The billionaire brothers who are waging a war against Obama.
by Jane Mayer August 30, 2010
One dignitary was conspicuously absent from the gala: the event’s third honorary co-chair, Michelle Obama. Her office said that a scheduling conflict had prevented her from attending. Yet had the First Lady shared the stage with Koch it might have created an awkward tableau. In Washington, Koch is best known as part of a family that has repeatedly funded stealth attacks on the federal government, and on the Obama Administration in particular.
With his brother Charles, who is seventy-four, David Koch owns virtually all of Koch Industries, a conglomerate, headquartered in Wichita, Kansas, whose annual revenues are estimated to be a hundred billion dollars. The company has grown spectacularly since their father, Fred, died, in 1967, and the brothers took charge. The Kochs operate oil refineries in Alaska, Texas, and Minnesota, and control some four thousand miles of pipeline. Koch Industries owns Brawny paper towels, Dixie cups, Georgia-Pacific lumber, Stainmaster carpet, and Lycra, among other products. Forbes ranks it as the second-largest private company in the country, after Cargill, and its consistent profitability has made David and Charles Koch—who, years ago, bought out two other brothers—among the richest men in America. Their combined fortune of thirty-five billion dollars is exceeded only by those of Bill Gates and Warren Buffett.
In a statement, Koch Industries said that the Greenpeace report “distorts the environmental record of our companies.” And David Koch, in a recent, admiring article about him in New York, protested that the “radical press” had turned his family into “whipping boys,” and had exaggerated its influence on American politics. But Charles Lewis, the founder of the Center for Public Integrity, a nonpartisan watchdog group, said, “The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”
In April, 2009, Melissa Cohlmia, a company spokesperson, denied that the Kochs had direct links to the Tea Party, saying that Americans for Prosperity is “an independent organization and Koch companies do not in any way direct their activities.” Later, she issued a statement: “No funding has been provided by Koch companies, the Koch foundations, or Charles Koch or David Koch specifically to support the tea parties.” David Koch told New York, “I’ve never been to a tea-party event. No one representing the tea party has ever even approached me.”
At the lectern in Austin, however, Venable—a longtime political operative who draws a salary from Americans for Prosperity, and who has worked for Koch-funded political groups since 1994—spoke less warily. “We love what the Tea Parties are doing, because that’s how we’re going to take back America!” she declared, as the crowd cheered. In a subsequent interview, she described herself as an early member of the movement, joking, “I was part of the Tea Party before it was cool!” She explained that the role of Americans for Prosperity was to help “educate” Tea Party activists on policy details, and to give them “next-step training” after their rallies, so that their political energy could be channelled “more effectively.” And she noted that Americans for Prosperity had provided Tea Party activists with lists of elected officials to target. She said of the Kochs, “They’re certainly our people. David’s the chairman of our board. I’ve certainly met with them, and I’m very appreciative of what they do.”
Venable honored several Tea Party “citizen leaders” at the summit. The Texas branch of Americans for Prosperity gave its Blogger of the Year Award to a young woman named Sibyl West. On June 14th, West, writing on her site, described Obama as the “cokehead in chief.” In an online thread, West speculated that the President was exhibiting symptoms of “demonic possession (aka schizophrenia, etc.).” The summit featured several paid speakers, including Janine Turner, the actress best known for her role on the television series “Northern Exposure.” She declared, “They don’t want our children to know about their rights. They don’t want our children to know about a God!”
During a catered lunch, Venable introduced Ted Cruz, a former solicitor general of Texas, who told the crowd that Obama was “the most radical President ever to occupy the Oval Office,” and had hidden from voters a secret agenda—“the government taking over our economy and our lives.” Countering Obama, Cruz proclaimed, was “the epic fight of our generation!” As the crowd rose to its feet and cheered, he quoted the defiant words of a Texan at the Alamo: “Victory, or death!”
Americans for Prosperity has worked closely with the Tea Party since the movement’s inception. In the weeks before the first Tax Day protests, in April, 2009, Americans for Prosperity hosted a Web site offering supporters “Tea Party Talking Points.” The Arizona branch urged people to send tea bags to Obama; the Missouri branch urged members to sign up for “Taxpayer Tea Party Registration” and provided directions to nine protests. The group continues to stoke the rebellion. The North Carolina branch recently launched a “Tea Party Finder” Web site, advertised as “a hub for all the Tea Parties in North Carolina.”
The anti-government fervor infusing the 2010 elections represents a political triumph for the Kochs. By giving money to “educate,” fund, and organize Tea Party protesters, they have helped turn their private agenda into a mass movement. Bruce Bartlett, a conservative economist and a historian, who once worked at the National Center for Policy Analysis, a Dallas-based think tank that the Kochs fund, said, “The problem with the whole libertarian movement is that it’s been all chiefs and no Indians. There haven’t been any actual people, like voters, who give a crap about it. So the problem for the Kochs has been trying to create a movement.” With the emergence of the Tea Party, he said, “everyone suddenly sees that for the first time there are Indians out there—people who can provide real ideological power.” The Kochs, he said, are “trying to shape and control and channel the populist uprising into their own policies.”
A Republican campaign consultant who has done research on behalf of Charles and David Koch said of the Tea Party, “The Koch brothers gave the money that founded it. It’s like they put the seeds in the ground. Then the rainstorm comes, and the frogs come out of the mud—and they’re our candidates!”
The Kochs and their political operatives declined requests for interviews. Instead, a prominent New York public-relations executive who is close with the Kochs put forward two friends: George Pataki, the former governor of New York, and Mortimer Zuckerman, the publisher and real-estate magnate. Pataki, a Republican who received campaign donations from David Koch, called him “a patriot who cares deeply about his country.” Zuckerman praised David’s “gentle decency” and the “range of his public interests.”
The Republican campaign consultant said of the family’s political activities, “To call them under the radar is an understatement. They are underground!” Another former Koch adviser said, “They’re smart. This right-wing, redneck stuff works for them. They see this as a way to get things done without getting dirty themselves.” Rob Stein, a Democratic political strategist who has studied the conservative movement’s finances, said that the Kochs are “at the epicenter of the anti-Obama movement. But it’s not just about Obama. They would have done the same to Hillary Clinton. They did the same with Bill Clinton. They are out to destroy progressivism.”
Koch married Mary Robinson, the daughter of a Missouri physician, and they had four sons: Freddie, Charles, and twins, David and William. John Damgard, the president of the Futures Industry Association, was David’s schoolmate and friend. He recalled that Fred Koch was “a real John Wayne type.” Koch emphasized rugged pursuits, taking his sons big-game hunting in Africa, and requiring them to do farm labor at the family ranch. The Kochs lived in a stone mansion on a large compound across from Wichita’s country club; in the summer, the boys could hear their friends splashing in the pool, but they were not allowed to join them. “By instilling a work ethic in me at an early age, my father did me a big favor, although it didn’t seem like a favor back then,” Charles has written. “By the time I was eight, he made sure work occupied most of my spare time.” David Koch recalled that his father also indoctrinated the boys politically. “He was constantly speaking to us children about what was wrong with government,” he told Brian Doherty, an editor of the libertarian magazine Reason, and the author of “Radicals for Capitalism,” a 2007 history of the libertarian movement. “It’s something I grew up with—a fundamental point of view that big government was bad, and imposition of government controls on our lives and economic fortunes was not good.”
David attended Deerfield Academy, in Massachusetts, and Charles was sent to military school. Charles, David, and William all earned engineering degrees at their father’s alma mater, M.I.T., and later joined the family company. Charles eventually assumed control, with David as his deputy; William’s career at the company was less successful. Freddie went to Harvard and studied playwriting at the Yale School of Drama. His father reportedly disapproved of him, and punished him financially. (Freddie, through a spokesperson, denied this.)
In 1967, after Fred Koch died, of a heart attack, Charles renamed the business Koch Industries, in honor of his father. Fred Koch’s will made his sons extraordinarily wealthy. David Koch joked about his good fortune in a 2003 speech to alumni at Deerfield, where, after pledging twenty-five million dollars, he was made the school’s sole “lifetime trustee.” He said, “You might ask: How does David Koch happen to have the wealth to be so generous? Well, let me tell you a story. It all started when I was a little boy. One day, my father gave me an apple. I soon sold it for five dollars and bought two apples and sold them for ten. Then I bought four apples and sold them for twenty. Well, this went on day after day, week after week, month after month, year after year, until my father died and left me three hundred million dollars!”
David and Charles had absorbed their father’s conservative politics, but they did not share all his views, according to diZerega, who befriended Charles in the mid-sixties, after meeting him while browsing in a John Birch Society bookstore in Wichita. Charles eventually invited him to the Kochs’ mansion, to participate in an informal political-discussion group. “It was pretty clear that Charles thought some of the Birch Society was bullshit,” diZerega recalled.
DiZerega, who has lost touch with Charles, eventually abandoned right-wing views, and became a political-science professor. He credits Charles with opening his mind to political philosophy, which set him on the path to academia; Charles is one of three people to whom he dedicated his first book. But diZerega believes that the Koch brothers have followed a wayward intellectual trajectory, transferring their father’s paranoia about Soviet Communism to a distrust of the U.S. government, and seeing its expansion, beginning with the New Deal, as a tyrannical threat to freedom. In an essay, posted on Beliefnet, diZerega writes, “As state socialism failed . . . the target for many within these organizations shifted to any kind of regulation at all. ‘Socialism’ kept being defined downwards.”
Members of the John Birch Society developed an interest in a school of Austrian economists who promoted free-market ideals. Charles and David Koch were particularly influenced by the work of Friedrich von Hayek, the author of “The Road to Serfdom” (1944), which argued that centralized government planning led, inexorably, to totalitarianism. Hayek’s belief in unfettered capitalism has proved inspirational to many conservatives, and to anti-Soviet dissidents; lately, Tea Party supporters have championed his work. In June, the talk-radio host Glenn Beck, who has supported the Tea Party rebellion, promoted “The Road to Serfdom” on his show; the paperback soon became a No. 1 best-seller on Amazon. (Beck appears to be a fan of the Kochs; in the midst of a recent on-air parody of Al Gore, Beck said, without explanation, “I want to thank Charles Koch for this information.” Beck declined to elaborate on the relationship.)
Charles and David also became devotees of a more radical thinker, Robert LeFevre, who favored the abolition of the state but didn’t like the label “anarchist”; he called himself an “autarchist.” LeFevre liked to say that “government is a disease masquerading as its own cure.” In 1956, he opened an institution called the Freedom School, in Colorado Springs. Brian Doherty, of Reason, told me that “LeFevre was an anarchist figure who won Charles’s heart,” and that the school was “a tiny world of people who thought the New Deal was a horrible mistake.” According to diZerega, Charles supported the school financially, and even gave him money to take classes there.
Throughout the seventies, Charles and David continued to build Koch Industries. In 1980, William, with assistance from Freddie, attempted to take over the company from Charles, who, they felt, had assumed autocratic control. In retaliation, the company’s board, which answered to Charles, fired William. (“Charles runs it all with an iron hand,” Bruce Bartlett, the economist, told me.) Lawsuits were filed, with William and Freddie on one side and Charles and David on the other. In 1983, Charles and David bought out their brothers’ share in the company for nearly a billion dollars. But the antagonism remained, and litigation continued for seventeen more years, with the brothers hiring rival private investigators; in 1990, they walked past one another with stony expressions at their mother’s funeral. Eventually, Freddie moved to Monaco, which has no income tax. He bought historic estates in France, Austria, and elsewhere, filling them with art, antiques, opera scores, and literary manuscripts. William founded his own energy company, Oxbow, and turned to yachting; he spent an estimated sixty-five million dollars to win the America’s Cup, in 1992.
With Charles as the undisputed chairman and C.E.O., Koch Industries expanded rapidly. Roger Altman, who heads the investment-banking firm Evercore, told me that the company’s performance has been “beyond phenomenal.” Charles remained in Wichita, with his wife and two children, guarding his privacy while supporting community charities. David moved to New York City, where he is an executive vice-president of the company and the C.E.O. of its Chemical Technology Group. A financial expert who knows Koch Industries well told me, “Charles is the company. Charles runs it.” David, described by associates as “affable” and “a bit of a lunk,” enjoyed for years the life of a wealthy bachelor. He rented a yacht in the South of France and bought a waterfront home in Southampton, where he threw parties that the Web site New York Social Diary likened to an “East Coast version of Hugh Hefner’s soirées.” In 1996, he married Julia Flesher, a fashion assistant. They live in a nine-thousand-square-foot duplex at 740 Park Avenue, with their three children. Though David’s manner is more cosmopolitan, and more genial, than that of Charles, Brian Doherty, who has interviewed both brothers, couldn’t think of a single issue on which the brothers disagreed.
As their fortunes grew, Charles and David Koch became the primary underwriters of hard-line libertarian politics in America. Charles’s goal, as Doherty described it, was to tear the government “out at the root.” The brothers’ first major public step came in 1979, when Charles persuaded David, then thirty-nine, to run for public office. They had become supporters of the Libertarian Party, and were backing its Presidential candidate, Ed Clark, who was running against Ronald Reagan from the right. Frustrated by the legal limits on campaign donations, they contrived to place David on the ticket, in the Vice-Presidential slot; upon becoming a candidate, he could lavish as much of his personal fortune as he wished on the campaign. The ticket’s slogan was “The Libertarian Party has only one source of funds: You.” In fact, its primary source of funds was David Koch, who spent more than two million dollars on the effort.
Many of the ideas propounded in the 1980 campaign presaged the Tea Party movement. Ed Clark told The Nation that libertarians were getting ready to stage “a very big tea party,” because people were “sick to death” of taxes. The Libertarian Party platform called for the abolition of the F.B.I. and the C.I.A., as well as of federal regulatory agencies, such as the Securities and Exchange Commission and the Department of Energy. The Party wanted to end Social Security, minimum-wage laws, gun control, and all personal and corporate income taxes; it proposed the legalization of prostitution, recreational drugs, and suicide. Government should be reduced to only one function: the protection of individual rights. William F. Buckley, Jr., a more traditional conservative, called the movement “Anarcho-Totalitarianism.”
That November, the Libertarian ticket received only one per cent of the vote. The brothers realized that their brand of politics didn’t sell at the ballot box. Charles Koch became openly scornful of conventional politics. “It tends to be a nasty, corrupting business,” he told a reporter at the time. “I’m interested in advancing libertarian ideas.” According to Doherty’s book, the Kochs came to regard elected politicians as merely “actors playing out a script.” A longtime confidant of the Kochs told Doherty that the brothers wanted to “supply the themes and words for the scripts.” In order to alter the direction of America, they had to “influence the areas where policy ideas percolate from: academia and think tanks.”
In recent decades, members of several industrial dynasties have spent parts of their fortunes on a conservative agenda. In the nineteen-eighties, the Olin family, which owns a chemicals-and-manufacturing conglomerate, became known for funding right-leaning thinking in academia, particularly in law schools. And during the nineties Richard Mellon Scaife, a descendant of Andrew Mellon, spent millions attempting to discredit President Bill Clinton. Ari Rabin-Havt, a vice-president at the Democratic-leaning Web site Media Matters, said that the Kochs’ effort is unusual, in its marshalling of corporate and personal funds: “Their role, in terms of financial commitments, is staggering.”
Of course, Democrats give money, too. Their most prominent donor, the financier George Soros, runs a foundation, the Open Society Institute, that has spent as much as a hundred million dollars a year in America. Soros has also made generous private contributions to various Democratic campaigns, including Obama’s. But Michael Vachon, his spokesman, argued that Soros’s giving is transparent, and that “none of his contributions are in the service of his own economic interests.” The Kochs have given millions of dollars to nonprofit groups that criticize environmental regulation and support lower taxes for industry. Gus diZerega, the former friend, suggested that the Kochs’ youthful idealism about libertarianism had largely devolved into a rationale for corporate self-interest. He said of Charles, “Perhaps he has confused making money with freedom.”
Some critics have suggested that the Kochs’ approach has subverted the purpose of tax-exempt giving. By law, charitable foundations must conduct exclusively nonpartisan activities that promote the public welfare. A 2004 report by the National Committee for Responsive Philanthropy, a watchdog group, described the Kochs’ foundations as being self-serving, concluding, “These foundations give money to nonprofit organizations that do research and advocacy on issues that impact the profit margin of Koch Industries.”
The Kochs have gone well beyond their immediate self-interest, however, funding organizations that aim to push the country in a libertarian direction. Among the institutions that they have subsidized are the Institute for Justice, which files lawsuits opposing state and federal regulations; the Institute for Humane Studies, which underwrites libertarian academics; and the Bill of Rights Institute, which promotes a conservative slant on the Constitution. Many of the organizations funded by the Kochs employ specialists who write position papers that are subsequently quoted by politicians and pundits. David Koch has acknowledged that the family exerts tight ideological control. “If we’re going to give a lot of money, we’ll make darn sure they spend it in a way that goes along with our intent,” he told Doherty. “And if they make a wrong turn and start doing things we don’t agree with, we withdraw funding.”
In 1977, the Kochs provided the funds to launch the nation’s first libertarian think tank, the Cato Institute. According to the Center for Public Integrity, between 1986 and 1993 the Koch family gave eleven million dollars to the institute. Today, Cato has more than a hundred full-time employees, and its experts and policy papers are widely quoted and respected by the mainstream media. It describes itself as nonpartisan, and its scholars have at times been critical of both parties. But it has consistently pushed for corporate tax cuts, reductions in social services, and laissez-faire environmental policies.
When President Obama, in a 2008 speech, described the science on global warming as “beyond dispute,” the Cato Institute took out a full-page ad in the Times to contradict him. Cato’s resident scholars have relentlessly criticized political attempts to stop global warming as expensive, ineffective, and unnecessary. Ed Crane, the Cato Institute’s founder and president, told me that “global-warming theories give the government more control of the economy.”
Cato scholars have been particularly energetic in promoting the Climategate scandal. Last year, private e-mails of climate scientists at the University of East Anglia, in England, were mysteriously leaked, and their exchanges appeared to suggest a willingness to falsify data in order to buttress the idea that global warming is real. In the two weeks after the e-mails went public, one Cato scholar gave more than twenty media interviews trumpeting the alleged scandal. But five independent inquiries have since exonerated the researchers, and nothing was found in their e-mails or data to discredit the scientific consensus on global warming.
Nevertheless, the controversy succeeded in spreading skepticism about climate change. Even though the National Oceanic and Atmospheric Administration recently issued a report concluding that the evidence for global warming is unequivocal, more Americans are convinced than at any time since 1997 that scientists have exaggerated the seriousness of global warming. The Kochs promote this statistic on their company’s Web site but do not mention the role that their funding has played in fostering such doubt.
In a 2002 memo, the Republican political consultant Frank Luntz wrote that so long as “voters believe there is no consensus about global warming within the scientific community” the status quo would prevail. The key for opponents of environmental reform, he said, was to question the science—a public-relations strategy that the tobacco industry used effectively for years to forestall regulation. The Kochs have funded many sources of environmental skepticism, such as the Heritage Foundation, which has argued that “scientific facts gathered in the past 10 years do not support the notion of catastrophic human-made warming.” The brothers have given money to more obscure groups, too, such as the Independent Women’s Forum, which opposes the presentation of global warming as a scientific fact in American public schools. Until 2008, the group was run by Nancy Pfotenhauer, a former lobbyist for Koch Industries. Mary Beth Jarvis, a vice-president of a Koch subsidiary, is on the group’s board.
Naomi Oreskes, a professor of history and science studies at the University of California, San Diego, is the co-author of “Merchants of Doubt,” a new book that chronicles various attempts by American industry to manipulate public opinion on science. She noted that the Kochs, as the heads of “a company with refineries and pipelines,” have “a lot at stake.” She added, “If the answer is to phase out fossil fuels, a different group of people are going to be making money, so we shouldn’t be surprised that they’re fighting tooth and nail.”
David Koch told New York that he was unconvinced that global warming has been caused by human activity. Even if it has been, he said, the heating of the planet will be beneficial, resulting in longer growing seasons in the Northern Hemisphere. “The Earth will be able to support enormously more people because far greater land area will be available to produce food,” he said.
Fink, with his many titles, has become the central nervous system of the Kochtopus. He appears to have supplanted Ed Crane, the head of the Cato Institute, as the brothers’ main political lieutenant. Though David remains on the board at Cato, Charles Koch has fallen out with Crane. Associates suggested to me that Crane had been insufficiently respectful of Charles’s management philosophy, which he distilled into a book called “The Science of Success,” and trademarked under the name Market-Based Management, or M.B.M. In the book, Charles recommends instilling a company’s corporate culture with the competitiveness of the marketplace. Koch describes M.B.M. as a “holistic system” containing “five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives.” A top Cato Institute official told me that Charles “thinks he’s a genius. He’s the emperor, and he’s convinced he’s wearing clothes.” Fink, by contrast, has been far more embracing of Charles’s ideas. (Fink, like the Kochs, declined to be interviewed.)
At a 1995 conference for philanthropists, Fink adopted the language of economics when speaking about the Mercatus Center’s purpose. He said that grant-makers should use think tanks and political-action groups to convert intellectual raw materials into policy “products.”
The Wall Street Journal has called the Mercatus Center “the most important think tank you’ve never heard of,” and noted that fourteen of the twenty-three regulations that President George W. Bush placed on a “hit list” had been suggested first by Mercatus scholars. Fink told the paper that the Kochs have “other means of fighting [their] battles,” and that the Mercatus Center does not actively promote the company’s private interests. But Thomas McGarity, a law professor at the University of Texas, who specializes in environmental issues, told me that “Koch has been constantly in trouble with the E.P.A., and Mercatus has constantly hammered on the agency.” An environmental lawyer who has clashed with the Mercatus Center called it “a means of laundering economic aims.” The lawyer explained the strategy: “You take corporate money and give it to a neutral-sounding think tank,” which “hires people with pedigrees and academic degrees who put out credible-seeming studies. But they all coincide perfectly with the economic interests of their funders.”
In 1997, for instance, the E.P.A. moved to reduce surface ozone, a form of pollution caused, in part, by emissions from oil refineries. Susan Dudley, an economist who became a top official at the Mercatus Center, criticized the proposed rule. The E.P.A., she argued, had not taken into account that smog-free skies would result in more cases of skin cancer. She projected 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 took up Dudley’s smog argument. Evaluating the E.P.A. rule, the court found that the E.P.A. had “explicitly disregarded” the “possible health benefits of ozone.” In another part of the opinion, the court ruled, 2-1, that the E.P.A. had overstepped its authority in calibrating standards for ozone emissions. As the Constitutional Accountability Center, a think tank, revealed, the judges in the majority had previously attended legal junkets, on a Montana ranch, that were arranged by the Foundation for Research on Economics and the Environment—a group funded by Koch family foundations. The judges have claimed that the ruling was unaffected by their attendance.
To defend its reputation, Koch Industries hired Robert Strauss, then a premier Washington lobbyist; the company soon opened an office in the city. A grand jury was convened to investigate the allegations, but it eventually disbanded, without issuing criminal charges. According to the Senate report, after the committee hearings Koch operatives delved into the personal lives of committee staffers, even questioning an ex-wife. Senate investigators were upset by the Kochs’ tactics. Kenneth Ballen, the counsel to the Senate committee, said, “These people have amassed such unaccountable power!”
By 1993, when Bill Clinton became President, Citizens for a Sound Economy had become a prototype for the kind of corporate-backed opposition campaigns that have proliferated during the Obama era. The group waged a successful assault on Clinton’s proposed B.T.U. tax on energy, for instance, running advertisements, staging media events, and targeting opponents. And it mobilized anti-tax rallies outside the Capitol—rallies that NPR described as “designed to strike fear into the hearts of wavering Democrats.” Dan Glickman, a former Democratic congressman from Wichita, who supported the B.T.U. tax, recalled, “I’d been in Congress eighteen years. The Kochs actually engaged against me and funded my opponent. They used a lot of resources and effort—their employees, too.” Glickman suffered a surprise defeat. “I can’t prove it, but I think I was probably their victim,” he said.
The Kochs continued to disperse their money, creating slippery organizations with generic-sounding names, and this made it difficult to ascertain the extent of their influence in Washington. In 1990, Citizens for a Sound Economy created a spinoff group, 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 spinoff group had “no citizen membership of its own.”
In 1997, another Senate investigation began looking into what a minority report called “an audacious plan to pour millions of dollars in contributions into Republican campaigns nationwide without disclosing the amount or source,” in order to evade campaign-finance laws. A shell corporation, Triad Management, had paid more than three million dollars for attack ads in twenty-six House races and three Senate races. More than half of the advertising money came from an obscure nonprofit group, the Economic Education Trust. The Senate committee’s minority report suggested that “the trust was financed in whole or in part by Charles and David Koch of Wichita, Kansas.” The brothers 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 may have played a decisive role in four of six federal races. The Kochs, when asked by reporters if they had given the money, refused to comment. In 1998, however, the Wall Street Journal confirmed that a consultant on the Kochs’ payroll had been involved in the scheme. Charles Lewis, of the Center for Public Integrity, described the scandal as “historic. Triad was the first time a major corporation used a cutout”—a front operation—“in a threatening way. Koch Industries was the poster child of a company run amok.”
During the 2000 election campaign, Koch Industries spent some nine hundred thousand dollars to support the candidacies of George W. Bush and other Republicans. During the Bush years, Koch Industries and other fossil-fuel companies enjoyed remarkable prosperity. The 2005 energy bill, which Hillary Clinton dubbed the Dick Cheney Lobbyist Energy Bill, offered enormous subsidies and tax breaks for energy companies. The Kochs have cast themselves as deficit hawks, but, according to a study by Media Matters, their companies have benefitted from nearly a hundred million dollars in government contracts since 2000.
In 2004, Citizens for a Sound Economy was accused of illegitimately throwing its weight behind Bush’s reëlection. The group’s Oregon branch had attempted to get Ralph Nader on the Presidential ballot, in order to dilute Democratic support for John Kerry. Critics argued that it was illegal for a tax-exempt nonprofit organization to donate its services for partisan political purposes. (A complaint was filed with the Federal Election Commission; it was dismissed.)
That year, internal rivalries at Citizens for a Sound Economy caused the organization to split apart. David Koch and Fink started a new group, Americans for Prosperity, and they hired Tim Phillips to run it. Phillips was a political veteran who had worked with Ralph Reed, the evangelical leader and Republican activist, co-founding Century Strategies, a campaign-consulting company that became notorious for its ties to the disgraced lobbyist Jack Abramoff. Phillips’s online biography describes him as an expert in “grasstops” and “grassroots” political organizing. The Kochs’ choice of Phillips signalled an even greater toughness. The conservative operative Grover Norquist, who is known for praising “throat slitters” in politics, called Phillips “a grownup who can make things happen.”
Last year, Phillips told the Financial Times that Americans for Prosperity had only eight thousand registered members. Currently, its Web site claims that the group has “1.2 million activists.” Whatever its size, the Kochs’ political involvement has been intense; a former employee of the Cato Institute told me that Americans for Prosperity “was micromanaged by the Kochs.” And the brothers’ investment may well have paid off: Americans for Prosperity, in concert with the family’s other organizations, has been instrumental in disrupting the Obama Presidency.
In January, 2008, Charles Koch wrote in his company newsletter that America could be on the verge of “the greatest loss of liberty and prosperity since the 1930s.” That October, Americans for Prosperity held a conference of conservative operatives at a Marriott hotel outside Washington. Erick Erickson, the editor-in-chief of the conservative blog RedState.com, took the lectern, thanked David Koch, and vowed to “unite and fight . . . the armies of the left!” Soon after Obama assumed office, Americans for Prosperity launched “Porkulus” rallies against Obama’s stimulus-spending measures. Then the Mercatus Center released a report claiming that stimulus funds had been directed disproportionately toward Democratic districts; eventually, the author was forced to correct the report, but not before Rush Limbaugh, citing the paper, had labelled Obama’s program “a slush fund,” and Fox News and other conservative outlets had echoed the sentiment. (Phil Kerpen, the vice-president for policy at Americans for Prosperity, is a contributor to the Fox News Web site. Another officer at Americans for Prosperity, Walter Williams, often guest-hosts for Limbaugh.)
Americans for Prosperity also created an offshoot, Patients United Now, which organized what Phillips has estimated to be more than three hundred rallies against health-care reform. At one rally, an effigy of a Democratic congressman was hung; at another, protesters unfurled a banner depicting corpses from Dachau. The group also helped organize the “Kill the Bill” protests outside the Capitol, in March, where Democratic supporters of health-care reform alleged that they were spat on and cursed at. Phillips was a featured speaker.
Americans for Prosperity has held at least eighty events targeting cap-and-trade legislation, which is aimed at making industries pay for the air pollution that they create. Speakers for the group claimed, with exaggeration, that even back-yard barbecues and kitchen stoves would be taxed. The group was also involved in the attacks on Obama’s “green jobs” czar, Van Jones, and waged a crusade against international climate talks. Casting his group as a champion of ordinary workers who would be hurt by environmentalists, Phillips went to Copenhagen last year and staged a protest outside the United Nations conference on climate change, declaring, “We’re a grassroots organization. . . . I think it’s unfortunate when wealthy children of wealthy families . . . want to send unemployment rates in the United States up to twenty per cent.”
Grover Norquist, who holds a weekly meeting for conservative leaders in Washington, including representatives from Americans for Prosperity, told me that last summer’s raucous rallies were pivotal in undermining Obama’s agenda. The Republican leadership in Congress, he said, “couldn’t have done it without August, when people went out on the streets. It discouraged deal-makers”—Republicans who might otherwise have worked constructively with Obama. Moreover, the appearance of growing public opposition to Obama affected corporate donors on K Street. “K Street is a three-billion-dollar weathervane,” Norquist said. “When Obama was strong, the Chamber of Commerce said, ‘We can work with the Obama Administration.’ But that changed when thousands of people went into the street and ‘terrorized’ congressmen. August is what changed it. Now that Obama is weak, people are getting tough.”
As the first anniversary of Obama’s election approached, David Koch came to the Washington area to attend a triumphant Americans for Prosperity gathering. Obama’s poll numbers were falling fast. Not a single Republican senator was working with the Administration on health care, or much else. Pundits were writing about Obama’s political ineptitude, and Tea Party groups were accusing the President of initiating “a government takeover.” In a speech, Koch said, “Days like today bring to reality the vision of our board of directors when we started this organization, five years ago.” He went on, “We envisioned a mass movement, a state-based one, but national in scope, of hundreds of thousands of American citizens from all walks of life standing up and fighting for the economic freedoms that made our nation the most prosperous society in history. . . . Thankfully, the stirrings from California to Virginia, and from Texas to Michigan, show that more and more of our fellow-citizens are beginning to see the same truths as we do.”
While Koch didn’t explicitly embrace the Tea Party movement that day, more recently he has come close to doing so, praising it for demonstrating the “powerful visceral hostility in the body politic against the massive increase in government power, the massive efforts to socialize this country.” Charles Koch, in a newsletter sent to his seventy thousand employees, compared the Obama Administration to the regime of the Venezuelan strongman Hugo Chávez. The Kochs’ sense of imperilment is somewhat puzzling. Income inequality in America is greater than it has been since the nineteen-twenties, and since the seventies the tax rates of the wealthiest have fallen more than those of the middle class. Yet the brothers’ message has evidently resonated with voters: a recent poll found that fifty-five per cent of Americans agreed that Obama is a socialist.
Americans for Prosperity, meanwhile, has announced that it will spend an additional forty-five million dollars before the midterm elections, in November. Although the group is legally prohibited from directly endorsing candidates, it nonetheless plans to target some fifty House races and half a dozen Senate races, staging rallies, organizing door-to-door canvassing, and running ads aimed at “educating voters about where candidates stand.”
Though the Kochs have slowed Obama’s momentum, their larger political battle is far from won. Richard Fink, interviewed by FrumForum.com this spring, said, “If you look at where we’ve gone from the year 2000 to now, with the expansion of government spending and a debt burden that threatens to bankrupt the country, it doesn’t look very good at all.” He went on, “It looks like the infrastructure that was built and nurtured has not carried the day.” He suggested that the Kochs needed “to get more into the practical, day-to-day issues of governing.”
Koch’s corporate and political roles, however, may pose conflicts of interest. For example, at the same time that David Koch has been casting himself as a champion in the fight against cancer, Koch Industries has been lobbying to prevent the E.P.A. from classifying formaldehyde, which the company produces in great quantities, as a “known carcinogen” in humans.
Scientists have long known that formaldehyde causes cancer in rats, and several major scientific studies have concluded that formaldehyde causes cancer in human beings—including one published last year by the National Cancer Institute, on whose advisory board Koch sits. The study tracked twenty-five thousand patients for an average of forty years; subjects exposed to higher amounts of formaldehyde had significantly higher rates of leukemia. These results helped lead an expert panel within the National Institutes of Health to conclude that formaldehyde should be categorized as a known carcinogen, and be strictly controlled by the government. Corporations have resisted regulations on formaldehyde for decades, however, and Koch Industries has been a large funder of members of Congress who have stymied the E.P.A., requiring it to defer new regulations until more studies are completed.
Koch Industries became a major producer of the chemical in 2005, after it bought Georgia-Pacific, the paper and wood-products company, for twenty-one billion dollars. Georgia-Pacific manufactures formaldehyde in its chemical division, and uses it to produce various wood products, such as plywood and laminates. Its annual production capacity for formaldehyde is 2.2 billion pounds. Last December, Traylor Champion, Georgia-Pacific’s vice-president of environmental affairs, sent a formal letter of protest to federal health authorities. He wrote that the company “strongly disagrees” with the N.I.H. panel’s conclusion that formaldehyde should be treated as a known human carcinogen. David Koch did not recuse himself from the National Cancer Advisory Board, or divest himself of company stock, while his company was directly lobbying the government to keep formaldehyde on the market. (A board spokesperson said that the issue of formaldehyde had not come up.)
James Huff, an associate director at the National Institute for Environmental Health Sciences, a division of the N.I.H., told me that it was “disgusting” for Koch to be serving on the National Cancer Advisory Board: “It’s just not good for public health. Vested interests should not be on the board.” He went on, “Those boards are very important. They’re very influential as to whether N.C.I. goes into formaldehyde or not. Billions of dollars are involved in formaldehyde.”
Harold Varmus, the director of the National Cancer Institute, knows David Koch from Memorial Sloan-Kettering, which he used to run. He said that, at Sloan-Kettering, “a lot of people who gave to us had large business interests. The one thing we wouldn’t tolerate in our board members is tobacco.” When told of Koch Industries’ stance on formaldehyde, Varmus said that he was “surprised.”
Cristián Samper, the museum’s director, said that the exhibit is not about climate change, and described Koch as “one of the best donors we’ve had, in my tenure here, because he’s very interested in the content, but completely hands off.” He noted, “I don’t know all the details of his involvement in other issues.”
The Kochs have long depended on the public’s not knowing all the details about them. They have been content to operate what David Koch has called “the largest company that you’ve never heard of.” But with the growing prominence of the Tea Party, and with increased awareness of the Kochs’ ties to the movement, the brothers may find it harder to deflect scrutiny. Recently, President Obama took aim at the Kochs’ political network. Speaking at a Democratic National Committee fund-raiser, in Austin, he warned supporters that the Supreme Court’s recent ruling in the Citizens United case—which struck down laws prohibiting direct corporate spending on campaigns—had made it even easier for big companies to hide behind “groups with harmless-sounding names like Americans for Prosperity.” Obama said, “They don’t have to say who, exactly, Americans for Prosperity are. You don’t know if it’s a foreign-controlled corporation”—or even, he added, “a big oil company.” ♦