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

by Jane Mayer

Case by case, financed by wealthy donors who treated the cause as a tax-deductible charity, Bopp had battered away at the foundation of modern campaign-finance law. He had succeeded in part by using the liberals’ language of civil rights and free speech against their own practices. The tactic was intentional. Clint Bolick, a pioneer in the conservative legal movement whose group, the Institute for Justice, had received start-up funds from Charles Koch, had argued that the Right needed to combat the Left by asserting appealing “counter-rights” of its own. Thus Citizens United was cast as the right of corporations to exercise their free speech. As conservatives had hoped, the argument disarmed and divided the Left, even attracting the support of traditionally liberal champions of the First Amendment.

In Iowa, the American Future Fund began airing an ad created by Larry McCarthy that Geoff Garin, the Democratic pollster, described as perhaps “the most egregious of the year.” The ad accused the then congressman Bruce Braley, an Iowa Democrat and a lawyer, of supporting a proposed Islamic community center in lower Manhattan, which it misleadingly called a “mosque at Ground Zero.” As footage of the destroyed World Trade Center rolled, a narrator said, “For centuries, Muslims built mosques where they won military victories.” Now it said a mosque celebrating 9/11 was to be built on the very spot “where Islamic terrorists killed three thousand Americans”; it was, the narrator suggested, as if the Japanese were to build a triumphal monument at Pearl Harbor. The ad then accused Braley of supporting the mosque. In fact, Braley had taken no position on the issue. No surprise for a congressman from Iowa. But an unidentified video cameraman had ambushed him at the Iowa State Fair and asked him about it. Braley replied that he regarded the matter as a local zoning issue for New Yorkers to decide. Soon afterward, he says, the attack ad “dropped on me like the house in ‘The Wizard of Oz.’ ” Braley, who won his seat by a margin of 30 percent in 2008, barely held on in 2010. The American Future Fund’s effort against Braley was the most expensive campaign that year by an independent group.

Only in 2011 did it surface that in New York, at least, the “Ground Zero mosque” controversy had been stirred up for political gain in part by money from Robert Mercer, the co-CEO of the $15 billion Long Island hedge fund Renaissance Technologies. To aid a conservative candidate in New York, Mercer gave $1 million to help pay for ads attacking supporters of the “Ground Zero mosque.” A former computer programmer who had a reputation as a brilliant mathematician and an eccentric loner, Mercer was a relative newcomer to the Koch summits. But he was immediately impressed by the organization. He had long held the government in low regard and shared the Kochs’ antipathy toward government regulations. In addition to fanning flames around the “mosque” issue, in 2010 Mercer reportedly gave over $300,000 to a super PAC trying to defeat a Democratic congressman from Oregon, Pete DeFazio, who had proposed taxing stock trades. Renaissance, a so-called quant fund, traded stocks in accordance with computer algorithms at enormously high frequencies and volumes, so the proposed tax would have bitten into the firm’s legendary profits. Someone familiar with Mercer’s thinking maintained that the proposed tax on stock trades was not behind his involvement in the race; rather, Mercer shared deep skepticism about global warming with the Republican candidate, Arthur Robinson. Instead of openly debating these issues, though, Mercer, who declined to speak about his motivations, paid for ads that ma...

Bob Phillips, the head of the North Carolina chapter of Common Cause, an organization that promotes stricter controls on political money, watched the unfolding drama closely and concluded that the Citizens United decision was an even bigger “game changer” at the local level than at the national. He said it enabled a single donor, particularly one with access to major corporate funds like Pope or the Kochs, to play a significant and even decisive role. “We didn’t have that before 2010,” Phillips says. “Citizens United opened up the door. Now a candidate can literally be outspent by independent groups. We saw it in North Carolina, and a lot of the money was traced back to Art Pope.”

It was almost impossible to explain to the public in sound bites the connections between the sea of dark money, the donors’ financial interests, the assault on Obama’s policies, and their lives. The conventional wisdom among professional political consultants was that Americans either didn’t get it or just didn’t care.

It’s likely given historical trends and an unemployment rate topping 9.5 percent that a Republican wave in 2010 was inevitable, but the unmatched money from a handful of ultrarich conservatives helped turn the likely win into a rout.

Critics argued that the extraordinarily rich had managed to shirk their fair share. But this was not how Charles Koch looked at it. He argued that “there is no ‘fair share’ ” of the tax burden. The notion that cutting taxes on the wealthy shifted the burden to others, he said, was a false premise. Everyone’s taxes should be cut, he argued. The aim, he said, was to shrink the government. “Our goal,” he wrote in an impassioned essay in 1978, is “not to reallocate the burden of government; our goal is to roll back government.” From the standpoint of a radically antigovernment libertarian, paying lower taxes wasn’t a matter of greed; it was a matter of principle. Libertarianism elevated tax avoidance into a principled crusade. Indeed, Koch argued that it was a moral act for the wealthy to cut their own taxes. As he put it in the same essay, “Morally, lowering taxes is simply defending property rights.” It was, as the Libertarian Party platform put it in 1980, the responsibility of citizens to “challenge the cult of the omnipotent state.”

Charles Koch, however, favored neither taxes nor charity. As he explained in a speech in 1999, “I agree with the 12th century philosopher, Maimonides, who defined the highest form of charity as dispensing with charity altogether, by enabling your fellow humans to have the wherewithal to earn their own living.” But according to the cultural critic and Jewish scholar Leon Wieseltier, who has taught several university courses on Maimonides, “This is false and tendentious and idiotic.” He explains, “Maimonides did indeed prize the sort of charity that made its recipient more self-reliant, but he believed that the duty of charity is permanent” and that the responsibility to help the poor was “unequivocal and absolute.” In fact, he points out, Maimonides declared that “he who averts his eyes from the obligation of charity is regarded as a villain.”

Joseph Stiglitz, the liberal economist, described the 2008 financial meltdown as the equivalent for free-market advocates to the fall of the Berlin Wall for Communists. Even the former Federal Reserve chairman Alan Greenspan, Washington’s free-market wise man nonpareil, admitted that he’d been wrong in thinking Adam Smith’s invisible hand would save business from its own self-destruction. Potentially, the disaster was a “teachable moment” from which the country’s economic conservatives could learn. This is not what happened, however. They instead started with their preferred conclusion and worked backward to reach it. In what the economic writer and asset manager Barry Ritholtz labeled Wall Street’s “big lie,” scholars at conservative think tanks argued that the problem had been too much government, not too little. The lead role in the revisionism was played by the American Enterprise Institute, whose board was stocked with financial industry titans, many of whom were free-market zealots and regulars at the Koch donor seminars. Specifically, AEI argued that government programs that helped low-income home buyers get mortgages caused the collapse. Ritholtz noted that these theories “failed to withstand even casual scrutiny.” There was plenty wrong with the government’s quasi-private mortgage lenders, Fannie Mae and Freddie Mac, but numerous nonpartisan studies ranging from Harvard University’s Joint Center for Housing Studies to the Government Accountability Office proved th...

As tensions built in the increasingly calamitous debt ceiling stalemate, two sources say, Boehner traveled to New York to personally beseech David Koch’s help. One former adviser to the Koch family says that “Boehner begged David to ‘call off the dogs!’ He pointed out that if the country defaulted, David’s own investments would tank.” A spokeswoman for Boehner, Emily Schillinger, confirmed the visit but insisted, “Anyone who knows Speaker Boehner knows he doesn’t ‘beg.’ ” But the spectacle of the Speaker of the House, who was among the most powerful elected officials in the country, third in line in the order of presidential succession, traveling to the Manhattan office of a billionaire businessman to ask for his help in an internecine congressional fight captures just how far the Republican Party’s fulcrum of power had shifted toward the outside donors by 2011.

“With no basis in fact,” according to Thomas Mann and Norman Ornstein’s study of congressional dysfunction, It’s Even Worse Than It Looks, Boehner claimed that the president had reneged on the terms of their agreement. “I gave it my all,” Boehner proclaimed. “Unfortunately, the president would not take yes for an answer.” Cantor later told the real story to Ryan Lizza of The New Yorker. Blowing up the grand bargain had been his idea. He said it was a “fair assessment” to say that in the critical final moments he had talked Boehner out of accepting the deal for purely political reasons. Cantor had argued, why give Obama a win? Why aid his reelection campaign by helping him look competent? It would be more advantageous for the Republicans to sabotage the talks, regardless of the mess it left the country in, and wait to see if the next year’s presidential election brought them a Republican president who would give them a better deal.

At this point, Neera Tanden believes, the president finally understood what he was up against. “I think he came in truly trying to be post-partisan,” she said. “I think it took the debt ceiling fight to make him see that they hated him more than they wanted to succeed. It was an irrational deal, driven by their funders.” Two and a half years into his presidency, she said, “he finally realized they would rather kill him than save themselves.”

The Kochs had recently come up with a new and even cleverer way of masking the money. Rather than simply directing the funds through the maze of secretive nonprofit charities and social welfare groups that they had used during the 2010 campaign, they now established a more efficient method. They pooled much of the cash first in a form of nonprofit corporation that the tax code defined as a 501(c)(6), or a “business league.” The advantage of this umbrella organization, which they named the Association for American Innovation (AAI), was that donations to it could be classified as “membership dues” and to some extent get deducted as business expenses. As with contributions to a 501(c)(4), the law protected the donors’ anonymity. But as a business league, it fell outside the charitable trust purview of state attorneys general, further safeguarding the secrecy.

John Menard Jr., for instance, the richest man in Wisconsin, was both a million-dollar donor at the Kochs’ June 2011 summit and a million-and-a-half-dollar donor to the Wisconsin Club for Growth, an outside dark-money group boosting Walker. Like many of Menard’s investments, the political contributions more than paid off. Once in office, Walker chaired a state economic development corporation that bestowed $1.8 million in special tax credits on Menard’s business. Walker’s administration also eased up on enforcement actions against polluters. Seventy years old at the time Walker was elected, Menard had made a fortune, estimated at about $6 billion in 2010, from a chain of home improvement stores bearing his name, but until Walker entered the statehouse, his relationship with the government had been contentious, to say the least. According to a 2007 profile in Milwaukee Magazine, his company had more clashes with the state’s Department of Natural Resources than any other firm in Wisconsin. Ultimately, his company and Menard personally paid $1.7 million in fines for illegally disposing of hazardous waste. In one memorable instance, his company reportedly labeled arsenic-tainted mulch as “ideal for playgrounds.”

Menard’s hostility to organized labor was pronounced. He imposed an absolute ban on hiring anyone who had ever belonged to a union. One employee described having to fire two promising management prospects because they had worked in high school as baggers for a unionized supermarket. Managers, meanwhile, were subject to 60 percent pay cuts if their stores became unionized. They also had to agree to pay fines of $100 per minute for infractions such as opening late and to submit any disputes to management-friendly arbitration rather than the courts. Menard also forbade employees to build their own houses, for fear they would pilfer supplies. When one employee got special permission to build a ramp-equipped home in order to accommodate a wheelchair-bound daughter (in exchange for a demotion and a large salary cut), he was fired. His offense was that his contractor was using building materials from a competitor.