Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (32 page)

Charles told friends that he believed the onslaught of attention was coordinated and directed from the highest levels in Washington. “He thinks there are certain folks within the Democratic Party or even within the administration who decided to target them,” said INTRUST’s Charlie Chandler. Charles’s company, in addition to jabbing back at journalists, complained that it had become the target of a “concerted smear campaign” and suggested this underhanded effort led all the way to 1600 Pennsylvania Avenue.

Charles and David had learned some important lessons from their decades of political and public policy involvement. One was that it takes a village—preferably one populated by outrageously wealthy people—to build a free-market army.

Starting during the Bush administration, Charles began holding biannual seminars that brought together deep-pocketed donors—from hedge fund billionaires to media moguls—who shared their political objectives. The purpose, at least at first, was to showcase conservative groups deemed worthy of their support. But over the years this network transformed into a central coordinating body for the purpose of strategically channeling resources into conservative,
free-market causes—cash that flowed to groups including Americans for Prosperity to bankroll efforts to trounce Democrats in the upcoming midterms.

The brothers held their final conclave before the midterm elections on June 27 and 28, 2010, at the St. Regis Hotel in Aspen. The impressive roster of attendees hardly needed name tags, though they wore them anyway, in accordance with the security protocol they were reminded of before the start of every meeting. Mingling with Charles and David and their wives in the hotel’s chandeliered Grand Ballroom was billionaire entrepreneur Phil Anschutz, owner of the Examiner newspapers and
The Weekly Standard
; leveraged buyout pioneer John Childs; megamillionaire investor Foster Friess; hedge fund manager Ken Griffin, founder and CEO of Citadel LLC; several members of the Marshall family, whose stake in Koch Industries was estimated at nearly $13 billion; and the Blackstone Group’s CEO Stephen Schwarzman, one of David’s neighbors at his New York residence at 740 Park Avenue. Charles’s son, Chase, an executive at the family company, and his new wife, Annie, also attended, as did the CEO’s daughter, Elizabeth, a Brooklyn-based writer.

The two-day conference featured back-to-back presentations and panel discussions on topics ranging from “Framing the Debate on Spending” to electing free-market allies in upcoming judicial elections, and from “Winning the Fight between Big Government and Free Enterprise” to “Mobilizing Citizens” for the November midterms (Americans for Prosperity’s Tim Phillips was a presenter).

The
Wall Street Journal
’s Stephen Moore moderated a discussion on “Understanding the Persistent Threats We Face.” A description of the session in the conference program noted: “The current administration swept into office with a promise to ‘fundamentally transform America.’ From the nationalization of healthcare to the rising power of unions, as well as a push for major
new climate and energy regulations, financial regulation, and even more government spending, there is no lack of significant threats for us to understand and address.”

The Aspen seminar’s headliner was Glenn Beck, who Fox News would ease out the following year after his controversial diatribes provoked an advertiser boycott. Beck’s Hayek-themed keynote was titled “Is America on the Road to Serfdom?”

There had been much talk during the conference about the upcoming midterm elections and knocking Nancy Pelosi and the House Democrats back into the congressional minority, but no sooner had the fleet of private jets cleared Aspen airspace than Charles turned his mind to an even bigger political fight—the 2012 presidential race.

As the midterms neared, Charles sent a letter to new members of the donor network, inviting them to the next conference, scheduled for late January 2011. “ ‘If not us, who? If not now, when?’ ” his letter began. “That question was posed by a member of our network of business and philanthropic leaders, who are dedicated to defending our free society. We cannot rely on politicians to do so, so it is up to us to combat what is now the greatest assault on American freedom and prosperity in our lifetimes.”

He noted that the network’s biannual meetings “have been critical in improving and expanding our efforts” to combat “the multitude of public policies that threaten to destroy America as we know it.”

In Aspen, Charles wrote, “our group heard plans to activate citizens against the threat of government over-spending and to change the balance of power in Congress this November. In response, participants committed to an unprecedented level of support.”

But they would not stop at the midterms.

“Everyone benefits from the prosperity that emerges from free societies,” he wrote. “But that prosperity is under attack by the current Administration and many of our elected officials. Their
policies threaten to erode our economic freedom and transfer vast sums of power to the state. We must stop—and reverse—this internal assault on our founding principles.

“Fighting back with incremental changes will only lead to a slower rate of decline. We must dedicate ourselves to making major advances in the direction of economic freedom.”

Wearing a tweed overcoat and a tan scarf, David stepped out of the chill and into the gleaming, marble corridors of the U.S. Capitol. It was January 5, 2011, and the building teemed with lawmakers and their families, including the eighty-five Republican freshmen who had helped their party reclaim the House and were waiting to be sworn in that afternoon along with the rest of the new Congress.

Two months after the midterms, the pundit class was still guffawing over the Democrats’ “shellacking” and attempting to wrap their minds around the ascendant Tea Party. The 2010 midterm elections had followed a similar script to 1994’s “Republican Revolution.” During both elections, one of the catalyzing issues had been health care. Each had likewise brought to power a Republican House majority with an ambitious agenda of drastically downsizing government and returning to core conservative principles.

The Koch brothers certainly deserved a share of the credit for the Democratic drubbing. In the lead-up to the midterms, their advocacy group carpet-bombed dozens of congressional swing districts with ads aimed at Democratic lawmakers. Americans for Prosperity rolled out an initiative dubbed “November Is Coming,” featuring a petition drive commanding politicians to “oppose big government programs or any other freedom-killing policies or we will remember in November.” The group mobilized thousands of activists to go door to door in their districts. It also provided them with a computerized phone-banking program that connected Americans for Prosperity volunteers to targeted voters, generating
a script to read from. “I’m calling to encourage you to call Congressman John Salazar and tell him to stop his wasteful spending that is bankrupting America,” read one script targeting the Colorado Democrat—and the brother of the Interior secretary—who ultimately went down to defeat. Also booted from Congress were Democrats including Representatives Alan Mollohan, Christopher Carney, Kathy Dahlkemper, Steve Kagen, Earl Pomeroy, and Michael Arcuri, the lawmakers Americans for Prosperity had targeted for early retirement with withering health-care-reform-related attack ads.

Americans for Prosperity formed just one prong of Charles and David’s plan of attack for 2010. Their political operatives had parceled out their donor network’s war chest to dozens of like-minded conservative groups, which hammered the Democrats from every conceivable angle. The brothers had together pledged at least $12 million toward the effort.

David had come to the Capitol that day for the gratifying experience of witnessing California’s Nancy Pelosi pass the Speaker’s gavel to Ohio’s John Boehner, whose star had risen, fallen, and risen again during his two-decade congressional career. Their plan was working.

David was accompanied to the Capitol that day by Nancy Pfotenhauer, who after leaving Americans for Prosperity had become a policy advisor and spokeswoman for the 2008 presidential campaign of John McCain. When the media scrutiny of Charles and David had heated up, Koch Industries had retained Pfotenhauer—and other crisis communication specialists—as an outside PR consultant. Also by David’s side was Pfotenhaeur’s Americans for Prosperity successor Tim Phillips, who had a meeting that day with Michigan’s Fred Upton, the incoming chairman of the House Energy and Commerce Committee. Before the New Year, Phillips and Upton, a long-serving Republican lawmaker who had first come to Washington in the 1980s to work in Reagan’s Office of
Management and Budget, had teamed up on a
Wall Street Journal
editorial calling the Environmental Protection Agency’s efforts to regulate carbon emissions “an unconstitutional power grab that will kill millions of jobs.”

After the swearing-in, David was hosting a welcome party for the new class of Republican lawmakers at the Capitol Hill Club, a private haunt for GOP powerbrokers where some of the real business of Washington gets done over single malts. A reporter for the liberal blog ThinkProgress approached him as he left the Capitol with Phillips that afternoon. Deaf in his left ear, David leaned down with his right.

“Are you proud of what Americans for Prosperity has achieved this year?” the reporter asked.

“You bet I am, man oh’ man,” David responded. “We’re going to do more too in the next couple of years, you know.”

Phillips, laughing nervously, tried to hurry David away. But the billionaire, who had flipped open a cell phone and put it to his ear, obliged the reporter with another question.

The journalist inquired about the Tea Party—was David proud of its accomplishments?

“Yeah,” he responded. “There are some extremists there, but the rank and file are just normal people like us. And I admire them. It’s probably the best grassroots uprising since 1776 in my opinion.”

If this was the second coming of the American Revolution, then the midterms had been its Lexington and Concord. What came next was all-out war.

The chants wafted up from the street below.

It was January 30, 2011, the kickoff of Charles and David’s next donor conclave, this one held in the Southern California resort city of Rancho Mirage, just outside Palm Springs. Among the conservative megadonors who jetted in to attend were Home Depot cofounder Ken Langone, Amway billionaire Richard DeVos, and Wisconsin building products mogul Diane Hendricks. The featured speakers were Eric Cantor and Paul Ryan, the incoming House majority leader and budget committee chairman, respectively.

For the first time in the eight years the Koch brothers had convened these strictly confidential gatherings, a copy of the invitation had leaked, giving away the location and allowing a collection of liberal advocacy groups and unions to mobilize. Watching from an upper balcony at the Rancho Las Palmas Resort and Spa, David and his wife, Julia, her head resting heavily in her left hand, grimaced at the clamorous scene below.

Hundreds of shouting, sign-waving protestors swarmed in front of the resort. Activists held up a yellow banner with biohazard symbols reading,
QUARANTINE THE KOCHS
. Another sign declared:
KOCH KILLS
. One protestor carried a cardboard placard splashed with fake blood and the slogan
NEUTER FERAL FATCATS
—the “s” doubling as a swastika.

It was the liberal analogue of a Tea Party. Instead of irate activists demanding the government keep its hands off their health care, these protestors were calling on the Kochs and their wealthy friends to keep their money out of the political system.

A line of police in riot gear guarded the driveway to the locked-down resort, while a contingent of Koch security guards, wearing gold “K” lapel pins, patrolled the grounds within the complex. Discovering
Politico
reporter Ken Vogel sleuthing on the premises, Koch’s surly guards ejected the journalist under threat of a “night in the Riverside County jail.”

Security wasn’t just tight on the ground. The Federal Aviation Administration had taken the cautionary step of curbing access to the airspace above the resort. A couple of days earlier, Greenpeace had launched its 135-foot airship above Rancho Mirage. As guests began to arrive at the resort, they were greeted with the spectacle of the lime green, blimp-like craft circling overhead and displaying large banners with Charles and David’s caricatures; sandwiched between their faces was the slogan
KOCH BROTHERS: DIRTY MONEY.

The brothers were under the radar no more, their pictures used for left-wing propaganda and their family name a code word for corporate villainy. Experiencing the contempt firsthand was unnerving. And it materialized in some of the least expected places. A few weeks earlier, audience members had booed David at the opening of the
Nutcracker
at the Brooklyn Academy of Music, a holiday performance he had chipped in $2.5 million to sponsor. “He’s an evil man,” a voice in the audience whispered when he
took the stage to say a few words about his contribution. It was an uncomfortable convergence of his life as a New York City philanthropist and his life as a billionaire bankroller of conservative causes.

Charles viewed the intensity of the onslaught as an omen of progress. “I believed that when we were considered effective we would be attacked,” he told
The Weekly Standard
. Charles’s father had made a nearly identical statement almost a half-century earlier, at the height of his infamy as a leader of the John Birch Society. “There are many who are attempting and will undoubtedly continue to smear us,” Fred Koch griped to a reporter in 1960. “We’ve been called just about everything in the book but we consider that a sign of our effectiveness.”

There was a big difference between Fred Koch’s era and the present one, however. The Kochs were no longer fringe players on the political scene. The brothers had begun their political careers as idealists, third-party outsiders. Now the same establishmentarians that had kept Fred Koch’s John Birch Society at bay and laughed off the Libertarian Party had started to embrace them. Even
National Review
, the arbiter of American conservatism that crusaded against both Birchism and Libertarianism, was defending the brothers from their liberal antagonists.

In the coming presidential election cycle, the Kochs would do battle on several fronts. On the surface, their objective was installing a Republican in the Oval Office and packing Congress with conservatives, but this fight was also about reshaping the Republican Party and crashing the gates of political power to claim a seat at the table. During the war ahead, the Kochs waged some of their most brutal combat not with ideological enemies, but with onetime allies from their early days in the political arena.

During breaks in the conference, curious attendees peeked outside to watch the protest, where police ultimately arrested twenty-five
activists. If anything, the demonstration galvanized members of the Kochs’ donor network. “It generated a lot of enthusiasm for what we are trying to do,” a Koch official said at the time. Hanging out with the big, bad Koch brothers, the scourge of the Obama administration, had become a conservative status symbol.

That enthusiasm had been a long time in coming.

Since the 1970s, when Charles was the libertarian movement’s primary benefactor, he had been intent on cultivating a group of like-minded business leaders to support the causes he held dear. “He wanted more guys like him who would put money into Cato and these different organizations,” said Richard Wilcke, who ran the Koch-funded Council for a Competitive Economy. He was trying to “identify other Charles Kochs” and seeking to drum up “movement-type organizational support.” A number of lonely years had passed before Charles began to find willing investors who shared his vision.

Through the biannual seminars, Charles hoped to build a deep network of business leaders and philanthropists that would grow and sustain a coterie of favored free-market think tanks, advocacy groups, and educational programs. The inaugural conference, held in Chicago in 2003, attracted just seventeen participants, many of them drawn from Charles’s circle of friends. Back then, these invitation-only confabs, where presenters bored attendees senseless with marathon economics lectures, held little mystique. It was hard to read the long-winded name of these events—“Understanding and Addressing Threats to American Free Enterprise and Prosperity”—without stifling a yawn. The brothers didn’t need a heavy security presence to keep people out—the problem was getting them in the door to start with.

“Their first few seminars were disasters. No one even came,” said a Republican operative who has attended the donor summits.

Eventually Richard Fink and his staff began to spice up the tedious conferences with conservative celebrities and high-profile
Republican lawmakers. The events gradually drew a hundred, then two hundred attendees. Soon guests rubbed elbows with Rush Limbaugh, Charles Krauthammer, Senator Jim DeMint, Mississippi Governor Haley Barbour—even Supreme Court justices Antonin Scalia and Clarence Thomas. The more donors the events attracted, the more these gatherings became a magnet for politicians prowling for campaign contributions. “It became a libertarian Woodstock that you had to go to,” a conservative strategist said.

By the 2008 election cycle, the Kochs’ donor retreats began attracting the type of heavy hitters who wrote seven-figure checks without flinching. Kevin Gentry, Koch Industries’ vice president for special projects and the brothers’ chief fund-raiser, played an important role in transforming the donor summits into a well-oiled machine. An acolyte of conservative activist Morton Blackwell, Gentry served as a vice chairman of Virginia’s Republican Party and he was an old pal of Tim Phillips, Americans for Prosperity’s president; he had been a director of the Faith and Family Alliance, the Jack Abramoff–linked group that Phillips had helped to set up.

Gentry’s entrée to the Koch universe came through George Mason University, where he was a fund-raiser for both the Mercatus Center and the Institute for Humane Studies. He was hired in 2003 by Charles’s foundation and later went to work for Koch Industries directly, serving as a liaison between the Kochs and the organizations they funded.

Gentry employed a simple yet brutally effective fund-raising strategy at the donor retreats, which he organized and emceed. During lunch on the second day of the conference, after attendees had heard from a variety of speakers and been briefed on the Kochs’ political strategy, Gentry often presided over a lively pledge-a-thon during which some of America’s wealthiest men rose to their feet to one-up each other as they promised six- and seven-figure contributions to advance the cause of economic freedom.

“Literally, Kevin’s at the front of the room with a microphone: ‘Foster, what do you think you can pledge?’ ” said a political strategist who has attended these sessions. “They would get in this room and just feed off each other.” Between ultracompetitive billionaires and business moguls, it almost became a contest over who could cut the bigger check. “Everybody gets so excited, and it’s this human nature of ‘my dick’s longer than your dick.’ They’re tapping into basic human nature and they’re raising tens of millions of dollars in the span of an hour.”

Minnesota broadcasting billionaire Stanley Hubbard, a regular attendee of the Kochs’ donor summits, said: “When people stand up and say, ‘I’ll give,’ another guy will say, ‘I’ll give the same thing,’ and another, ‘I’ll do the same thing.’ And they raise a lot of money in a big hurry at lunch.”

By the time the Rancho Mirage conference disbanded on Tuesday, February 1, Charles and David’s political operation had banked $49 million toward the goal of completing the Republican takeover they had helped to set in motion in the midterms.

Several weeks later, at about 2:00 p.m. central time on February 22, Scott Walker, the newly elected Republican governor of Wisconsin, picked up the phone in his office. David Koch, he’d been told, wanted to speak with him. Koch Industries’ political action committee had contributed $43,000 to Walker’s campaign, making the company one of the governor’s biggest financial backers. Koch’s PAC had also directed more than $1 million to the Republican Governors Association, a political outfit focused on electing GOP chief executives across the nation; David had personally donated $1 million to the association, which had in turn sunk more than $3.4 million into Walker’s race.

David was precisely the type of megadonor an ambitious politician like Walker wanted in his Rolodex. And if he called, you answered the phone.

“Hi, this is Scott Walker.”

“Scott! David Koch. How are you?”

“Hey, David! I’m good. And yourself?”

“I’m very well. I’m a little disheartened by the situation there, but, uh, what’s the latest?”

The situation was that thousands of people were protesting in the streets outside Walker’s office in the state capitol in Madison. An angry throng of activists had made camp inside the building’s three-story rotunda. Walker, the forty-four-year-old son of a Baptist minister, had stirred the outrage of tens of thousands of Wisconsinites when, less than a month into his new job, he “dropped the bomb,” as he put it, on the public sector workers and unions of his state.

He had unveiled a piece of legislation intended to plug a $137 million hole in the state budget by, in part, slashing collective bargaining rights for public workers and forcing them to pay more for their health care and retirement benefits. The bill required an annual vote to keep a union functioning and, going a step further to weaken labor’s power, curbed the ability of unions to collect money for political spending. Democratic members of the state Senate had fled Wisconsin to deny their Republican colleagues a quorum to vote on Walker’s bill. The state was in turmoil.

Walker was not alone in his efforts to neuter organized labor at the state level. Other conservative governors, swept into power by riding the Tea Party wave of 2010, put forward their own bills targeting unions. Legislation similar to Walker’s popped up in Iowa, Idaho, Alaska, and Ohio, sparking smaller protests in those states as well. The early months of 2011 saw a sustained assault on organized labor, of the kind that hadn’t been seen since the right-to-work movement of the 1940s and 1950s, when Fred Koch and his right-wing ally Bob Love had successfully led the charge to make Kansas a right-to-work state.

As Walker came under fire, the Koch brothers’ Americans for
Prosperity rallied to his aid. Wisconsin was home to one of the group’s largest and most active state chapters, and in the past Walker had been a frequent speaker at Americans for Prosperity events. (Koch Industries also had a sizable presence in the state, where it employed some 3,000 employees, including at two Georgia-Pacific paper mills in the Green Bay area.) In an interview with
The New York Times
, Tim Phillips suggested that AFP leaders had encouraged Walker to battle the unions (though Phillips later denied saying this). And his group mobilized quickly to defend Walker from the pro-labor onslaught. It flooded the airwaves with issue ads urging citizens to “Stand with Walker,” organized counterrallies, and launched a statewide bus tour in support of Walker’s budget plan. (The advocacy group would later be pivotal in helping Walker keep his job, after his antiunion tactics culminated in a recall election.)

On the phone, Walker provided an insider’s account of what was transpiring in Wisconsin and a preview of his plans. “The state Senate still has the 14 members missing,” Walker said, “but what they’re doing today is bringing up all sorts of other non-fiscal items, many of which are things that members in the Democratic side care about. And each day we’re going to ratchet it up a little bit.”

When the caller brought up the idea of “planting some troublemakers” among the crowd of protestors, Walker acknowledged that “we thought about that.” And when he suggested the governor “bring a baseball bat” to a potential meeting with the fourteen Democratic senators who had left Wisconsin to bring the legislative session to a standstill, Walker responded, “I have one in my office; you’d be happy with that. I got a Slugger with my name on it.”