Inside the Dems’ Dark Money Machine

Koch brothers
Photo by Patrick McMullan via Getty Images
Theodore Schleifer
November 30, 2021

One of the more piquant aspects of my career has been watching the people I cover today learn from the people I covered years ago. It can sometimes feel like you’re seeing a new cast perform an original play with a novel spin on the script, like Mark Zuckerberg reinventing himself as a philanthropist in the mold of Bill Gates, or today’s tech leaders lobbying Washington in the mold of John Doerr. Over the last few weeks, however, I’ve felt some deja vu over a more bipartisan phenomenon, studying with amazement how the mega-donors of the left have perfected the playbook authored by their rivals on the right.

Before moving to Silicon Valley, I spent a few years in Houston and Washington reporting on the machinations of conservative mega-donors, like the billionaires Sheldon Adelson, Bob Mercer and, of course, Charles and David Koch. I’d attend their donor confabs—getting tossed by security for sneaking around the halls at Adelson’s Venetian, schmoozing the establishment set over drinks at Mitt Romney’s ideas summits at a Park City chalet, or hunting for leaks at the Kochs’ annual “seminar” at the idyllic Broadmoor in Colorado Springs. The power of these G.O.P. fundraising networks resided in their sophisticated mastery of the tax code, and their gumption in exploiting it. At the center of the Kochs’ influence machine, after all, was their spider web of almost entirely tax-exempt nonprofits—most expressly political, others as nominally do-goodery as a Rotary Club—that allowed donors to shield their identities while funneling billions of dollars over the decades into everything from promoting tax cuts to downplaying climate change.

Meanwhile, Democrats were wrestling with purity politics that today seem almost quaint. During the 2012 presidential election, the first after the Citizens United decision ushered in a new era of mega-donordom, Barack Obama’s team hemmed and hawed over whether to embrace Priorities USA, the super PAC that eventually buried Romney in millions of negative ads. Liberals consoled themselves with the notion that they could not “unilaterally disarm.” Four years later, the debate over big-money politics had largely receded: John Podesta’s hacked correspondence is a fascinating window into just how savvily Hillary Clinton played that game. By the time that 2020 rolled around, Democrats had mastered the new terrain that the right had excavated, injecting their outside groups with steroids even as they bemoaned the coarseness of the Swift Boat era.

All that has been obvious for some time. But I was nevertheless rendered slack-jawed over the past few weeks as new tax returns were published, revealing the incredible growth of Democratic dark-money networks, which took in hundreds of millions—possibly billions—of dollars during the 2020 campaign. We have known for a few years now that Democrats had been shedding any remaining inhibition toward using whatever means necessary to win the election du jour. But thanks to these new filings, we now have a sense of the true scale of the fundraising colossus that the left has built, at least equaling the conservative efforts that inspired them in the first place. How much undisclosed cash courses through our elections is hard to say precisely, but the end result is that we are headed toward a race to the bottom, where more and more money moves in the underworld.

First, a few notes on terminology, since political combatants have somewhat intentionally clouded the skies. A super PAC is a group that can take in checks of unlimited size and do whatever they want with them, but they must disclose the identity of its donors. A political-nonprofit group is an advocacy organization that can only spend up to half of its money on political campaigning—enfeebling its electoral muscle—but does not have to disclose its donors. Those last groups are sometimes pejoratively called “dark-money” organizations, but let’s be honest: Thanks to the successful demonization of the Kochs by antagonists like Harry Reid, that term is much more often used to describe conservative organizations than liberal ones. In reality, the term applies, or should apply, to any group usually organized as a 501(c)4 that engages in politics, whether it’s the Koch network or the ACLU. Finally, there are charities, which are 501(c)3 groups such as your neighborhood church or soup kitchen that are often surprisingly as part of big-money politics as your neighborhood super PAC.

Neither party will admit it, but the line between philanthropy and politics has, frankly, been completely obliterated over the last few years. What counts as “philanthropy” versus “politics” depends on your political tribe: I can tell you that the Koch network views their campaigns to deregulate the economy as philanthropy that helps the poor, although liberals won’t believe it. Similarly, conservatives won’t believe that registering likely Democratic voters in Wisconsin, Pennsylvania and Arizona is “philanthropy.” Many liberals see that as plainly pro-democracy, and given the racial inequities in voter turnout, as anti-racist. Conservatives see these well-tailored charitable gifts—such as the half-a-billion dollars that Zuckerberg and Priscilla Chan donated for elections administration last year—as driven by a sinister agenda, or at least as a bank-shot progressive power play. You’d have an equally difficult time convincing Democrats that the Kochs’ lobbying against the E.P.A. is done for the benefit of the rural poor.

If there was a silver lining to Citizens United, it’s that most insiders now will admit, in candid moments, they’re in on the joke. Cynicism abounds. Technically, there should be an easy way to distinguish between philanthropy and politics: According to the tax code, a donation to a 501(c)3 organization is tax-deductible because it is philanthropy, while a donation to a 501(c)4 group, a super PAC or a campaign is not tax-deductible because it counts as politics. And technically, there should be a way to distinguish between policy advocacy—the purpose of dark-money 501(c)4 organizations—and explicit elect-him or oust-her electioneering, which is the provenance of super PACs and campaigns. But the territory has become decidedly murky, as the new filings from outside groups reveal.

The left has refined a tool first exploited by the right in which donors make contributions to dark-money groups, which in turn make contributions from their balance sheets to super PACs. That clever workaround allows donors to avoid the disclosure that would be required if they donated to the super PAC directly. For instance, consider Future Forward USA, a new super PAC run by a well-regarded, low-profile operative named Chauncey McLean, with help from newfound strategist celebrities like David Shor. The group was wildly popular in the 2020 cycle with Silicon Valley billionaires like Dustin Moskovitz, who put at least $47 million into the super PAC to finance a last-minute barrage of anti-Trump television ads. 

But I say at least because the biggest donor to Future Forward USA was actually its own 501(c)4 nonprofit group, which doesn’t disclose its donors. Similarly, consider the progressive powerhouse Sixteen Thirty Fund, another 501(c)4 that raises major money from 501(c)3s organized by Arabella Advisors, a philanthropy consulting firm that is popular with liberal donors. The Sixteen Thirty Fund raised a staggering $390 million last year, nearly three times what it raised in each of the prior two years. The group then sent $164 million to liberal super PACs like Future Forward in the 2020 campaign to whack Trump, with no donor disclosure required.

Sometimes the play is to toe the line between philanthropy and politics. The inconspicuously named Voter Participation Center, a 501(c)3, and its allied dark-money brother, the Center for Voter Information, were favorites of Silicon Valley donors and collected $85 million and $49 million respectively in 2020—far more than the $14 million and $6 million they raised in 2016. C.E.O. Tom Lopach stresses that “increasing civic engagement is not a partisan endeavor.” Both groups are nonprofits, but they are led by longtime Democratic operatives like Lopach, funded by Democratic Party donors, and work to turn out voters who are likely Democrats. Are these philanthropies?

None of these tactics are illegal. But one consequence of the aforementioned loopholes and exploits is that ever more of the money that shapes civic life is retreating into the shadows. This trend began in philanthropy over the last decade, as billionaires moved their charitable work from tax-filing foundations into donor-advised funds and LLCs that don’t share anything with the I.R.S. And now what has eaten philanthropy has eaten campaign finance, too. The upshot is that the public disclosures that are filed with the government have never meant less. Reading the tax documents that private foundations must file, or the F.E.C. reports that campaigns and super PACs must declare, reveals an awfully incomplete snapshot of big-money philanthropy and big-money politics. The real innovation, and the real money, increasingly flows in the unaccountable backwaters of America’s political swamp.

I’m not Pollyannaish about the way campaigns work. Elections have profound consequences, and donors on both sides deeply believe that they are waging a righteous cause. When pressed, I often hear from donors some version of “the ends justify the means.” Maybe they do. But donors would be wise to grapple with the second-order consequences of this retreat into the shadows: It fuels suspicion that a wealthy cabal is secretly anointing presidents, not unlike Logan Roy in the recent plot of Succession. I’ve noticed that even last week’s donation from Jeff Bezos to the foundation of Barack Obama is already the subject of some early conspiracy theories in right-wing media. And while I personally thought the specific allegations surrounding Zuckerberg’s donations for election administration were unfounded, those claims, like other conspiracy theories, are based on a kernel of truth: Why is the liberal Facebook founder allowed to use his philanthropy to help run American elections? 

There is a vigorous debate unfolding right now about the power of the ultra-wealthy. More visibility into their civic contributions—whether it’s the money they put into a donor-advised fund, or into their political philanthropy, or hell, into Peter Thiel’s Roth I.R.A.—could help to defuse some of the more hair-brained conspiracy theorists. Big donors could still act like swaggering moneymen, but at least it would be more-or-less disclosed. Instead, the trend in our politics is pointing in the precise opposite direction.

The dark-money operations of the Republican Party continue to hum along just fine. While the Kochs are no longer as political as they once were, other conservative power centers like the Donors Trust or the N.R.A. continue to play the same game. But to not both-sides this, what is unique to the left is the incongruence between Democrats’ growing dark-money power and their public rhetoric from politicians like Sheldon Whitehouse about the perniciousness of money in elections. A decade after Citizens United, the left has embraced the same tactics and created the same type of dark-money machine. Democratic big-money groups counter that they, and not their peers on the right, are pushing for campaign-finance reforms to effectively put themselves out of business. Until then, they say, they still cannot unilaterally disarm, letting Trump and his acolytes run roughshod over all the causes they cherish. Fair enough. But in the meantime, Democrats have to own the fact that it is their rich donors—not just the bogeymen that they have cast as villains on the right—that are at the fore of the philanthropic-political dark arts.