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Billionaire Brothers’ Money Plays Role in Wisconsin Dispute

by Eric Lipton

WASHINGTON — Among the thousands of demonstrators who jammed the Wisconsin State Capitol grounds this weekend was a well-financed advocate from Washington who was there to voice praise for cutting state spending by slashing union benefits and bargaining rights.

David H. Koch, left, and Charles G. Koch have long used their wallets to promote fiscal conservatism and combat regulation. (Left, Robert Caplin For The New York Times; Dave Williams/Wichita Eagle, via Associated Press) The visitor, Tim Phillips, the president of Americans for Prosperity, told a large group of counterprotesters who had gathered Saturday at one edge of what otherwise was a mostly union crowd that the cuts were not only necessary, but they also represented the start of a much-needed nationwide move to slash public-sector union benefits.

“We are going to bring fiscal sanity back to this great nation,” he said.

What Mr. Phillips did not mention was that his Virginia-based nonprofit group, whose budget surged to $40 million in 2010 from $7 million three years ago, was created and financed in part by the secretive billionaire brothers Charles G. and David H. Koch.

State records also show that Koch Industries, their energy and consumer products conglomerate based in Wichita, Kan., was one of the biggest contributors to the election campaign of Gov. Scott Walker of Wisconsin, a Republican who has championed the proposed cuts.

Even before the new governor was sworn in last month, executives from the Koch-backed group had worked behind the scenes to try to encourage a union showdown, Mr. Phillips said in an interview on Monday.

State governments have gone into the red, he said, in part because of the excessively generous pay and benefits that unions have been able to negotiate for teachers, police, firefighters and other state and local employees.

“We thought it was important to do,” Mr. Phillips said, adding that his group is already working with activists and state officials in Indiana, Ohio and Pennsylvania to urge them to take similar steps to curtail union benefits or give public employees the power to opt out of unions entirely.

To union leaders and liberal activists in Washington, this intervention in Wisconsin is proof of the expanding role played by nonprofit groups with murky ties to wealthy corporate executives as they push a decidedly conservative agenda.

“The Koch brothers are the poster children of the effort by multinational corporate America to try to redefine the rights and values of American citizens,” said Representative Gwen Moore, Democrat of Wisconsin, who joined with others in the union protests.

A spokesman for Koch Industries, as well as Mr. Phillips, scoffed at that accusation. The companies owned by Koch (pronounced Coke) — which include the Georgia-Pacific Corporation and the Koch Pipeline Company — have no direct stake in the union debate, they said. The company has about 3,000 employees in Wisconsin, including workers at a toilet paper factory and gasoline supply terminals. The pending legislation would not directly affect its bottom line.

“A balanced budget will benefit Koch Industries and its thousands of employees in Wisconsin no more and no less than the rest of the state’s private-sector workers and employers,” said Jeff Schoepke, a Koch Industries lobbyist in Wisconsin. “This is a dispute between public-sector unions and democratically elected officials over how best to serve the public interest.”

Certainly, the Koch brothers have long used their wallets to promote fiscal conservatism and combat regulation, another Koch Industries spokesman said Monday.

But the push to curtail union benefits in Wisconsin has been backed by many conservative groups that have no Koch connection, Mr. Phillips noted.

Americans for Prosperity came to Wisconsin more than five years ago and has thousands of members, he said. The state chapter organized buses on Saturday for hundreds of Wisconsin residents to go to the Capitol to support the governor’s proposals.

“This is a Wisconsin movement,” said Fred Luber, chief executive of the Supersteel Products Corporation in Milwaukee, who serves on Americans for Prosperity’s Wisconsin state advisory board. “Obviously, Washington is interested in this. But it is up to us to do.”

Political activism is high on the list of priorities for Charles Koch, who in a letter last September to other business leaders and conservatives explained that he saw no other choice.

“If not us, who? If not now, when?” said the letter, which invited other conservatives to a retreat in January in Rancho Mirage, Calif. “It is up to us to combat what is now the greatest assault on American freedom and prosperity in our lifetimes.”

Campaign finance records in Washington show that donations by Koch Industries and its employees climbed to a total of $2 million in the last election cycle, twice as much as a decade ago, with 92 percent of that money going to Republicans. Donations in state government races — like in Wisconsin — have also surged in recent years, records show.

But the most aggressive expansion of the Koch brothers’ effort to influence public policy has come through the Americans for Prosperity, which runs both a charitable foundation and a grass-roots-activists group. Mr. Phillips serves as president of both branches, and David Koch is chairman of the Americans for Prosperity Foundation.

The grass-roots-activists wing of the organization today has chapters in 32 states, including Wisconsin, and an e-mail list of 1.6 million supporters, said Mary Ellen Burke, a spokeswoman. She would not say how much of last year’s $40 million budget came from the Koch family, but nationwide donations have come in from 70,000 members, she said, offering it as proof that it has wide support.

The organization has taken up a range of topics, including combating the health care law, environmental regulations and spending by state and federal governments. The effort to impose limits on public labor unions has been a particular focus in Ohio, Indiana, Pennsylvania and Wisconsin, all states with Republican governors, Mr. Phillips said, adding that he expects new proposals to emerge soon in some of those states to limit union power.

To Bob Edgar, a former House Democrat who is now president of Common Cause, a liberal group that has been critical of what it sees as the rising influence of corporate interests in American politics, the Koch brothers are using their money to create a façade of grass-roots support for their favorite causes.

“This is a dangerous moment in America history,” Mr. Edgar said. “It is not that these folks don’t have a right to participate in politics. But they are moving democracy into the control of more wealthy corporate hands.”

During a demonstration outside the Wisconsin Capitol Monday, one protester made a similar point, holding a sign saying: “Gov. Walker: Kick the Koch Habit.”

But Mr. Phillips and members of his group and other conservative activists, not surprisingly, see it very differently.

Just as unions organize to fight for their priorities, conservatives are entitled to a voice of their own.

“This is a watershed moment in Wisconsin,” Mr. Phillips said. “For the last two decades, government unions have used their power to drive pensions and benefits and salaries well beyond anything that can be sustained. We are just trying to change that.”

Steven Greenhouse contributed reporting from Madison, Wis.

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