New Koch Brothers Group Revamps Billionaires' Dark Money Operation
The sprawling conservative network backed by the
billionaire brothers Charles and David Koch is being
overhauled, with some key Koch operatives moving to a
fledgling "dark money" group that is poised to become a
chief financing vehicle for the mega donors' political and
ideological projects, The Huffington Post has learned.
The new organization, called the Association for American
Innovation, is expected to ultimately funnel millions of
dollars to other dark money groups nationwide. It's being
staffed with Koch stalwarts, including Marc Short, who
currently oversees other Koch-funded projects, according to
a few GOP operatives familiar with the overhaul.
In a twist, the association has been established under
Internal Revenue Service rules as a 501(c)(6) business
league, setting it apart from many of the dark money groups
into which the Kochs and allied donors have in recent years
poured hundreds of millions. Adding a business league,
which will have members, to the Koch-backed conservative
orbit could boost corporate funding, while still allowing
some political spending and letting donors remain
anonymous, tax lawyers say.
By contrast, Americans for Prosperity, which was founded by
the Koch brothers and spent close to $140 million last year
on electoral and advocacy drives with little to show for
it, has two arms: It is a 501(c)(4) social welfare group --
which can engage in some political activity and keep its
donors secret -- and a 501(c)(3) charity.
The staffing-up at the business association comes at a
sensitive moment as several older 501(c)(4) groups face
increasing scrutiny from government regulators and private
watchdogs about their political activities. In California,
officials are probing alleged money laundering that might
violate state election disclosure laws by a few groups,
including one run by Sean Noble, a prominent Koch operative
"501(c)(4) groups are getting a lot of heat these days, but
(c)(6)s are like mom-and-apple-pie organizations," said Ken
Gross, a political law expert at the law firm Skadden,
Arps, Slate, Meagher & Flom. The U.S. Chamber of
Commerce and many other business groups in Washington have
The roles now being carved out for the Association for
American Innovation, which will promote Koch-favored free
market solutions in the states, were sparked in part by
last year's bitter electoral losses. In the 2012 cycle, the
two Koch brothers and other wealthy donors poured hundreds
of millions into electoral and related advocacy efforts by
dark money groups -- from TV ads to grassroots drives -- in
a failed effort to defeat President Barack Obama and help
the GOP take the Senate.
Now the new group is looking to enhance donor interest by
rebranding Koch-backed projects and to improve controls
over their funding, according to GOP operatives familiar
with the plan. It also may help Koch-backed efforts fly
under the radar better and lower the Koch brothers' public
profiles after last year's intense media coverage.
"The outside political efforts last year by
Republican-leaning groups are widely regarded as a
failure," said one GOP operative. "Trotting out the same
old groups and strategies will not be received well by
donors. That's why you see major rebranding efforts."
The GOP operatives who spoke to HuffPost requested
anonymity because they were not authorized to discuss the
inner workings and funding of Koch political projects,
which are often shrouded in secrecy.
Koch Industries spokesman Rob Tappan did not respond to
requests for comment.
Starting on Sunday in Palm Springs, Calif., Charles Koch is
hosting a two-day strategy and fundraising conference for
hundreds of wealthy conservative donors and corporate
executives. Pitches to financially help the new association
and other Koch-backed outfits will be made, say the GOP
operatives. (The event is one of two that the Kochs hold
each winter and summer, but this year the winter event was
postponed until this weekend to finish a post-election
Other topics on the agenda include the need to improve the
recruitment of "principled candidates to run for office"
and to "more effectively communicate" with key demographic
groups such as Hispanics, women and youth, according to an
email invitation sent to donors by Kevin Gentry, who
coordinates Koch conference fundraising.
More broadly, Gentry's missive -- first disclosed by Mother
Jones magazine -- promised that conference attendees will
have an opportunity to "join the most strategic
market-oriented minds in the business world to advance a
plan to defend our free enterprise system." To attract
donors and pry open checkbooks, the conference will feature
some big-name GOP governors, members of Congress and
The shakeup and shifts in the Koch-backed political network
have been underway for months. The realignment is designed
to better position conservatives to take on Democrats and
some GOP moderates in the next elections and to enhance the
credibility of the Kochs' free market messages.
Perhaps to boost those prospects and advance their small
government agenda with the media, the Koch brothers are
reportedly weighing a bid for the Chicago Tribune, the Los
Angeles Times and several other papers.
The Association for American Innovation was set up and
approved by the IRS last year, according to public
documents, with help from veteran Koch operative Wayne
Gable, who since the 1980s has held top posts with the
brothers' conservative outfits. Gable was once a senior
lobbyist with Koch Industries, the energy conglomerate
that's enriched each brother to the tune of over $30
billion, according to Forbes.
For now at least, the association is being spearheaded by
Kansas-based Alan Cobb, who previously spent several years
leading the state operations for Americans for Prosperity
and is expected to focus heavily on state free market
programs to reduce the size of government, as Politico
first reported. Cobb also did a stint lobbying for Koch
It's another sign of the importance of the new effort that
Short, who has overseen political spending for the Kochs in
Washington, is moving to the association, according to the
GOP operatives. They say that Gentry, the Koch donor
network's lead fundraiser, may also be shifted there.
More broadly, the launch of the innovation group mirrors
past attempts by the Koch brothers to start new outfits to
attract more funding and increase their influence --
efforts that also often involved shifting around veteran
Why the Kochs opted to set up the Association for American
Innovation as a business league isn't entirely clear, but
there's no doubt that the scrutiny of 501(c)(4) social
welfare groups intensified during the last election.
Watchdog groups have sharply criticized several (c)(4)s for
their hefty political spending, charging that some have
violated IRS rules mandating that (c)(4)s cannot have
politics as their primary purpose. The Senate Permanent
Subcommittee on Investigations will hold hearings this
spring to examine IRS oversight of (c)(4) groups.
"It's possible that the Kochs think there's less audit
exposure with a (c)(6)," said Marc Owens, who used to run
the tax exempt division at the IRS and is now a partner at
the law firm Caplin & Drysdale. Owens added that there
could be risks with the business association: "It's not
clear to me what line of business is furthered by an
innovation group. That could make it difficult to establish
entitlement to (c)(6) status with the IRS."
Some other experts echo Owens. "A dues or annual payment to
a business association isn't likely to raise questions,"
said Ken Gross of Skadden. "But if the business league
isn't actively promoting a line of commerce and is acting
more like an ideological group, the payments may come under
Nonetheless, the benefits of launching the association as a
501(c)(6) may outweigh other risks given the intensifying
probe by California's Fair Political Practices Commission
and the state's attorney general. Working closely together,
they have issued more than a dozen subpoenas to groups and
individuals in order to find the true source of $11 million
that was funneled through three dark money groups --
including the Center to Protect Patient Rights run by Koch
operative Sean Noble -- to influence two ballot initiatives
last fall. Under California law, donors to ballot
initiative campaigns have to be publicly disclosed.
In the last two federal elections, Noble's group also
funneled more than $60 million to some two dozen
conservative groups, such as Americans for Tax Reform, the
American Future Fund and Americans for Job Security, to buy
television ads to help GOP candidates. Noble is expected to
play a significantly smaller role in the Koch network going
forward, say GOP operatives.
In Palm Springs on April 28 and 29, donors will receive
briefings from various Koch operatives on the brothers'
months-long post-election review of what went wrong and
hear pitches for new Koch-backed ventures like the
Association for American Innovation and for others. In the
last few years, the Koch donor network has stepped up its
financial backing for a few Hispanic and women's groups
that take conservative stances on lower taxes and less
regulation, efforts that should increase given the GOP's
poor 2012 results with these constituencies. Among those
groups receiving money from the Koch donor network, GOP
operatives say, are Concerned Women for America and the
Libre Initiative, which was launched by Dan Garza, a former
White House aide under President George W. Bush.
The retooling of the Kochs' political machine and perhaps
the innovation association were presaged late last year. In
post-election comments to Forbes, both Koch brothers voiced
clear disappointment with the election results but showed
no signs of slowing down their giving.
"We're going to study what worked, what didn't work and
improve our efforts in the future," David Koch vowed.
"We're not going to roll over and play dead."
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