Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (33 page)

The Pennsylvania think tank waged a campaign to get Mann fired and successfully lobbied Republican allies in the legislature to threaten to withhold Penn State’s funding until the university took “appropriate action” against Mann. With the public university’s finances held hostage, it agreed to investigate Mann. Meanwhile, the think tank ran a campaign of attack ads against him in the university’s daily newspaper, as well as helping to organize an anti-Mann campus protest.

“It was nerve-racking to be under that pressure at Penn State,” recalls Mann. “There were these nebulous accusations based on stolen e-mails. Ordinarily, it would have been clear there were no grounds for investigation. But it was promoted by the Commonwealth Foundation, which seems to almost have a stranglehold on Republicans in the state legislature. I knew I had done nothing wrong, but there was this uncertain future hanging over me. There was so much political pressure being brought to bear on Penn State I wasn’t sure if they’d cave.”

In the meantime, death threats began appearing in Mann’s inbox. “I tried to shield my family as much as I could,” he says. But this became impossible when one day he opened a suspicious-looking letter without thinking, only to have it release a cloud of white powder into his office. Fearing anthrax, he called the campus police. Soon the FBI quarantined his office behind crime tape, disrupting the whole department. The powder turned out to be harmless, but, Mann recalls, “it was a spectacle. There was a point where I had the hotline number for the chief of police on our fridge, in case my wife saw anything unusual. It felt like there was a very calibrated campaign of vilification to the extent where the crazies might go after us.”

It was particularly disturbing to Mann that there appeared to be overlap between hard-core climate change deniers and Second Amendment enthusiasts, whipped up, he came to believe, by “cynical special interests.” Mann says, “The disaffected, the people who have trouble putting dinner on the table, were being misled into believing that action on climate change meant that ‘They’ want to take away your freedom and probably your guns, too. There was a very skillful campaign to indoctrinate them,” he said. “We’ve seen Second Amendment enthusiasts take action against abortion doctors. There’s an attempt to paint us as villains in the same way.”

He was not alone in receiving death threats. Several climatologists, he said, including Phil Jones, director of the hacked Climatic Research Unit in Great Britain, felt compelled to hire personal bodyguards. “Luckily,” Mann relates, both the Penn State investigations—which the legislature required to be done a second time in greater depth—and another one by the inspector general of the National Science Foundation, essentially the highest scientific body in the United States, exonerated Mann. “It lasted two years. It came out well. But two years is a long time,” he says. “I never imagined I’d be at the center of some contentious debate. It’s not why you study what I did. What worries me,” he adds, “is that this circus-like atmosphere may have scared off many young scientists. It actually has a chilling effect. It prevents scientists from participating in the public discourse, because they fear they, or their department head, will be threatened.”

By the time Mann’s scientific research was upheld, underscoring his integrity as well as the genuine danger posed by climate change, it hardly mattered. By then, the percentage of Americans who believed the world was warming had dropped a precipitous fourteen points from 2008.
Almost half of those polled by Gallup in 2010—48 percent—believed that fears of global warming were “generally exaggerated,” the highest numbers since the polling firm first posed the question more than a decade before. Watching from afar, Mann could see no cause for the United States to move in the opposite direction from science other than money. “In the scientific community, the degree of confidence in climate change is rising,” he said. “In the public, it’s either steady or falling. There’s a divergence. That wedge is what the industry has bought.”

A
lthough the cap-and-trade bill moved to the Senate, it was already dead. At first, Lindsey Graham, the independent-minded Republican from South Carolina, took a courageous leadership role in the fight, offering to co-sponsor the legislation with the Democrat John Kerry and the Independent Joe Lieberman after declaring, to the surprise and delight of environmentalists, “
I have come to conclude that greenhouse gases and carbon pollution” are “not a good thing.”

Graham, however, feared pressure from his right flank. He warned the Democrats that they had to move fast, before Fox News caught wind of the process. As he feared, in April 2010, Fox News attacked him for backing a “gas tax.” A vitriolic Tea Party activist immediately held a press conference in his home state denouncing him as “gay,” and a political front group called American Solutions launched a negative campaign against him for his climate stance in South Carolina. American Solutions, it later turned out, was funded by huge fossil fuel and other corporate interests, many of whom were in the Koch fold. Among them were Larry Nichols of Devon Energy, Dick Farmer of Cintas, Stan Hubbard of Hubbard Broadcasting, and Sheldon Adelson, chairman of the Las Vegas Sands Corporation. Within days of the drubbing, Graham withdrew from the process. Harry Reid, the Democratic majority leader from Nevada, dealt the final blow to the cap-and-trade bill. Facing a tough reelection himself and worried about making Democrats walk the plank for the bill, he refused after Graham backed out to bring the legislation to the Senate floor for a vote.

Opponents of climate change reform got their wish.
“Gridlock is the greatest friend a global warming skeptic has, because that’s all you really want,” Morano later acknowledged. “There’s no legislation we’re championing. We’re the negative force. We are just trying to stop stuff.”

Asked why the climate legislation failed, Al Gore told
The New Yorker
’s Ryan Lizza, “
The influence of special interests is now at an extremely unhealthy level. It’s at a point,” he said, “where it’s virtually impossible for participants in the current political system to enact any significant change without first seeking and gaining permission from the largest commercial interests who are most affected by the proposed change.”

As the first legislation aimed at addressing climate change sputtered out, the Massey mine in West Virginia collapsed in a methane explosion, killing twenty-nine miners. Soon after, a leak from the Deepwater Horizon oil rig in the Gulf of Mexico triggered the largest accidental oil spill in history, killing and causing birth defects in record numbers of marine animals. A grand jury would charge the owner of the Upper Big Branch mine with criminally conspiring to evade safety regulations, while a federal judge would find the oil rig’s principal owner, British Petroleum, guilty of gross negligence and reckless conduct.

Meanwhile, the amount of carbon dioxide in the atmosphere was already above the level that scientists said risked causing runaway global warming. Obama acknowledged at this point that he knew “the votes may not be there right now,” but, he vowed, “I intend to find them in the coming months.” The conservative money machine, however, was already far ahead of him on an audacious new plan to try to ensure that he would never succeed.

On May 17, 2010, a black-tie audience at the Metropolitan Opera House in New York City applauded as a tall, jovial-looking billionaire loped to the stage. It was the seventieth annual spring gala of American Ballet Theatre, and David Koch was being honored for his generosity as a member of the board of trustees. A longtime admirer of classical ballet, he had recently donated $2.5 million toward the company’s upcoming season and had given many millions before that. As Koch received a token award, he was flanked by two of the gala’s co-chairs, the socialite Blaine Trump, in a peach-colored gown, and the political scion Caroline Kennedy Schlossberg, in emerald green. Kennedy’s mother, Jacqueline Kennedy Onassis, had been a patron of the ballet and, coincidentally, the previous owner of a Fifth Avenue apartment that Koch had bought in 1995 and then sold eleven years later for $32 million, having found it too small.

The gala marked the official arrival of Koch as one of New York’s most prominent philanthropists. At the age of seventy, he was recognized for an impressive history of giving. In 2008, he donated $100 million to modernize Lincoln Center’s New York State Theatre building, which now bore his name. He had given $20 million to the American Museum of Natural History, whose dinosaur wing was named for him. That spring, after noticing the decrepit state of the fountains outside the Metropolitan Museum of Art, he pledged at least $10 million for their renovation. He was a trustee of the museum, perhaps the most coveted social prize in the city, and served on the board of Memorial Sloan Kettering Cancer Center, where, after he donated more than $40 million, an endowed chair and a research center were named for him.

One dignitary was conspicuously absent from the gala: the event’s third honorary co-chair, Michelle Obama. Her office said that a scheduling conflict had prevented her from attending. In New York philanthropic circles, though, David Koch was a celebrity in his own right. With the help of a bevy of public relations advisers, he had sculpted an impressive public image.
One associate said Koch had confided that he gave away approximately 40 percent of his income each year, which he estimated at about $1 billion. This of course left him with an annual income of some $600 million and considerably helped ease his tax burden, but he enjoyed the role, a family member said, in part because it bought him respectability. There was another side to his spending, however, that was then still largely secret. While David was happy to put his name on some of the country’s most esteemed and beloved cultural and scientific institutions and to take a public bow at the ballet, his family’s prodigious political spending was a much more private affair.

It would in fact take years before the faint outlines of the Kochs’ massive political machinations began to surface through required public tax filings, and the full story may never be known. But a decision by the Supreme Court four months earlier in a case that began over a dispute about a right-wing attack on Hillary Clinton had already launched the family’s covert spending into a new, more electorally ambitious phase. At the moment that David Koch took the stage in New York, operatives working for his brother and himself were quietly converting thirty years’ worth of ideological institution building into a machine that would resemble, and rival, those of the two major political parties. Rather than representing broad-based support, however, theirs was financed by a tiny fraction of the wealthiest families in America, who could now, should they wish, spend their entire fortunes influencing the country’s politics.

O
n January 21, 2010, the Court announced its 5–4 decision in the
Citizens United
case, overturning a century of restrictions banning corporations and unions from spending all they wanted to elect candidates. The Court held that so long as businesses and unions didn’t just hand their money to the candidates, which could be corrupt, but instead gave it to outside groups that were supporting or opposing the candidates and were technically independent of the campaigns, they could spend unlimited amounts to promote whatever candidates they chose. To reach the verdict, the Court accepted the argument that corporations had the same rights to free speech as citizens.

The ruling paved the way for a related decision by an appeals court in a case called
SpeechNow
, which soon after overturned limits on how much money individuals could give to outside groups too. Previously, contributions to political action committees, or PACs, had been capped at $5,000 per person per year. But now the court found that there could be no donation limits so long as there was no coordination with the candidates’ campaigns. Soon, the groups set up to take the unlimited contributions were dubbed super PACs for their augmented new powers.

In both cases, the courts embraced the argument that independent spending, as opposed to direct contributions to the candidates, wouldn’t result in corruption. From the start, critics like Richard Posner, a brilliant and iconoclastic conservative federal judge, declared the Court had reasoned “naively,” pointing out that it was “
difficult to see what practical difference there is between super PAC donations and direct campaign donations, from a corruption standpoint.” The immediate impact, as the
New Yorker
writer Jeffrey Toobin summarized it, was that “
it gave rich people more or less free rein to spend as much as they want in support of their favored candidates.”

Among the few remaining restraints that the majority of the Court endorsed was the long-standing expectation that any spending in a political campaign should be visible to the public. Justice Anthony Kennedy, who wrote the majority opinion, predicted that “with the advent of the Internet, prompt disclosure of expenditures” would be easier than ever. This, he suggested, would prevent corruption because “citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.”

The assumption soon proved wrong. Instead, as critics had warned, more and more of the money flooding into elections was spent by secretive nonprofit organizations that claimed the right to conceal their donors’ identities. Rich activists such as Scaife and the Kochs had already paved the way to weaponize philanthropy. Now they and other allied donors gave what came to be called dark money to nonprofit “social welfare” groups that claimed the right to spend on elections without disclosing their donors. As a result, the American political system became awash in unlimited, untraceable cash.

In striking down the existing campaign-finance laws, the courts eviscerated a century of reform. After a series of campaign scandals involving secret donations from the newly rich industrial barons in the late nineteenth and early twentieth centuries, Progressives had passed laws limiting spending in order to protect the democratic process from corruption. The laws were meant to safeguard political equality at a time of growing economic inequality. Reformers had seen the concentration of wealth in the hands of oil, steel, finance, and railroad magnates as threatening the democratic equilibrium. The Republican William McKinley’s elections in 1896 and 1900, for instance, were infamously lubricated by donations raised by the political organizer Mark Hanna from big corporations like Rockefeller’s Standard Oil.
In a growing backlash to the corruption, at President Theodore Roosevelt’s behest, Congress passed the Tillman Act in 1907, which banned corporate contributions to federal candidates and political committees. Later scandals resulted in further restrictions limiting spending by unions and the size of individual contributions, and requiring public disclosure. By overturning many of these restrictions, the
Citizens United
decision was in many respects a return to the Gilded Age.

Justice John Paul Stevens, a moderate Republican when first appointed but long part of the court’s liberal wing, described the decision as “a radical departure from what has been settled First Amendment law.” In a lengthy dissent, he argued that the Constitution’s framers had enshrined the right of free speech for “individual Americans, not corporations,” and that to act otherwise was “a rejection of the common sense of the American people who have recognized the need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt.” Memorably, Stevens added, “While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.”

Most analyses attributed the about-face on these vital rules guaranteeing fair elections to the increasingly assertive conservatism of Chief Justice John Roberts’s Court. Clearly, this was the decisive factor. But there was a backstory, too.

F
or almost four decades, a tiny coterie of ultrarich activists who wished to influence American politics by spending more than the laws would allow had been chafing at the legal restraints. One family had been particularly tireless in the struggle, the DeVos clan of Michigan. The family, whose members became stalwarts in the Kochs’ donor network, had made a multibillion-dollar fortune from a remarkable American business success, the Amway direct-marketing empire. Founded in 1959 by two boyhood friends, Richard DeVos Sr. and Jay Van Andel, in Ada, Michigan, a suburb of Grand Rapids, it sold household products door-to-door while preaching the gospel of wealth with cultlike fervor. Over time, the private company grew into a marketing behemoth, generating revenues of nearly $11 billion a year by 2011.

The DeVoses were devout members of the Dutch Reformed Church, a renegade branch of Calvinism brought to America by Dutch immigrants, many of whom settled around Lake Michigan. By the 1970s, the church had become a vibrant and, some would say, vitriolic center of the Christian Right. Members crusaded against abortion, homosexuality, feminism, and modern science that conflicted with their teachings. Extreme free-market economic theories rejecting government intervention and venerating hard work and success in the Calvinist tradition were also embraced by many followers. Within this community of extreme views, no family was more extreme or more active than the DeVoses. They were less well-known outside Michigan than some of the other founding families of the conservative movement, but few played a bigger role as its bankrollers. Among the many causes they supported was the Koch donor network. Although their views on social issues were considerably more reactionary than those of the Kochs, they ardently shared the brothers’ antipathy toward regulations and taxes.

Amway in fact was structured to avoid federal taxes. DeVos and Van Andel achieved this by defining the door-to-door salesmen who sold their beauty, cleaning, and dietary products as “independent business owners” rather than employees. This enabled the company’s owners to skip Social Security contributions and other employee benefits, greatly enhancing their bottom line. It resulted, however, in numerous legal skirmishes with the Internal Revenue Service and the Federal Trade Commission (FTC). In a charge that was later dropped, the government alleged that the company was little more than a pyramid scheme built upon misleading promises of riches to prospective distributors, many of whom bought its products in bulk, found themselves unable to sell them, and so were forced to cover their debts by recruiting additional distributors.

The gray zone in which the company operated made its cultivation of political influence important. In 1975, after Grand Rapids’s Republican congressman Gerald R. Ford became president, the usefulness of political clout became particularly apparent. While the Federal Trade Commission investigation was ongoing, DeVos and Van Andel obtained a lengthy meeting with Ford in the Oval Office. Two of Ford’s top aides, soon after, became investors in a new venture founded by DeVos and Van Andel.
After news of their involvement surfaced, the White House aides dropped out, but Amway later hired one of them as a Washington lobbyist. Meanwhile, perhaps coincidentally, the FTC investigation into whether Amway was an illegal pyramid scheme fizzled, resulting only in the company having its knuckles rapped for misleading advertising about how much its distributors could earn.

The company’s political activism was so unusually intense that one FTC attorney at the time told
Forbes
, “
They’re not a business, but some sort of quasi-religious sociopolitical organization.” Indeed as Kim Phillips-Fein writes in
Invisible Hands
, “Amway was much more than a simple direct-marketing firm. It was an organization devoted with missionary zeal to the very idea of free enterprise.”

There were legal limits, however, to how much the DeVoses could spend on elections. In 1974, after the Watergate scandal, Congress set new contribution limits and established the public financing of presidential campaigns. Opponents struggled to find ways around the new rules. In 1976, they partly succeeded when the Supreme Court, judging a case brought by a Republican Senate candidate, William F. Buckley Jr.’s brother James, struck down limits on “independent expenditures.” This opened what became an ever-expanding opportunity for big donors.

In 1980, Richard DeVos and Jay Van Andel led the way in “independent expenditures,” becoming the top spenders on behalf of Ronald Reagan’s presidential candidacy.
By 1981, their titles reflected their growing clout. Richard DeVos was the finance chair of the Republican National Committee (RNC), while Jay Van Andel headed the U.S. Chamber of Commerce. In Washington, the pair cut a swath, hosting lavish parties on the Amway yacht, which was docked on the Potomac River, attended by Republican big shots and dignitaries from the dozen countries in which Amway operated.
DeVos, the son of a poor Dutch immigrant, appeared as if dressed by a Hollywood costume department, flashing a pinkie ring and driving a Rolls-Royce.

The flood of money from Amway’s founders failed, though, to quash an investigation by the Canadian government into a tax-fraud scheme in which both DeVos and Van Andel were criminally charged in 1982.
The scandal exploded when Kitty McKinsey and Paul Magnusson, then reporters for the
Detroit Free Press
, shocked readers accustomed to DeVos and Van Andel’s professions of patriotism and religiosity with an exposé tracing an elaborate, thirteen-year-long tax scam directly to the bosses’ offices. At its highest levels, they revealed, Amway had secretly authorized a scheme creating dummy invoices to deceive Canadian customs officials into accepting falsely low valuations on products the company imported into Canada. Amway had thus fraudulently lowered its tax bills by $26.4 million from 1965 until 1978.