The political network spearheaded by conservative billionaires Charles and David Koch has expanded into a far-reaching operation of unrivaled complexity, built around a maze of groups that cloaks its donors, according to an analysis of new tax returns and other documents.
The filings show that the network of politically active nonprofit groups backed by the Kochs and fellow donors in the 2012 elections financially outpaced other independent groups on the right and, on its own, matched the long-established national coalition of labor unions that serves as one of the biggest sources of support for Democrats.
The resources and the breadth of the organization make it singular in American politics: an operation conducted outside the campaign finance system, employing an array of groups aimed at stopping what its financiers view as government overreach. Members of the coalition target different constituencies but together have mounted attacks on the new health-care law, federal spending and environmental regulations.
Key players in the Koch-backed network have already begun engaging in the 2014 midterm elections, hiring new staff members to expand operations and strafing House and Senate Democrats with hard-hitting ads over their support for the Affordable Care Act.
Its funders remain largely unknown; the coalition was carefully constructed with extensive legal barriers to shield its donors.
But they have substantial firepower. Together, the 17 conservative groups that made up the network raised at least $407 million during the 2012 campaign, according to the analysis of tax returns by The Washington Post and the Center for Responsive Politics, a nonpartisan group that tracks money in politics.
A labyrinth of tax-exempt groups and limited-liability companies helps mask the sources of the money, much of which went to voter mobilization and television ads attacking President Obama and congressional Democrats, according to tax filings and campaign finance reports.
The coalition’s revenue surpassed that of the Crossroads organizations, a super PAC and nonprofit group co-founded by GOP strategist Karl Rove that together brought in$325 million in the last cycle.
The left has its own financial muscle, of course; unions plowed roughly $400 million into national, state and local elections in 2012. A network of wealthy liberal donors organized by the group Democracy Alliance mustered about $100 million for progressive groups and super PACs in the last election cycle, according to a source familiar with the totals.
The donor network organized by the Kochs — along with funding an array of longtime pro-
Republican groups such as the U.S. Chamber of Commerce, the National Rifle Association and Americans for Tax Reform — distributed money to a coalition of groups that share the brothers’ libertarian, free-market perspective. Each group was charged with a specialized task such as youth outreach, Latino engagement or data crunching.
Freedom Partners and TC4 Trust moved a large share of their funds through an intermediary group, the Phoenix-based Center to Protect Patient Rights, which served as a major cash turnstile for groups on the right during the past two election cycles. It is run by political operative Sean Noble, who served as a Koch consultant in 2012.
Rather than finance CPPR directly, Freedom Partners and TC4 Trust transferred $129 million to limited-liability companies with changing names that are registered in Delaware, a state that requires corporations to disclose little about their operations: Eleventh Edition (which was renamed Corner Table and then Cactus Wren) and American Commitment (which was SDN, then became Meridian Edition).
Their relationship to CPPR was unknown until May, when the Arizona group acknowledged in amended tax filings that the LLCs were its affiliates.
Such LLCs are known as “disregarded entities,” which means that, for IRS purposes, they do not exist. Their revenue is reported on the balance sheets of their parent organizations.
Tax experts said disregarded entities are typically used by nonprofits to, for example, hold a piece of real estate to shield an organization from liability.
But they also can be used to make it harder to trace the movement of funds between groups. In its final tax return, TC4 reported doling out nearly $28 million to 10 organizations with names such as POFN LLC, PRDIST LLC and TRGN LLC. Those are the affiliates of the groups Public Notice, Americans for Prosperity and Generation Opportunity, in that order.
The Post and the Center for Responsive Politics identified the groups that make up the Koch-backed network through an analysis of tax filings, which revealed their shared DNA. Most have affiliated LLCs and received a substantial share of their revenue from the feeder funds.
The makeup of the coalition was corroborated by people familiar with the structure who said the network is ad hoc and will not necessarily remain constant.
A key player is Americans for Prosperity, the Virginia-based advocacy organization that finances activities across the country and ran an early and relentless television ad assault against Obama during the 2012 campaign. More than $44 million of the $140 million the organization raised in that election cycle came from Koch-linked feeder funds.
Other groups in the network included the American Future Fund, a Des Moines-based nonprofit that poured more than $25 million into ads against Obama and congressional Democrats in 2012; Concerned Women for America, a conservative Christian women’s activist group that ran a get-out-the-vote effort aimed at young women; the Libre Initiative Trust, a Texas-based group aimed at Latinos; Generation Opportunity, which seeks to engage millennials; and Themis Trust, which houses the data used by the allied groups.
The network also distributed funds to other independent political players. In the last election, Freedom Partners and CPPR doled out millions of dollars to a wide assortment of groups on the right, including the U.S. Chamber of Commerce ($3 million), the NRA ($6.6 million), the National Federation of Independent Business ($2.5 million) and Heritage Action for America ($500,000).
Obama’s reelection prompted internal reassessments in the network, as it did among many conservative groups that had worked to defeat him in 2012. But there are no signs that the coalition plans to retreat.
Rather, officials are focused on creating a more effective operation aimed at bolstering the conservative movement for the long term. Freedom Partners, which now has nearly 50 employees, is expected to bring many functions in-house and expand beyond grantmaking, according to people familiar with the plans. Groups such as CPPR are expected to play a smaller role going forward.