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

by Daniel Schulman

  Under the deal, Cato’s sixteen-member board would have four members, including David, selected by the Kochs. The think tank’s directors in the future would choose their own successors. Along with stepping down as Cato’s president, Crane was also forced to relinquish his seat on Cato’s board. The sixty-eight-year-old, once described as “the lion king of button-down libertarianism,” had poured more than half his life into Cato and its broader mission of advancing the libertarian worldview. Leaving it behind was agonizing.

  “Basically, it was taken from him,” said Levy. “He would not have stepped down when he did.… And it wouldn’t have been under those circumstances. And it wouldn’t have been to settle a disagreement with the Kochs, because I’m sure there’s still difficulty between those parties.” Levy added, “He definitely didn’t like it. There’s no question about that.”

  On his final day as a Cato employee later that year, Crane alluded only briefly to the “recent unpleasantness” in a short farewell e-mail to staff. “The essence of the American Experiment is a respect for the dignity of the individual,” he wrote. “It is axiomatic that such dignity depends on liberty. That is what Cato is all about.”

  Crane signed off simply, “Aloha.”

  “In the end,” said one friend of Crane’s, “they paid him a fat sum. He left with a gag in his mouth and a non-compete clause that barely lets him get dressed in the morning.”

  In early July 2012, two weeks after the Cato settlement was announced, a small plane buzzed over the Atlantic, flying past David’s $18 million Southampton estate. A large banner fluttered behind it: MITT ROMNEY HAS A KOCH PROBLEM. A cheer rose up through the throng of protestors who had gathered on the beach near the billionaire’s home.

  During David’s bachelor days, the beachfront mansion had been the site of all-night parties that drew comparisons to Hugh Hefner’s debauchery-filled soirees. On July 8, a more subdued crowd queued up on Meadow Lane in Range Rovers, Benzes, and Beamers awaiting entry to a $50,000-a-head fund-raiser ($75,000 per couple) benefiting the former Massachusetts governor.

  Romney had clinched the Republican presidential nomination in late May, following a brutal primary fight in which the candidates had done Obama’s work for him by savaging one another. Newt Gingrich, after all, had helped to cast Romney as a “vulture capitalist,” whose tenure at private equity firm Bain Capital involved enriching himself while destroying jobs and businesses. The Obama campaign only too happily added to this portrait once Romney emerged as the de facto nominee. Thanks to the Tea Partyized atmosphere, Romney—a historically moderate, Northeastern Republican whose health-care reform effort in Massachusetts formed the inspiration for Obama’s—was running on a “severely conservative” platform. Doing so forced him to engage in the kind of political contortionism that made it seem like he was willing to say anything to get elected.

  David had supported Romney during his 2008 White House bid. And in August 2010, before Romney officially announced his second attempt on the presidency, he and Julia convened a Hamptons mixer for the politician attended by about 150 well-heeled donors, including New York financier and former Port Authority chairman Lew Eisenberg, private equity investor Donald Marron, and real estate billionaire Stephen Ross. Despite this early signal of support, David had changed horses by 2011 and pledged his backing to Chris Christie, should the New Jersey governor decide to enter the race.

  In October 2011, after Christie publicly put an end to any presidential speculation, Romney quickly reached out to David seeking his endorsement, according to an internal Romney campaign memo that described the Koch brother as “the financial engine of the Tea Party.” The following month, pursuing David’s support, Romney even skipped the famous Ronald Reagan Dinner in Des Moines—where the other Republican hopefuls had gathered to court Iowa voters ahead of the state’s bellwether primary—to keynote an Americans for Prosperity conference in DC.

  But David withheld his formal support until the candidate vanquished his GOP rivals. “David very much admired Romney’s success in business and his values,” said a close friend. “I know that David and Romney and Romney’s wife and Julia bonded. So I think he was very much a Romney supporter.” The friend added, chuckling: “Charles loved the governor from New Mexico, Gary Johnson,” the Libertarian Party’s presidential candidate.

  David’s twin brother, Bill, by contrast, did not play hard to get with his endorsement. His relationship with Romney stretched back to the 1980s, before Bill relocated from Massachusetts to Florida. Long before Romney clinched the nomination, Bill and companies he controlled began pouring money into Restore Our Future, the pro-Romney super-PAC. Over the course of the campaign, Bill steered at least $2 million to the group and hosted two Restore Our Future fund-raisers at his Palm Beach mansion. During one of them, held during the second half of 2012, the super-PAC’s fund-raisers displayed a PowerPoint presentation outlining their strategy. One slide contained a picture of a Frederic Remington painting, depicting a Union cavalry officer galloping forward, gun drawn. The super-PAC, this image was meant to convey, was Romney’s cavalry. Bill, according to an attendee, couldn’t help pointing out that he owned the painting.

  Bill also held multiple fund-raisers for the candidate himself, and he contributed more than just cash to Romney’s candidacy. During a 2011 visit to Homeport, Bill’s Cape Cod property, Romney recounted the story of how his parents read to him from Irving Stone’s Men to Match My Mountains during childhood drives through national parks. Bill interrupted, saying, “You know, the title of that book comes from a poem.” And he began to recite it.

  Bring me men to match my mountains,

  Bring me men to match my plains.

  Men with empires in their purpose,

  And new eras in their brains.

  Romney committed Sam Walter Foss’s 1894 poem “The Coming American” to memory and thereafter it became a fixture of his stump speech.

  Before the July fund-raiser at the Kochs’ Southampton compound, David and Julia huddled privately with the Romneys. Whatever was said during their half-hour tête-à-tête, the men emerged from an upstairs room with a confident glow about them, descending “like two world leaders with their first ladies,” according to one guest. The Kochs served a simple dinner of tomato and mozzarella corn fritters and chicken and arugula salad to their guests. David was overheard that evening telling attendees soberly, “We can’t afford these levels of debt.… We don’t want to end up bankrupt like Greece.”

  The high-dollar fund-raiser—attended by donors including New York Jets owner Woody Johnson and Miami Marlins owner Jeffrey Loria—was one of a trio Romney attended in Southampton that day, which collectively netted $3 million for his campaign.

  “I understand there is a plane out there saying Mitt Romney has ‘a Koch problem,’ ” Romney remarked to attendees of David and Julia’s fund-raiser. “I don’t look at it as a problem; I look at it as an asset.”

  The following month, on August 30, Romney’s asset awaited the candidate’s grand entrance at the Republican National Convention in muggy Tampa. At the back of the Tampa Bay Times Forum, the black curtains parted and Romney emerged, holding a wide smile and wearing a navy suit as impeccable as his trademark gray-flecked coif. The band, competing with the crowd roar, launched into Kid Rock’s “Born Free,” the candidate’s theme song. Romney worked his way slowly down the red-carpeted aisle, soaking up the adulation as he glided past the delegations from Tennessee, Indiana, and Idaho, then crossed the aisle to glad-hand supporters from Utah and Illinois.

  When Romney reached New York’s 95-member delegation, the candidate found David in the crowd and clasped his outstretched hand, on which David wore, as usual, his gold MIT class ring depicting the school’s mascot, the industrious beaver. Romney clapped David on the back with his free hand and continued on toward the dais to formally accept the Republican presidential nomination.

  The convention had attracted to Tampa all the disparate elements of the current
Republican Party, along with the crew of megadonors who would help to make the 2012 presidential race the most expensive in American history. Wheelchair-bound casino mogul Sheldon Adelson (who alone pumped nearly $150 million into the 2012 race) took in the proceedings with Karl Rove from a fourth-floor skybox. Foster Friess ($2.5 million in publicly disclosed contributions, not counting his donations to the Koch network) leaned against a wall on the convention floor, proudly pulling out his cell phone to show a reporter a picture of the fourteen-foot crocodile he’d bagged on a recent hunting expedition in Tanzania.

  But no one was more sought after than David, who had accepted the invitation of the chairman of New York’s Republican Party, Ed Cox, to attend the convention as an alternate delegate. On the convention floor, where David often sat beside Cox, the son-in-law of the late Richard Nixon, delegates and journalists alike excitedly crept up to furtively snap pictures of the industrialist, who did his best to ignore the attention.

  One evening, as Michele Bachmann sashayed up the aisle nearby wearing a flesh-colored knee-length dress, and twenty feet away Wisconsin’s Scott Walker received a rock star’s welcome from the Washington delegation, a pair of fresh-faced convention pages nervously sidled up to David. Getting his attention, the young men asked for career advice. “I’m the evil billionaire Koch brother,” David replied, a grin spreading to his face. “You’re not afraid of me?”

  When roving journalists approached David on the convention floor, one of at least three PR representatives—among them, Nancy Pfotenhauer and Cristyne Nicholas, Rudy Giuliani’s former communications director—intercepted them. Glued to his side throughout the four-day convention, the billionaire’s handlers passed out a three-paragraph statement from David in lieu of interviews. “The 2012 election may be the most important of our lifetimes,” it read in part. “Profoundly different political philosophies are competing for our hearts and minds—and our votes. I have made no secret about which philosophy I support—the one that provides the greatest economic and personal freedom possible.”

  Despite the force field surrounding him, David—considered a loose cannon within Koch’s public affairs division—still managed to generate headlines when he espoused views that veered well to the left of Republican Party orthodoxy during an Americans for Prosperity reception held in his honor. “I believe in gay marriage,” he told a Politico reporter. The Republicans, meanwhile, had just approved a party platform that supported a constitutional amendment banning it. David also confided that he backed reductions in defense spending and believed tax increases might be a necessary component of any deficit reduction strategy. (Congressional Republicans had fought bitterly to keep tax hikes off the table.) The brothers’ political advisors cringed at his comments. It wasn’t the time or place to break ranks with their GOP allies.

  Romney’s 37-minute convention speech drew tepid reviews from pundits and voters alike, but in the moment, with thousands of delegates and spectators on their feet and chanting his name, the convention crowd was electrified. Joined by his large family and his vice presidential running mate, Wisconsin’s Paul Ryan, Romney beamed from the stage as thousands of red, white, and blue balloons floated down from the ceiling, blanketing the convention floor.

  David stood in the aisle, clapping rhythmically and smiling up at the blizzard of confetti that swirled above. He high-fived a fellow delegate and swatted balloons as they rained down. A choir was singing “America the Beautiful” and David sang enthusiastically along with it. Moments later, one of his press handlers led him away through balloons and confetti and discarded MITT! signs. Slowly climbing a stairway out of the arena, he plaintively scanned the dissipating crowd and the clock in the corner of the arena that had been recording the dizzying amount of debt the United States had accrued since the convention started. He turned back, disappearing into the crowd.

  Perhaps they could win this thing.

  A little after 9:00 p.m. on November 6, the networks called Pennsylvania. Then Wisconsin, New Hampshire, and Iowa. As the battleground states fell into Obama’s column, Romney’s path to victory narrowed, then disappeared completely. “Four more years,” the president tweeted at 11:16 p.m., after winning Ohio. On Fox News, Karl Rove refused to accept defeat, claiming that key Republican precincts had yet to report. But at 740 Park Avenue, reality was sinking in.

  Late that evening David’s home phone rang. He was monitoring the election results with disbelief. Obama had dispatched Romney easily. Meanwhile, Democrats had increased their ranks in the House and strengthened their Senate majority. He and his brother Charles had pulled out the stops to usher in a new conservative era, and they had almost nothing to show for their considerable efforts.

  David answered the phone to the gravelly voice of his Deerfield friend John Damgard, who was calling to commiserate.

  David “was pissed,” Damgard recalled. The Republicans had a real opportunity to win the Senate, and heading into the election, it was hard to imagine a more vulnerable incumbent president than Obama, who was saddled with a major unemployment crisis. The stars had seemed aligned for the political transformation the Kochs and their allies had dreamt of. Then bone-headed candidates mired themselves in controversies over abortion and “legitimate rape.” And Romney, playing to the Tea Party mood of the GOP, alienated large swaths of the electorate—women, Hispanics, not to mention the 47 percent of Americans who “believe that they are entitled to health care, to food, to housing, to you name it,” as the candidate inelegantly put it during a surreptitiously recorded fund-raiser. David believed the primary process, with its endless debates, had hobbled Romney from the start. He’d run so far to the Right that he could never course-correct back to the center.

  “We’ve got to do better with primaries,” David said, according to Damgard. “We’ve got to find ways to make sure our candidate is advantaged.” And he complained about the crop of wild-eyed candidates who had derailed the GOP’s chances of taking over Congress. “We’ve got to make sure better candidates surface.”

  David, still reeling from the loss, rang off. “Four more years of this guy,” he groaned.

  All the plotting and planning, the donor conclaves, the piles of money—it hardly seemed worth it. Charles and David had taken a high-profile stand, just as their political Svengali, Richard Fink, advised they should four years earlier. They had accepted the scorn and the death threats and the damage to their family legacy. But in the end they had paid the price without reaping the reward. They hadn’t changed the country; they had only changed the way the country perceived them and their company, and not for the better.

  Charles hated to lose at anything. He even golfed like he was competing in the Masters. (“You think that Michael Jordan is competitive—well, Charles is competitive,” said one of his close friends.) And the political game had much higher stakes.

  “We obviously miscalculated,” the bitterly disappointed CEO confided to friends after the election. “We’ll just have to work harder.” According to his friend Nestor Weigand, Charles didn’t point fingers. “He wasn’t blaming Rich Fink. He wasn’t blaming people. It’s just that they perceived that there would be more people that would want a freer society and less governmental intervention and less people dependent upon the federal government. He thought… that people would see it, and they didn’t.” Charlie Chandler, another Wichita friend of Charles’s and a member of the donor network, said the brothers were self-critical about the loss. “I never heard one word [of], ‘so and so should have done this.’ It was always, ‘We failed. We didn’t get where we wanted to be. End of story.’ ”

  In the wake of Obama’s reelection, though, there were still the donors to answer to—many who viewed politics through the businessman’s lens of ROI (return on investment). The Kochs had pressed their wealthy friends and acquaintances to pony up a staggering amount of money, and they had delivered, pouring hundreds of millions of dollars into the Koch-led political effort. In the lead-up to the election, the level of co
nfidence within the Kochs’ political operation had bordered on euphoric. “They were pretty exuberant,” said a conservative strategist. “They thought they had it.” The Kochs and their overconfident political advisors, another political operative said, made big promises to their donors. “They… basically promised these donors that, ‘if you continue to fund what we’re doing, we will win this election through our efforts, through AFP and others.’ There was quite a bit of overpromising.”

  After the election, some longtime contributors to the Koch network were understandably disappointed. Some blamed the electoral defeat on the quality of the Republican presidential candidate (“When you try and sell crap, you lose, right?” said Minnesota billionaire Stan Hubbard), but others wondered if the Koch brothers’ vaunted political operation had lived up to its reputation, according to fund-raisers and strategists who know the conservative donor world well. “I’ve heard there are people who have pulled back and there are people asking, ‘Where did my money go?’ ” said the conservative strategist. A Republican fund-raiser identified Wyoming investor Foster Friess—a major backer of the Kochs’ 2012 efforts—as one of the donors who’d grown deeply disillusioned with the brothers’ political network. (Friess declined to comment.)

  Charles had pledged to donors that his team would invest their contributions wisely to produce the maximum political dividends, but there was some question about whether their money had been well spent. Americans for Prosperity, a major recipient of donor funds, delivered an underwhelming performance. Its get-out-the-vote efforts fell flat and its political ads were poorly targeted. “In terms of the buying strategy, they were not particularly sophisticated,” recalled Larry Grisolano, the Obama campaign’s ad guru. The Obama team noticed early on that their real competition was Karl Rove’s Crossroads groups, whose well-produced ads closely tracked their own buys. AFP’s Tim Phillips, unveiling a $6.2 million ad campaign two months before the election, made a comment that seemed revealing in retrospect. “It’s difficult to assess the kind of bang for buck, candidly,” he told a reporter. “We just wanted to take a stand.” This was the opposite of the hypertargeted, data-centric strategy employed by the Obama campaign (and Crossroads), which did not use its precious resources for symbolic purposes.