Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (47 page)

At the time, Schwarzman’s comment got little attention. But when the rest of the nation learned from Romney’s remarks that the superrich considered nearly half of them freeloaders, the reaction was explosive. Obama’s internal polling numbers, which had hovered steadily in the range of 48 to 50 percent, shot up to 53 percent over Romney. The damage was even more pronounced in battleground states, where Romney’s numbers plummeted. Within days, polls showed that fully 80 percent of the country had heard about the remark—more, one pollster said, than knew of the existence of North Korea.

The Obama campaign delightedly held its fire while Romney tried to explain but never disavowed it. Finally, after ten days, Obama’s team went on the air with a new television ad slamming the 47 percent gaffe. It was not the original version the campaign had created. The first version, which never aired, cast Romney’s remark against a backdrop of impoverished Americans whose woeful portraits seemed borrowed from Walker Evans or from Robert Kennedy’s tour of Appalachia. But in the version that aired, the poor had been banished, replaced by the middle class. The ad now featured female factory workers wearing protective eye gear, a Latino construction worker near a ladder, redolent of upward mobility, and steely-eyed retired veterans in VFW hats. This wasn’t just about the poor. By parroting his donors, Romney had cast the election, the “Mother of All Wars,” as a fight between a tiny, privileged clique and virtually everyone else.

F
or the most part, the Kochtopus was more sensed than seen during the campaign, but one month before the election its elaborate funding mechanism came perilously close to exposure. In California, the Fair Political Practices Commission, the state’s campaign ethics watchdog, demanded to know who was behind a suspicious $15 million donation aimed at influencing two controversial California ballot initiatives. One initiative would raise taxes on the wealthy, and the other would curb labor unions from spending money on politics. The donor purported to be an obscure Arizona nonprofit called Americans for Responsible Leadership, but California officials were not convinced this was the whole story. At the eleventh hour, they launched an investigation to learn more, because the state’s stringent campaign laws required full donor disclosure.

Soon California authorities began to uncover an extraordinary dark-money shell game involving many of the same donors, operatives, and front groups associated with the Kochs. Overseeing it was Sean Noble, the Kochs’ outside political consultant. His group, the Center to Protect Patient Rights, had passed the money from undisclosed individuals to the obscure Arizona nonprofit, which had sent it on without the donors’ names to California. In between, there was a shuffle back and forth to another nonprofit in Arlington, Virginia, Americans for Job Security. As a result, the identities of the original sources of the contributions were masked. Among them was Charles Schwab, the Koch network regular, whose chatty e-mail to Charles Koch surfaced, asking for “several million” dollars for the California fight and promising to catch up on the golf course after the election. “I’ve committed an extra 2 million today making my total commitment 7 million,” Schwab wrote. “I must tell you that Sean Noble from your group has been immensely helpful to our efforts.”

The Kochs, according to one adviser, “panicked” as California investigators began unraveling Noble’s money operation, which was entwined with their own. “
They did it wrong, and they thought they had legal liability,” he said. Details started emerging, such as a deposition from a California political consultant snared in the investigation who described how the scheme had begun with “
some donors who were part of Koch” who wanted to wage an antilabor fight in California, like the one in Wisconsin. “They liked the Koch model,” the consultant, Tony Russo, explained, so they suggested that he work with Noble, whom Russo identified as the Kochs’ “outside consultant.”

After a lengthy investigation, Ann Ravel, the head of the California Fair Political Practices Commission, blasted the daisy chain of front groups as “definitely money laundering.” The agency eventually imposed a record-breaking $1 million fine to settle the case. It exposed a “nationwide scourge of dark money nonprofit networks hiding the identities of their contributors,” Ravel said in a public statement that also noted that the groups involved were tied to “the ‘Koch Brothers’ Network.’ ”

Koch Industries officials leaped in, stressing that the settlement had stipulated that the lawbreaking was “inadvertent, or at worst negligent,” and that the Kochs had not personally donated money to influence the California ballot initiatives. Further, they argued, Noble was merely an independent contractor. “
There is not a Koch
network
in the sense of we control these groups, I don’t understand what that means,” Mark Holden, the company’s general counsel, told
Politico
’s Vogel, who pointed out that, to the contrary, Charles Koch had referred to “our network” himself, in his invitation to the 2011 donor seminar.

Following the embarrassing California investigation, which went on into late 2013, the Kochs began to ease Noble out. By then, Noble, the sunny avatar of small-town America, had left his wife for an office colleague and stirred additional bad publicity by charging almost $24 million for his and his firm’s services in 2012.
This was more than $1 for every $6 that the Center for Patient Rights spent, according to ProPublica. As the investigation grew in California, the Koch world expertly distanced itself. “They’ve spun it really well,” said one of Noble’s friends, who spoke on condition that he not be identified because he, too, feared retribution. “They’ve worked it hard. The truth? The guy who the billionaires hire to direct the money got caught breaking the law. Is he guilty? It’s not Sean who is the problem—it’s the enterprise—it’s an illegal enterprise!”

I
n the final stretch of the campaign, it became clear that the presidential race was so close that the outcome would likely depend on voter turnout. Nowhere was this truer than in the state of Ohio, without which Romney couldn’t rack up enough electoral votes to win. Here, too, the Kochs and other conservative philanthropists played a little-detected role.

Controversy about allegations of voter fraud had built to a boiling point all summer. Each side accused the other of dirty tricks, further poisoning and polarizing the political process. The chairman of the Republican National Committee, Reince Priebus, accused Democrats of “standing up for fraud—presumably because ending it would disenfranchise at least two of its core constituencies: the deceased and double voters.” Democrats accused Republicans of deliberately reviving racist voter suppression tactics predating the civil rights movement. Bill Clinton declared, “It’s the most determined effort to limit the franchise since we got rid of the poll tax and all the other Jim Crow burdens on voting.” Impartial experts, meanwhile, like Richard Hasen, a professor of election law at the University of California in Irvine, regarded the allegations of fraud as the real fraud. After searching in vain to find a single case since 1980 when “an election outcome could plausibly have turned on voter impersonation fraud,” he concluded the problem was a “myth.”

Nonetheless, the alarmism resulted in legislative initiatives aimed at requiring voters to produce official photo IDs in thirty-seven states between 2011 and 2012. It also led to a national outbreak of mysterious citizen watchdog groups calling for crackdowns on election fraud. One such group, the Ohio Voter Integrity Project, policed voter rolls for “irregularities” and then persuaded local election authorities to send summonses to suspect voters requiring them to prove their legitimacy at public hearings. Teresa Sharp, a fifty-three-year-old lifelong Democrat from the outskirts of Cincinnati, who received one such summons, discovered at the hearing that the self-appointed watchdog group had mistaken her address for a vacant lot. “
My first thought,” recalled Sharp, who is African-American, “was, Oh, no! They ain’t messing with us poor black folks! Who is challenging my right to vote?”

The national outbreak of fear over voter fraud appeared a spontaneous grassroots movement, but beneath the surface there was a money trail that led back to the usual deep-pocketed right-wing donors. To target Sharp, for instance, the Ohio Voter Integrity Project had relied on software supplied by a national nonprofit, True the Vote, which itself was supported in different ways by the Bradley Foundation, the Heritage Foundation, and Americans for Prosperity.

True the Vote described itself as a nonprofit organization, created “
by
citizens
for
citizens,” that aimed to protect “the rights of legitimate voters, regardless of their political party.” But its founder, Catherine Engelbrecht, a Houston Tea Party activist, was guided by Hans von Spakovsky, a Republican lawyer and fellow at the Heritage Foundation who had made a career of challenging liberal voting rights reforms. Heritage had an ugly history on the issue. The think tank’s founder, Paul Weyrich, had openly admitted, “
I don’t want everybody to vote.” In 1980, he told supporters, “As a matter of fact our leverage in elections quite candidly goes up as the voting populace goes down.”

Spakovsky’s most recent book,
Who’s Counting?
, which was filled with incendiary claims about voter fraud, was published by Encounter Books, a Bradley Foundation grantee, and co-authored by John Fund, another Heritage Foundation fellow.
True the Vote, meanwhile, had received Bradley Foundation funds. Americans for Prosperity also gave the organization and the voter fraud issue a boost by featuring both Fund and Engelbrecht at its political events.

If the aim was to intimidate voters like Sharp, though, in her case, it backfired. When her name was called at the hearing, Sharp, who was accompanied by six other members of her family, walked to the front, slammed her purse and papers on the table, and asked, “Why are you all harassing me?” Later she said, “It was like a kangaroo court. There were, like, ninety-four people being challenged, and my family and I were the only ones contesting it! I looked around. The board members and the stenographer, they were all white people. The lady bringing the challenge—she was white.” Sharp concluded, “I think they want to stop as many black people as they can from voting.”

On Election Day, to the surprise of Romney and his backers, Democratic voters turned out in far bigger numbers than the Republicans expected. The Koch network had spent an astounding $407 million at a minimum, most of it from invisible donors. The operatives running the enterprise believed they were able to accurately anticipate how the vote would go, and right until the polls closed on November 6, they, like the Romney team, were convinced victory was at hand.

Sean Noble, who was already under a cloud because of the California campaign-finance scandal, was so sure of success that on Election Day he sent out a memo to the donors telling them that soon the rest of the country would know the good news that they already did, which was that Romney would be the next president. But around 4:30 that afternoon, Frank Luntz called. He said the exit polls didn’t look right. But neither Noble nor anyone else among the big donor groups believed it yet.

At 11:12 p.m., NBC News called Ohio for Obama, projecting him as the election’s winner. When Fox News followed suit, Karl Rove, who was a Fox News analyst as well as the founder of the American Crossroads independent campaign operation, threw a fit on the air. He had talked the rich into contributing $117 million to his super PAC, and many, many more millions in dark money, and had confidently assured them of a historic victory. It was “premature” for Fox to call the race, he insisted. Fox’s number crunchers, however, held their ground. Romney had lost.

“What happened? We had bad data,” a Koch insider conceded after it was over. They had counted on an electorate less diverse than the one that swept Obama into office in 2008. Instead, the 2012 voters were even more diverse. While the proportion of the electorate that was white and old fell, the participation by Hispanic, female, and young voters rose. Black voters, meanwhile, held steady, casting an overwhelming 93 percent of their votes for Obama. The America that the conservative donors were counting on was out of touch with the reality.

In a postelection phone call to his biggest contributors, Romney explained it a little differently. The problem, he said, was that Obama had in essence bribed supporters with government services. “
What the president’s campaign did was focus on certain members of his base coalition, give them extraordinary financial gifts from the government, and then work very aggressively to turn them out to vote.”

Obama chuckled upon hearing of Romney’s analysis. “He must have really meant that 47 percent thing,” he told his aides.

In Bentonville, Arkansas, a few days later, Senator John McCain’s private cell phone interrupted a meeting with Walmart’s top executives by mechanically announcing the name of a caller trying to reach him. “Mitt Romney!” it squawked. “Mitt Romney!” Looking a little startled, McCain fished the phone out of his pocket and answered, rising to leave the room so that he could speak in privacy. When McCain returned, he explained to the curious executives that Romney had wanted advice on how to cope with losing the presidency. “I told him the first time, I did it all wrong,” McCain related. “My wife talked me into taking a vacation in Tahiti. Worst Goddam mistake I ever made. The second time,” he went on, “I just went right back to work. It was fine. I told him, ‘Go back to work.’ ” The only problem, someone cracked, was that Romney, like those loafers in the 47 percent, had no job.

Commentators leaped to the conclusion that 2012 proved that money had little or no influence on elections.
Politico
changed the heading for a series it had been running on money in politics from “The Billion-Dollar Buy” to “The Billion-Dollar Bust?” With a final tally of approximately $7 billion in traceable spending on the presidential and congressional campaigns, it was the most expensive election in American history by far. One donor alone, Sheldon Adelson, who had vowed to spend “as much as it takes,” had dumped nearly $150 million, $92 million of which was disclosed, and had still come up short.
Approximately $15 million of that had reportedly gone to the Kochs’ group, Americans for Prosperity.