DARK MONEY
by Jane Mayer
THE AMWAY CONNECTION
SUPREME COURT'S WRONG DECISION
On January 21, 2010, the Court announced its 5-4 decision in the Citizens United case, overturning a century of restrictions banning corporations and unions from spending all they wanted to elect candidates. The Court held that so long as businesses and unions didn't just hand their money to the candidates, which could be corrupt, but instead gave it to outside groups that were supporting or opposing the candidates and were technically independent of the campaigns, they could spend unlimited amounts to promote whatever candidates they chose. To reach the verdict, the Court accepted the argument that corporations had the same rights to free speech as citizens.
The ruling paved the way for a related decision by an appeals court in a case called SpeechNow, which soon after overturned limits on how much money individuals could give to outside groups too. Previously, contributions to political action committees, or PACs, had been capped at $5,000 per person per year. But now the court found that there could be no donation limits so long as there was no coordination with the candidates' campaigns. Soon, the groups set up to take the unlimited contributions were dubbed super PACs for their augmented new powers.
In both cases, the courts embraced the argument that independent spending, as opposed to direct contributions to the candidates, wouldn't result in corruption.
From the start, critics like Richard Posner, a brilliant and iconoclastic conservative federal judge, declared the Court had reasoned "naively," pointing out that it was "difficult to see what practical difference there is between super PAC donations and direct campaign donations, from a corruption standpoint."
The immediate impact, as the New Yorker writer Jeffrey Toobin summarized it, was that "it gave rich people more or less free rein to spend as much as they want in support of their favored candidates."
Among the few remaining restraints that the majority of the Court endorsed was the long-standing expectation that any spending in a political campaign should be visible to the public. Justice Anthony Kennedy, who wrote the majority opinion, predicted that "with the advent of the Internet, prompt disclosure of expenditures" would be easier than ever. This, he suggested, would prevent corruption because "citizens can see whether elected officials are 'in the pocket' of so-called moneyed interests."
The assumption soon proved wrong. Instead, as critics had warned, more and more of the money flooding into elections was spent by secretive nonprofit organizations that claimed the right to conceal their donors' identities. Rich activists such as Scaife and the Kochs had already paved the way to weaponize philanthropy. Now they and other allied donors gave what came to be called dark money to nonprofit "social welfare" groups that claimed the right to spend on elections without disclosing their donors. As a result, the American political system became awash in unlimited, untraceable cash.
In striking down the existing campaign-finance laws, the courts eviscerated a century of reform. After a series of campaign scandals involving secret donations from the newly rich industrial barons in the late nineteenth and early twentieth centuries, Progressives had passed laws limiting spending in order to protect the democratic process from corruption.
The laws were meant to safeguard political equality at a time of growing economic inequality. Reformers had seen the concentration of wealth in the hands of oil, steel, finance, and railroad magnates as threatening the democratic equilibrium. The Republican William McKinley's elections in 1896 and 1900, for instance, were infamously lubricated by donations raised by the political organizer Mark Hanna from big corporations like Rockefeller's Standard Oil. In a growing backlash to the corruption, at President Theodore Roosevelt's behest, Congress passed the Tillman Act in 1907, which banned corporate contributions to federal candidates and political committees. Later scandals resulted in further restrictions limiting spending by unions and the size of individual contributions, and requiring public disclosure. By overturning many of these restrictions, the Citizens United decision was in many respects a return to the Gilded Age.
Justice John Paul Stevens, a moderate Republican when first appointed but long part of the court's liberal wing, described the decision as "a radical departure from what has been settled First Amendment law." In a lengthy dissent, he argued that the Constitution's framers had enshrined the right of free speech for "individual Americans, not corporations," and that to act otherwise was "a rejection of the common sense of the American people who have recognized the need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt." Memorably, Stevens added, "While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics."
Most analyses attributed the about-face on these vital rules guaranteeing fair elections to the increasingly assertive conservatism of Chief Justice John Roberts's Court. Clearly, this was the decisive factor. But there was a backstory, too.
ENTER DeVos and AMWAY
For almost four decades, a tiny coterie of ultrarich activists who wished to influence American politics by spending more than the laws would allow had been chafing at the legal restraints. One family had been particularly tireless in the struggle, the DeVbs clan of Michigan. The family, whose members became stalwarts in the Kochs' donor network, had made a multibillion-dollar fortune from a remarkable American business success, the Amway direct-marketing empire. Founded in 1959 by two boyhood friends, Richard DeVos Sr. and Jay Van Andel, in Ada, Michigan, a suburb of Grand Rapids, it sold household products door-to-door while preaching the gospel of wealth with cultlike fervor? Over time, the private company grew into a marketing behemoth, generating revenues of nearly $11 billion a year by 2011.
The DeVbses were devout members of the Dutch Reformed Church, a renegade branch of Calvinism brought to America by Dutch immigrants, many of whom settled around Lake Michigan. By the 1970s, the church had become a vibrant and, some would say, vitriolic center of the Christian Right. Members crusaded against abortion, homosexuality, feminism, and modern science that conflicted with their teachings.
(EVIL AND CORRUPTION OFTEN HAS GOOD POINTS) - Keith Hunt
Extreme free-market economic theories rejecting government intervention and venerating hard work and success in the Calvinist tradition were also embraced by many followers.
Within this community of extreme views, no family was more extreme or more active than the DeVoses. They were less well-known outside Michigan than some of the other founding families of the conservative movement, but few played a bigger role as its bankrollers. Among the many causes they supported was the Koch donor network. Although their views on social issues were considerably more reactionary than those of the Kochs, they ardently shared the brothers' antipathy toward regulations and taxes.
Amway in fact was structured to avoid federal taxes.
DeVos and Van Andel achieved this by defining the door-to-door salesmen who sold their beauty, cleaning, and dietary products as "independent business owners" rather than employees. This enabled the company's owners to skip Social Security contributions and other employee benefits, greatly enhancing their bottom line. It resulted, however, in numerous legal skirmishes with the Internal Revenue Service and the Federal Trade Commission (FTC). In a charge that was later dropped, the government alleged that the company was little more than a pyramid scheme built upon misleading promises of riches to prospective distributors, many of whom bought its products in bulk, found themselves unable to sell them, and so were forced to cover their debts by recruiting additional distributors.
The gray zone in which the company operated made its cultivation of political influence important. In 1975, after Grand Rapids's Republican congressman Gerald R. Ford became president, the usefulness of political clout became particularly apparent. While the Federal Trade Commission investigation was ongoing, DeVos and Van Andel obtained a lengthy meeting with Ford in the Oval Office. Two of Ford's top aides, soon after, became investors in a new venture founded by DeVos and Van Andel. After news of their involvement surfaced, the White House aides dropped out, but Amway later hired one of them as a Washington lobbyist. Meanwhile, perhaps coincidentally, the FTC investigation into whether Amway was an illegal pyramid scheme fizzled, resulting only in the company having its knuckles rapped for misleading advertising about how much its distributors could earn.
The company's political activism was so unusually intense that one FTC attorney at the time told Forbes, "They're not a business, but some sort of quasi-religious sociopolitical organization." Indeed as Kim Phillips-Fein writes in Invisible Hands, "Amway was much more than a simple direct-marketing firm. It was an organization devoted with missionary zeal to the very idea of free enterprise."
There were legal limits, however, to how much the DeVoses could spend on elections. In 1974, after the Watergate scandal, Congress set new contribution limits and established the public financing of presidential campaigns. Opponents struggled to find ways around the new rules. In 1976, they partly succeeded when the Supreme Court, judging a case brought by a Republican Senate candidate, William F. Buckley Jr.'s brother James, struck down limits on "independent expenditures." This opened what became an ever-expanding opportunity for big donors.
In 1980, Richard DeVos and Jay Van Andel led the way in "independent expenditures," becoming the top spenders on behalf of Ronald Reagan's presidential candidacy. By 1981, their titles reflected their growing clout. Richard DeVos was the finance chair of the Republican National Committee (RNC), while Jay Van Andel headed the U.S. Chamber of Commerce. In Washington, the pair cut a swath, hosting lavish parties on the Amway yacht, which was docked on the Potomac River, attended by Republican big shots and dignitaries from the dozen countries in which Amway operated. DeVos, the son of a poor Dutch immigrant, appeared as if dressed by a Hollywood costume department, flashing a pinkie ring and driving a Rolls-Royce.
The flood of money from Amway's founders failed, though, to quash an investigation by the Canadian government into a tax-fraud scheme in which both DeVos and Van Andel were criminally charged in 1982. The scandal exploded when Kitty McKinsey and Paul Magnusson, then reporters for the Detroit Free Press, shocked readers accustomed to DeVos and Van Andel's professions of patriotism and religiosity with an expose tracing an elaborate, thirteen-year-long tax scam directly to the bosses' offices. At its highest levels, they revealed, Amway had secretly authorized a scheme creating dummy invoices to deceive Canadian customs officials into accepting falsely low valuations on products the company imported into Canada. Amway had thus fraudulently lowered its tax bills by $26.4 million from 1965 until 1978.
Amway denounced the news reports and threatened to file a $500 million libel suit against the Free Press. But the next year, the company released a terse statement announcing that it had pleaded guilty to defrauding the Canadian government and would pay a $20 million fine. In exchange, the plea agreement called for criminal charges to be dropped against four of the company's top executives, including DeVos and Van Andel. In 1989, Amway paid an additional $38 million to settle a related civil suit.
DeVos was soon dethroned as the RNC's finance chair. His standing hadn't been helped by his reference to the brutal 1982 economic recession as a welcome "cleansing process" or by his insistence that he'd never seen an unemployed person who wanted to work. Top donors were also put off by his attempts to transform RNC meetings into patriotic pep rallies akin to those run for Amway salesmen. DeVos would call wealthy contributors to the stage and ask, "Why are you proud to be an American?" A longtime Republican activist told The Washington Post, "We were losing contributions and that was the last straw."
The DeVos family nonetheless remained huge financiers of the Republican Party and the growing conservative movement, as well as sponsoring efforts to undo campaign-finance laws.
Starting in 1970, they began to direct at least $200 million into virtually every branch of the New Right's infrastructure, from think tanks like the Heritage Foundation to academic organizations such as the Intercollegiate Studies Institute, which funded conservative publications on college campuses. "There's not a Republican president or presidential candidate in the last fifty years who hasn't known the DeVoses," Saul Anuzis, a former chairman of the Michigan Republican Party, said.
The DeVoses were also deeply involved in the secretive Council for National Policy, described by The New York Times as "a little-known club of a few hundred of the most powerful conservatives in the country," which it said "met behind closed doors in undisclosed locations for a confidential conference" three times a year. Membership lists were secret, but among the names tied to the organization were Jerry Falwell, Phyllis Schlafly, Pat Robertson, and Wayne LaPierre of the National Rifle Association (NRA). There was overlap with a number of other participants in the Koch seminars, too, including Foster Friess, the multimillionaire founder of a Wyoming mutual fund, Friess Associates, who had collaborated politically with the Kochs at least since the 1996 election, when they both channeled money into Triad Management to surreptitiously fund attack ads. Charles Koch accepted an award from the Council for National Policy but was not a member of the group. It was, in Richard DeVos's phrase, a place that brought together "the doers with the donors."
If anything, the DeVbs family's brushes with the law merely emboldened them.
During the 1994 midterm elections, Amway gave $2.5 million to the Republican Party, which was the largest known soft money donation from a corporation in the country's history. In 1996, clean-government groups criticized the family for skirting campaign contribution limits by also donating $1.3 million to the San Diego tourist bureau to help air the Republican National Convention there that year.
AMWAY GOES TO THE SON
By then, Richard DeVos Sr. had bought the NBAs Orlando Magic and had passed the management of Amway on to his son Richard junior, who was known as Dick. The younger DeVos shared his fathers political and religious views. But he was a pragmatist when it came to business, expanding the zealously free-market company deeply into China. By 2006, fully a third of Amway's revenue came from the Communist state.
MARRIAGE
The DeVos family's stature and wealth were magnified by Dick's marriage to the other royal family of Michigan's Dutch Reformed community, Betsy Prince. Her father, Edgar Prince, had founded an auto parts manufacturing company that sold for $1.35 billion in cash in 1996. Her brother Erik Prince, meanwhile, founded the global security firm Blackwater, which the reporter Jeremy Scahill described as "the world's most powerful mercenary army."
Betsy DeVos, who eventually became the chairwoman of Michigan's Republican Party, was said to be every bit as politically ambitious as her husband, if not more so.
POLITICALLY
With her support, in 2002 Dick DeVos ceased managing Amway in order to devote more time to his political career. The results, though, were dismal. The DeVos family spent over $2 million in 2000 on a Michigan school voucher referendum that was defeated by 68 percent of the voters. The family then spent $35 million in 2006 on Dick DeVos's unsuccessful bid to become the state's governor.
In their zeal to implement their conservative vision, few issues were more central to the DeVos family's mission than eradicating restraints on political spending. For years, the family funded legal challenges to various campaign-finance laws. Ground zero in this fight was the James Madison Center for Free Speech, of which Betsy DeVos became a founding board member in 1997. The nonprofit organization's sole goal was to end all legal restrictions on money in politics. Its honorary chairman was Senator Mitch McConnell, a savvy and prodigious fund-raiser.
ENTER McCONNELL
Conservatives cast their opposition to campaign-finance restrictions as a principled defense of free speech, but McConnell, who was one of the cause's biggest champions, had occasionally revealed a more partisan motive. As a Republican running for office in Kentucky in the 1970s, when it was almost solidly Democratic, he once admitted "a spending edge is the only thing that gives a Republican a chance to compete." He had once opened a college class by writing on the blackboard the three ingredients that he felt were necessary to build a political party: "Money, money, money." In a Senate debate on proposed campaign-finance restrictions, McConnell reportedly told colleagues, "If we stop this thing, we can control the institution for the next twenty years."
The James Madison Center aimed to make this dream a reality by taking the fight to the courts. In addition to the DeVos family, early donors included several of the most powerful groups on the right, such as the Christian Coalition and the NRA. But the driving force behind the organization was a single-minded lawyer from Terre Haute, Indiana, James Bopp Jr., who was general counsel to the anti-abortion National Right to Life Committee. Bopp also became the Madison Centers general counsel.
In fact, Bopps law firm and the James Madison Center had the same office address and phone number, and although Bopp listed himself as an outside contractor to the center, virtually every dollar from donors went to his firm. By designating itself a nonprofit charitable group, though, the Madison Center enabled the DeVos Family Foundation and other supporters to take tax deductions for subsidizing long-shot lawsuits that might never have been attempted otherwise. "The relationship between this organization and Bopp's law firm is such that there really is no charity," observed Marcus Owens, a Washington lawyer who formerly oversaw tax-exempt groups for the Internal Revenue Service. "I've never heard of this sort of captive charity/foundation funding of a particular law firm before."
In 1997, the same year that she helped found the Madison Center, Betsy DeVbs explained her opposition to campaign-finance restrictions.
At the time, there was a national outcry against the way both the Democratic and the Republican Parties had evaded contribution limits in the 1996 presidential campaign by paying for what they claimed were "issue" ads rather than campaign ads, with unlimited funds that came to be known as soft money.
There was a bipartisan Senate push for reform. But in a guest column in the Capitol Hill newspaper Roll Call, DeVos defended the unlimited contributions.
OPENLY CONCEDING
"Soft money," she wrote, was just "hard-earned American dollars that Big Brother has yet to find a way to control. That is all it is, nothing more." She added, "I know a little something about soft money, as my family is the largest single contributor of soft money to the national Republican Party." She said, "I have decided, however, to stop taking offense at the suggestion that we are buying influence. Now I simply concede the point. They are right. We do expect some things in return. We expect to foster a conservative governing philosophy consisting of limited government and respect for traditional American virtues. We expect a return on our investment; we expect a good and honest government. Furthermore, we expect the Republican Party to use the money to promote these policies, and yes, to win elections. People like us," she concluded archly, "must surely be stopped."
Most of the big donors fighting the campaign-finance restrictions were conservatives, but a few extraordinarily rich liberal Democrats belonged to this rarefied club, too.
In 2004, Democratic-aligned outside groups spent $185 million—more than twice what the Republican outside groups spent—in a failed effort to defeat George W. Bush's reelection.
Of this, $85 million came from just fourteen Democratic donors. Leading the pack was the New York hedge fund magnate George Soros, an opponent of the U.S. invasion of Iraq who regarded President Bush as such a scourge that he vowed he would spend his entire $7 billion fortune to defeat him, if the result could be guaranteed. With the help of Democratic operatives, Soros funneled more than $27 million into the outside spending vehicle of choice that year, known as 527 groups. It was the same year that Republicans used the same mechanism to fund the "Swift Boat" attacks on John Kerry.
Prior to Citizens United, such schemes were legally dubious at best. The Federal Election Commission ruled that the gargantuan outside spending schemes violated campaign-finance laws and imposed hefty fines on both the Democratic and the Republican perpetrators.
Afterward, Soros remained active in ideological philanthropy, spending hundreds of millions to support a network of human rights and civil liberties groups, but he largely withdrew from spectacular campaign contributions.
If the DeVoses expected a "return on our investment" in the Madison Center, as Betsy had put it, they got one in the Supreme Court's Citizens United decision. It "was really Jim [Boppj's brainchild," Richard L. Hasen, an expert on election law at Loyola Law School in Los Angeles told The New York Times. "He has manufactured these cases to present certain questions to the Supreme Court in a certain order and achieve a certain result," said Hasen. "He is a litigation machine."
Bopp agreed. "We had a 10-year plan to take all this down," he told the Times. "And if we do it right, I think we can pretty well dismantle the entire regulatory regime that is called campaign finance law."
Such a statement would have seemed ludicrous just a few years earlier, and in fact, in the beginning, no one took Bopp seriously. With his shaggy gray Beatles haircut and his dogmatic legal style, not to mention his extreme views, he was literally laughed at by one federal judge. At the time, he was arguing that a hyperbolic film attacking Hillary Clinton, who was running for president, deserved the same First Amendment protection as newscasts aired by CBS's 60 Minutes. The film, a screed called Hillary: The Movie, had been produced by Citizens United, an old right-wing group with a history of making vicious campaign ads. The question, as the Supreme Court interpreted it, was whether Hillary: The Movie was a protected form of speech or a corporate political donation by its backers, which could be regulated as a campaign donation.
Case by case, financed by wealthy donors who treated the cause as a tax-deductible charity, Bopp had battered away at the foundation of modern campaign-finance law. He had succeeded in part by using the liberals' language of civil rights and free speech against their own practices. The tactic was intentional.
Clint Bolick, a pioneer in the conservative legal movement whose group, the Institute for Justice, had received start-up funds from Charles Koch, had argued that the Right needed to combat the Left by asserting appealing "counter-rights" of its own. Thus Citizens United was cast as the right of corporations to exercise their free speech. As conservatives had hoped, the argument disarmed and divided the Left, even attracting the support of traditionally liberal champions of the First Amendment.
While polls consistently showed that large majorities of the American public—both Republicans and Democrats—favored strict spending limits, the key challenges that led to dismantling the laws were initiated by an extraordinarily rich minority: the Kochs and their clique of ultra-wealthy conservative activists.
ENTER AGAIN KOCH!!!
A close look at the SpeechNow case, for instance, the lower-court decision following quickly on the heels of Citizens United, leads right back to the same people. There was no organization called SpeechNow until several libertarian activists invented it solely for the purpose of challenging the spending limits. The suit was the brainchild of Eric O'Keefe, among others, the Wisconsin investor who had been a libertarian ally of the Kochs since working in Davids 1980 vice presidential campaign, which called for the end of campaign spending limits.
Leading the suit was Bradley Smith, a bright and radically antiregulatory lawyer who co-founded the conservative Center for Competitive Politics. He was a proponent of zero public disclosure of political spending and didn't disclose his funders, but IRS records showed that in 2009 his center enjoyed support from several conservative foundations, including the Bradley Foundation. Smith's career illustrated the way that the fortunes of conservative philanthropists cultivated and nurtured talent like his. He had been a scholar at Charles Koch's Institute for Humane Studies before becoming the most outspoken foe of finance restrictions ever to chair the Federal Election Commission, the federal agency charged with policing campaign spending. His patrons for this key post were Mitch McConnell and the Cato Institute. As he acknowledged, "I would not have been an FEC commissioner if not for Cato's efforts to promote me on the Hill."
Also essential to the SpeechNow suit was the Institute for Justice, the group founded with Charles Koch's seed money. The litigation, meanwhile, was underwritten heavily by Fred Young, a libertarian retiree in Wisconsin who made tens of millions of dollars by selling his father's firm, Young Radiator Company, after outsourcing the jobs of unionized workers to non-union states. Young served on the boards of the Koch-backed Reason Foundation and Cato Institute and was yet another regular attendee at the Kochs' donor summits.
In 2010, Young took full advantage of the newfound freedom to spend. He contributed 80 percent of the money spent that year by SpeechNow.org's super PAC, all of which paid for television ads targeting Wisconsin's Democratic senator Russ Feingold. Feingold was a particularly symbolic target. He had been the Senate's premier supporter of strict campaign spending laws. Standing on principle, he urged outside groups not to spend on his behalf. That fall, he went down to defeat.
In the view of defenders, Citizens United and its progeny did not represent the black-and-white contrast of progressives' nightmares so much as it clarified gray areas. But this alone was extremely important.
By flashing a bright green light, the Supreme Court sent a message to the wealthy and their political operatives that when it came to raising and spending money, they now could act with impunity. Both the legal fog and the political stigma lifted.
Soon, the sums pledged at the Koch donor summits began to soar from the $13 million that Sean Noble raised in June 2009 to nearly $900 million at a single fund-raising session in the years that followed. "This Supreme Court decision essentially gave a 'Good Housekeeping seal of approval'" acknowledged Steven Law, president of American Crossroads, the conservative super PAC formed by the Republican political operative Karl Rove soon after the Citizens United decision.
Critics, though, including Obama, saw the change as far more consequential. In his 2010 State of the Union address, Obama made headlines by denouncing the Court's decision, saying that it "reversed a century of law that I believe will open the floodgates for special interests—including foreign corporations—to spend without limit in our elections."
In response, the associate Supreme Court justice Samuel Alito Jr., who attended the address, was seen shaking his head and mouthing the words "not true."
Another consequence was that the Citizens United decision shifted the balance of power from parties built on broad consensus to individuals who were wealthy and zealous enough to spend millions of dollars from their own funds. By definition, this empowered a tiny, atypical minority of the population.
"It unshackled the big money," David Axelrod contends. "Citizens United unleashed constant negativity, not just toward the president, but toward government generally. Presidents before have been under siege, but now there is no longer the presumption that they are acting in the public interest. There's a pernicious drumbeat." After the ruling, he said, "we felt under siege."
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BIG MONEY IN POLITICS AND WHAT IT CAN BUY SHOULD MAKE EVERY CITIZEN FROZEN WITH AGAST WHILE THEIR BLOOD BOILS. THEN WHEN YOU LOOK AT NEARLY A WHOLE YEAR OF POLITICKING BEFORE THE ELECTION FOR A USA PRESIDENT ….. IT IS UNREAL AT THE DEPTH OF UGLINESS THE RUN TO THE FINISHING LINE HAS BECOME.
READING THIS BOOK AND SEEING THE ANTICS ON TV NEWS ETC. I SHAKE MY HEAD IN SORROWFUL DISGUST AT IT ALL.
Keith Hunt