Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right
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Few noticed, but in 2016 Koch Industries and Freedom Partners poured huge sums into at least nineteen Senate, forty-two House, and four gubernatorial races as well as countless lesser ones all over the country. They also mobilized what a 2016 study by two Harvard University scholars, Theda Skocpol and Alexander Hertel-Fernandez, described as an unprecedented and unparalleled permanent, private political machine. In fact, amazingly, in 2016 the Kochs’ private network of political groups had a bigger payroll than the Republican National Committee. The Koch network had 1,600 paid staffers in ...more
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The Kochs might have disavowed Trump, but in several important respects he was their natural heir and the unintended consequence of the extraordinary political movement they had underwritten since the 1970s. For forty years, they had vilified the very idea of government. They had propagated that message through the countless think tanks, academic programs, front groups, ad campaigns, legal organizations, lobbyists, and candidates they supported. It was hard not to believe that this had helped set the table for the takeover of the world’s most powerful country by a man who made his inexperience ...more
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In short, during the Obama years, the Kochs radicalized and organized an unruly movement of malcontents, over which by 2016 they had lost control. “We are partly responsible,” one former employee in the Kochs’ political operation admitted to Politico a month before Trump was elected. “We invested a lot in training and arming a grassroots army that was not controllable.”
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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.”
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They were mostly businessmen; very few were women. Fewer still were nonwhite. And while some had made their own fortunes, many others were intent on preserving vast legacies they had inherited. While those attracted to the Kochs’ meetings were uniformly conservative, they were not the predictable cartoon villains of conspiracy theories but spanned a wide range of views and often disagreed among themselves about social and international issues. The glue that bound them together, however, was antipathy toward government regulation and taxation, particularly as it impinged on their own ...more
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Meanwhile, another donor, Oliver Grace Jr., a relation of the family that founded the William R. Grace Company, was at the center of a stock-backdating scandal that resulted in his being ousted from the board of Take-Two, the company behind the ultraviolent Grand Theft Auto video games.
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"ultraviolent" = someone who's never played video games
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Antagonism toward the government ran so high within the Koch network that one donor angrily objected to federal interference not just in his business but on behalf of his own safety as well. Thomas Stewart, who built his father’s Seattle-based food business into the behemoth Services Group of America, reportedly loved flying in his helicopter and corporate jet. But when a former company pilot refused to take his aeronautic advice because it violated Federal Aviation Administration regulations, according to an interview with the pilot in the Seattle Post-Intelligencer, Stewart “rose out of his ...more
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Although some conservative groups and politicians such as DeMint still opposed the bailout, the market panic was enough to change many minds. Among those who flipped during the next forty-eight hours were the Kochs. Two days after the unexpected House vote, as the measure was about to be considered by the Senate, a list of conservative groups now supporting the bailouts was circulated behind the scenes to Republican legislators, in hopes of persuading them to vote for the bailouts. Among the groups now listed as supporters was Americans for Prosperity. Soon after, the Senate passed TARP with ...more
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Had the newly sworn-in president looked down at the ground directly beneath his polished shoes as he delivered these optimistic words, he might have been wise to take note. The red-and-blue carpet on which he was standing, which had been custom made in accordance with a government contract, had been manufactured by Invista, a subsidiary of Koch Industries. In American politics, the Kochs and all they stood for were not so easy to escape.
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In 1927, Fred, who was an inveterate tinkerer, invented an improved process for extracting gasoline from crude oil. But as he would later tell his sons bitterly and often, America’s major oil companies regarded him as a business threat and shut him out of the industry, suing him and his customers in 1929 for patent infringement. Koch regarded the monopolistic patents invoked by the major oil companies as anticompetitive and unfair. The fight appears to be an early version of the Kochs’ later opposition to “corporate cronyism” in which they contend that the government and big business ...more
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In 1934, Davis turned to Fred Koch’s company, Winkler-Koch, for help in executing his German business plan. Under Fred Koch’s direction, the refinery was finished by 1935. With the capacity to process a thousand tons of crude oil a day, the third-largest refinery in the Third Reich was created by the collaboration between Davis and Koch. Significantly, it was also one of the few refineries in Germany, according to Harrington, that could “produce the high-octane gasoline needed to fuel fighter planes. Naturally,” he writes, “Eurotank would do most of its business with the German military.” ...more
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Raymond Stokes, director of the Centre for Business History at the University of Glasgow in Scotland and co-author of a history of the German oil industry during the Nazi years, Faktor Öl (The oil factor),
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R. Karlsch
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In late 1938, as World War II approached and Hitler’s aims were unmistakable, he wrote admiringly about fascism in Germany, and elsewhere, drawing an invidious comparison with America under Franklin Roosevelt’s New Deal. “Although nobody agrees with me, I am of the opinion that the only sound countries in the world are Germany, Italy, and Japan, simply because they are all working and working hard,” he wrote in a letter to a friend. Koch added, “The laboring people in those countries are proportionately much better off than they are any place else in the world. When you contrast the state of ...more
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Fred Koch’s willingness to work with the Soviets and the Nazis was a major factor in creating the Koch family’s early fortune. By the time he met his future wife, Mary Robinson, at a polo match in 1932, the oilman’s work for Stalin had put him well on his way to becoming exceedingly wealthy.
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It is unclear what Fred Koch’s views of Hitler were during the 1930s, beyond his preference for the country’s work ethic in comparison with the nascent welfare state in America. But he was enamored enough of the German way of life and thinking that he employed a German governess for his first two sons, Freddie and Charles. At the time, Freddie was a small boy, and Charles still in diapers. The nanny’s iron rule terrified the little boys, according to a family acquaintance. In addition to being overbearing, she was a fervent Nazi sympathizer, who frequently touted Hitler’s virtues. Dressed in a ...more
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Clayton Coppin, a former associate professor and research historian based at George Mason University, was one of the rare outsiders to the Koch family with firsthand knowledge of its inner workings. In 1993, Koch Industries commissioned him to write a confidential corporate history. For the next six years, Coppin had nearly unlimited access to the private archives in the company’s headquarters in Wichita, along with the private papers of Fred and Mary Koch. He also had carte blanche to interview their business associates. After he completed the history in 1999, the company laid Coppin off. ...more
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Fred Koch’s political views were apparently shaped by his traumatic exposure to the Soviet Union. Over time, Stalin brutally purged several of Koch’s Soviet acquaintances, giving him a firsthand glimpse into the murderous nature of the Communist regime. Koch was also apparently shaken by a steely government minder assigned to him while he worked in the Soviet Union, who threatened that the Communists would soon conquer the United States. Koch was deeply affected by the experience and later, after his business deals were completed, said he regretted his collaboration. He kept photographs in the ...more
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The John Birch Society’s views were primitive, but its marketing was quite sophisticated. Welch, the candy manufacturer who founded the group, urged organizers to implement a modern sales plan, advertising heavily and pushing pamphlets door-to-door. The movement flourished in Wichita, where Fred Koch frequently attended local John Birch Society meetings and was a generous benefactor. Ironically, the organization modeled itself on the Communist Party. Stealth and subterfuge were endemic. Membership was kept secret. Fighting “dirty” was justified internally, as necessary to combat the imputed ...more
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According to diZerega, who befriended Charles in the mid-1960s after meeting him while browsing in a John Birch Society bookstore in Wichita, Charles didn’t accept all of the group’s conspiracy theories. He recalls that Charles, who was several years older, steered him away from the Communist conspiracy books and toward the collection of antigovernment economic writers whose work he found especially exciting. “This is the good stuff,” he recalls Charles telling him. The founder of the John Birch Society, Welch, was a board member of the Foundation for Economic Education, which spread a version ...more
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Contributing to Charles’s intellectual ferment at this time were his father’s dinner table diatribes against taxation. Fred saw taxes in America darkly, as incipient socialism. Early on, the Internal Revenue Service had sued his company for underpayment of taxes, requiring a large additional payment as well as penalties and legal fees. He remained vehemently opposed to estate taxes, and told Charles that he feared the U.S. government would tax him so heavily it might force him to sell the family business, diminishing his sons’ inheritances. To minimize future taxes, Fred Koch took advantage of ...more
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The school taught a revisionist version of American history in which the robber barons were heroes, not villains, and the Gilded Age was the country’s golden era. Taxes were denigrated as a form of theft, and the Progressive movement, Roosevelt’s New Deal, and Lyndon Johnson’s War on Poverty, in the school’s view, were ruinous turns toward socialism. The weak and poor, the school taught, should be cared for by private charity, not government. The school had a revisionist position on the Civil War, too. It shouldn’t have been fought; instead, the South should have been allowed to secede. ...more
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A group of Illinois teachers sent to a session at the school in 1959 by a local chamber of commerce returned so shocked that they notified the FBI and published a letter denouncing the school for advocating “no government, no police department, no fire department, no public schools, no health or zoning laws, not even national defense.” They noted that “this of course is anarchy.” They also described the school as proposing that the Bill of Rights be reduced to “just a single one: the right to own property.”
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He had obtained a second graduate degree from MIT in chemical engineering, the Times reported, after realizing that his previous degree in nuclear engineering would have required him to work closely with the government. At the time, according to the paper, the school was so implacably opposed to the U.S. government it was proposing that the Constitution be scrapped in favor of one that limited the government’s authority to impose “compulsory taxation.” The Times described LeFevre as also opposing Medicare and antipoverty programs and hinted that the school opposed government-sponsored ...more
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Charles Koch was so enthusiastic about the Freedom School he talked his three brothers into attending sessions. But Freddie, the outlier in the family, who had spent more time than the others studying history and literature, disparaged the curriculum as bilge. He said that LeFevre reminded him of the con artists in Sinclair Lewis’s novels. Charles was so incensed by his brother’s apostasy, Frederick told people later, he threatened to “deck” him if he didn’t toe the line.
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“It was a stew pot of ideas,” recalled diZerega, who later became a liberal academic, “but if you grew up with more money than God, and felt weird about it, this version of history, where the robber barons were heroes, would certainly make you feel a lot better about it.”
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The private life of the younger Frederick, who remained single, became the focus of a vicious blackmail attempt by the other brothers, according to a sworn deposition given by Bill Koch in 1982. In his deposition, Bill described an emotionally wrenching confrontation in the mid-1960s in which he, Charles, and David tried to force their older brother Frederick, who they believed was gay, to relinquish his claim to a share of the family company, or else they threatened to expose his private life to their father.
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Pine Bend was a gold mine because it was uniquely well situated geographically to buy inexpensive, heavy, “garbage” crude oil from Canada. After refining the cheap muck, the company could sell it at the same price as other gasoline. Because the heavy crude oil was so cheap, Pine Bend’s profit margin was superior to that of most other refineries. And because of a host of environmental regulations, it became increasingly difficult for rivals to build new refineries in the area to compete. By 2015, Pine Bend was processing some 350,000 barrels of Canadian crude a day, and according to David ...more
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Then, when Mary Koch’s will was opened, it included a provision denying any inheritance from her $10 million estate to any son who was engaged in litigation against any other within six weeks of her death. Frederick and Bill, who were in the midst of suing their other two brothers, suspected their mother, who had suffered from dementia, had been unduly influenced during her fading days into adding this provision to her will. Again they sued, but lost, appealed, and lost again.
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When he proposed to his future wife, Liz, he did so reportedly over the phone, and she could hear him flipping through his busy date book in search of an open day for the wedding. In preparation, he required her to study free-market economics.
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David was known for his laugh, which has been described as a “window-shattering honk.”
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“They live, and always have, in a rarefied bubble,” said the longtime family insider, explaining the Kochs’ outrage at being subjected to critical scrutiny. “They move in a world with people like them, or who want to be. They know no poor people at all. They’re not the kind of people who feel obligated to get to know the help.”
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Coppin suggests that Charles harbored a hatred of the government so intense it could only be truly understood as an extension of his childhood conflicts with authority. From his earliest years, he writes, Charles’s goal was to achieve total control. “He did not escape his father’s authority until his father died,” he notes. After that, Charles went to great lengths to ensure that neither his brothers nor anyone else could challenge his personal control of the family company. Later clashes with unionized workers at the Pine Bend Refinery and with the expanding regulatory state strengthened his ...more
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Coppin suggests, “He was driven by some deeper urge to smash the one thing left in the world that could discipline him: the government.”
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In response to libertarian thinkers who argued that ideas, not practical politics, were the best instruments of change, Charles wrote a revealing 1978 article in the Libertarian Review, arguing that outsiders like themselves needed to organize. “Ideas do not spread by themselves; they spread only through people. Which means we need a movement,” he wrote. His language was militant, demanding that “our movement must destroy the prevalent statist paradigm.” In Coppin’s view, it was already clear by this point, at the end of the 1970s, that Charles “was not going to be satisfied with being the ...more
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In 1976, with a contribution of some $65,000 from Charles Koch, the Center for Libertarian Studies in New York City was launched and soon held a conference featuring several leading lights of the libertarian movement. Among those delivering papers on how the fringe movement could obtain genuine power was Charles Koch. The papers are striking in their radicalism, their disdain for the public, and their belief in the necessity of political subterfuge. Speakers proposed that libertarians hide their true antigovernment extremism by banishing the word “anarchism,” because it reminded too many ...more
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He noted that Welch’s ownership of the organization’s stock had centralized control in his hands, making him impervious to constructive criticism. (Interestingly, Charles would go on to issue stock in his own nonprofit think tank, the Cato Institute, in much the same way.)
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As for gaining adherents, Charles suggested, their best bet was to focus on “attracting youth” because “this is the only group that is open to a radically different social philosophy.” He would act on this belief in years to come by funneling millions of dollars into educational indoctrination, with free-market curricula and even video games promoting his ideology pitched to prospects as young as grade school. In support of building their own youth movement, another speaker, the libertarian historian Leonard Liggio, cited the success of the Nazi model. In his paper titled “National Socialist ...more
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Traditional gifts to universities, he warned, didn’t guarantee enough ideological control. Instead, he advocated funding private institutes within prestigious universities, where influence over hiring decisions and other forms of control could be exerted by donors while hiding the radicalism of their aims.
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The only substance that appears to have been in nearly as great supply as money in the Scaife household was alcohol. By the time he was sent off to Deerfield Academy at the age of fourteen (the same prep school attended eight years later by David Koch), Scaife was already a drinker. Caught drinking off campus with some local girls in his senior year, in violation of Deerfield’s rules, he almost didn’t graduate. Scaife recalls that his parents hastily donated funds for a new dormitory for the school in order to assure his diploma. Years later, he would nonetheless help fund the social critic ...more
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One attractive solution for enormously wealthy families like the Scaifes and the Kochs was to donate to their own private philanthropic foundations. By doing so, they could get the tax deductions and still keep control of how the charitable funds were spent.
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Private foundations have very few legal restrictions. They are required to donate at least 5 percent of their assets every year to public charities—referred to as “nonprofit” organizations. In exchange, the donors are granted deductions, enabling them to reduce their income taxes dramatically. This arrangement enables the wealthy to simultaneously receive generous tax subsidies and use their foundations to impact society as they please. In addition, the process often confers an aura of generosity and public-spiritedness on the donors, acting as a salve against class resentment.
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Rockefeller sought legal permission from Congress to obtain a federal charter to set up a general-purpose private foundation whose broad mission was to prevent and relieve suffering and promote knowledge and progress. Critics, including the former president Theodore Roosevelt, assailed the idea, declaring, “No amount of charity in spending such fortunes can compensate in any way for the misconduct in acquiring them.” At the time, a parade of notable Americans testified in Congress against the creation of private foundations, including the Reverend John Haynes Holmes, who denounced them as ...more
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What distinguished his jeremiad from many other conservative screeds was his argument that the greatest threat was posed not by a few “extremists of the left,” but rather by “perfectly respectable elements of society.” The real enemies, he suggested, were “the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences,” and “politicians.” Powell called on corporate America to fight back. He urged America’s capitalists to wage “guerilla warfare” against those seeking to “insidiously” undermine them. Conservatives must capture public opinion, he argued, ...more
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A supporter of the John Birch Society, Joe Coors regarded organized labor, the civil rights movement, federal social programs, and the counterculture of the 1960s as existential threats to the way of life that had enabled him and his forebears to succeed. The Coors Brewing Company, founded in 1873 by Adolph Coors, a Prussian immigrant, was famously hostile to unions and had repeated run-ins with the Colorado Civil Rights Commission, which accused the company of discriminating against minority employees. Convinced that radical leftists had overrun the country, Joe Coors, the youngest grandson ...more
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A popular saying at the time was “Coors gives six-packs; Scaife gives cases.”
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Powell and others in the newly aggressive corporate vanguard inverted from a negative into a positive the accusation that conservative organizations were slanted by successfully redefining existing establishment organizations like Brookings and The New York Times as equally biased but on the liberal side. They argued that a “market” of ideas was necessary that would give equal balance to all views. In effect, they reduced the older organizations that prided themselves on their above-the-fray public-service-oriented neutrality to mere combatants in a polarized war.
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The new, hyper-partisan think tanks had impact far beyond Washington. They introduced doubt into areas of settled academic and scientific scholarship, undermined genuinely unbiased experts, and gave politicians a menu of conflicting statistics and arguments from which to choose. The benefit was a far more pluralistic intellectual climate, beyond liberal orthodoxy. The hazard, however, was that partisan shills would create “balance” based on fraudulent research and deceive the public about pressing issues in which their sponsors had financial interests.
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Scaife’s rambling remarks were made in the same year that he returned to drinking after a life in and out of rehab programs. In 1987, his second wife, Margaret “Ritchie” Battle, took him with her to the Betty Ford Center. He stayed sober, associates said, for several years. His life, however, remained flamboyantly turbulent. After he met Ritchie—who was married, as was he—in 1979, the couple carried on a soap-opera-worthy affair. Scaife claimed he consummated it after Ritchie, a glamorous and memorably feisty southerner, appeared in his office in an irresistible white angora sweater. “We did ...more
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In 1991, he married Ritchie, who continued to live in her own house around the corner. Their wedding reception scandalized Pittsburgh’s upper crust with its blazing double-entendre lawn sign spelling out “Ritchie loves Dick.”
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After hiring a private detective who trailed Scaife to a roadside motel where rooms rented by the hour, and after documenting trysts between Scaife and a tall, blond woman named Tammy Vasco who had an arrest record for prostitution, Ritchie herself was arrested for “defiant trespass” at her husband’s house, for peeping into his windows and crawling in after spying servants setting a romantic, candlelit dinner table for two. The charges were dismissed, but the scorned wife soon came to blows with Scaife’s housekeeper over custody of the couple’s yellow Labrador retriever, Beauregard. After ...more
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