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

by Jane Mayer

All of which calls into question how in 1990 the Scaife Foundation could justify pressing the Heritage Foundation, of which it was the largest funder, to focus more on conservative social and moral issues and in particular family values. Heritage’s president, Ed Feulner, quickly complied with his donor’s request, hiring William J. Bennett. Soon after, Bennett, an outspoken social conservative who had been the secretary of education under Ronald Reagan and the director of National Drug Control Policy under George H. W. Bush, was appointed Heritage’s new distinguished fellow in cultural policy studies. Lee Edwards, who wrote Heritage’s official history, confirms that the Scaife Foundation “had particularly in mind the disintegration of the family, an issue which became a major Heritage concern.” Bennett also served as a Scaife Foundation director.

Equally hard to fathom is how Scaife rationalized his foundations’ funding of an obsessive investigation of President Clinton’s marital infidelities during the 1990s that came to be known as the Arkansas Project. Hiring private detectives to dig up dirt from anti-Clinton sources, the project funneled smutty half-truths to The American Spectator magazine, which was also funded by Scaife’s family foundations. Scaife’s foundations also poured money into lawsuits against Clinton, all of which helped whip up the political frenzy that led to the Clinton impeachment hearings. Scaife, meanwhile, succumbed to a far-fetched conspiracy theory positing that the death of the Clinton White House aide Vincent Foster, which police had ruled a suicide, was actually a murder and, as he put it at one point, “the Rosetta Stone to the Clinton Administration.” Scaife even insisted in an interview that Clinton “can order people done away with at will…God there must be 60 people [associated with Clinton] who have died mysteriously.”

Scaife’s extraordinary self-financed and largely tax-deductible vendetta against Clinton demonstrated the impact that a single wealthy extremist could have on national affairs, and served as something of a dress rehearsal for the Kochs’ later war against Obama. Presidents might surround themselves with Secret Service agents and phalanxes of lawyers and operatives, but Scaife proved how hard it wa...

Then, in a stunning turnaround in 2008, Scaife met with Hillary Clinton, who had fingered him as the ringleader of what she called a “vast right-wing conspiracy” to torment the Clintons. Conservative political pundit Byron York declared, “Hell has officially frozen over.” After a pleasant editorial board chat, Scaife came out and wrote an opinion piece in his own paper declaring that his view of her as a Democratic presidential contender had changed and was now “very favorable indeed.” The rapprochement testified both to Hillary Clinton’s political skills and to Scaife’s almost childlike impressionability. Repeatedly in his memoir, he changes his political views after meeting antagonists in person, whether the liberal Kennedy family member Sargent Shriver or the Democratic congressman Jack Murtha. “Like many billionaires, he lived in a bubble,” concluded his friend Ruddy (whose relations with the Clintons also thawed). Contrary information rarely penetrated it. Instead, Scaife’s family fortune enabled him to build a political bulwark reinforcing his ideology and imposing it on the rest of the country.

Gifts to nonprofit groups could be concealed from the public. The new think tanks thus became fast-growing, sub-rosa corporate arsenals. In fact, after Watergate the conservative think tanks pitched themselves to businesses as the safest way to influence policy without scandal.

Another early sign that the investment was yielding real results on the national scale was the Republican wave that swept the 1978 midterm elections. That year, Republicans gained three Senate seats, fifteen House seats, and six governorships. In Georgia, in a development that would have unforeseen future repercussions, Newt Gingrich was elected to Congress. External events such as the energy crisis and “stagflation” of course played into the election results, too. But the new conservative think tanks and other right-wing political organizations fanned the discontent and shaped the dominant narrative.

The labor movement, which had expected ambitious gains under Jimmy Carter’s presidency, instead soon suffered a series of devastating setbacks dealt by the ascendant business caucus backed by the expanding network of think tanks and outside lobby groups. Weyrich’s hand was key here, too. He cemented the movement’s influence in Congress by creating the Republican Study Committee, a caucus that united outside activists and conservative elected officials. For years, Heritage Foundation personnel were the only outsiders allowed to regularly caucus with Republican members of Congress because of this hybrid organization. “We are basically a conduit to and from the Heritage Foundation to and from conservative members of the House,” its director, Don Eberly, said in 1983.

Weyrich, with Scaife’s financial backing, launched several other ingenious political organizations during this period. One was the American Legislative Exchange Council (ALEC), a group aimed at waging conservative fights in every state legislature in the country. From 1973 until 1983, the Scaife and Mellon family trusts donated half a million dollars to ALEC, constituting most of its budget. “ALEC is well on its way to fulfilling the dream of those who started the organization,” a Weyrich aide wrote to Scaife’s top adviser in 1976, “thanks wholly to your confidence and the tremendous generosity of the Scaife Family Charitable Trusts.” When one ALEC administrator complained that Scaife’s foundation had too much influence over the organization’s agenda, a Scaife employee retorted that they operated on “the Golden Rule—whoever has the gold rules.”

Weyrich, meanwhile, dramatically enlarged the conservative groundswell by co-founding with Jerry Falwell the Moral Majority, which brought social and religious conservatives into the pro-corporate fold. Weyrich was particula...

If there was a single event that galvanized conservative donors to try to wrest control of higher education in America, it might have been the uprising at Cornell University on April 20, 1969. That afternoon, during parents’ weekend at the Ithaca, New York, campus, some eighty black students marched in formation out of the student union, which they had seized, with their clenched fists held high in black power salutes. To the shock of the genteel Ivy League community, several were brandishing guns. At the head of the formation was a student who called himself the “Minister of Defense” for Cornell’s Afro-American Society. Strapped across his chest, Pancho Villa–style, was a sash-like bandolier studded with bullet cartridges. Gripped nonchalantly in his right hand, with its butt resting on his hip, was a glistening rifle. Chin held high and sporting an Afro, goatee, and eyeglasses reminiscent of Malcolm X, he was the face of a drama so infamous it was regarded for years by conservatives such as the journalist David Horowitz as “the most disgraceful occurrence in the history of American higher education.”

Traveling almost as fast was the news that Cornell’s administrators had quickly capitulated to the demands of the black militants, rather than risk a bloody confrontation. Under duress, the university’s president had promised to accelerate plans to establish an independent black studies program at Cornell, as well as to investigate the burning of a cross outside a building in which several black female students lived. And to the deep consternation of many conservative faculty members and students on campus, the president also agreed to grant full amnesty to the protesters, some of whom were facing previous disciplinary proceedings following an earlier uprising in which they had reportedly flung books from the shelves of Cornell’s libraries, denouncing the works as “not relevant” to the black experience.

Olin’s chlorine production process used huge quantities of mercury, which the plant leaked into the public waterways on a daily basis. From 1951 to 1970, the company estimated its factory spilled about a hundred pounds of mercury every day. Most of it emptied directly into the North Fork of the Holston River, which ran picturesquely along the town’s edge. An open sediment pond, meanwhile, into which the company dumped its mercury waste, contained an astounding fifty-three thousand pounds of the toxic substance. “They all knew the dangers back then. They had some really good scientists and chemists. But you didn’t have the regulations,” says Harry Haynes, who runs a small history museum in Saltville and whose father used to work at the Olin plant. “We all played with the mercury as children,” he recalls. “Daddy brought it home from the chemical plant. You’d drop it on the floor, and it would explode into a zillion little bits, and then sweep it together and it would clump back together again.” The company issued gas masks to workers because of the pervasive chemical vapors, but, another resident recalled, “no one wore them.”

Testing conducted by the state soon revealed high levels of mercury in the sediment in the North Fork of the Holston River, which ran from Saltville on down to Tennessee, where it flowed into the Cherokee Lake recreation area, a favorite fishing destination. Dangerous levels of mercury were discovered in the fish for eighty miles south of the Olin plant, according to one report.

The company actually had several other reasons for shutting the plant. It was unable to compete with more efficient western salt ash manufacturers. Also, it was under pressure from the United Mine Workers union, which had succeeded after bitter battles in representing the employees. In all likelihood, the factory was doomed not just for environmental reasons. Yet the story line blaming environmental activists for its problems proved irresistible. Life magazine produced an elegiac photo essay called “End of a Company Town,” and The Wall Street Journal lamented the crushing new regulatory burden on corporate America.

What emerged was a strategy they called the “beachhead” theory. The aim, as Piereson later described it in an essay offering advice to fellow conservative philanthropists, was to establish conservative cells, or “beachheads,” at “the most influential schools in order to gain the greatest leverage.” The formula required subtlety, indirection, and perhaps even some misdirection. The key, Piereson explained, was to fund the conservative intelligentsia in such a way that it would not “raise questions about academic integrity.” Instead of trying to earmark a chair or dictate a faculty appointment, both of which he noted were bound to “generate fierce controversy,” he suggested that conservative donors look for like-minded faculty members whose influence could be enlarged by outside funding. In time, such a professor could administer an expanded program. But Piereson warned that it was “essential for the integrity and reputation of the programs that they be defined not by ideological points of view.” To overtly acknowledge “pre-ordained conclusions” would doom a program. Instead of saying the program was designed to “demonstrate the falsity of Marxism” or to promote “free-enterprise,” he advised that it was better to “define programs in terms of fields of study, [like the] John M. Olin Fellowships in Military History.” He wrote, “Often a program can be given a philosophical or principled identity by giving it the name of an important historical figure, such as the James Madison ...

On top of these programs, the foundation doled out $8 million to more than a hundred John M. Olin faculty fellows. These funds enabled scores of young academics to take the time needed to research and write in order to further their careers. The roster of recipients includes John Yoo, the legal scholar who went on to become the author of the George W. Bush administration’s controversial “torture memo” legalizing the American government’s brutalization of terror suspects.

Without the rigorous peer-reviewed standards required by prestigious academic publications, the Olin Foundation was able to inject into the mainstream a number of works whose scholarship was debatable at best. For example, Olin Foundation funds enabled John R. Lott Jr., then an Olin fellow at the University of Chicago, to write his influential book More Guns, Less Crime. In the work, Lott argued that more guns actually reduce crime and that the legalization of concealed weapons would make citizens safer. Politicians advocating weaker gun control laws frequently cited Lott’s findings. But according to Adam Winkler, the author of Gunfight, Lott’s scholarship was suspect. Winkler wrote that “Lott’s claimed source for this information was ‘national surveys,’ ” which under questioning he revised to just one survey that he and research assistants had conducted. When asked to provide the data, Winkler recounts, Lott said he had lost it in a computer crash. Asked for any evidence of the survey, writes Winkler, “Lott said he had no such evidence.” (Proving that the recipients of Olin funds weren’t ideologically monolithic, Winkler, too, had received funds from the foundation.)

Another Olin-funded book that made headlines and ended in accusations of intellectual dishonesty was David Brock’s Real Anita Hill, to which the foundation gave a small research stipend. In the book, Brock defended the Supreme Court justice Clarence Thomas by accusing Hill of fabricating her sworn testimony against him during his Senate confirmation hearings. Later, though, Brock recanted, admitting that he had been wr...

In time, the Olin Foundation’s success in minting right-leaning thinkers drew the envy of the Left. “On the right, they understood that books matter,” says Steve Wasserman, now the editor at large at Yale University Press, who formerly tried but failed to get wealthy liberal donors to match the intellectual investments being made by conservatives. “I remember meeting at a restaurant in California with some of the major Democratic operatives and funders, Margery Tabankin, Stanley Sheinbaum and Danny Goldberg. I was telling them that they needed to figure out a way to fund books on the left. But books aren’t sexy. They weren’t interested. They didn’t think that in the political culture it mattered. The Democrats were hostage to star personalities and electoral politics.”

Piereson, however, admitted that the beauty of the program was that it was a stealth political attack and that the country’s best law schools didn’t grasp this and therefore didn’t block the ideological punch it packed. “I saw it as a way into the law schools—I probably shouldn’t confess that,” he told The New York Times in 2005. “Economic analysis tends to have conservatizing effects.” In a later interview with the political scientist Steven M. Teles, he added that he would have preferred to fund a conservative constitutional law program, but had the foundation tried such a direct political challenge, it probably would have been barred entry to America’s best law schools. “If you said to a dean that you wanted to fund conservative constitutional law, he would reject the idea out of hand. But if you said you wanted to support Law and Economics, he would be much more open to the idea,” he confided. “Law and Economics is neutral, but it has a philosophical thrust in the direction of free markets and limited government. That is, like many disciplines, it seems neutral, but it isn’t in fact.”

After Harvard approved Law and Economics, other schools soon followed. By 1990, nearly eighty law schools taught the subject. Olin fellows in Law and Economics, meanwhile, began to beat a path to the top of the legal profession, winning Supreme Court clerkships at a rate of approximately one each year, starting in 1985. Many of the adherents were outstanding lawyers and not all were conservative, but they were changing the prevailing legal culture. By 1986, Bruce Ackerman, then a professor at Columbia Law School, called Law and Economics “the most important thing in legal education since the birth of Harvard Law School.” Teles, in his 2008 book, The Rise of the Conservative Legal Movement, described Law and Economics as “the most successful intellectual movement in the law of the past thirty years, having rapidly moved from insurgency to hegemony.”

More controversial still were Law and Economics seminars that the Olin Foundation funded for judges. The seminars were initiated by Henry Manne, who had become dean of the George Mason University School of Law in Virginia, which he was trying to transform into a hub of libertarian jurisprudence. The seminars treated judges to two-week-long, all-expenses-paid immersion training in Law and Economics usually in luxurious settings like the Ocean Reef Club in Key Largo, Florida. They soon became popular free vacations for the judges, a cross between Maoist cultural reeducation camps and Club Med. After a few hours of learning why environmental and labor laws were anathema, or why, as Manne argued, insider-trading laws did more harm than good, the judges broke for golf, swimming, and delightful dinners with their hosts. Within a few years, 660 judges had gone on these junkets, some, like the U.S. Court of Appeals judge and unconfirmed Supreme Court nominee Douglas Ginsburg, many times. By one count, 40 percent of the federal judiciary participated, including the future Supreme Court justices Ruth Bader Ginsburg and Clarence Thomas.

Simultaneously, the Olin Foundation provided crucial start-up funds for the Federalist Society, a powerful organization for conservative law students founded in 1982. With $5.5 million from the Olin Foundation, as well as large donations from foundations tied to Scaife, the Kochs, and other conservative legacies, the Federalist Society grew from a pipe dream shared by three ragtag law students into a powerful professional network of forty-two thousand right-leaning lawyers, with 150 law school campus chapters and about seventy-five lawyers’ groups nationally. All of the conservative justices on the Supreme Court are members, as are the former vice president Dick Cheney, the former attorneys general Edwin Meese and John Ashcroft, and numerous members of the federal bench. Its executive director, Eugene B. Meyer, son of a founding editor of National Review, acknowledged that without Olin funding “it possibly wouldn’t exist at all.” Looking back, the Olin Foundation’s staff described it as “one of the best investments” the foundation ever made.

Around the same time, the Olin Foundation made a key $25,000 investment of its own in an unknown writer named Charles Murray, funding a grant at the Manhattan Institute that would support a book he was writing that attacked liberal welfare policies. The backstory to Losing Ground, Murray’s book, was a primer on the growing and interlocking influence of conservative nonprofits. At thirty-nine, Murray was an unknown academic, toiling thanklessly at a Washington Beltway firm evaluating U.S. government social programs. Frustrated and just scraping by, he was about to try writing a thriller novel in order to make ends meet when his application for a job at the Heritage Foundation caught the eye of the conservative philanthropy world. Soon, he was the beneficiary of its growing network. Heritage placed an antiwelfare piece by Murray on the op-ed page of The Wall Street Journal. This sparked a grant from the Olin Foundation that enabled him to work full-time on what became his pathbreaking 1984 book, Losing Ground, even though he hadn’t previously considered turning his research into a book. “It was a classic case of philanthropic entrepreneurship,” Murray says. The hidden force behind Murray was Joyce, the Olin Foundation’s enfant terrible. “Mike Joyce was one of the most influential obscure people of the last century,” says Murray. Losing Ground, which was written in a tone of sorrow rather than anger, blamed government programs for creating a culture of dependence among the po...

The Olin Foundation also backed what came to be known as the Collegiate Network, privately financing a string of right-wing newspapers on America’s college campuses. Among them was The Dartmouth Review, which infamously published an editorial in Ebonics proclaiming, “Now we be comin’ to Dartmut’ and be up over our ’fros in studies, but we still be not graduatin’ Phi Beta Kappa.” The paper hosted a feast of lobster and champagne to mock a student fast against global hunger, sledgehammered shantytowns erected by students protesting apartheid in South Africa, and published a transcript of a secretly taped meeting of students belonging to Dartmouth’s gay student association. The Dartmouth Review became an incubator for right-wing media figures like D’Souza and the future conservative radio host Laura Ingraham. Its counterpart at Vassar, meanwhile, gave starts in journalism to the ABC correspondent Jonathan Karl and Marc Thiessen, an online columnist at The Washington Post best known for his defense of the Bush administration’s use of torture.

The event that multiplied the Bradley Foundation’s assets by a factor of twenty almost overnight, transforming it into a major political force, was the 1985 business takeover in which Rockwell International, then America’s largest defense contractor, bought the Allen-Bradley company, a Milwaukee electronics manufacturer, for $1.65 billion in cash. The deal created an instant windfall for the Bradley family’s private foundation, which held a stake in the company. Its assets leaped from $14 million to some $290 million.

Carlson’s job was demanding, but he enjoyed it. He cleaned out huge tanks that contained leaded gasoline, scraping them down by hand. He took samples from storage tanks whose vapors escaped with such force they sometimes blew his helmet off. He hoisted heavy loads and vacuumed up fuel spills deep enough to cause burns to his legs. Like many of the one thousand employees at the refinery, Carlson was often exposed to toxic substances. “He was practically swimming in those tanks,” his wife recalled. But Carlson never thought twice about the hazards. “I was a young guy,” he explained later. “They didn’t tell me anything, I didn’t know anything.” In particular, Carlson said, no one warned him about benzene, a colorless liquid chemical compound refined from crude oil. In 1928, two Italian doctors first detected a connection between it and cancer. Afterward, numerous scientific studies linked chronic benzene exposure to greatly increased risks of leukemia. Four federal agencies—the National Institutes of Health (NIH), the Food and Drug Administration, the Environmental Protection Agency, and the Centers for Disease Control—have all declared benzene a human carcinogen. Asked under oath if he’d been warned about the harm it posed to his hemoglobin, Carlson replied, “I didn’t even know what hemoglobin was.”

It’s difficult to disentangle Charles’s philosophical opposition to regulations from his financial interest in avoiding them. As he described it, he was trying to “unceasingly advance the cause of liberty” in the face of “arrogant, intrusive, totalitarian laws.” Critics such as Thomas Frank, the author of What’s the Matter with Kansas? who grew up in Kansas watching the Kochs, saw it quite differently. “Libertarianism is supposed to be all about principles, but what it’s really about is political expedience. It’s basically a corporate front, masked as a philosophy.”

Under oath, Charles admitted that the company had improperly taken approximately $31 million worth of crude oil over a three-year period from Indian lands but argued that it had been accidental. He told investigators that oil measurement is “a very uncertain art.” The committee, however, produced evidence showing that none of the other companies buying oil from Indian land at the time had substantial problems with measurements. In fact, the other companies, most of which were far better known, had secretly turned Koch in, because they regarded it as cheating.

The Kochs’ corporate interests clashed with their philosophical positions on other issues as well, including their opposition to government-supported “crony capitalism.” Koch Industries took full advantage of a panoply of federal subsidies, ranging from artificially low grazing fees on the 40 percent of their 500,000 acres of cattle ranches that used federal lands, to a deal with the Bush administration in 2002 to sell eight million barrels of crude oil to fill the Strategic Petroleum Reserve, a federal supply set aside as a hedge against market disruptions. “Can you think of any more anti-free-market tool than the Strategic Petroleum Reserve?” asked a former Koch executive. “Energy doesn’t operate in a free market,” he pointed out.

According to an investigative report by Bloomberg Markets, Koch Industries was “involved in improper payments to win business in Africa, India and the Middle East” and had “sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism.” The report suggested that the Kochs’ Iranian deals flouted a trade ban put in place against the outlaw state by President Clinton in 1995. Koch Industries acknowledged that it had helped Iran build what became the largest methanol plant in the world in the midst of the trade embargo but insisted that the deal had been structured in a strictly legal way, by relying on foreign subsidiaries. The company subsequently fired the employee who exposed the controversial practices.

The Kochs had previously disdained conventional politics, but now they became major Republican donors. “It was the investigation that got them to the Republican Party,” notes Kenneth Ballen, the former counsel to the Senate’s investigative committee. Before that, he points out, “Charles had been so far right he was off in the ether. They thought Reagan was a sellout. But they were worried about their business. It was about power.” Doherty saw the Kochs’ embrace of the Republican Party in much the same way. He credits the Kochs with being by far the largest funders of libertarian ideas but notes they also became “direct funders of Republican politicians for all the same reasons other businesses are. It confuses a lot of people in the libertarian world, who think of them as sellouts,” he conceded.

According to The Washington Post, Koch Industries did succeed in getting Dole’s help on another matter, an exemption from a new real estate depreciation schedule, a favor that saved the company millions of dollars. As Dole conceded decades later, after he retired from politics, “I’ve always believed when people give big money, they—maybe silently—expect something in return.”

The bundler, Johnny Chung, had infamously said, “I see the White House is like a subway. You have to put in coins to open the gates.”

The Democrats produced a scathing report exposing what they called an “audacious” scheme by undisclosed big donors to illegally buy elections in the final moments of the 1996 campaign. It was undertaken by a suspicious shell corporation called Triad Management Services that had paid more than $3 million for unusually harsh attack ads against Democratic candidates in twenty-nine races. More than half of the advertising money came from an obscure nonprofit group whose real source of funds was a mystery, the Economic Education Trust. The Senate committee’s investigators believed that “the ‘trust’ was in fact financed in whole or in part by Charles and David Koch of Wichita, Kansas.” The trust was a front group, according to the Senate report, designed to conceal the real donors’ identities, in violation of campaign-finance laws. The brothers, who had long opposed restrictions on their political spending, were suspected of having secretly paid for the attack ads, most of which aired in states where Koch Industries did business. In Kansas, where Triad Management was especially active, the funds were suspected of having tipped the outcome in four close races. The conservative Republican Sam Brownback’s race for the U.S. Senate received a special boost, which included a barrage of phone calls informing voters that his opponent, Jill Docking, was a Jew. The shady victories in Kansas had national impact, helping Republicans retain control of the House of Representatives, despite Pr...

Republicans argued that they were simply trying to balance the score against spending by labor unions, but in 1998 business outspent labor by a ratio of twelve to one.

Charles Lewis, who heads the Investigative Reporting Workshop at American University and who founded the Center for Public Integrity, a nonpartisan watchdog group, describes the Triad scandal of 1996 as a “historic” moment in American politics. There had of course been many bigger campaign scandals before then. But Triad was a new model. He said it was the first time a major corporation used a tax-exempt nonprofit as a front group or, as he put it, “a cutout to secretly influence elections in a threatening way.” He said the Kochs showed that “you could dump a million dollars on someone’s head by using cutouts.” After reporting on political corruption in Washington for years, Lewis concluded that “Koch Industries was the poster child of a company run amok.”

Other wealthy activists made political contributions, and other companies lobbied. But the Kochs’ strategic and largely covert philanthropic spending became their great force magnifier.

Ironically, although Charles had criticized Robert Welch for turning the John Birch Society into a cult of personality by flaunting his ownership of the organization’s stock, Charles had set Cato up in the same way, as a nonprofit with stockholders, who picked the board of directors. The arrangement was rare in the nonprofit world. But as Charles had observed of the John Birch Society, it guaranteed the directors an unusual measure of continuing control.

In the mid-1980s, as called for in the first phase of Fink’s plan, the Kochs also began to establish an academic beachhead of their own. Their particular focus was on George Mason University, a little-known campus of Virginia’s prestigious higher-education system, located in the Washington suburbs. In 1977, The Washington Post described the school as toiling in “the wilderness of obscurity.” By 1981, Fink had moved his Austrian economics program there from Rutgers, eventually naming it the Mercatus Center. The think tank was entirely funded by outside donations, largely from the Kochs, but it was located in the midst of the public university’s campus, so it touted itself, somewhat misleadingly, as “the world’s premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems.” Financial records show that the Koch family foundations donated some $30 million to the school, much of it going to the Mercatus Center. The Washington Post described Mercatus as a “staunchly anti-regulatory center funded largely by Koch Industries Inc.” This, however, raised questions about whether the Mercatus Center was in fact an independent intellectual center or an extension of the Kochs’ lobbying operation. Clayton Coppin, who taught history at George Mason and compiled the confidential study of Charles’s political activities for Bill Koch, describes Mercatus outright in his report as “a lobbying group disguised as a disinterested academic prog...

Sharing a building with the Mercatus Center was the heavily Koch-funded Institute for Humane Studies, chaired by Charles Koch. The IHS was founded by F. A. “Baldy” Harper, a free-market fundamentalist who had been a trustee at the Freedom School, where he had written essays for The Freeman, calling taxes “theft,” welfare “immoral,” and labor unions “slavery” and opposing court-ordered remedies to racial segregation. Charles Koch had eulogized Harper glowingly, saying, “Of all the teachers of liberty, none was as well-beloved as Baldy, for it was he who taught the teachers and, in teaching, taught them humility and gentleness.” The aim of the IHS was to cultivate and subsidize a farm team of the next generation’s libertarian scholars. Anxious at one point that the war of ideas was proceeding too slowly, Charles reportedly demanded better metrics with which to monitor students’ political views. To the dismay of some faculty members, applicants’ essays had to be run through computers in order to count the number of times they mentioned the free-market icons Ayn Rand and Milton Friedman. Students were tested at the beginning and the end of each week for ideological improvement. The institute also housed the Charles G. Koch summer internship program, a paid fellowship placing students who shared the Kochs’ views in like-minded nonprofit groups, where they could join the libertarian network.

George Mason’s economics department, meanwhile, became a hotbed of controversial theories that began to transform Americans’ tax bills, serving as an incubator for the supply-side tax cuts in the Reagan administration that hugely advantaged the rich. Paul Craig Roberts, an adjunct professor at GMU, drafted a precursor to the first supply-side tax cut bill of the Reagan era, which was introduced by his former boss Congressman Jack Kemp. While these tax cuts starved the government, George Mason also belittled its role philosophically. A star on its faculty was James Buchanan, the founder of “public choice” theory, who often described his approach as “politics without romance” because he categorized elected officials and public servants as just another greedy, self-aggrandizing private interest group, a view popular with antigovernment libertarians. In 1986, Buchanan was awarded a Nobel Prize in economics. Liberal economists were aghast. Robert Lekachman, for instance, lambasted Buchanan for reducing “all human behavior to simple self-interest.” The prize nonetheless was an indisputable achievement, helping to put the school, and libertarianism, on the map. Julian Sanchez, a fellow...

In 1997, for instance, the EPA moved to reduce surface ozone, a form of air pollution caused, in part, by emissions from oil refineries. Susan Dudley, an economist who became a top official at the Mercatus Center, came up with a novel criticism of the proposed rule. The EPA, she argued, had not taken into account that by blocking the sun, smog cut down on cases of skin cancer. She claimed that if pollution were controlled, it would cause up to eleven thousand additional cases of skin cancer each year. In 1999, the District of Columbia Circuit Court embraced Dudley’s pro-smog argument. Evaluating the EPA rule, the court found that the EPA had “explicitly disregarded” the “possible health benefits of ozone.” In another part of the opinion, the court also ruled, 2–1, that the EPA had overstepped its authority. Afterward, the Constitutional Accountability Center, a watchdog group, revealed that the judges in the majority had previously attended one of the all-expenses-paid legal seminars for judges that were heavily funded by the Kochs’ foundations. This one had taken place on a Montana ranch run by a group that the Kochs helped subsidize called the Foundation for Research on Economics and the Environment. The judges claimed that their decision was unaffected by the junket. Their embrace of the Mercatus Center’s novel argument, however, soon proved embarrassing. The Supreme Court overruled their position unanimously, noting that the Clean Air Act’s standards are absolute and n...

The most fateful Mercatus Center hire might have been Wendy Gramm, an economist and director at the giant Texas energy company Enron who was the wife of Senator Phil Gramm, the powerful Texas Republican. In the mid-1990s, she became the head of Mercatus’s Regulatory Studies Program. There, she pushed Congress to support what came to be known as the Enron Loophole, exempting the type of energy derivatives from which Enron profited from regulatory oversight. Both Enron and Koch Industries, which also was a major trader of derivatives, lobbied desperately for the loophole. Koch claimed there was no need for government policing because corporations’ concern for their reputations would cause them to self-regulate.

In 2001, Enron collapsed in a heap of bogus financial statements and fraudulent accounting practices. But Wendy Gramm had pocketed up to $1.8 million from Enron the year after arguing for the loophole. And it emerged that before going under, Enron had made substantial campaign contributions to Senator Gramm, while its chairman, Kenneth Lay, had given money to the Mercatus Center. By the end of 2002, the Gramms had gone into semiretirement, but at the Mercatus Center the zeal to exempt enormously risky markets, including energy derivatives favored by Koch Industries, lived on. The consequences wouldn’t become fully visible until the economic crash of 2008. By then, George Mason University was both the largest single recipient of Koch funds for higher education and the largest research university in Virginia.

By 2015, according to an internal list, the Charles Koch Foundation was subsidizing pro-business, antiregulatory, and antitax programs in 307 different institutions of higher education in America and had plans to expand into 18 more. The schools ranged from cash-hungry West Virginia University to Brown University, where the Kochs, in the tradition of the Olin Foundation, established an Ivy League “beachhead.”

At West Virginia University, the Charles Koch Foundation’s donation of $965,000 to create the Center for Free Enterprise came with some strings attached. The foundation required the school to give it a say over the professors it funded, in violation of traditional standards of academic independence. The Kochs’ investment had an outsized impact in the small, poor state where coal, in which the Kochs had a financial interest, ruled. One of the WVU professors approved for funding, Russell Sobel, edited a 2007 book called Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It, arguing that mine safety and clean water regulations only hurt workers. “Are workers really better off being safer but making less income?” it asked. Soon, Sobel was briefing West Virginia’s governor and cabinet, as well as a joint session of the Senate and the House Finance Committees. The state Republican Party chairman declared Sobel’s antiregulatory book the blueprint for its party platform.

Total liberty for wolves is death to the lambs. —Isaiah Berlin

The idea of employing a deceptive front group to mask corporate self-interest was not original, even within the Koch family. The same ruse had been used not just by the du Pont family and others during the New Deal years but also by a group to which Fred Koch belonged in the 1950s. He was an early and active member of the Wichita-based DeMille Foundation for Political Freedom, an antilabor union group that was a forerunner of the National Right to Work Legal Defense Foundation. In a revealing private letter, one of its staff members explained the group’s “Astroturf” strategy. In reality, he said, big-business industrialists would run the group, serving as its “anonymous quarterbacks,” and “call the turns.” But he said they needed to sell the “yarn” that the group was “composed of housewives, farmers, small businessmen, professional people, wage earners—not big business industrialists.” Otherwise, he admitted, the movement was “almost certainly doomed to failure.”

The group’s unorthodox practices occasionally stirred controversy. In 1990, the organization created a spin-off, Citizens for the Environment, which called acid rain and other environmental problems “myths.” When the Pittsburgh Post-Gazette investigated the matter, it discovered that the spin-off group had “no citizen membership of its own.” One insider said the main organization’s membership claims were deceptive as well. “They always said they had 250,000 members,” he later recalled, but when he asked if that meant they carried cards or paid dues, he was told no, it just meant they’d contributed money at one point, no matter how long ago or how small an amount. “It was intellectually dishonest,” he maintains.