Karl Rove and the Modern Money Machine

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Politico

The nation was in crisis, and it was shaping up to be the best thing that had happened to Karl Rove all year. On October 2, 2013, President Barack Obama and congressional leaders were meeting at the White House into the evening, desperately trying to come to a deal to end the government shutdown, then in its second full day. A mile up Pennsylvania Avenue, a grinning Rove was plying his guests with premium liquor at the Georgetown Four Seasons. It was no surprise that Rove’s mood was said to be buoyant at the first-ever donor “summit” of his American Crossroads super PAC. Or even that his buoyance came “with a sort of contrite undertone,” as one participant described it to me.

For Rove, the famed “architect” of George W. Bush’s presidency turned financial mastermind of the post-Bush GOP, it had been a horrible year of reckoning. He had helped orchestrate an extraordinary $1 billion investment in 2012 Republican candidates through a web of groups like Crossroads, only to see his reputation suffer a devastating blow as bet after bet proved wrong. The humiliation was capped off by his memorable on-screen election night meltdown on Fox News, when the network refused to call the presidential race to his liking. More indignities followed: Two of his top donors died after the election. The big-money coalition he built in his Washington living room had crumbled. And the biggest names in the 2016 presidential sweepstakes had little use for him.

But now finally was a chance at redemption: He saw that the timing of the shutdown was … perfect. For months, in fact, Rove had been warning the Tea Party and its congressional standard-bearers to back off the shutdown idea. Don’t do it, he kept saying. It will be a political disaster. Now, that’s exactly what seemed to be happening—and Rove was very much in need of an I-told-you-so moment. Even one that came at the expense of his own party.
And it was just in time for his Crossroads summit, not so subtly titled “The Republican Future,” where Rove was busy selling himself all over again to the dozens of wealthy donors, establishment luminaries and schmoozing politicians like Sen. Marco Rubio and Rep. Sean Duffy who came to the Four Seasons for Rove-centric sessions including a reception dubbed “Cocktails, Conversation … and Karl.” This next election would be different, Rove told attendees. “They were going to create a better product and not make the same mistakes again,” as one later recounted to me.

Rove and his shadow GOP spent $1 billion trying—and failing—to defeat Obama and the Democrats in 2012. Will 2014 offer redemption? | Doug Mills/N.Y. Times/Redux

But first there was the matter of the war within—Rove’s escalating battle for supremacy in a cutthroat big-money world that pitted him against the Tea Partiers and their deep-pocketed sometime backers, the billionaire Koch brothers, Charles and David. The Tea Party and the Koch network were being blamed for the shutdown, which was starting to look like a terrible mistake. Hundreds of thousands of federal workers were going without paychecks. Millions more Americans were at risk of losing their social services. The GOP’s poll numbers were cratering. Rove, my sources told me, was aggressively going around taking swipes at the Koch-backed groups that had pushed for the confrontational Republican tactics in the first place and disparaging Koch operatives to major donors who had given to both camps. (“Gang warfare,” the head of one Tea Party group had earlier complained to me.) This was Rove’s moment to take advantage, and he was determined to win the argument as he hustled for checks. “It’s time Republicans remembered that bad tactics produce bad outcomes,” he would go on to chide in his Wall Street Journal column as the shutdown ended in a clear-cut defeat for his party.

America’s industrial boom changed political campaigns forever, as a new class of wealthy entrepreneurs began spending to protect their political interests. Among those who donated to fiscal conservative Ulysses S. Grant in 1868 were railroad speculator and banker Jay Cooke, rail and shipping tycoon Cornelius Vanderbilt and dry goods magnate A.T. Stewart. In 1872, Cooke alone contributed $50,000 to the Republican Party and Grant’s reelection campaign—a quarter of the party’s budget. “Never before,” wrote one prominent historian of the period, “was a candidate placed under such obligation to men of wealth.” One year later, Cooke’s company declared bankruptcy, setting off the Panic of 1873 and the international depression that followed.

The Party Heavy

Republican nominee William McKinley may have raised some $3 million or more in 1896, and again in 1900—mostly from big corporations, like the Rockefeller-owned Standard Oil Co., that supported McKinley’s protectionist platform. The man credited with McKinley’s fundraising success was Ohio businessman-cum-Republican organizer Mark Hanna; through his unofficial donation system, the major businesses of the day were expected to contribute according to their “stake in the general prosperity of the country,” wrote leading progressive and Hanna biographer Herbert Croly. Flush with campaign cash, McKinley beat his Democratic opponent William Jennings Bryan by a landslide in 1896—the greatest electoral sweep in a quarter-century—and by an even wider margin four years later. “All questions in a democracy [are] questions of money,” said Hanna. The backlash over his influence resulted in the country’s first major campaign finance legislation: the 1907 Tillman Act banning corporate contributions to federal candidates.

The Union Boss

During his 1936 reelection campaign, President Franklin Delano Roosevelt had major support from American labor unions, which had reaped rewards from FDR’s New Deal—including legal protection of their right to organize. The largest single contribution to Roosevelt that year—more than $500,000—came from the United Mine Workers of America, led by prominent liberal John L. Lewis. The donation, along with other labor contributions, was instrumental in FDR’s landslide victory over Alf Landon. It also led to 1947’s Taft-Hartley Act, which restricted unions’ political activities. At the time, President Harry Truman called it a “dangerous intrusion on free speech.”

The Last Straw

Perhaps the biggest spender in the years before post-Watergate reforms limited individual donations to candidates was insurance magnate W. Clement Stone, who contributed roughly $30 million in today’s dollars to Richard Nixon’s campaigns in 1968 and 1972. The self-made millionaire wanted desperately to become ambassador to Britain, and, had it not been for the Watergate scandal, might have gotten the post. “Anybody who wants to be an ambassador must at least give $250,000,” Nixon told his chief of staff in June 1971. Three years later, Congress passed the most stringent set of campaign-finance laws in American history.

It is somewhat ironic—but perhaps poetically just—that the money monster of American politics may have turned on Karl Rove; after all, Rove, more than anyone in America, was its Dr. Frankenstein. Thanks partly to the Supreme Court’s 2010 Citizens United decision, which opened the floodgates to huge amounts of loosely regulated political giving, Rove had personally overseen an astonishing influx of big money into the 2012 campaign, much of it in the form of massive, undisclosed checks from major donors. For a brief period, Rove had appeared to form a sort of shadow Republican Party all on his own, sustained by this new flood of cash.

But raising the money had proved easier than changing the country’s politics, and Rove had failed to achieve his goal of ousting Obama and installing a Republican majority in the U.S. Senate on Election Day 2012. Fox News anchor Chris Wallace drove the point home that nasty night. “We spent billions of dollars,” Wallace said to an exhausted-looking Rove. “Crossroads, which you helped found, spent—what?—$325 million, and we’ve ended up with the same president, the same Democratic majority in the Senate and the same Republican majority in the House. Was it worth it?”

Today, of course, that question is still hanging out there, looming large over this year’s congressional elections, and over Rove’s future. In June, House Majority Leader Eric Cantor’s stunning loss to a shoestring-budgeted nobody named David Brat once again proved that money doesn’t add up to much without the right message. All we really know for sure is that in the four years since the Citizens United decision, a few dozen enigmatic billionaires have effectively crowned themselves the new kings of politics. Even before the legal landscape shifted, Rove anticipated their rise, and he set himself up to be their keeper.

This is the story—based on dozens of interviews, hundreds of documents and some stealthy stakeouts and chance encounters—of how he did it, reinventing himself and, in the process, the modern American money machine. In many ways, it’s a classic American tale, of a college dropout from a struggling family who managed to become not only a president-maker but a billionaire-whisperer enveloped in a world of private jets and seven-figure pledges.

Like much about Karl Rove, who declined to comment for this article, it’s a story that starts in the Bush White House, where a full 2½ years before the Supreme Court’s ruling, Rove was already positioning himself to become a leader in the big-money revolution he foresaw. On an August day in 2007, he was in a lunch meeting with GOP operative Bradley Blakeman offering thoughts on how a group of billionaires could help Bush sell his military escalation in Iraq. Their lunch was in Rove’s office in the West Wing, the den from which he had ruled politics for the last 6½ years, ever since he guided Bush into office predicting a fundamental realignment of politics.

At the time of the meeting, Rove looked to outsiders—not for the first, or the last, time in his career—like a man on the ropes. He’d been blamed for the sweeping Republican losses in the 2006 midterm elections. He’d been called to testify multiple times before a grand jury investigating one Bush scandal and faced the threat of subpoenas over another. Then on August 13, 2007, he suddenly announced he was leaving the White House. Even as he was preparing to quit, though, he was laying the groundwork for a different kind of Republican realignment.
Rove had quietly summoned Blakeman, until 2004 a fellow Bush White House aide, to congratulate him on having been tapped a few weeks prior to run a new nonprofit group formed at the urging—and with the money—of a handful of extremely wealthy Republicans, including Las Vegas casino mogul Sheldon Adelson. The group, which would be called Freedom’s Watch, was planning a $15 million advocacy campaign to build support for the Iraq troop surge. Over lunch, Rove offered Blakeman advice about messaging and timing for the campaign.

Freedom’s Watch played into one of Rove’s core political beliefs: that big money spent outside the party system had the power to deeply influence the political debate. The left had proved as much, Rove liked to point out, with its cash-rich labor unions and—since the 2004 election—its own klatch of billionaires like George Soros. If a Republican operative could mount something similar, that person would become immensely powerful, perhaps more so than the billionaires themselves. But it would take a very specific type of operative to devise and execute such a plan. It would require someone who had a track record of winning elections, who had the trust of elected officials and donors, and who had a personal brand and wasn’t afraid to use it. An operative, in other words, just like Karl Rove.
Not long after Rove’s lunch with Blakeman, Freedom’s Watch made a grand public debut, vowing to become just what Rove craved: “a never-ending campaign—a stable, credible voice of reason on generational issues that won’t rise and fall with election cycles,” as Blakeman put it at the time. It quickly executed its initial $15 million campaign aimed at pressuring vulnerable members of Congress to back the surge.

Bradley Blakeman set up Freedom’s Watch, vowing “a never-ending campaign.” It didn’t work, but for Rove, it was a beta test for a new big-money effort. | Gerald Herbert/AP

Nine days after Freedom’s Watch launched, Rove officially left his job at the White House. His public plans included hanging out at the beach, writing his memoirs and spending time with his second wife, Darby, at their home in the Texas hill country. But he couldn’t resist the lure of a political landscape that appeared once again on the verge of a major shift. After all, he had come with Bush to Washington promising to usher in a “durable” Republican majority.
Back then, he invited comparisons between himself and Mark Hanna, the turn-of-the-century iron-and-coal magnate turned operative who was credited with leveraging massive contributions from the robber-baron industrialists to engineer William McKinley’s election and, with it, a decades-long era of Republican dominance. What Hanna launched with McKinley’s 1896 ascension to the White House, Rove hoped to replicate with Bush’s win in 2000. But his grand plan hadn’t come to pass. Now Bush was limping across the finish line, and Rove was limping out the door. The emerging big-money world offered Rove another chance, and one that eerily echoed Hanna’s famous words: “There are two things that are important in politics. The first is money and I can’t remember what the second one is.”
With no donor disclosure and the virtually unlimited pocketbook of Adelson behind it, Freedom’s Watch was the ideal beta test for the new kind of money politics Rove had in mind. In March 2008, about six months after the group went live, Blakeman left. Carl Forti became the lead strategist (we called him “Karl Rove’s Karl Rove” in a story I wrote for Politico), and the group moved away from pure issue advocacy to a more electorally focused brand of politics of the sort Rove relished. Forti led the Freedom’s Watch forays into House races, while its Senate efforts were handled by another Rove acolyte, Tony Feather.


How Rove Made Bush Top, from left—1994: As a Texas fundraiser, Rove helped elect Bush as governor. 2001: He was the first to alert Bush, in Florida, of 9/11. 2004: Rove is often called the “architect” of Bush’s 2004 reelection. Bottom, from left—2005: As deputy chief of staff, he faced allegations of involvement in the Valerie Plame scandal. 2007: Bush called Rove a "dear friend" when he left the White House. 2014: The two appeared recently at a wounded soldiers event.

The Myth of America’s Golden Age

A few months after the shift, Freedom’s Watch secretly made another move that dovetailed with Rove’s vision: convening regular closed-door strategy sessions of big-money conservative groups. The idea was to coordinate advertising and voter mobilization strategies to avoid the duplicative efforts that had plagued past Republican groups. The clandestine 2008 meetings, not previously reported, marked the inaugural attempt at a broad-based collaboration uniting the party’s sometimes feuding money factions.

Just as significant was who showed up: operatives associated with the secretive Koch brothers. Until then, the Kochs’ network had largely steered clear of Republican causes, preferring to fund instead an array of libertarian-leaning think tanks and advocacy groups. But now they were wading into electoral politics. When the Freedom’s Watch meetings happened, the Koch political operatives, through their previously unknown control of a nonprofit group called the Wellspring Committee, took a leading role, coordinating both with libertarian-leaning groups like the Club for Growth and also—for the first time—with more mainstream conservative players from the Rove wing.
Still, Election Day 2008 was a major letdown. Not only did Obama handily defeat John McCain, but Democrats increased their majorities in both chambers of Congress. The Koch operation cut its ties to Wellspring, while Freedom’s Watch abruptly announced plans to close up shop. It wouldn’t become the “never-ending campaign” Blakeman had predicted, nor would it get anywhere near its reported revenue goal of $200 million. By the time all the bills were paid, its tax filings showed, it had spent $56 million.

But the Freedom’s Watch experiment served as a valuable test for Rove and others still intent on launching a shadow party network of their own. “Freedom’s Watch was like the MySpace of IEs,” board member Matt Brooks told me, comparing the group’s role in the universe of “independent expenditures” to the early social network overtaken by Facebook. Freedom’s Watch “provided a model for Crossroads and everything that came later.” Rove also had the benefit of escaping the Freedom’s Watch collapse with no scars, since he had been only an informal adviser. “The chips fell exactly in the right place,” said a Republican who worked with Freedom’s Watch. “He got none of the blame, but he got the opportunity to then reconstitute a group under his own brand.”
***

First, there was Karl Rove Inc. to take care of. He needed some money of his own. For starters, there were significant legal bills from the various controversies that dogged him from his time in the Bush administration. And a divorce from Darby would soon be in the works, costing him more than half of his assets, which at that point included a million-dollar home the couple co-owned in Northwest Washington, and whatever Rove had socked away from his $168,000-a-year White House salary and the 1999 sale of his political consulting firm. Rove connected with Bob Barnett, arguably the most politically wired lawyer in Washington, to get help creating the financial foundations for a new life. Barnett negotiated a $1.5 million deal for a memoir that would give Rove’s version of the Bush years, the Wall Street Journal column and a $400,000-a-year contract to be a contributor to Fox News. Rove, 56 when he left the White House, would no longer be a hired-hand political consultant as he had been before the Bush years; this time, when he returned to politics, it would be on his own terms.

There was something of a running debate in conservative politics about whether Rove was driven more by power or by money; certainly, he always had an uncanny knack for getting close to both. And yet, for someone whose political power would become so closely intertwined with his connections to the very rich, Rove had a complicated relationship with wealth. He grew up in Colorado, Nevada and Utah on what he would call in his memoir “the genteel fringes of the lower middle class,” in a family where “there didn’t seem to be enough money,” and dropped out of the University of Utah. He has long condemned his critics and opponents as elitists, yet he hitched himself to the patrician Bush clan. In 1973, George H.W. Bush chose Rove to chair the College Republicans, then hired him to be a special assistant at the Republican National Committee, where he ran errands for Bush.

One day, Rove was asked to deliver car keys to Bush’s son George W. Bush, who was visiting Washington during a break from Harvard Business School. W., with his family pedigree and folksy charm, made an immediate impression on Rove, who recalled years later being taken with Bush’s “swagger, cowboy boots, flight jacket, wonderful smile, just charisma—you know, wow.”

Rove began dating a Houston socialite, Valerie Wainwright, whose family was friendly with the Bushes. At first, he thought she was “way out of my league.” They married in an extravagant ceremony and moved to Texas to be near her family. He began raising money in preparation for both George W.’s 1978 congressional campaign and George H.W.’s 1980 presidential bid. Both campaigns failed, as did Rove’s marriage. Soon afterward, Rove’s mother, who had been prone to erratic behavior since Rove’s childhood and had long since deserted the family, killed herself. Rove was stunned, though he later wrote that “at some deep level I had always known she was capable of this.”

Rove and former RNC chair Ed Gillespie pitched donors on their vision. “We’re really a half-assed right-wing conspiracy,” Rove would say. “Now, it’s time to get serious.” | Haraz N. Ghanbari/AP

Amid the catastrophes, Rove threw himself into Texas politics, building a direct mail business that would collect millions of dollars in fees, make him the state’s premier Republican operative and put him in close contact with its biggest donors. Rove seemed acutely attuned to—and fond of—the private planes, sprawling ranches, yachts and other trappings of wealth that surrounded the rich Republicans he courted. When he moved to Washington after guiding Bush into the Oval Office, he drove a titanium-colored Jaguar to the White House, and he and Darby bought a five-bedroom brick colonial in a prestigious neighborhood in Northwest Washington, where Rove made it his business to know the value of every home on his block of Weaver Terrace.

Pat Caddell, a Democratic pollster and fellow Fox News pundit, sees Rove as having understood and pursued the nexus of power and money from early on. “I’m telling you, I know Karl, and Karl is in the business of power,” Caddell told me. “The money is incidental to it. It’s how you have power. It’s how Mark Hanna had power, except with Karl, it’s more of the donors’ money. This is a long-term process with him, as he has seeded and developed these people.”

***
When the Supreme Court issued its Citizens United ruling, Rove was ready with a plan to capitalize on the decision—and the transformation he knew it meant for American money politics. Three weeks after the ruling, he hit the road with former RNC Chairman Ed Gillespie, top GOP fundraiser Fred Malek and former Minnesota Sen. Norm Coleman to seek seed funding straight from the billionaires. Over a February 2010 lunch at the swanky Dallas Petroleum Club before about 20 Republican plutocrats, the foursome laid out their blueprint for a sort of shadow party.

The plan was complicated, calling for an alphabet-soup coalition of unlimited-money nonprofit groups that would work together to boost Republicans in the 2010 elections and beyond, each filling a different niche:
• American Crossroads. It would eventually be registered as a super PAC, the new breed of political committee that emerged from a lower court decision that followed on Citizens United, and would focus on television ads hitting Democratic congressional candidates. It would be chaired by former RNC Chairman Mike Duncan and run on a daily basis by former Chamber of Commerce operative Steven Law, along with Forti.
• American Action Network. Unlike American Crossroads, American Action Network was registered under a section of the tax code, 501(c)(4), that allowed donors to give anonymously. It planned to focus on issue-based ads in Senate races and would be chaired by Malek and run by Coleman and a former Hill staffer named Rob Collins.
• Resurgent Republic. Co-founded by Gillespie, it would conduct polling and message testing.
• Republican State Leadership Committee. Registered under section 527 of the tax code, it was being revamped by Gillespie, who envisioned it as an aggressive campaign arm for state races that would extend the coalition’s reach down ballots.

The groups would embrace the collaborative approach pioneered by Freedom’s Watch and Wellspring but would learn from their mistakes. There would be a deeper pool of wealthy givers, so the groups wouldn’t rise or fall on the fortunes of a single patron like Adelson. Instead of huge full-time staffs, they would contract out much of the strategic work to a small corps of consultants who would form a privatized brain trust, taking the shadow party’s decision making even further out of the remit of elected and party officials and distinguishing it from the struggling RNC.

This was the donors’ chance to really shape the future of Republican politics for a long time to come, Rove, Gillespie, Coleman and Malek told the money men at the Dallas Petroleum Club. “People call us a vast right-wing conspiracy, but we’re really a half-assed right-wing conspiracy,” Rove would say in his pitches. “Now, it’s time to get serious.”

It was the duty of the assembled billionaires to dig deep, Rove suggested, telling them that “all of us are responsible for the kind of country we have.” The Dallas group included veteran Republican donors like T. Boone Pickens, Harlan Crow and Harold Simmons. There were also newer players like Ross Perot Jr. and Robert Rowling. Simmons left early, but not before saying on his way out the door: “I like this, I’m in for five”—as in $5 million. His early support sent an important signal. Other megadonors followed suit after the meeting, and more pledges resulted from a donor pitch session a month later in New York by Gillespie, Malek and Coleman.

A few days later, American Crossroads filed its incorporation papers in Virginia and started spreading the word among the GOP consultant class that it had received $30 million in pledged contributions. Though the checks themselves were slow in arriving, Rove and his crew began wrangling other big-money groups to join their coalition, which would quickly, and with good reason, come to be regarded as Rove’s network. Gillespie emailed a few dozen Republican operatives representing various other conservative groups, inviting them to Rove’s house on Weaver Terrace for an “informal discussion of the 2010 political landscape.”

That was a little coy, it turned out. Rove’s purpose was less chitchat than recruiting the other groups to join his shadow alliance. And so, on April 21, 2010, exactly three months after Citizens United, a group of about two dozen Republican operatives convened at Rove’s house. Karl and Darby had recently split and would soon sell the house for $1.4 million, but on that April day, 4925 Weaver Terrace was the birthplace of a new Republican Party—one steered by just a handful of unelected operatives who answered only to the richest activists who funded them.
The turnout was a testament to Rove’s clout. The crowd spilled over from the living room and into the kitchen. There were representatives from corporate heavyweights like the U.S. Chamber of Commerce, new organizations like American Crossroads and the American Action Network, and star vehicles like Alliance for America’s Future, spearheaded by the daughter of former Vice President Dick Cheney. They munched on a lunch of takeout chicken pot pies. “It really took people with the stature of Karl and Ed to personally invite all of these political operators at different organizations and groups who were used to working individually—groups that in some cases were not always aligned,” recalled Bill Miller, who attended as national political director at the Chamber. “Not just anybody could have convened a group like that.”

America’s New Oligarchs
In the 2012 election, 0.01 percent of the population—a mere 31,385 people—were responsible for 28 percent of all disclosed political contributions to federal candidates, party committees, congressional campaign committees’ PACs and super PACs, according to an analysis by the Sunlight Foundation. Not a single congressional candidate was elected without a contribution from one of these 31,385 individuals, whose minimum donation was $13,054 and median was $26,584—about half of what an average American household makes in an entire year.

Companies

The top represented employers among the 0.01 percent were:

1. Goldman Sachs: 85 donors
2. Blackstone: 49
3. Kirkland and Ellis: 40
4. Morgan Stanley: 38
5. Comcast: 37
6. Akin Gump: 36
7. Google: 33
8. Harvard University: 33
9. Microsoft: 31
10. Podesta Group: 30

Cities

The most represented cities were:

1. New York: 2,259 donors
2. Washington, D.C.: 814
3. Houston: 664
4. Chicago: 603
5. Los Angeles: 598
6. Dallas: 507
7. San Francisco: 498
8. Boston: 266
9. Atlanta: 262
10. Greenwich, Conn.: 240

Who Benefits?

The members of Congress who received the greatest portion of their funding from the 0.01 percent, in order, were:

1. Rep. Nancy Pelosi (D-Calif.)
2. Rep. Roger Williams (R-Texas)
3. Sen. Sheldon Whitehouse (D-R.I.)
4. Rep. Nita Lowey (D-N.Y.)
5. Rep. Eric Cantor (R-Va.)
6. Sen. Jeff Flake (R-Ariz.)
7. Rep. Joe Kennedy III (D-Mass.)
8. Rep. Bill Foster (D-Ill.)
9. Rep. John Sarbanes (D-Md.)
10. Rep. John Boehner (R-Ohio)

What Do the Rich Stand For?

In a 2011 survey of superrich Americans—a small sample of 83 Chicago-area individuals each worth at least $40 million—political scientists Benjamin Page, Larry Bartels and Jason Seawright found that the political views of the wealthy, not surprisingly, diverged from the rest of the population’s. The wealthy were much more concerned about budget deficits, more in favor of cutting social welfare programs including health care and Social Security and less supportive of higher taxes, Wall Street regulation and government programs for jobs and education. Despite their conservative-leaning fiscal and economic views, the wealthy tend to be more liberal than the rest of the population on religious and moral issues, including abortion, gay rights and school prayer, according to an analysis of the top 20 percent of earners by political scientist Martin Gilens.

Crossroads would later protest any characterization that it was Rove’s group, and subsequent meetings were held at the downtown Washington office suite American Action Network shared with American Crossroads on New York Avenue, a couple of blocks from the White House. But the gatherings were still referred to as meetings of the Weaver Terrace Group, ensuring that Rove would be forever seen as the godfather of the coalition.

Still, it wasn’t immediately clear if the groups would be able to raise the huge sums necessary to pull off their ambitious plans. During the month after the first Weaver Terrace Group meeting at Rove’s house, American Crossroads raised a mere $200. When I reported that figure, noting as well that the group said it had $30 million in pledges, the story embarrassed Rove, setting off speculation that he had overplayed—or at least overhyped—his hand. (Months later, during a chance encounter outside the Fox News studios, Rove angrily confronted me about that report. “You counted me out,” he said, adding for good measure that I was a “moron” and “a shitty reporter.”)
Only two days after the end of the group’s $200 month, the American Crossroads team quietly created a sister group called Crossroads Grassroots Policy Strategies. The move seemed a tacit acknowledgment that it needed to do something to loosen donor purse strings, but it was also an abandonment of one of the guiding principles Duncan had set forth for the new venture: “full disclosure.” The new offshoot was registered as a nonprofit under section 501(c)(4) of the tax code. That allowed it to accept anonymous donations—unlike American Crossroads. Secrecy turned out to be a fundraising boon for the new group, which was called Crossroads GPS for short (its first contribution form played off the satellite navigation system, promising that the new group would chart “the course for a new direction for America”). Donors gave more in secret money to Crossroads GPS than in disclosed money to American Crossroads. Together, the Crossroads groups raised more than $70 million for their 2010 effort, with most of it—$43 million—going to the nondisclosing Crossroads GPS.

Not that all efforts to keep donors’ identities secret were successful. I learned, for instance, that Las Vegas casino owner Steve Wynn, after an assiduous courtship by Rove, became the biggest donor to Crossroads GPS, giving at least $10.1 million sometime between the beginning of June 2010 and the end of May 2011. The two men would attend each other’s nuptials—Wynn’s gala second wedding in Vegas in April 2011, and Rove’s comparatively intimate third wedding to lobbyist Karen Johnson in Austin in 2012. Rove’s wedding, which fell on the same day the Supreme Court upheld Obamacare (Rove actually did a Fox News hit on the ruling that morning, hours before his ceremony), was attended by former President George W. Bush and multiple megadonors. It was held on the upper deck of Westwood Country Club and featured a performance from the Grammy Award-winning western swing band Asleep at the Wheel. Afterward, Rove, Wynn and their new wives flew together aboard Wynn’s Boeing 737 to Naples, Italy, where they boarded Wynn’s massive yacht and cruised the Mediterranean.

The secret cash flow from Wynn and others affirmed that Rove still had the touch. Crossroads was raising so much money that it was able to pass some of it along to other groups in the Weaver Terrace coalition. It became a bank of sorts for the shadow party. As the 2010 midterms approached, the coalition was functioning just as Rove had envisioned. The Koch network had come to the table in a major way too, with a top operative named Sean Noble attending the Rove-led meetings at the 1401 New York Ave. office of Crossroads. “It was very coordinated,” a strategist who participated told me, adding, “There wasn’t one race in which there were multiple groups airing ads at the same time.”

In the weeks before the midterms, polls of congressional races were starting to register the results of the rising dissatisfaction with Obamacare, combined with the surging wave of Tea Party activism. Democrats, meanwhile, were coming to the realization that they were in trouble, and they began searching for someone to blame. Obama’s political guru, David Axelrod, ripped the Koch brothers as “billionaire oilmen secretly underwriting what the public has been told is a grassroots movement for change in Washington.” A Democratic National Committee ad the month before the election accused Rove and the Chamber of Commerce of “stealing our democracy,” while then-Sen. John Kerry wrote in a fundraising appeal for Democratic Senate candidates, “Karl Rove is back—like an even worse sequel to a movie panned by the critics.”

Rove seemed to be relishing his return to center stage, even the barbs that accompanied it. “I’m having a lot of fun,” he told me defiantly a week before the election, rejecting suggestions that Democrats might be able to leverage his unpopularity to hurt Republicans. “It certainly hasn’t seemed to help them up until now, has it?” he gloated.

A week later, Republicans recaptured control of the House of Representatives and picked up six Senate seats, six governorships and 680 state legislative seats.
***

And so Karl Rove—who was once dubbed “turd-blossom” by an unpopular president and slunk out of the White House amid controversy—had succeeded in becoming the de facto boss of a shadow Republican Party. But now expectations around Rove were sky-high. Now he had little choice but to relentlessly argue that things were going his way—and to show results regularly. To maintain his status, he needed more checks, which meant he needed to keep forecasting success. In the new big-money economy, it was also imperative to make the case that in giving to a particular group, donors were spending cash more effectively than if they’d given it to one of its Republican rivals. The result was a vigorous, and sometimes contentious, competition among ostensibly allied conservative groups to see who could corral the most cash and, with it, the most influence.

All of which pointed to a struggle for power and money between Rove’s network and that of the Koch brothers. It didn’t help matters that Tea Party activists had quickly come to distrust Rove. Many activists I talked with during the movement’s rapid rise considered him “antithetical to everything the Tea Party stands for,” as one Wisconsin Tea Party leader told me, and their philosophy of fiscal restraint and limited government was much closer to the libertarian-leaning Kochs than to Rove and the party establishment. One top Tea Party group would even send a fundraising appeal urging members to “wipe the smirk off Karl Rove’s face,” accompanied by a photo illustration of Rove in a Nazi SS uniform. (The group apologized for the image, calling it a production error.)

David and Charles Koch emerged as rove’s biggest conservative rivals. “The relationship has just broken down,” a Koch operative said. | Wichita Eagle/McClatchy-Tribune/Getty Images; Brian Ach/Wireimage/Getty Images
By the 2012 campaign cycle, the Koch operatives were clashing with Rove’s allies on everything from the superiority of their Themis voter database to House Speaker John Boehner’s deal with the White House to increase the debt ceiling, which Rove-linked groups supported and Koch-linked groups opposed. And Rove had to contend with new rivals too: Presidential nominee Mitt Romney, for example, had a supportive super PAC, Restore Our Future, which set up shop and argued to the donor class that it was a better investment for ensuring a White House victory because it was the only big-money group devoted exclusively to helping Romney.

Sources: Big Money; Center for Responsive Politics
The power struggle between Restore Our Future and Rove grew particularly fierce, and for good reason. If Romney won, the thinking in GOP money circles went, the Restore gang could displace Rove atop the shadow party. But it wouldn’t be easy. Rove had constructed his throne on a foundation of relationships with the biggest GOP donors. Rove reinforced his status with donors by coaxing his competitors—including those associated with the Kochs—into his Weaver Terrace coalition to coordinate spending. At the same time, though, in conversations with donors Rove was privately undercutting his rivals just as aggressively as they were coming at him. Among his main arguments was that Crossroads was making the most effective use of donor dollars because of its low overhead. Rove, pointing out that he wasn’t being paid by Crossroads, contrasted that with suggestions that Restore Our Future, in particular, was paying too much to its fundraising consultants.

But all these arguments depended on success in 2012, which could help explain why Rove was in such a state of nervous collapse on election night. It was not just his personal credibility but his organization that was on the line. In all, a record $7 billion—the traceable amount spent by all the candidates, parties and outside groups combined—had been poured into the 2012 election. Super PACs and other independent outfits had spent a total of $2.5 billion, marking the first time outside groups spent more than the two major political parties themselves, at $1.6 billion total. The political operations fronted by the Kochs and Rove combined to spend about $725 million attacking Democrats, only to watch Obama win reelection and Democrats hold the Senate.

For Rove, a reckoning was inevitable.

And it would come quickly. Just three weeks after Election Day, a source happened to be present at the Madison Hotel in Washington for an early breakfast one morning when American Crossroads’ founding chairman, Mike Duncan, sat down at the next table with its communications director, Jonathan Collegio. Inevitably, Rove’s role—and the future of the group—was a subject of conversation. In response to a question from Collegio, Duncan, an old friend of Rove’s going back to their College Republican days, explained that about two-thirds of Crossroads’ fundraising could be credited to Rove. But he also seemed to suggest the group could benefit by creating some distance from Rove. Crossroads, Duncan insisted and all appearances to the contrary, was “not intended to be the Karl show,” according to my source. (Duncan said later he didn’t recall the breakfast and stressed he would never minimize Rove’s role. “Karl is and always will be a key to the Crossroads efforts,” he told me.)

In the meantime, Crossroads soon suffered a very tangible hit to its bottom line, with the deaths of first one and then a second of Rove’s most reliable donors going all the way back to early Bush days in Texas. Harold Simmons and Bob Perry and their companies had given $44 million combined in disclosed contributions to American Crossroads—and potentially much more in secret money to its nondisclosing sister group—from 2010 until their deaths. Their widows have not ponied up so much as one cent in disclosed contributions for Crossroads. “When they lost those two donors last year, it was really debilitating,” a prominent conservative fundraiser told me. Now, several conservative operatives told me, it’s become open season in Texas’ stocked GOP donor pool, with a host of GOP-affiliated groups—including some in the Koch network—reeling in big catches.

And of course Rove’s many rivals have been more than happy to pile on.

“Guys like Rove need the spotlight—need to be the guy, and after the 2012 debacle, I think it’s pretty apparent that he’s out of favor with donors and trying to rebuild,” says Drew Ryun, political director of the Madison Project, a Tea Party political action committee. “The problem is, once the curtain has been pulled back, folks have realized that he and the wizard of Oz have a lot of similarities.”
***

Wizard of Oz, or wizard for real? Rove has been counted out of the game so many times it would probably be foolish to write him off now. If anything, he’s had a good 2014 so far. Boosted by the shutdown, Rove has been rallying establishment types around the idea that the fault for 2012 lay mainly with the Tea Partiers on the Republican Party ballot. “We’ve given away at least five seats in the last two election cycles, maybe more, because of poor candidates,” Rove complained at an event in Dallas last year, citing a handful of Tea Partiers who won GOP primaries. “The quality of candidates matters.” In a New York House race this cycle, Crossroads spent $800,000 to help elect newcomer Elise Stefanik, a former Bush administration official, by fiercely attacking Matt Doheny, her GOP primary opponent, as unfit for Congress. After Doheny lost on June 24, he frankly laid the blame on Rove. “The reality is my opponent had a good night, and Karl Rove had a good night,” he said.

And Rove has been quick to take credit where he can. Not long ago, he held a secret donor conference call on which the celebrity guest was Thom Tillis, whose decisive win in the North Carolina GOP primary in May earned him the right to take on a vulnerable Democrat, Sen. Kay Hagan, in a key state in November. Tillis, a once-obscure state House speaker, is now one of Rove’s prize horses in the national money derby; Crossroads spent more than $1.6 million on advertising boosting Tillis’ primary campaign and later unveiled a $3.6 million ad campaign attacking Hagan. “Our advertising was terrific,” Rove declared on the call, and Tillis gave credit to Crossroads for his victory, saying in his smooth drawl that the group’s “contribution can’t be overstated.”

One big problem Rove has going forward, and one reason he’s cultivating unknowns like Tillis, is that many big-name Republicans want to keep their distance from him, especially the leading 2016 candidates. Jeb Bush’s allies see Rove as an unhelpful reminder of the most toxic elements of his older brother’s legacy, according to people familiar with their thinking. Others point out that Rove has simply never been a part of the former Florida governor’s circle.

“Jeb’s crew was always pretty robust on its own accord,” Florida GOP consultant Rick Wilson told me. Rick Perry’s closest allies, meanwhile, harbor grudges against Rove dating from Texas politics in the ’90s; while Rand Paul and Ted Cruz have aligned themselves with Tea Partiers for whom Rove is almost as big an enemy as Obama.
Just as tellingly, Rove no longer seems to be even the titular head of the new Republican machine. His Weaver Terrace Group meetings have ceased, replaced by ad hoc coalitions of deep-pocketed groups interested in a particular race or candidate. Supporters of specific candidates are now forming their own super PACs exclusively intended to support single campaigns in this 2014 election year. Why should they give to a national group like Crossroads without any guarantees that the money will be spent on their favorite? Crossroads has dramatically and cannily narrowed the number of races it is involved in. (“He’s cherry picking,” says the Madison Project’s Ryun.)

Rove is projecting confidence because the establishment candidates he supports are, on the whole, beating back Tea Party challengers; the Kochs’ allies counter that their goal is less about specific elections and more about shifting the entire political conversation on fiscal issues to the right. Neither can afford to admit defeat, because that means fewer donors will come to their events next time around. And, increasingly, it’s personal warfare: The Kochs’ operatives have come to mistrust Rove not only on ideological grounds but also because he “is trashing them for being ineffective and not team players,” as an adviser to various Koch groups told me. “They are sick of his shit and don’t really need to play nice. Basically, the relationship has just broken down.” The operative insisted that Rove’s disparaging remarks about the Koch operations have done little to win over the party’s moneyed class.

“Big donors want peace and coordination, not wasteful spending and personality-driven BS.” Even a Republican finance operative who attended the Crossroads summit agreed, saying that Rove’s “trashing of different groups” was “completely counterproductive” and has “frozen up money.” (For the record, Crossroads spokesman Paul Lindsay says of the Koch groups: “We have a high regard for Freedom Partners and Americans for Prosperity.”)

But in the end, the biggest challenge for Rove might be to prove that he still has any control over the political process at all. He didn’t do much to convince donors of that at the October 2013 Crossroads summit, according to the Republican finance operative who attended. “People wanted to hear some very intense self-evaluation of what went wrong in 2012, but it was the same old stuff—‘just keep doing what we’re doing, and everything will be OK.’”
Once again, Rove has appeared to be wrong in projecting a new era of Republican dominance, though he continues to forecast a major realignment, telling a private group in May that “something is going to happen. You cannot remain this locked up for as long as we have without somebody gaining some kind of advantage.” Rove will need a huge electoral win this fall—including a return of the Senate to Republican control—to make his case.

For now, the only thing that is clear is that Rove has profoundly changed the way the political game is played. Thanks to him, no one can afford to stand down in what has become an arms race for money, and Rove and his rivals are left with no choice but to rapaciously solicit such checks from wider and wider pools of extremely wealthy supporters. If $400 million in anonymous cash spent by the Koch brothers’ network in the run-up to the 2012 election didn’t do the trick, will $1 billion from a small cluster of donors help elect a 2016 presidential candidate?
But that is the secret drama of politics, the one that unfolds in the opulent private places where big money and needy politicians meet to shape outcomes that the rest of us only dimly understand on election night. Karl Rove may delight in publicly taunting Hillary Clinton about her age or the Tea Partiers about their political tactics, but he doesn’t like to talk about this other part of his work. It is a tough business to stay on top. “He still wants to be The Decider,” a Republican fundraiser who has closely observed Rove told me not long ago. “He tries to be everyone’s gatekeeper. Other people have different ideas.”

[Josh]

Even if they get another wave election, or a smaller wave just based on high base turnout vs. demoralized Dem base turnout, it doesn't mean shit for them. They've been over-reading the results of midterm elections since '94. The simple formula these days is that nobody will hang onto power for too long, because the media environment is effective at tearing down whoever is in power. The current House powerbase has been protected by gerrymandering and the fact that the House, in isolation, is the least-noticed aspect of the executive branch/legislative branch power share because it doesn't have sexy stuff like filibusters or the central status of the presidency.