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

by Jane Mayer

Conventional wisdom often attributed the rightward march to a public backlash against liberal spending programs. But an additional explanation, less examined, was the impact of this small circle of billionaire donors.

Fink reportedly told the billionaire brothers, whose wealth, when combined, put at their disposal the single largest fortune in the world, that if they wanted to beat back the progressive tide that Obama’s election represented, it would take “the fight of their lives.”

Advisers to Obama later acknowledged that he had no inkling of what he was up against. He had campaigned as a post-partisan politician who had idealistically taken issue with those who he said “like to slice and dice our country into red states and blue states.” He insisted, “We are one people,” the United States of America. His vision, like his own blended racial and geographic heredity, was of reconciliation, not division. Echoing these themes in his first inaugural address, Obama had chided “cynics,” who, he said, “fail to understand…that the ground has shifted beneath them—that the stale political arguments that have consumed us for so long no longer apply.”

Charles became particularly enamored of the work of two laissez-faire economists, the Austrian theorist Ludwig von Mises and his star pupil, Friedrich Hayek, an Austrian exile, who visited the Freedom School. Hayek’s book The Road to Serfdom had become an improbable best seller in 1944, after Reader’s Digest published a condensed version. It offered a withering critique of “collectivism” and argued that centralized government planning, in which liberals were then engaged, would lead, inexorably, to dictatorship. In many respects, Hayek was a throwback, romanticizing a lost golden age of idealized unfettered capitalism

Roger Altman, who heads the investment-banking firm Evercore, described the company’s performance as “beyond phenomenal.” He added, “I’d love to know how they do it.” Much of the credit went to Charles, who won a reputation as a brilliant, detail-oriented, metrics-driven manager. He was such a tough negotiator, one associate joked, that “in a fifty-fifty deal, he takes the hyphen.”

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 resolve. “Only the governments and the courts remained as sources of authority,” Coppin writes, and if enacted, Charles’s “libertarian policies would eliminate these.”

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.

George Pearson, a former member of the John Birch Society in Wichita, who served as Charles Koch’s political lieutenant during these years, expanded on this strategy in his own eye-opening paper. He suggested that libertarians needed to mobilize youthful cadres by influencing academia in new ways. 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. As Coppin summarized Pearson’s arguments, “It would be necessary to use ambiguous and misleading names, obscure the true agenda, and conceal the means of control. This is the method that Charles Koch would soon practice in his charitable giving, and later in his political actions.”

According to Doherty’s history, the Kochs came to regard elected politicians as merely “actors playing out a script.” Instead of wasting more time, a confidant of the Kochs’ told Doherty, the brothers now wanted to “supply the themes and words for the scripts.” In order to alter the direction of America, they realized they would have to “influence the areas where policy ideas percolate from: academia and think tanks.”

Even by his own estimation, his life was dissolute. In his memoir, he writes that one of his favorite authors was John O’Hara because no one has better captured the decadence and the disappointment that were rife in his own upper-crust circle. “How beautifully he summed up Pennsylvanians of a certain class,” Scaife writes, “their country club values, the wrecks they made of their lives on too much money and alcohol.”

Mellon fretted that “the normal condition of man is hard work, self-denial, acquisition and accumulation; as soon as his descendants are freed from the necessity of exertion they begin to degenerate sooner or later in body and mind.”

And no figure was more instrumental in leading the early opposition than Andrew Mellon. When Congress instituted the federal income tax, Mellon was one of the wealthiest men in America, with interests in dozens of monopolistic conglomerates then called “trusts.” His Union Trust bank reportedly financed almost half the investments in Pittsburgh. In his view, the economic inequality that such arrangements produced was not only inevitable; it was the just reward for excellence and virtue. In an effort to win popular support for this outlook, he wrote a mass-market book called Taxation: The People’s Business, in which he argued counterintuitively that cutting taxes on the rich would boost tax payments, not lower them, and so was a matter of broad public interest, not narrow private gain. Sixty years later, Jude Wanniski, the father of “supply-side economics,” would pay homage to Mellon as his inspiration. At the time, though, Mellon’s antitax book sold poorly, despite bulk purchases by business leaders. Once in public office, Mellon helped define the 1920s as an era during which business succeeded in rolling back many of the Progressive Era’s reforms. In 1921, capital gains taxes were cut, and the stock market boomed. After repeated efforts during his dozen-year tenure at Treasury, in 1926 Mellon finally succeeded in getting a bill passed that “cut the tax rates on the richest Americans more deeply than any other tax law in history,” according to Martin. Mellon promised greate...

In 2013, there were over a hundred thousand private foundations in the United States with assets of over $800 billion. These peculiarly American organizations, run with little transparency or accountability to either voters or consumers yet publicly subsidized by tax breaks, have grown into 800-billion-pound Goliaths in the public policy realm. Richard Posner, the iconoclastic libertarian legal scholar, has called perpetual charitable foundations a “completely irresponsible institution, answerable to nobody,” and suggested that “the puzzle in economics is why these foundations are not total scandals.”

both the Environmental Protection Agency and the Occupational Safety and Health Administration, giving the government new powers with which to police business. The standards decreed by the Clean Air Act were notably tough. In developing regulations, the EPA was directed to weigh only one concern—public health. Costs to industry were explicitly deemed irrelevant. Meanwhile, as opposition grew to the Vietnam War, protesters turned angrily against companies they accused of fueling the conflict, such as Dow Chemical, the producer of napalm, which became the target of more than two hundred demonstrations in the 1970s. New Left leaders, like Staughton Lynd, urged the antiwar movement not to waste time on Washington but instead, as he wrote in 1969, to “lay siege to corporations.” Polls showed that Americans’ respect for business was plummeting. As scientists linked smoking to cancer, the tobacco industry was under particularly pointed attack, which might have heightened Powell’s alarmism. As a director at Philip Morris from 1964 until he joined the Supreme Court, Powell was an unabashed defender of tobacco, signing off on a series of annual reports lashing out at critics. The company’s 1967 annual report, for instance, declared, “We deplore the lack of objectivity in so important a controversy…Unfortunately the positive benefits of smoking which are so widely acknowledged are largely ignored by many reports linking cigarettes and health, and little attention is paid to the scien...

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.

Enormously wealthy right-wing donors had transformed themselves from the ridiculed, self-serving “economic royalists” of FDR’s day into the respected “other side” of a two-sided debate. 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.

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.

Between 1981 and 1986, the top income tax rate was cut from 70 percent to 28 percent. Meanwhile, taxes on the bottom four-fifths of earners rose. Economic inequality, which had flatlined, began to climb.

By the late 1960s, Ford was pioneering what its head, McGeorge Bundy, a former dean at Harvard and national security adviser to the Kennedy and Johnson administrations, called “advocacy philanthropy.” Ford was, for instance, pouring money into the environmental movement, funding the Environmental Defense Fund and the Natural Resources Defense Council. By supporting public interest litigation, it showed conservatives how philanthropy could achieve large-scale change through the courts while bypassing the democratic electoral process, just as the early critics of private foundations had feared.

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.

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 Program [in] American Ideals and Institutions at Princeton University.”

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.”

Powell, in his memo, had argued that “the judiciary may be the most important instrument for social, economic and political change.” The Olin Foundation agreed. As the courts expanded consumer, labor, and environmental rights and demanded racial and sexual equality and greater workplace safety, conservatives in business were desperate to find more legal leverage. Law and Economics became their tool.

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.

Federalist Society, a powerful organization for conservative law students founded in 1982.

Heritage placed an antiwelfare piece by Murray on the op-ed page of The Wall Street Journal.

Losing Ground, which was written in a tone of sorrow rather than anger, blamed government programs for creating a culture of dependence among the poor.

would be cheaper to pay off damages from a lawsuit than make the repairs.

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.”

“Nickles put the kibosh on the prosecution there. He got involved in the appointment of the U.S. attorney. He was getting a tremendous amount of support from Koch. He was their man. He was the best senator money could buy.”

In his own display of the family’s relentlessness, he filed a whistle-blower lawsuit against Koch Industries under the False Claims Act,

Charles Koch has acknowledged that he miscalculated earlier, writing in his 2007 book, The Science of Success, “We were caught unprepared by the rapid increase in regulation.” As he explained it, “While business was becoming increasingly regulated, we kept thinking and acting as if we lived in a pure market economy.”

The Kochs’ corporate interests clashed with their philosophical positions on other issues as well, including their opposition to government-supported “crony capitalism.”

Yet as Charles and David continued to plow 90 percent of their company’s profits back into their business—a strategy they often noted would be impossible if they were required to pay quarterly dividends to public shareholders—its revenues grew phenomenally.

In 1960, it grossed a healthy $70 million, but by 2006 it was grossing an astounding $90 billion. “It is beyond spectacular,” one Wall Street investment banker, Roger Altman of Evercore, observed. “It’s just gigantically successful. It is in everything.”

Richard Fink, nicknamed the Pirate by detractors within their sphere for the handsome living he made on their payroll.

Called “The Structure of Social Change,” it approached the manufacture of political change like any other product. As Fink later described it in a talk, it laid out a three-phase takeover of American politics. The first phase required an “investment” in intellectuals whose ideas would serve as the “raw products.” The second required an investment in think tanks that would turn the ideas into marketable policies. And the third phase required the subsidization of “citizens” groups that would, along with “special interests,” pressure elected officials to implement the policies. It was in essence a libertarian production line, waiting only to be bought, assembled, and switched on.

Koch Industries crossed ideological lines to hire Robert Strauss, the former chairman of the Democratic National Committee, who was by then Washington’s premier lobbyist.

The attacks reflected Charles Koch’s revisionist belief that government interference in the economy was what had caused the last Great Depression. “Bankers, brokers and businessmen,” he argued, had been falsely blamed. The true culprits were Herbert Hoover and Franklin Roosevelt, both of whom he regarded as dangerous liberals. In his view, the economic policies of Warren Harding and Calvin Coolidge—the latter had famously declared, “The chief business of the American people is business”—had been unfairly maligned. Charles argued that the New Deal only “prolonged and deepened the decline.”

Think tanks funded by the Kochs and their allied network of donors, such as the Cato Institute, the Heritage Foundation, and the Hoover Institution at Stanford University—where six attendees at the Kochs’ annual seminars served in official capacities—began cranking out research papers, press releases, and op-ed columns opposing Obama’s stimulus plan. Much of the research was later challenged by less biased experts. The Mercatus Center at George Mason University, for instance, released a report claiming that stimulus funds were directed disproportionately at Democratic districts. Eventually, the author was forced to correct the report but not before Rush Limbaugh, citing the paper, had labeled Obama’s program “a slush fund” and Fox News and other conservative outlets had echoed the sentiment.

The conventional wisdom at the beginning of the Obama presidency was that the 2008 election had been such a wipeout for Republicans that their only hope of staying relevant was to cut deals with Obama, who was seen as far too popular to oppose. But those who expected compromise—which included the president and his top aides—hadn’t noticed the growing extremism in the Grand Old Party.

“If the Purpose of the Majority is to Govern…What is Our Purpose?” His answer was simple: “The Purpose of the Minority is to become the Majority.” That one goal, he said, was “the entire Conference’s mission.”

LaTourette was astonished, he said, when he went to the first meeting of the Republican caucus after Obama was elected. “When the question came up, about why we lost, these folks were saying, ‘It’s because we weren’t conservative enough.’ Well, I looked at the numbers, and we lost 58 percent of the independents!” Yet moderates like himself were getting frozen out. He became so frustrated he eventually retired, becoming a lobbyist and starting an organization aimed at battling the forces of extremism in his party.

“I left,” he said, “because I was sick of it. I couldn’t take it anymore. I was there eighteen years. I understood it was a contact sport, but whether it was transportation or student loans, there were things you’d do without thinking. Now you can’t get anything done. Some people don’t want the government to do anything,” he concluded.

The Republicans of course saw it differently. They accused Obama of being too partisan and took umbrage when he flaunted his election mandate and reminded Cantor during one tense session, “I won.” In Lewis’s view, the Democrats were arrogant, intolerant, and overbearing.

Obama nonetheless continued to seek bipartisan support. His experience with what Hillary Clinton labeled the “vast right-wing conspiracy” was limited. He had vaulted in only five years from the Illinois State Senate to the White House. He turned out to be unrealistically confident that he could transcend partisan rancor as he had while editing the Harvard Law Review. So when he received an invitation from Boehner and the others in the House Republican caucus to come up to Capitol Hill to consult with them about the stimulus package, Obama accepted, with much fanfare.

In fact Obama’s economic advisers thought they had tailored the stimulus plan for Republican support by deriving one-third of it from tax cuts.

“We didn’t really see the force, the outside money, until after he was elected. Then the first thing he had to do, the only thing he could do, was spend trillions and trillions of dollars, passing the stimulus bill first, and that led to Stimulus Two, and TARP, and the auto bailouts. The right-wing plutocrats really fed off of that. They tapped into this anger about spending.” He admits, “No one saw the Kochs or the Dick Armeys out there.”

The free-market orthodoxy that dominated the Republican Party in Washington had completely veered from rational, professional expertise, yet the extremists nearly prevailed. As it was, Obama’s opponents forced the administration to adopt a smaller stimulus package than many economists thought necessary, undercutting the recovery. One month into his presidency, extreme opponents, fueled by outside money, had already wounded Obama.

The strange story of the Sam Adams Alliance was yet another demonstration of the way that years of private funding by a few wealthy ideologues had created an underground political infrastructure.