Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right

Front Cover
Doubleday, 2016 - Billionaires - 449 pages
Why is America living in an age of profound economic inequality? Why, despite the desperate need to address climate change, have even modest environmental efforts been defeated again and again? Why have protections for employees been decimated? Why do hedge-fund billionaires pay a far lower tax rate than middle-class workers?
The conventional answer is that a popular uprising against "big government" led to the ascendancy of a broad-based conservative movement. But as Jane Mayer shows in this powerful, meticulously reported history, a network of exceedingly wealthy people with extreme libertarian views bankrolled a systematic, step-by-step plan to fundamentally alter the American political system.
The network has brought together some of the richest people on the planet. Their core beliefs--that taxes are a form of tyranny; that government oversight of business is an assault on freedom--are sincerely held. But these beliefs also advance their personal and corporate interests: Many of their companies have run afoul of federal pollution, worker safety, securities, and tax laws.
The chief figures in the network are Charles and David Koch, whose father made his fortune in part by building oil refineries in Stalin's Russia and Hitler's Germany. The patriarch later was a founding member of the John Birch Society, whose politics were so radical it believed Dwight Eisenhower was a communist. The brothers were schooled in a political philosophy that asserted the only role of government is to provide security and to enforce property rights.
When libertarian ideas proved decidedly unpopular with voters, the Koch brothers and their allies chose another path. If they pooled their vast resources, they could fund an interlocking array of organizations that could work in tandem to influence and ultimately control academic institutions, think tanks, the courts, statehouses, Congress, and, they hoped, the presidency. Richard Mellon Scaife, the mercurial heir to banking and oil fortunes, had the brilliant insight that most of their political activities could be written off as tax-deductible "philanthropy."
These organizations were given innocuous names such as Americans for Prosperity. Funding sources were hidden whenever possible. This process reached its apotheosis with the allegedly populist Tea Party movement, abetted mightily by the Citizens United decision--a case conceived of by legal advocates funded by the network.
The political operatives the network employs are disciplined, smart, and at times ruthless. Mayer documents instances in which people affiliated with these groups hired private detectives to impugn whistle-blowers, journalists, and even government investigators. And their efforts have been remarkably successful. Libertarian views on taxes and regulation, once far outside the mainstream and still rejected by most Americans, are ascendant in the majority of state governments, the Supreme Court, and Congress. Meaningful environmental, labor, finance, and tax reforms have been stymied.
Jane Mayer spent five years conducting hundreds of interviews-including with several sources within the network-and scoured public records, private papers, and court proceedings in reporting this book. In a taut and utterly convincing narrative, she traces the byzantine trail of the billions of dollars spent by the network and provides vivid portraits of the colorful figures behind the new American oligarchy.
Dark Money is a book that must be read by anyone who cares about the future of American democracy.

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User Review  - larryerick - LibraryThing

Jane Mayer is a remarkably thorough and articulate investigative journalist. Her works provide background, breadth, insight, and very often important nuance to her subjects. This book, ostensibly ... Read full review

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User Review  - Carlie - LibraryThing

The current political industrial complex is funded by big business in secretive ways that run counter to what our democracy was founded on. How this came to be took much less time than might be ... Read full review

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About the author (2016)


Radicals: A Koch Family History

Oddly enough, the fiercely libertarian Koch family owed part of its fortune to two of history''s most infamous dictators, Joseph Stalin and Adolf Hitler. The family patriarch, Fred Chase Koch, founder of the family oil business, developed lucrative business relationships with both of their regimes in the 1930s.

According to family lore, Fred Koch was the son of a Dutch printer and publisher who settled in the small town of Quanah, Texas, just south of the Oklahoma border, where he owned a weekly newspaper and print shop. Quanah, which was named for the last American Comanche chief, Quanah Parker, still retained its frontier aura when Fred was born there in 1900. Bright and eager to get out from under his overbearing old-world father, Fred once ran away to live with the Comanches as a boy. Later, he crossed the country for college, transferring from Rice in Texas to attend the Massachusetts Institute of Technology. There, he earned a degree in chemical engineering and joined the boxing team. Early photographs show him as a tall, formally dressed young man with glasses, a tuft of unruly curls, and a self-confident, defiant expression.

In 1927, Fred, who was an inveterate tinkerer, invented an improved process for extracting gasoline from crude oil. But as he would later tell his sons bitterly and often, America''s major oil companies regarded him as a business threat and shut him out of the industry, suing him and his customers in 1929 for patent infringement. Koch regarded the monopolistic patents invoked by the major oil companies as anticompetitive and unfair. The fight appears to be an early version of the Kochs'' later opposition to "corporate cronyism" in which they contend that the government and big business collaborate unfairly. In Fred Koch''s eye, he was an outsider fighting a corrupt system.

Koch fought back in the courts for more than fifteen years, finally winning a $1.5 million settlement. He correctly suspected that his opponents bribed at least one presiding judge, an incompetent lush who left the case in the hands of a crooked clerk. "The fact that the judge was bribed completely altered their view of justice," one longtime family employee suggests. "They believe justice can be bought, and the rules are for chumps." Meanwhile, crippled by lawsuits in America during this period, Koch took his innovative refining method abroad.

He had already helped build a refinery in Great Britain after World War I with Charles de Ganahl, a mentor. At the time, the Russians supplied England with fuel, which led to the Russians seeking his expertise as they set up their own oil refineries after the Bolshevik Revolution.

At first, according to family lore, Koch tore up the telegram from the Soviet Union asking for his help. He said he didn''t want to work for Communists and didn''t trust them to pay him. But after securing an agreement to get paid in advance, he overcame his philosophical reservations. In 1930, his company, then called Winkler-Koch, began training Russian engineers and helping Stalin''s regime set up fifteen modern oil refineries under the first of Stalin''s five-year plans. The program was a success, forming the backbone of the future Russian petroleum industry. The oil trade brought crucial hard currency into the Soviet Union, enabling it to modernize other industries. Koch was reportedly paid $500,000, a princely sum during America''s Great Depression. But by 1932, facing growing domestic demand, Soviet officials decided it would be more advantageous to copy the technology and build future refineries themselves. Fred Koch continued to provide technical assistance to the Soviets as they constructed one hundred plants, according to one report, but the advisory work was less profitable.

What happened next has been excised from the official corporate history of Koch Industries. After mentioning the company''s work in the Soviet Union, the bulk of which ended in 1932, the corporate history skips ahead to 1940, when it says Fred Koch decided to found a new company, Wood River Oil & Refining. Charles Koch is equally vague in his book The Science of Success. He notes only that his father''s company "enjoyed its first real financial success during the early years of the Great Depression" by "building plants abroad, especially in the Soviet Union."

A controversial chapter is missing. After leaving the U.S.S.R., Fred Koch turned to Adolf Hitler''s Third Reich. Hitler became chancellor in 1933, and soon after, his government oversaw and funded massive industrial expansion, including the buildup of Germany''s capacity to manufacture fuel for its growing military ambitions. During the 1930s, Fred Koch traveled frequently to Germany on oil business. Archival records document that in 1934 Winkler-Koch Engineering of Wichita, Kansas, as Fred''s firm was then known, provided the engineering plans and began overseeing the construction of a massive oil refinery owned by a company on the Elbe River in Hamburg.

The refinery was a highly unusual venture for Koch to get involved with at that moment in Germany. Its top executive was a notorious American Nazi sympathizer named William Rhodes Davis whose extensive business dealings with Hitler would eventually end in accusations by a federal prosecutor that he was an "agent of influence" for the Nazi regime. In 1933, Davis proposed the purchase and conversion of an existing German oil storage facility in Hamburg, owned by a company called Europäische Tanklager A.G., or Eurotank, into a massive refinery. At the time, Hitler''s military aims, and his need for more fuel, were already well-known. Davis''s plan was to ship crude petroleum to Germany, refine it, and then sell it to the German military. The president of the American bank with which Davis dealt refused to have anything to do with the deal, because it was seen as supporting the Nazi military buildup, but others extended the credit. After lining up the American financing, Davis needed the Third Reich''s backing. To gain it, he first had to convince German industrialists of his support for Hitler. In his effort to ingratiate himself, Davis opened an early meeting with Hermann Schmitz, the chairman of I.G. Farben--the powerful and well-connected chemical company that soon after produced the lethal gas for the concentration camps'' death chambers--by saluting him with a Nazi "Heil Hitler." When these efforts didn''t produce the green light he sought, Davis sent messages directly to Hitler, eventually securing a meeting in which the führer walked in and ordered his henchmen to approve the deal. On Hitler''s orders, the Third Reich''s economic ministers supported Davis''s construction of the refinery. In his biography of Davis, Dale Harrington draws on eyewitness accounts to describe Hitler as declaring to his skeptical henchmen, "Gentlemen, I have reviewed Mr. Davis''s proposition and it sounds feasible, and I want the bank to finance it." Harrington writes that during the next few years Davis met at least half a dozen more times with Hitler and on one occasion asked him to personally autograph a copy of Mein Kampf for his wife. According to Harrington, by the end of 1933 Davis was "deeply committed to Nazism" and exhibited a noticeable "dislike for Jews."

In 1934, Davis turned to Fred Koch''s company, Winkler-Koch, for help in executing his German business plan. Under Fred Koch''s direction, the refinery was finished by 1935. With the capacity to process a thousand tons of crude oil a day, the third-largest refinery in the Third Reich was created by the collaboration between Davis and Koch. Significantly, it was also one of the few refineries in Germany, according to Harrington, that could "produce the high-octane gasoline needed to fuel fighter planes. Naturally," he writes, "Eurotank would do most of its business with the German military." Thus, he concludes, the American venture became "a key component of the Nazi war machine."

Historians expert in German industrial history concur. The development of the German fuel industry "was hugely, hugely important" to Hitler''s military ambitions, according to the Northwestern University professor Peter Hayes. "Hitler set out to create ''autarchy,'' or economic self-sufficiency," he explained. "Gottfried Feder, the German official in charge of the program, reasoned that even though Germany would have to import crude oil, it would be able to save foreign exchange by refining the products itself."

In the run-up to the war, Davis profited richly from the arrangement, engaging in elaborate scams to keep the crude oil imports flowing into Germany despite Britain''s blockade. When World War II began, the high-octane fuel was used in bombing raids by German pilots. Like Davis, the Koch family benefited from the venture. Raymond Stokes, director of the Centre for Business History at the University of Glasgow in Scotland and co-author of a history of the German oil industry during the Nazi years, Faktor Öl (The oil factor), which documents the company''s role, says, "Winkler-Koch benefited directly from this project, which was designed to help enable the fuel policy of the Third Reich."

Fred Koch often traveled to Germany during these years, and according to family lore he was supposed to have been on the fatal May 1937 transatlantic flight of the Hindenburg, but at the last minute he got delayed. In late 1938, as World War II approached and Hitler''s aims were unmistakable, he wrote admiringly about fascism in Germany, and elsewhere, drawing an invidious comparison with America under Franklin Roosevelt''s New Deal. "Although nobody agrees with me, I am of the opinion that the only sound countries in the world are Germany, Italy, and Japan, simply because th

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