Karl Rove vs. the Koch Brothers

By Kenneth P. Vogel, Politico

10 October 11

arl Rove's team and the Koch brothers' operatives quietly coordinated millions of dollars in political spending in 2010, but that alliance, which has flown largely under the radar, is showing signs of fraying.

And with each network planning to dwarf its 2010 effort, Republicans worry that the emerging rivalry between the two deepest-pocketed camps in the conservative movement could undercut their party's chances of taking the Senate and White House in 2012.

The billionaire industrialist brothers David and Charles Koch plan to steer more than $200 million - potentially much more - to conservative groups ahead of Election Day, POLITICO has learned. That puts their libertarian-leaning network in the same league as the most active of the groups in the more establishment-oriented network conceived last year by veteran GOP operatives Rove and Ed Gillespie, which plans to raise $240 million.

The fault lines revealed themselves this summer, when the camps split on the highest-profile conservative movement issue of the day: The biggest groups in the Rove-Gillespie network supported House Speaker John Boehner's bill to increase the debt ceiling and the Koch brothers' primary political group, Americans for Prosperity, pressured conservatives to oppose it.

They also have spent big on seemingly competing infrastructure. The networks recently launched similar initiatives to woo Hispanic voters. And their allies are spending millions to build dueling voter files to help their respective camps get out the vote. The Republican National Committee recently partnered with associates of Rove and Gillespie on a privately run database, which could give them an advantage over the Koch-backed data project.

"With a broad-based conservative movement - or any political movement - it's obvious that there's often going to be competition, rivalries, egos involved," said Art Pope, a Koch intimate who chairs an arm of Americans for Prosperity and has advocated for the Kochs' voter database, which is called Themis.

"But overall, that competition results in a better work product and better results than a single authoritarian decision that there should be only one product - whether it's a voter database or whatever - that everyone must use," said Pope.

Behind the competition are ideological and stylistic differences that have bred suspicion between some in each camp.

Some Koch allies blame what they contend is the Rove team's win-at-all-costs mentality for the decay of fiscal conservatism under former President George W. Bush. And they roll their eyes at Rove's high media profile. In turn, some in the Bush-Rove axis accuse the Kochs of clinging to free-market zealotry, even if it backfires on Republicans. Others in Rove's orbit believe the Kochs are too focused on control and not enough on coordination.

The two camps put their differences aside in the run-up to last year's midterm elections, which conservatives felt had uniquely high stakes. But it's not clear if that will last, said a Republican strategist familiar with the Koch's 2010 coordination efforts.

"The 2010 political environment made for some very strange bedfellows," said the strategist, who requested anonymity to discuss the notoriously press-shy Kochs. "You've got Rove and those guys who are driven by electing Republicans for Republicans' sake and then you've got the Kochs who have this giant corporate empire and say it's all about the free market."

In the months preceding the 2010 elections, operatives working with groups that received millions of dollars in Koch-linked funding participated in twice-a-month coordinating meetings convened by Rove that drew an array of conservative groups looking to boost Republicans. Koch-backed groups included Americans for Prosperity, Americans for Limited Government and the 60 Plus Association.

They took place in the downtown Washington office suite housing the flagship outfits conceived by Rove and Gillespie - American Crossroads and its sister group Crossroads Grassroots Policy Strategies, plus a linked group called American Action Network.

The Crossroads groups - for which Rove provides advice and fundraising help but technically plays no formal role - initially focused on backing Republicans and attacking Democrats in competitive Senate races.

A strategist who participated in some of the meetings said: "We were tracking about 120 House races, and the Koch organization, 60 Plus, Americans for Prosperity, American Action Network all took some, and Crossroads came in and invested heavily at the end."

"It was very coordinated," the participant said. "There wasn't one race in which there were multiple groups airing ads at the same time."

Sean Noble, a Koch operative who worked with a number of groups, was among the active participants in the meetings, according to sources with knowledge of the meetings. The meetings were supplemented with more frequent conference calls in the weeks before Election Day.

But not everyone in Koch land was keen on the unprecedented coordination, as Americans for Prosperity's President Tim Phillips attended only a couple of the meetings, telling POLITICO he bowed out because he believed they were too partisan for his group.

"We're very much about the issues and not trying to help anybody win the majority or anything like that," Phillips said. "It's just not what we do. There are times when we absolutely go after Republicans who are doing stupid things."

Phillips said it is unlikely that his group will participate in regular meetings to coordinate on 2012 strategy, either. But he added, "We talk, and there are moments where we absolutely work together and cooperate, but it's on a project-by-project basis and on an issue-by-issue basis."

Indeed, last week Phillips's group found itself in concert with American Crossroads, which debuted a $50,000 television advertising campaign assailing President Barack Obama's jobs plan, while Americans for Prosperity kicked off a ground-organizing effort partly focused on attacking the proposal.

Phillips acknowledged his group, which does not endorse candidates, may occasionally work at cross purposes with more overtly GOP-aligned efforts but said: "That doesn't mean that we have a battle going on with any group when that happens. It just means for that period of time, maybe our priorities aren't aligned. And so, would that be a rivalry? No, of course not."

Rove, Gillespie and Noble did not respond to questions about the relationship between their respective networks, but Brian Walsh, president of American Action Network, said the occasional policy differences aren't taken personally.

"Many of the principals who are involved have known each other for years, and even when they disagree on particular issues, there is a professional respect, where one institution fully understands the position of another institution," he said, though he declined to speculate on to what extent the groups would coordinate their 2012 efforts.

There have been some signs suggesting how they might divide up the 2012 labor. For instance, during presentations in late June in Vail, Colo., at the latest installment of the twice-a-year gatherings of major donors sponsored by the Koch brothers' privately owned oil, chemical and consumer products company, Koch operatives signaled they "are going to focus a great deal on the presidential race," according to someone who attended the meeting.

The meeting drew nearly 300 people, who pledged to contribute more than $70 million into a pool that includes the brothers' own money that Koch political advisers distribute at their discretion to political and policy groups featured at their conferences, with more cash typically going to groups with the tightest ties, like Americans for Prosperity.

After their January donor summit in Rancho Mirage, Calif., the brothers were aiming, POLITICO reported, to raise and distribute $88 million from the pool ahead of the 2012 elections, but the attendee said the plans presented in Vail called for a budget exceeding $200 million.

The 2012 plans and budgeting "was presented with great clarity at the meeting in Vail, and I think people were impressed," said the attendee, who characterized the relationship between the Koch groups and the Rove groups as somewhere between rivalry and teamwork.

"It's a little bit of both," said the attendee. "The Kochs feel - and, frankly, rightfully so in some ways - that they have a more sophisticated approach to this stuff, more well developed and better financed."

The brothers, who until recently had kept a relatively low profile and focused their giving on sleepy libertarian policy groups to which they still give, have become more aggressively political in their giving since Obama's election, attracting more donors and money to their summits.

They've also attracted more scrutiny from Democrats, who targeted the Kochs (and Rove, too) as poster children for using secret corporate money to distort the Democratic process and the media. In the wake of a recent Bloomberg Markets Magazine exposé revealing a Koch Industries subsidiary did business with Iran, Democrats tried to turn the brothers' influence against Republicans, criticizing those who have benefited from the Kochs' largesse.

There's no indication the brothers will dial back their political activity as a result, and, in fact, in recent months they have aggressively expanded their political footprint in ways that seem to place them in competition with more establishment GOP-aligned groups.

That's most apparent in dueling efforts to build databases of likely conservative voters for targeting throughout the campaign and on Election Day. Rather than combine forces, the two camps are building separate, multimillion-dollar files.

Earlier this year, operatives from both camps had conversations with the Republican National Committee about accessing its mega database of voter information, which is both a powerful organizing tool and a valuable asset used as collateral to secure bank loans and lines of credit.

"This is about getting a hold of the most valuable asset that the RNC has," said former RNC Chairman Michael Steele, who asserted Rove's allies have for years wanted to "get their hands on this list so bad they can taste it."

In late August, the party signed a contract to outsource its list management to a new group called Data Trust run by Rove allies Anne Hathaway and Mike Duncan - a former RNC chairman who sits on the board of the Crossroads groups.

Supporters of the plan say it will create better targeting data for both the RNC and approved outside groups, and they minimize concerns expressed by some RNC members about losing control of the party's list. Sources say that, even though Data Trust is independent, the RNC's contract with the group, which was written with help from prominent GOP lawyer Ben Ginsberg, gives the party veto power over who can use the list, meaning the party could block anti-establishment tea party groups or others seeking to use it to criticize GOP incumbents, as Americans for Prosperity says it does on occasion.

But, even without control of the RNC list, Koch operatives have privately boasted of the superiority of their Themis database, which was seeded with an initial $2.5 million investment orchestrated by the brothers.

Regardless of which is the better database, Themis is already being deployed by conservative groups, putting it ahead of the pace of Data Trust, which sources say is in its formative stages.

Interestingly, fundraising for Data Trust was assisted by Matt Schlapp, the former head of the Kochs' Washington operation, who - along with Duncan - referred questions about the group to Hathaway, who, like Ginsberg, didn't respond to inquiries.

The two sides have also mounted seemingly competing initiatives to target Latino voters. The Libre Initiative, a recently formed Hispanic-voter targeting effort, was funded by one of the Kochs' foundations, according to a video on its website. Also launching recently was the American Action Network's Hispanic Leadership Network and the Gillespie-led Republican State Leadership Committee's $3 million The Future Majority Project, which is intended to attract more Hispanic candidates to run for office.

Around the time of Future Majority's launch, Koch Industries gave $50,000 to the RSLC, which also got $1.2 million from American Crossroads last year and is run by Gillespie, who sat on an election analysis panel at the January 2010 Koch donor meeting with Noble and AfP director Pope.

Dan Garza, the GOP operative running the Libre Initiative, said he hasn't spoken with the other groups but didn't see them as competitors.

Like it or not, the Republican strategist familiar with the Kochs' 2010 coordination efforts said there is a burgeoning competition between the Kochs and the Rove-Gillespie camp. And the strategist predicted that 2012 electoral prospects - more than divergent styles or visions of conservatism - will determine whether the camps work together or at cross purposes in 2012.

"What they did in 2010 was unique, but they started reverting to their old behavior in 2011," the operative said, predicting "If they think the House, Senate and White House are all in play in 2012, then the stars will align again and they will come back to the table to coordinate again."