junkets to press their cases in the courts. Eventually, they added to this a private political machine that rivaled, and threatened to subsume, the Republican Party. Much of this activism was cloaked in secrecy and presented as philanthropy, leaving almost no money trail that the public could trace. But cumulatively it formed, as one of their operatives boasted in 2015, a
“fully integrated network
.
”

The Kochs were unusually single-minded, but they were not alone. They were among a small, rarefied group of hugely wealthy, archconservative families that for decades poured money, often with little public disclosure, into influencing how Americans thought and voted. Their efforts began in earnest during the second half of the twentieth century. In addition to the Kochs, this group included Richard Mellon Scaife, an heir to the Mellon banking and Gulf Oil fortunes; Harry and Lynde Bradley, midwesterners enriched by defense contracts; John M. Olin, a chemical and munitions company titan; the Coors brewing family of Colorado; and the DeVos family of Michigan, founders of the Amway marketing empire. Each was different, but together they formed a new generation of philanthropist, bent on using billions of dollars from their private foundations to alter the direction of American politics.

W
hen these donors began their quest to remake America along the lines of their beliefs, their ideas were, if anything, considered marginal. They challenged the widely accepted post–World War II consensus that an activist government was a force for public good. Instead, they argued for “limited government,” drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry, particularly in the environmental arena. They said they were driven by principle, but their positions dovetailed seamlessly with their personal financial interests.

By Ronald Reagan’s presidency, their views had begun to gain more traction.
For the most part, they were still seen as defining the extreme edge of the right wing, but both the Republican Party and much of the country were trending their way. Conventional wisdom often attributed the rightward march to a public backlash against liberal spending programs. But an additional explanation, less examined, was the impact of this small circle of billionaire donors.

Of course rich patrons on both sides of the ideological spectrum had long wielded disproportionate power in American politics.
George Soros, a billionaire investor who underwrote liberal organizations and candidates, was often singled out for criticism by conservatives. But the Kochs in particular set a new standard. As Charles Lewis, the founder of the Center for Public Integrity, a nonpartisan watchdog group, put it, “
The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”

B
y the time Barack Obama was elected president, the billionaire brothers’ operation had become more sophisticated. By persuading an expanding, handpicked list of other wealthy conservatives to “invest” with them, they had in effect created a private political bank. It was this group of donors that gathered at the Renaissance. Most, like the Kochs, were businessmen with vast personal fortunes that placed them not just in the top 1 percent of the nation’s wealthiest citizens but in a more rarefied group, the top 0.1 percent or higher. By most standards, they were extraordinarily successful. But for this cohort, Obama’s election represented a galling setback.

During the previous eight years of Republican rule, this conservative corporate elite had consolidated its power, amassing enormous sway over the U.S. government’s regulatory and tax laws. Some in this group faulted President Bush for not having been conservative enough. But having molded policy to serve their interests during the Bush years, many members of this caste had accumulated phenomenal wealth and regarded the newly elected Democratic president as a direct threat to all they had gained. Participants feared they were seeing not just the passing of eight years of Republican dominance but the end of a political order, one that they believed had immeasurably benefited both the country and themselves.

I
n the 2008 election, Republicans had been defeated up and down the ballot. Democrats had not only recaptured the White House but held majorities in both houses of Congress. The 2008 election hadn’t just been a disappointment. It was a complete rout. “They’d just gotten blown out. The question was whether they could survive at all,” recalled Bill Burton, former deputy press secretary to President Obama. John Podesta, the liberal political activist who later became Obama’s senior adviser, recalled that in the early days after the election “
there was a sense of triumphalism, that Bush had crapped out, that he’d be Hoover and Obama would be Franklin Roosevelt and dominate. There was a feeling that the pendulum had swung and a new progressive era had begun. Bush’s poll ratings were below those of Nixon! There had been a complete failure of his economic and foreign policy ideas. There was a sense of ‘How can we blow it?’ ”

E
xacerbating conservatives’ sense of political peril, the economy was in the most vertiginous free fall since the Great Depression of the 1930s. The day that Obama was inaugurated, the stock market had plummeted on fresh doubts about the viability of the nation’s banks, with the Standard & Poor’s 500 stock index shedding more than 5 percent of its value and the Dow Jones Industrial Average plunging by 4 percent. The continuing economic collapse had laid waste not just to some conservatives’ portfolios but also to their belief system. The notion that markets are infallible, a fundamental tenet of libertarian conservatism, looked like a folly. Free-market advocates saw their entire ideological movement in peril. Even some Republicans had become doubters. The retired general Colin Powell, for instance, a veteran of both Bush administrations, argued that “Americans are looking for more government in their life, not less.”
Time
magazine captured the zeitgeist by emblazoning a Republican elephant on its cover under the headline “Endangered Species.”

Charles Koch himself described Obama’s election in almost apocalyptic terms, sending an impassioned newsletter to his company’s seventy thousand employees earlier that January declaring that America faced “the greatest loss of liberty and prosperity since the 1930s.” Fearing a liberal resurgence of federal spending, he told his employees that more government programs and regulation were exactly the wrong approach to the deepening recession. “It is markets, not government, that can provide the strongest engine for growth, lifting us out of these troubling times,” he insisted.

Obama’s inaugural address lived up to his worst dreams. The freshly sworn-in president all but declared war on the notion that markets work best when government regulates them least. “Without a watchful eye, the market can spin out of control,” Obama warned. Then, sounding almost as if he were taking aim directly at corporate plutocrats like those gathered in Indian Wells, Obama declared that “the nation cannot prosper long when it favors only the prosperous.”

It was against this threatening political backdrop that Charles Koch mustered what a fellow conservative, Craig Shirley, described as “
the mercantile Right” to take back, and if possible take over, American politics. Obama’s election added urgency to the mission, but the gathering in Indian Wells was not a first for the Kochs. Charles and his brother David had been quietly sponsoring similar sessions for conservative donors twice a year since 2003. The enterprise started small but exploded as antagonism toward Obama built among the 0.01 percent on the right.