Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (29 page)

“Fink is a mover,” said a libertarian activist who knew him well. “And sometimes you have to move people if you’re a mover.”

Fink is Charles’s gatekeeper, one of few people within the Koch empire who unfailingly have his ear. He created lasting enmity among the many people—most of them ideological allies—he tangled with on his path to power. His detractors describe him in Rasputinesque terms: sharp-elbowed, ruthless, backstabbing. One of his critics is George Mason University economics professor Charles Rowley, who said he has “fought an increasingly lonely battle against Charles Koch’s growing influence over the Economics Department and the Mercatus Center at George Mason
University since the late 1990s,” including efforts to meddle with hiring decisions at the school. Rowley called Fink “a third-rate political hack” and “a man who is very appropriately named.”

Fink made enemies as he did battle on the Koch brothers’ behalf, but he also produced results. His three-decade partnership with Charles changed the face of American politics—and it changed the public image of Koch Industries from a little-known energy conglomerate into a quasi-political corporate entity.

“Charles is a passionate free-market guy,” noted a former Koch executive. “Rich Fink is his soulmate on all of this. The arrival of Rich Fink changed a lot of stuff. They didn’t face the public sector threat. They weren’t involved in change-the-world stuff then.”

In the early 1980s, Charles asked Fink to study a handful of libertarian outfits he supported with a view toward recalibrating his strategy to bring about a free-market revolution. The plan they hatched culminated some 30 years later in the creation of a powerful political fiefdom within the broader Republican firmament that threatened the GOP establishment itself. Their strategy helped lay the intellectual and organizational groundwork for the Tea Party and other Obama antagonists.

Charles and Fink put into motion a Friedrich Hayek–inspired plan they called a “Structure of Social Change”—a three-tiered model in which the production, packaging, and marketing of ideas was akin to the manufacturing of Lycra. Their plan for bringing about a free-market epoch and Koch Industries’ business model—gathering raw materials and refining them into more valuable products consumers desire—were basically one and the same. As Fink once explained, in clinical fashion:

To facilitate the production of these raw materials, Charles pumped millions of dollars into hundreds of universities around the country. These contributions—which totaled nearly $31 million between 2007 and 2011 alone—have gone to endow professorships, underwrite free-market economics programs, and sponsor conferences and lecture series for libertarian thinkers. (Charles was not a passive investor: When his foundation provided $1.5 million to hire a pair of economics professors at Florida State University, his representatives insisted on a contract with the school giving them veto power over job candidates.)

Step two of the process, Fink explained, entailed taking the intellectual output of these academic programs, ideas “often unintelligible to the layperson and seemingly unrelated to real-world problems,” and refining them into a “useable form.”

This was the domain of the Cato Institute, Mercatus, and the dozens of other free-market, antiregulatory policy shops that Charles, David, and their foundations have supported over the years. Organizations like these churned out reports, position papers, and op-eds arguing for the privatization of Social Security; fingering public employee unions for causing state budget crises; attempting to debunk climate science; and making the case for slashing the welfare system and Medicaid.

Charles and Fink also concentrated on grooming an intellectual class of research scholars, journalists, and others to articulate these policies to the masses. One of the vehicles for this was the Institute for Humane Studies, the incubator of libertarian thought that economist Baldy Harper founded in the 1960s. The institute offers a range of educational opportunities for budding libertarian thinkers at the graduate and undergraduate level, holding summer seminars and awarding generous scholarships, grants, and fellowships to the next generation of Charles Kochs. Charles’s foundation provided another avenue for cultivating young ideological allies, offering an internship program that places students at an assortment of right-leaning public policy organizations.

The third piece of the master plan was mobilizing citizen-activists—or at least creating the illusion of a grassroots groundswell. These activists would agitate for the same policies the academics had conceptualized and the think tanks had refined into talking points and policy prescriptions.

As David once explained, “What we needed was a sales force that participated in political campaigns or town hall meetings, in rallies, to communicate to the public at large much of the information that these think tanks were creating.”

In 1985, Fink and the Koch brothers formed Citizens for a Sound Economy. The group was inspired in part by the tactics of the Left, especially those of crusading consumer advocate Ralph Nader, who commanded a formidable activist army. Citizens for a
Sound Economy concentrated on doing, one former board member chuckled, “what Ralph Nader would do if he had any sense.” It was in essence the bizarro-world version of Nader’s Public Citizen. Where Nader fought to expand regulation, Citizens for a Sound Economy worked to eviscerate it. And where Nader battled corporate power, Citizens for a Sound Economy concentrated on harnessing it.

The group, fueled by donations from the Koch brothers, their company, and a variety of corporate backers, quickly developed political cachet within the Beltway. The Reagan administration appointed Fink to its Commission on Privatization, and he won a spot on the Federal Reserve’s Consumer Advisory Council. Citizens for a Sound Economy’s friends on Capitol Hill grew to include influential Republican congressmen John Boehner of Ohio and Dick Armey of Texas, the House majority leader, and it attracted high-profile conservatives to its board, such as Reagan administration budget director James Miller III and C. Boyden Gray, George H. W. Bush’s White House counsel.

Its core mission consisted of promoting lower taxes and less government, for which it solicited large contributions from corporations with a direct financial interest in promoting or thwarting particular agendas. The issues Citizens for a Sound Economy advocated for or against, while consistent with its overarching philosophy, often appeared heavily influenced by its benefactors. Microsoft donated $380,000—Citizens for a Sound Economy lobbied Congress to cut the Justice Department’s antitrust enforcement budget. Three sugar companies chipped in $700,000—the group mounted a campaign against an Army Corps of Engineers reclamation plan that would have encroached on cane-growing acreage in Florida’s Everglades. The phone company US West ponied up $1 million; Citizens for a Sound Economy unleashed a telecommunications deregulation initiative.

One of the group’s biggest backers was the tobacco industry.
Citizens for a Sound Economy repeatedly aligned with tobacco makers to repel tax increases on cigarettes and eradicate the longstanding federal tobacco program, which limited the amount of tobacco that could be sold and imposed price controls.

A consultant who worked with the group in the 1990s recalled once accompanying Citizens for a Sound Economy’s leaders on a fund-raising expedition to the New York City headquarters of Philip Morris. There, executives from both groups plotted an antitax campaign orchestrated to appear like a grassroots uprising. “The concept was to find other like-minded potential donors, who would sign on to this front group concept, whether it was at the local level, or the state level, or the national level,” the consultant explained. “In this particular case, what this discussion was about, was that CSE funding… would be co-mingled with Philip Morris funds, with the purpose of setting up these handful of front groups that would fight against excise taxes, or retail taxes.… It was a very straight, bottom-line corporate interest.” It was a corporate antitax effort packaged to appear as the will of the people.

“I’d never seen anything like it in the American political system,” the consultant marveled, “and I thought I’d seen everything.”

Not long after, Citizens for a Sound Economy and Philip Morris joined forces again to battle the Clinton administration’s health care reform initiative. In 1994, as Hillary Clinton launched a national bus tour to promote the effort, Citizens for a Sound Economy rented a bus of its own. It was broken down and dilapidated; the group towed it from town to town as it shadowed the First Lady’s route. When she arrived at a tour stop, waiting for her was Citizens for a Sound Economy’s decrepit bus, “
THIS IS CLINTON CARE
” spray-painted on its side.

Citizens for a Sound Economy’s activists came to the health care fight riding high from one of their most successful legislative coups: shooting down the Clinton administration’s proposed
BTU tax. Clinton unveiled the measure during his first State of the Union address as part of a five-year deficit-cutting budget plan. He proposed taxing fuels based on their heat content, giving a leg up to sustainable energy sources such as wind and solar power.

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.