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Thursday, December 8, 2016

by Kim Barker and Theodoric Meyer, ProPublica.

Libertarian billionaire brothers Charles and David Koch were among the first to grasp the political potential of social welfare groups and trade associations — nonprofits that can spend money to influence elections but don’t have to name their donors.

The Kochs and their allies have built up a complex network of such organizations, which spent more than $383 million in the run-up to the 2012 election alone.

Documents released in recent months show the Kochs have added wrinkles to their network that even experts well versed in tax law and campaign finance say they’ve never seen before — wrinkles that could make it harder to discern who controls each nonprofit in the web and how it disperses its money.

A review of 2012 tax returns filed by Koch network groups shows that most have been set up as trusts rather than not-for-profit corporations, an unusual step that reduces their public reporting requirements. But that’s only the beginning. Each nonprofit has in turn created limited liability companies or LLCs, through which money can be funneled. Some also have a separate LLC that has the power to replace the nonprofit’s leader.

It sounds complicated and arcane because it is. Some of the nation’s top nonprofit experts said they could only speculate on the reasons for the network’s increasingly elaborate setup.

“My guess is that we’re looking at various forms of disguise — to disguise control, to disguise the flow of funds from one entity to another,” said Gregory Colvin, a tax lawyer and campaign-finance specialist in San Francisco who reviewed all the documents for ProPublica.

Four other leading nonprofit experts and three conservative operatives with knowledge of the Koch network said the most likely reason that the Kochs and their inner circle are using this arrangement was to exert control over the groups without saying publicly who was in charge. In particular, they said, the Kochs likely wanted to prevent any of the groups that they help fund from going against their wishes — as happened with the Cato Institute, the libertarian think tank the Kochs had long supported before they got into a dispute with its president, Ed Crane.

After a top Cato official ridiculed Charles Koch in a 2010 New Yorker article, the brothers pushed to put allies on the think tank’s board. The following year, they pressed Cato to provide “intellectual ammunition” for their oldest politically active nonprofit, Americans for Prosperity, Cato officials later alleged. The dispute was settled in 2012, with the departure of Crane and the installation of a traditional board. (Cato previously was controlled by four private shareholders, including the Kochs, an unusual setup for a nonprofit.)

Robert Levy, Cato’s board chairman, told ProPublica that while he didn’t disagree with the Kochs’ aims, Cato’s leaders were uncomfortable with serving as advocates for their political agenda.

“The Kochs had their notions about what they wanted to focus on, and those tended to focus on intellectual ammunition for what their political ambitions were,” Levy said in an interview last fall. “We didn’t disagree with that, but we didn’t want to operate at the direction of the Kochs. We’re not involved in electoral politics. We are strictly nonpartisan.”

The Kochs have disputed the allegation that they tried to force Cato to do their political bidding.

In this story, we define the Koch network as including 12 nonprofits active in 2012 — 11 social welfare nonprofits and one trade association. These nonprofits all shared the same attributes: They used LLCs, installed Koch allies at the helm and hired the same set of lawyers. (We did not include think tanks, foundations or other charities, nor the like-minded groups that are funded by the Kochs.)

Officials with Koch Industries and groups in the Koch network did not respond to calls or written questions from ProPublica.

When asked about his involvement with Americans for Prosperity in a rare interview with the Wichita Business Journal last month, Charles Koch downplayed his political activity, saying he and his brother did not have day-to-day involvement with the group.

“Listen, if I could do everything that’s attributed to me, I would be a very busy boy,” he told the Journal.

Here’s what we know so far about how the Koch network uses trusts and LLCs, as well as the advantages they may offer.

Disregarded Entities

As of 2012,all 12 Koch network groups had offshoots known as “disregarded entities” — LLCs that are “owned” by their parent nonprofits and are considered part of them for tax purposes.

The first such LLC sprang up in February 2010, when Sean Noble, the head of a Koch network nonprofit called the Center to Protect Patient Rights, formed SDN LLC, using the initials of his own name. (ProPublica wrote a story last month about Noble, the Koch network’s money man in 2010 and 2012.)

Koch network groups came to have a total of 19 disregarded entities, tax records show; Freedom Partners Chamber of Commerce, a trade association that distributed almost $236 million to other nonprofits in the year before the 2012 election, led the way with five.

Unlike corporations, LLCs set up in Delaware are not required to disclose who runs them. The only documentation available is the name of the person who creates them. In the Koch network, 11 of the disregarded entities were formed by the same Chicago trust lawyer, Jonathan Graber. Most had nonsensical strings of letters for names, like SLAH, ORRA or DAS MGR. All were set up in Delaware.

Charities typically use disregarded entities to protect themselves from liability. For instance, they’ll hold property in a disregarded entity to shield the nonprofit from lawsuits over anything from environmental pollution to slip-and-falls.

But these LLCs appear to serve different purposes for the Koch network, experts said.

Before the 2012 election, two groups sat at the top of the Koch money spigot. TC4 Trust, which has since folded, and Freedom Partners, which remains on top of the Koch pyramid, shelled out more than $204 million to the network’s 10 other nonprofits. But instead of giving the money directly to the nonprofits, TC4 and Freedom Partners gave those millions to the groups’ disregarded entities.

That made the money more difficult to follow.

Consider the case of the LLC with the inscrutable name of TOHE. (No, that’s not a typo.) Records for TC4 Trust show that it gave a $1,968,500 grant to TOHE between July 2011 and June 2012.

So what’s a TOHE?

You would think you could go to the Internal Revenue Service website, punch in the magic letters, and get an answer. But that’s not how it works.

Disregarded entities cannot be searched by name because their tax returns are filed as part of their parent nonprofit, which of course is exactly what you don’t know.

To solve the mystery, we searched IRS databases of recognized nonprofits by the names of lawyers known to work for the Koch network. We found one, Vets for Economic Freedom Trust, that seemed like a possible match for TOHE. Then we requested the group’s application from the IRS, which showed a leader, Wayne Gable, who had deep ties to the Koch brothers, earlier serving as a managing director at Koch Industries. But still, the application didn’t mention TOHE.

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Copyright 2014 The National Memo

48 Responses to Who Controls The Kochs’ Political Network? ASMI, SLAH And TOHE

  1. We all know who controls their network, the question is who controls their actions? These two gentlemen are driven by out of control ambition and hatred. Greed and intolerance are the catalysts that influence their psyche and drives their actions. Their activities are not limited to influencing the outcome of elections, their role in the making of the film that caused upheaval throughout the Islamic world two days before the terrorist attack against our consulate in Benghazi deserves investigation. Their influence in the Benghazi area, where they hold considerable assets, should be investigated. Their decision to propose a pipeline to carry highly corrosive Canadian tar sand oil for refining in the USA before exporting it to China, regardless of how harmful it may be to our environment, should be rejected by every single American.

          • “Yea – Right” is a bit limited in it’s informational scope.

            Please, share information with us that is contrary to the thesis of this article, as well as information that Soros is setting up hidden entities to promote his liberal causes, as per Koch’s extravagant efforts to hide from the American public their political agenda.

            I am skeptical that anyone on the planet is leveraging Citizens/United to further their self serving agenda more than the Kochs, and I am certain that no one else is spending as much time hiding their efforts from the citizens of a democracy. This is evidence that the brothers Koch know that the populace would be horrified if they knew what they were up to and who their contributors are. I have a hunch that some very public corporations, dependent on working people to buy their products, only contribute to the Koch’s initiatives because they don’t think they will get caught – which would be to the detriment of their businesses.

          • you are an ideologue who has been programmed. When you try to diss one of the world’s greatest gifts, to mankind, George Soros, you hatred comes across loud and clear.

      • How come you didn’t say, “What about Benghazi?” George Soros is a rich philanthropist who was born in Hungary. He funds many operations to benefit starving children around the world and he funds several medical research foundations. That research might save your life or someone you love’s life someday.. He was born under a communist dictatorship and fights dictators and fights for democracy. Contrary to what you believe, he is not funding any party. He did contribute a lot of money to keep George Bush from being elected the second time. Because he has lived under a dictatorship he can see things we cannot. He has not bought any candidates nor has he produced any. He is not buying up media to shape what people think. He has not started any propaganda groups to feed the masses.

        • I repeat the question is Who control George Sorus. You want to control the Koch brothers, so who gets to control Sorus? Whats good for one is good for another.

          • His name is George Soros not Sorus, if you are going to comment about someone at least spell his name correctly. You are responding to idamag’s comment in which she tells you who George Soros. Did you read it. No one is trying to control the Koch Brothers just making sure they are acknowledged for their generosity.

          • Without a doubt,they put their money into these super packs and other organizations to influence elections and then reap the benefits when their stooges are in office.

          • Noone controls the Koch Brothers. They are the up coming dictatorship that has many propaganda outlets and you end up repeating word-for-word their propaganda. George Soros believes in Democracy because he once lived where there wasn’t any. He has a conscience and doesn’t need to be controlled.

          • sooo, if someone agrees with your thoughts, they are ok, but if they don’t, they should be controlled?

          • If you go back and re-read the article, you will find you missed the point altogether. It asks who controls the koch-political-network-asmi-slah-tohe? Now if you have some data that disagrees with mine, I will be happy to ponder it. That is more than you will ever do. However, opinions and rhetoric are not data. Kapeesh?

      • I suspect George Soros is controlled by George Soros. Nobody forces a billionaire to become a philanthropist, and donate much of his fortune to help others. He does so openly and without shame, as opposed to the Koch brother who hide behind a facade of organizations whose donors are seldom disclosed and whose goal is limited to the advancement of specific business and political goals. Comparing a man who donates money to eradicate poverty, starvation, and disease with a pair a greedy bastards is the epitome of distortion or ignorance.

  2. Both sides have dark money. How about a similar article on George Soros? He’s also supplying dark money to various groups. He’s a trader – has no real business that produces anything. How many people did he destroy when he broke the Bank of England?

    • George Soros is perfectly open about who he supports. So, on the conservative side, is Sheldon Adelson. The Koch brothers try to mask their support through layers of dummy groups.
      As for people being destroyed, how many lives have the Koch brothers destroyed by buying up energy companies to eliminate them as rivals then cutting all the jobs? I do believe you will find significantly greater damage on the Koch side of things than by a bunch of bankers whose greed got the better of them.

  3. The Left like to cry about money & influence by the Koch brothers but never show any consistency by complaining about the Billions George Soros gives to many, many Liberal organizations, politicians & policies. You can’t have it both ways. MSNBC has been proven to be 85% opinion, 15% fact, and they never have opposing views as Fox News does “every day”. Fox has just the opposite, 85% fact, 15% opinion, so who do you believe has more credibility?
    Fox always has the back & forth from well established Liberal views on their program.

    • Considering that at just about every “news” article Fox covers can be disproven even by other branches of News Corp, their credibility is somewhat lacking.
      Fox hosts also regularly cut off Liberal commentators once they start disproving Fox claims by offering facts.
      However, at least we liberals are capable of writing coherent comments on sites like this that do not need to be read two or more times to figure out the syntax and identify all the typos and grammatical errors rife in most comments from Right Wingers.

      • FOX has regular liberal commentators on every day. If they just wanted to report just one side like MSNBC does, then we would see no liberals on FOX. The networks of NBC, CBS, ABC did not have one word on the outcome of the special election in Florida the day after the election on their 6:30 news programs, even though they all reported on it before the votes were in. You had a typical liberal response though. You have no facts or proof, so you start calling names or pointing out thinks like typing errors. Typing or grammatical errors mean absolutely nothing about the topic.

        • “Fair and balanced” to Fox means that they present the conservative side, as opposed to their opinion that all other networks are liberal. Their motto is a joke and everything that comes out of Fox is per Roger Ailes’ agenda. He wants America to be white and conservative and the wealthy to be in charge. Obama—he of the funny name and African background—represents the changing face of America, and he is determined to stop that. The Fox News network is mostly propaganda and the rest is bullshit.
          Read “The Loudest Voice in the Room.”

          • Two regular commentators on FOX are Juan Williams and Allen Combs. These two people are not exactly conservatives.

          • The only show on MSNBC given a 3 hour time segment is given to a conservative. There are many conservative contributors who appear regularly on MSNBC. The former head of the Republican Party is a paid contributor on MSNBC. Moreover, when they appear on MSNBC, they are given time and grace to express their views without being molested or loudly interrupted as Fox treats its Liberal contributors.

        • So you have no facts or proof, and make blanket statements like “typical liberal,” and insult those who comment or write here. What do you expect besides the same in return. If you think two “liberal” commentators in a sea of lies and fantasy-based opinions makes Fox a credible news source, then you deserve whatever names you get applied to your intelligence and honesty (or lack thereof).

          • I can remember when news was just that – news. No comments or dissecting it looking for something to start a scandal rumor about. Then people were allowed to think for themselves.

        • Faux pits “liberal” commentators who actually possess a degree of good manners against bullies like O’Really? who do not. When they get close to making a point they are shouted down or cut off. Their “liberals” are only straw men and whipping boys who never get a chance to make a persuasive case, and when they do cite a FACT that the right wing bullies find inconvenient, the right wing lie is repeated louder, which of course makes it the “truth.”

      • Just wonder whose deciding what the ‘facts’ are in your opinion. Some left wing stations avoid anyone who disagrees with them so they have no need to cut them off. They can continue to brainwash people by attacking the ‘rich’ the ‘corporations’ and the koch’s. Makes it easier to brainwash!

        • What have you got to complain about? You obviously decide what your “facts” are based on your political bias.

          • And on other posts during the campaigning, cannister cook’s bigotry came through loud and clear.

    • Soros is very open about the causes he supports. The Kochs, as the article notes, not so much.

      I am a parent. When my kids try to hide what they are doing, I figure they are up to no good. When they are open about what they are doing, I trust them.

      Thus I don’t trust the Kochs, who aren’t proud enough of their beliefs to allow them to see the light of day.

    • If a Republican was caught with kiddie porn, you would excuse him. If the koch brothers try to control the media and start several propaganda organizations, that is okay. If a wealthy man contributes to democracy, The constant yammering about the same things shows cult programming.

    • What is your source for these two 85% and 15% “facts” that you allude to. As in a math test you have to show your proof not just make unfounded statements.

    • Since you are a cumma sum laude graduate, from Harvard, I am sure you are going to list those organizations and their purpose, along with the amounts given and to whom given.

    • Since none of them deserved approval under the law, only under a deliberate GOP misinterpretation, what does it matter?

  4. If our “representatives” in Congress hadn’t set up all these absurd dodges with a lot of help from a GOP stooge in the Eisenhower administration, we wouldn’t have to worry about them.

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