Koch Industries considered killing the energy tax a matter of vital importance, and executives leaned heavily on members of Kansas’s congressional delegation to repudiate the proposal. (“Our belief is that the tax, over time, may have destroyed our business,” Fink later said.) According to the former consultant, Fink approached the American Petroleum Institute, the leading oil industry lobby and trade group, with a plan to eviscerate the BTU tax. “Rich walked into the American Petroleum Institute with a lump sum and said, ‘Will you match it?’ ” he recalled. “API and the oil companies matched it, with a very specific targeted campaign aimed just at knocking out the BTU tax from that budget bill.”
Pioneering the kind of tactics it would rely on time and again during the Clinton years, and which would reappear during the Obama administration, the group targeted key districts, organizing rallies and launching surgical strikes of print and radio ads. “With his budget vote, your congressman controls your cash and your job,” one radio ad intoned ominously. “In next year’s election, you’ll control his job.” Turning up the heat on lawmakers, Citizens for a Sound Economy set up a 1-800 number that patched callers through to the offices of their congressional representatives so they could express their displeasure directly.
The strategy, the consultant said, focused almost exclusively on swaying one critical Democratic senator—Oklahoma’s David Boren, a member of the Senate Finance Committee. “It was all geared to making it profoundly uncomfortable for Boren,” he said. Without his support, the tax was dead on arrival. When Boren eventually came out against it, the battle was over.
The victory gave the exuberant freedom fighters at Citizens for a Sound Economy their first real taste of political power and a model for future legislative skirmishes. “They thought, ‘Wow, this is how it works, and it really works,’ ” said the consultant. “That sort of targeted money at a key senator or congressman, at a pivotal point in time.… They took that initial victory and just made it a thing.”
When the Obama administration took office, the populist slant of the country felt to Fink and the Koch brothers like déjà vu. Democrats controlled the executive and legislative branches, just like at the start of Bill Clinton’s presidency. Obama, like Clinton, had ridden into office with ambitious plans to overhaul the health care system and touting energy policies the private sector found loathsome. They had been here before. Same fight, different decade.
Years earlier, during George W. Bush’s first term, Citizens for a Sound Economy had imploded owing to an internal power struggle that pitted the Kochs and Fink against a group of employees and board members who thwarted their control of the organization. According to Dick Armey, who joined the advocacy group as its chairman following his eight-year reign as House majority leader, Charles and David had pressed for the firing of two employees. Armey and other board members balked. As tensions mounted, Armey said, a representative of the brothers threatened to sue the dissidents “into submission.”
Eventually, the brothers walked, taking with them half of the Citizens for a Sound Economy organization. The group consisted of two entities—a 501(c)(4) organization through which the group conducted its advocacy and political activities and a 501(c)(3) foundation that focused on research and educational pursuits that wouldn’t violate its tax status. 501(c)s, the colloquial terms for tax-exempt organizations, take their names from section 501 of the IRS code. 501(c)(3) nonprofits, to which contributions are tax deductible, are intended for educational or religious purposes. 501(c)(4)s can engage in political advocacy and lobbying, but donations to these groups are not deductible.
When the Koch faction split off, they decamped with about $5 million, Armey said, and maintained control of the foundation. The Kochs renamed it the Americans for Prosperity Foundation and created a sister political advocacy group, Americans for Prosperity. By the time Obama took office, Americans for Prosperity had formed chapters in nearly two-dozen states and claimed to command thousands of activists.
In the months leading up to Obama’s inauguration on January 20, 2009, the country had descended into a period of tumult. The tinder was dry for an uprising. All it took was a spark—and after that, some vigorous fanning of the flames by Charles and David’s advocacy group and other like-minded organizations.
The spark, one of them at least, came on the morning of February 19, 2009, on the floor of the Chicago Mercantile Exchange. During a live shot, CNBC’s Rick Santelli launched into an on-air tirade, denouncing the administration’s $75 billion plan to rescue struggling homeowners for “promoting bad behavior” and rewarding people who “drink the water” over those who “carry the water.” Whoops and whistles rose up from the commodities traders around him.
“President Obama, are you listening!” the fired-up commentator said. “We’re thinking of having a Chicago Tea Party!”
Santelli’s diatribe went viral. It crystallized the shapeless anger over the government bailouts, which seemed to reinforce the irresponsible conduct of banks that had bought and sold time-bomb assets and of Americans who had borrowed far beyond their means.
Staffers at Americans for Prosperity—along with FreedomWorks, as the other half of Citizens for a Sound Economy, chaired by Dick Armey, had been renamed—quickly grasped that a watershed moment was unfolding and seized the moment to harness the public outrage. Hours after Santelli’s rant, Phil Kerpen, an Americans for Prosperity executive, registered the domain name taxpayerteaparty.com. The advocacy group created a simple site, its homepage declaring: “Rick Santelli is dead right! Enough bailouts of everyone who acted recklessly! It’s time to stand up for all the regular people who play by the rules! It is time for a taxpayer tea party!” The site was a clearinghouse for information on Tea Parties being organized around the country. (“Text ‘TEATIME’ to 74700 to join Americans for Prosperity and receive mobile updates on the tea parties!”) And it provided a link to “Tea Party Talking Points”: “Just as the citizens of a young republic came together in Boston in 1773 to reject excessive taxation by the Crown, so too do we come together now to reject oppressive taxation by our own government,” the document read.
If Santelli’s rant marked the moment of the Tea Party’s conception, April 15, Tax Day, was its DOB: Hundreds of thousands of citizens rallied at more than 750 Tea Parties around the country. Organized by Americans for Prosperity and a host of other conservative groups, the events drew crowds ranging from a couple dozen to many thousands.
The nation’s largest Tea Party took place in Atlanta, where as many as 15,000 people gathered in the streets around the gold-domed state capitol building. Americans for Prosperity had helped to organize the event, and the group’s forty-four-year-old president, Tim Phillips, was on hand to rally the crowd. He wore a gray suit and a lavender tie and exuded the slippery persona of a car salesman or TV evangelist.
A veteran Republican operative from Virginia, Phillips considered himself a specialist in “grasstops” organizing—building a citizen movement atop a corporate-funded campaign. In the 1990s, he had formed a political consulting business, Century Strategies, with onetime Christian Coalition leader and influence peddler extraordinaire Ralph Reed. Their firm had close ties to Jack Abramoff, the lobbyist who spent nearly four years in prison for defrauding Native American gaming interests of millions. Phillips (who was not accused of any wrongdoing) played a cameo role in the headline-grabbing corruption scandal, helping to establish a group called the Faith and Family Alliance, which served, on at least one occasion, as a pass-through for cash from Abramoff’s gaming clients.
“You all know that we face the greatest challenge to our economic freedom in more than a generation,” Phillips told the Tea Party crowd as he paced the stage with a yellow-tipped microphone in hand. “… And I’ll tell you something, this Tea Party is not an ending it is a beginning. This is the beginning of taking our nation back, of protecting the freedoms that have made us great for so long, and we’re going to do that and you’re going to do that and it
starts right here, right now!”
Across the country, mixed in with Gadsden flags, tricornered hats, and generic protest signs (GOT FREEDOM?), activists brandished placards that questioned the President’s citizenship, called him the “new face of Hitler,” depicted him slitting the throat of Uncle Sam, and accused him of plotting “white slavery.”
Though not characteristic of the Tea Party as a whole, a strain of extremism thrived within the movement that seemed out of another era—Fred Koch’s era. In the accusations of communism and socialism directed at the president, the paranoia about a United Nations power grab and one-world government, the undercurrent of racism, the claims that the country had come under the sway of an evil force, rang echoes of the John Birch Society in its heyday. Even some of the iconography was similar. In November 1963, ahead of John F. Kennedy’s ill-fated visit to Dallas, “Wanted for Treason” leaflets with the president’s picture, attributed to Birchers, blanketed the city. As the Tea Party gathered momentum, a similar “Wanted” poster bearing Obama’s likeness was littered across the Internet.
“The modern-day Birchers are the Tea Party,” David Welch, a former research director at the Republican National Committee (and no relation to the Birch Society’s founder), would later argue in a New York Times op-ed. He lamented the absence of a William Buckley–esque figure to squelch the extremism of the Tea Party movement.
David and Charles had spent decades and tens of millions of dollars trying to foment an ideological awakening in the United States, to create a movement of Americans who cherished the same free-market ideals that they did. A movement of people who abhorred bailouts. Decried deficit spending. Believed that government-run entitlement programs were socialism lite. The brothers did not condone the uglier aspects of the Tea Party, but their movement had finally arrived.
Americans for Prosperity positioned itself at the vanguard of the anti-Obama rebellion. In late April, as House Democrats prepared to introduce cap and trade legislation to limit greenhouse gas emissions, the group launched a national “Hot Air” tour—replete with a red hot air balloon—warning of “global warming alarmism.” It staged rallies targeting the union-friendly Employee Free Choice Act. And it stirred opposition to what Tim Phillips called “the clear and present threat” of the Obama administration’s health care reform initiative, crisscrossing the country in a bus with the slogan HANDS OFF MY HEALTHCARE emblazoned on the side. Members of Congress returned to their districts during the typically sedate August recess in 2009 to raucous “recess rallies” organized by Americans for Prosperity and other groups, where apoplectic activists shouted down lawmakers during town hall meetings on the soon-to-be-unveiled health care legislation.
Conservative activists would later gripe that Americans for Prosperity often horned in on the organizing work of others and that Phillips tended to claim credit for campaigns in which his organization had only tangential involvement. “What they did was they ran to the head of the parade a lot,” said a conservative strategist. “They attempted to buy the Tea Party as long as [the Tea Party] did what they wanted done.”
But there was no denying that as the Tea Party took off, Americans for Prosperity seemed omnipresent. The group’s role in organizing the unfolding mutiny begged the obvious question of who funded the organization. It didn’t require much digging to discover the group had been created by two petrochemical billionaires who had been fighting to eviscerate taxes and government regulations since the 1970s.
As Charles and David surfaced as the moneymen behind the Tea Party–stoking Americans for Prosperity, Koch Industries tried to maintain the fiction that the group was just one “among the hundreds” of organizations the brothers supported. The advocacy group operated completely “independently” of Koch Industries, the company insisted. But even Americans for Prosperity’s conservative allies roll their eyes at this notion. “AFP in many ways is a tool in the toolbox of a corporation to advance its corporate interests,” said the leader of one conservative nonprofit who has worked with Americans for Prosperity in the past.
The brothers have a long history of unusually close involvement with the political groups and public policy shops they fund. “They are very active directors,” said James Miller, an Americans for Prosperity board member and a long-serving chairman of its predecessor, Citizens for a Sound Economy. “They want to know what’s going on and they give the organization directions—direction on how it’s managed.… They are very focused on the organizations doing the most with the resources they have.”
Americans for Prosperity is in some ways an appendage of Koch Industries and it has historically been staffed and managed by people who have long and deep loyalties to the Kochs. Americans for Prosperity’s founding president was Nancy Pfotenhauer, who spent much of her professional life working for the Kochs, first as an executive at Citizens for a Sound Economy and later as the director of Koch Industries’ DC lobbying operation. A former Koch lobbyist named Alan Cobb was the group’s vice president of state operations. Meanwhile, Richard Fink served on the board of Americans for Prosperity’s foundation arm alongside David, its chairman. According to a Republican strategist who has worked with the Kochs’ political network, outside operatives in the brothers’ employ had a hand in guiding some of Americans for Prosperity’s activities, even playing a part in developing ads that ran under the group’s name.
Accused of running a Koch Industries front group, Tim Phillips has pointed out that his organization has thousands of donors. Yet grassroots contributors of $25, $50, or even $100 did not keep the lights on at AFP’s third-floor offices in Arlington, Virginia, let alone foot the bill for the pricey political ads saturating the airwaves. Americans for Prosperity’s primary benefactors were the Kochs, major U.S. corporations (including, at one point, the State Farm insurance company), and crucially, an extensive network of wealthy conservative donors cultivated by fund-raisers employed by Koch Industries. This donor network alone would channel tens of millions of dollars into Americans for Prosperity’s coffers in the years ahead.
David’s name popped up more and more as the corporate Oz behind the curtain of the Tea Party, even more so than Charles, who did not have a formal role with Americans for Prosperity. Charles had been on a lifelong mission to promote economic freedom and transform society, but David, who considered medical research the main thrust of his philanthropy, became the figurehead of their political crusade.
David had played the role of face man in their relationship dating back to the late 1970s, when Charles urged David to run for vice president on the Libertarian Party’s ticket. “I think he is the face on a lot of their politics stuff because Charles doesn’t want to be,” said one former Koch executive. “There is a bit of a character difference. Charles is a very reserved, shun the spotlight guy. David—and Bill, his twin brother—much more want to be in the public eye and are willing to do it.”
James Miller said of Charles: “I think he has a great interest in the political process; I just think he doesn’t want to do it himself. David is a little more willing to put himself out there.”
David, however, did not relish the attention that accompanied the rise of the Tea Party; he preferred the pose-in-a-tux-at-Lincoln-Center variety. He seemed surprised to become the object of vitriol, surprised that anyone would even associate him with the protests unfolding around the country. “I’ve never been to a Tea-Party event,” he told New York magazine in the summer of 2010. “No one representing the Tea Party has ever even approached me.” Yet he funded and sat on the board of one of the groups leading the movement.
Being portrayed as the “tea party’s wallet,” as New York dubbed him, didn’t play terribly well in liberal New York City, posing an unwelcome contrast to the Andrew Carnegie–esque image he preferred to project. But he couldn’t have it both ways. In New York magazine (and New York City), David scoffed at the notion that he was a major Tea Party backer, but he displayed a different side among the Americans for Prosperity faithfu
l.
David must have been aware that he was entering a hive of Tea Party organizing on the morning of October 3, 2009, when he strolled into the ballroom of Arlington, Virginia’s Crystal Gateway Marriott. Americans for Prosperity had convened its annual Defending the American Dream conference and hundreds of Americans for Prosperity activists had gathered to revel in their muscular opposition to the Obama administration and its Democratic allies.
The ballroom that morning was bathed in red and blue light, as David stepped to the stage, wearing a dark pinstripe suit with a silver tie. Gripping the sides of the podium, he scanned the sea of activists before him.
It was a sight to behold.
“Five years ago,” he began, “my brother Charles and I provided the funds to start the Americans for Prosperity and it’s beyond my wildest dreams how AFP has grown into this enormous organization. Two thousand people here this weekend—this is a phenomenal success in my judgment. Eight hundred thousand activists from nothing five years ago—this is a remarkable achievement. And we’re being effective in so many different ways.”
“Days like today,” he continued, “bring to reality the vision of our board of directors when we founded this organization.… 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 have made our nation the most prosperous society in history.” David concluded his speech by presenting the group’s annual Washington award, given to a national leader who had distinguished himself as a defender of economic freedom, to that year’s honoree—South Carolina’s Jim DeMint, a Republican senator whose name would become synonymous with the Tea Party revolt that roiled Congress in the coming years.
Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty Page 28
