The Hidden Cost of Free Market Newsmen

By Pam Martens: September 12, 2011

When Larry Kudlow of CNBC, WABC Radio and National Review speaks, who’s really talking?  Is it Kudlow or is it the $332,500 he has pocketed from the Koch-funded Mercatus Center.  While Kudlow did previously acknowledge accepting $50,000 from Enron after he wrote an article about the company and failed to disclose it, he has not disclosed the Mercatus money to readers of his columns, blog or to viewers of his programs as he openly pitches the Mercatus/Koch agenda.

When John Stossel gives us his free market shtick on his weekly program on the Fox Business Network, who’s putting the words in his mouth?  Is Stossel a muckracker or a buckracker in the debt of a web of shadowy right wing nonprofits that manage his name and message?

How about Stephen Moore, member of the Wall Street Journal’s editorial board and a frequent opinion writer on its pages; does his attendance at the super secretive Koch brothers junket in Aspen last year and his service to fellow Kochtopi as a Board Member of the ultra secretive Donors Capital Fund, Inc. cloud his views?

As we reported here on October 26 of last year, Donors Capital Fund, Inc. is a conduit that guarantees its donors complete anonymity.  It takes money from the elite folks and plows it into shady operations.  Secretly, in 2008, it handed the Clarion Fund $17,778,600 to release 28 million DVDs of the race-baiting documentary, “Obsession: Radical Islam’s War Against the West.”  Seven weeks before the Presidential election, against the background whispers that Obama was a Muslim, the DVDs flooded households in the swing voter states.  The Board composition and funding patterns of this group have Koch brothers written all over them. (See “Koch Footprints Lead to Secret Slush Fund to Keep Fear Alive.”)

Now, according to tax records obtained through the assistance of, Donors Capital sluiced over $130 million into the Kochtopi in 2008 and 2009, with massive sums going to fund “news bureaus” in dozens of states. (Apparently, as Brad Friedman exposed at Mother Jones recently, when Charles Koch stated at his secret Colorado bash in June of this year that the upcoming presidential campaign would be “the mother of all wars over the next 16 months,” he already had his boots on the ground in Donors Capital-funded newsrooms around the country.)   Next to each notation of funding for a “news bureau” there frequently appears another line item that reads “for transparency project.”  It takes an Orwellian brand of tartuffery to be running an ultra secretive slush fund and telling the IRS it’s for transparency projects.

Charles and David Koch, the anointed chiefs of the Kochtopi (way too sprawling to be called a Kochtopus) tied for 5th place, with $21.5 billion each, in the 2010 Forbes list of the richest Americans.  They are the controlling shareholders of Koch Industries Inc., a private global conglomerate with a presence in over 60 countries, including interests in oil, refining, pipelines, paper products, chemicals, fertilizer and commodities trading.  The firm’s annual revenues are estimated to be in the range of $100 billion.

A review of documents and tax records for the dizzying, interconnected web of corporate front groups, frequently created, supported and influenced by Charles or David Koch, shows just how dangerous these groups espousing free markets and liberty have become to a free society.  The game plan is to devalue the rights of actual citizens by seeking human voices dangling from a corporate marionette string, that might be willing for the right amount of cash incentive to broadcast the Orwellian reverse-speak: liberty means more liberty for corporations (corporate serfdom for real citizens); freedom means corporate freedom to privatize national resources, pollute the environment and fleece the consumer with impunity; free market means the freedom to draw a dark curtain around how the corporations are actually screwing us and stealing our liberty.

The reverse speak of the Koch brand of academic freedom became crystal clear this year with the leak of a contract the Charles G. Koch Charitable Foundation had previously signed with Florida State University to provide a grant of $1.5 million in exchange for the right to vet and veto faculty hires for an economics program based on “political economy and free enterprise.” According to the St. Petersburg Times, Jennifer Washburn has “reviewed dozens of contracts between universities and donors” and found the Koch agreement with FSU “truly shocking.”  Washburn went on to say: “This is an egregious example of a public university being willing to sell itself for next to nothing.”  If Washburn thinks the FSU deal is shocking, she should take a look at the arrangement Koch has carved out for itself over the past twenty years with another publicly funded institution: George Mason University in Virginia.

The goal is to financially allure university professors to Koch’s distorted vision of market based management, free markets, and transparency.  All the while, Koch Industries is a private, dark curtain corporation.  Its own stock has never been subjected to price discovery in a free market; the public can’t get a peek at the financials of this firm; there is no means of determining how much debt is on the corporate balance sheet or if, as with AIG and Citigroup, we, the sheared sheep, might have to bail the corporation out some day to save some too-big-to-fail bank that holds its debt.  When the firm purchased Georgia-Pacific, that company was immediately delisted from public, transparent trading on the New York Stock Exchange.  Maybe it takes a juggernaut of think tanks, lobby groups and corporate tyrants in drag as citizen movements to disorient inquisitive media minds.

The little we do know about Koch Industries came from 60 Minutes and that wasn’t at all pretty.   As we reported back on October 19 of last year, 60 Minutes did a story in 2000 on Koch Industries, disclosing jaw-dropping charges made by a brother, Bill Koch, in court documents.  According to a transcript of the show: “Bill Koch filed a lawsuit in federal court claiming that much of the oil collected by Koch Industries was stolen from federal lands. At the trial, 50 former Koch gaugers testified against the company, some in video depositions. They said Koch employees had a name for cheating on the measurements.”  It was called the Koch Method.  “The company used the Koch method with virtually all its customers.  In the 1980s alone, Koch records show those so-called adjustments brought the company 300 million gallons of oil it never paid for. And it was pure profit.  Bill Koch says that profits from that oil were a minimum of $230 million…In December 1999, the jury found that Koch Industries did steal oil from the public and lied about its purchases – 24 thousand times.”

So is the “Koch Method” the mumbo-jumbo “market based management” that they’re incentivizing economics departments at our institutions of higher education all around the country to indoctrinate in the minds of our young people?  Or is it something more basic; say, for example, plain ole cheating and regulatory capture.

The Koch brothers’ decision to create a nonprofit network dates back to 1977 when Charles Koch founded the Cato Institute, an organization the Koch foundations continue to fund.  According to Cato’s web site, David Koch continues to sit on its board along with Kevin Gentry, Vice President for Strategic Development at the Charles G. Koch Charitable Foundation and chief honcho of the secret, annual strategy meetings of the Kochtopi.

The next phase of a pseudo citizens group began in 1984 when Charles Koch, David Koch, and Richard Fink (Executive Vice President at Koch Industries and a board member at numerous Koch funded nonprofits) co-founded Citizens for a Sound Economy Foundation.  According to Right Wing Watch, Citizens for a Sound Economy (CSE), a sister organization, “spent $5 million against Clinton’s health care proposal, dogging the White House’s nationwide bus tour with its own bus and rallies. For a 1997 campaign, CSE spent hundreds of thousands of dollars per week running radio ads in 20 markets against proposed new EPA air standards.”

According to Source Watch, “CSE was a member of Project Relief, an alliance of corporations, trade associations, think tanks and law firms formed in December 1994 to promote the regulatory reform components of the House Republican ‘Contract with America.’ It was a member of the Cooler Heads Coalition, an industry-funded campaign sponsored by the National Consumer Coalition (an industry-funded front group) to spread skepticism about the science of global warming. It also belonged to the Health Benefits Coalition, which lobbies on behalf of the healthcare industry…”

CSE functioned very much as Donors Capital Fund is functioning today: in the dark.  In 2000, Public Citizen issued a report titled “CSE: Corporate Shill Enterprise,” calling it a “corporate lobbying front group.”  Budget documents for 1998 had been leaked to Public Citizen, showing that for just that one year, “the oil and gas industry contributed nearly $2.3 million, big phone companies gave nearly $1.5 million and the tobacco industry contributed more than $1.1 million….”  Back then, the Koch funding mechanisms were not that well known.  Today, looking at the names and amounts on the documents for just that one year of 1998, there is the Koch controlled Claude R. Lambe Charitable Foundation for $665,000; Koch Industries Inc., $626,500; David H. Koch, $750,000 — for a total of $2,041,500 – almost twice that of any other single contributor.  (Lawrence Kudlow served as economic advisor to the organization, according to Source Watch.)

In 2004, Citizens for a Sound Economy merged with Empower America (where Kudlow had served on the Board) to became FreedomWorks and the Citizens for a Sound Economy Foundation was renamed Americans for Prosperity Foundation.  According to the organization’s 2009 tax return, David Koch is chairman of the board and Koch Industries Executive V.P. Richard Fink is a board member.

Charles Koch, on the Koch Industries web site, admits to helping found or build the following organizations: the Institute for Humane Studies at George Mason University, the Cato Institute, the Mercatus Center at George Mason University, the Bill of Rights Institute and the Market-Based Management Institute.  In reality, there are many more organizations where Koch money forms the core of the operations.

Tax records obtained by Greenpeace show that Koch Foundations have given over $12 million to the Mercatus Center and its precursor organization, the Center for the Study of Market Processes, since 1986; over $13 million to Cato, since 1986; over $10 million to the Institute for Humane Studies. Citizens for a Sound Economy received at least $11 million from 1986 through 2002.  Since 2005, Americans for Prosperity Foundation has received over $5 million from the Koch Foundations.

Since its founding in 1999, the Bill of Rights Institute has received $2.6 million from the Charles G. Koch Charitable Foundation and $100,000 from the David H. Koch Charitable Foundation.  From 2007 through 2009, the foundation for the deceased parents of the brothers, the Fred C. and Mary R. Koch Foundation, which typically restricts its giving to Kansas, sent off $650,000 to the Bill of Rights Institute in Virginia.

A documentary available on the internet, “[Astro]Turf Wars,” exposed dissembling on the part of the Kochs over funding the Tea Party through Americans for Prosperity.  The video shows David Koch at an Americans for Prosperity confab, acknowledging his founding of the group and applauding each Tea Party speaker as they relay their work for the cause.  David Koch can be distinctly heard to say:

“Five years ago my brother Charles and I provided the funds to start the Americans for Prosperity and it’s beyond my wildest dreams how AFP has grown into this enormous organization of hundreds of thousands of Americans from all walks of life standing up and fighting for the economic freedoms that have made our nation the most prosperous society in history.”

Prosperous?  A man worth $21.5 billion can hardly be expected to take note of the news that 43 million Americans now live below the poverty level; or that 50 percent of the population would not be able to come up with $2,000 within 30 days for an unexpected expense, according to the National Bureau of Economic Research.

One of those freedoms most treasured by the Koch brothers is their ability to see a research study done by one of their funded economics departments, then have its dubious data quoted from the mouth of a funded “news” celebrity.  From 2002 through 2006, the Koch funded Mercatus Center paid Lawrence Kudlow, a CNBC co-host and later host of his own show, “The Kudlow Report,” a total of $332,500 through his consulting arm, Kudlow & Co. LLC.  I obtained the information from public filings Mercatus made with the IRS.  It is not known if the Mercatus Center continued to pay Kudlow after 2006.  The Mercatus tax filings show $3.1 million paid in a line item called  “honoraria” from 2001 through 2007.   Emails and phone calls to Kudlow, the CNBC legal department, and three communications executives of both CNBC and NBC/Universal were met with silence, despite a week’s lead time to respond.

The Center for Public Integrity had this to say about the Mercatus Center in 2006:

“In 2005, Rep. Bob Ney, R-Ohio, whose office has accepted 19 trips from Mercatus — more than any other — introduced a bill to amend the Clean Air Act and require the secretary of energy to construct 15 new gasoline refineries and sell them to private businesses.  Mercatus has sought to weaken the act and spoken of the need for more refineries — both scenarios that could benefit Koch Industries.

“ ‘Neither the congressman nor his staff has ever had a single conversation with anyone from Mercatus about that bill,’ said Brian Walsh, communications director for Ney. ‘He introduced that bill to reduce America’s dependence on foreign countries for oil. We have not had a new refinery built in this country in over 20 years.’

“Mercatus spent at least $227,000 on more than 400 trips for lawmakers and their aides from 2000 through mid-2005. Most of this money appears to have been spent on the group’s annual retreat for congressional chiefs of staff, who are often put up in posh hotels near Washington and attend seminars on public policy.

“While Congress is in session Mercatus also conducts regular seminars in congressional office buildings, where staffers are offered free meals and given lectures on issues such as health care, telecommunications regulation and tort reform.

“ ‘There is no conceivable argument of why this group has not registered to lobby. They have met the threshold that makes them a lobbying group,’ said [Craig] Holman of Public Citizen… ‘The Mercatus Center does not engage in lobbying,’ Carrie Conko, the organization’s communications director, said in a written statement for this story.”

Kudlow has a creed that he states regularly on air: “We believe that free market capitalism is the best path to prosperity.”  Rather than an editorial “we,” a strong argument could be made that Kudlow is speaking on behalf of the Kochtopi.  Consider this entry on June 29, 2006 at Kudlow’s ironically named blog, “Kudlow’s Money Politic$.” (The dollar sign is not a mistake; nor could it be more appropriate.  Kudlow received $70,000 from the Mercatus Center in 2006.) “At the request of my friends at the Mercatus Center, here is (sic) some policy issues that need the most attention during the remainder of 2006.” Kudlow goes on to detail the fondest dreams of the Mercatus Center.  Here’s a nice partisan snippet:  “The Republican Congress should be curtailing budget earmarks and tight spending policies in order to get re-elected.”

Kudlow has also highlighted, at CNBC or National Review, the work of Veronique de Rugy, a senior research fellow at Mercatus, along with multiple scholars paid by Mercatus or its sister organization, the Institute for Humane Studies.

The Institute for Humane Studies (HIS), funded by the Koch Foundations, describes its mandate as follows in its Spring 2010 Newsletter:

“Reversing decades of big government will require a critical mass of talent in every channel of opinion influence. The Institute for Humane Studies is on it. Targeting college students with a unique set of education and career-development programs, IHS is developing a growing supply of opinion leaders who champion the principles of individual liberty and free enterprise.

“The number of IHS alumni in opinion-leading careers has quadrupled in just 10 years, to 1,156 college professors, 587 in public policy and the freedom movement, and 385 in journalism and the venues of popular culture. And many more are in the pipeline.

“IHS alumni will influence many multiples of their own numbers, over many decades. This is the leverage of the IHS strategy, as alumni educate tomorrow’s leaders in university classrooms all around the country, inform millions of consumers of news and opinion, critique government interventions, and advance solutions that respect the ideals of America’s Founders.

“Veterans of IHS programs include professors such as John Tomasi at Brown University, where he founded a center that is bringing the ideas of liberty into the classroom.  Steve Moore is a member of the Wall Street Journal’s editorial board. Scott Bullock is a star litigator at the Institute for Justice, fighting for property rights and school choice all the way to the Supreme Court.  And Kristi Kendall is John Stossel’s top producer, first at ABC “20/20” and now at Fox Business Network.”

A repeat guest on Kudlow’s CNBC show is Stephen Moore.  Moore joined the Wall Street Journal as a member of the editorial board and senior economics writer on May 31, 2005. Moore is the former president of the Club for Growth and the Free Enterprise Fund.  He has served as a federal budget expert for the Heritage Foundation and was a senior economics fellow at the Koch-founded Cato Institute, where he published dozens of tax and economic studies that then made their way into the echo chamber of right-wing columnists.  Moore also served as research director for President Reagan’s Commission on Privatization.  Moore’s name appears on the guest list for the secret Koch bash in Aspen last June.

Moore is on the Board of the super secretive Donors Capital Fund and held that position in 2008 when the Fund made the outsized gift of $17 million to the Clarion Fund for the DVD production and distribution of the Islamophobic documentary, “Obsession,” seven weeks before the Presidential election.   Surely, as a board member of Donors Capital and an editorial board member of the Wall Street Journal, one of the papers that distributed the race-baiting film, Moore was in a pivotal position to debate the ethics of this deal.

Kudlow and Moore have co-authored articles such as: “It’s the Reagan Economy, Stupid” –  Washington Times, February 1, 2000 – trumpeting the mantra that the nation’s prosperity had been built on tax cuts and “deregulation of key industries like energy, financial services and transportation”; and  “The Time To Cut Taxes Is Now, But Bush Plan Should be Bigger” – Investor’s Business Daily, February 8, 2001.

Both Kudlow and Moore collect substantial additional income each year as keynote speakers for a broad assortment of conservative groups, Kochtopi, and industry groups.  One of Kudlow’s speakers’ bureaus puts his fee for a talk at between $25,000 and $40,000;  Kudlow has previously said $15,000 is more typical.  Moore is listed at All-American Speakers Bureau’s web site with a fee of $5,001 to $10,000.

John Stossel, former co-anchor of ABC’s 20/20 and now host of Fox Business News weekly “Stossel” show, is a case study in opaque money webs.  While Stossel was at ABC, a nonprofit operation sprang up to market DVDs of Stossel’s shows along with teaching guides to teachers of middle and high school students.  A stated goal was to help the students learn to engage in “independent” thought.  Indeed, one of the nonprofits involved is called the Center for Independent Thought, run by Andrea and Howard Rich.  (Howard Rich is on the Board of Cato and his involvement with Charles Koch dates back to the early 1980s and the Libertarian Party. )  The earlier teacher guides for this operation, called “Stossel in the Classroom,” boldly shows ABC News on the cover together with a photo of Stossel.  But the guides were originally written by economic professors at George Mason University where Charles Koch holds heavy influence. (According to Kris Hundley of the St. Petersburg Times, Koch has donated $30 million to the university over the past 20 years.)

On his page at George Mason University, one of the professors, Thomas Rustici, admits to preparing the materials. “In 1999, I wrote the student guide that accompanies ABC News reporter John Stossel’s ‘Greed,’ ‘Freeloaders’ and ‘Are We Scaring Ourselves to Death’ videos. These ‘Stossel in the Classroom’ guides are in almost 600 classrooms and have been read by more than 175,000 students.” 

A producer for Stossel at both ABC and Fox, Kristina (Kristi) Kendall, was involved in the Koch funded Institute for Humane Studies at George Mason University.  According to the Institute’s web site, Stossel asked it to recommend someone to work with him at 20/20. (Why an ABC producer would turn to a Koch funded institute was not explained.) Kendall received the Charles G. Koch Outstanding Alumnus award of $5,000 and in 2009 was elected to the Institute’s Board of Directors.  According to the Institute’s web site, Stossel has had other interns from the Institute working for him and had this to say: “I don’t know what I’d do without them.  Their enthusiasm, and their knowledge of free markets and limited government is a tremendous help in conveying the ideas of liberty in our special television reports.”

The 2011 Stossel in the Classroom teacher’s guide was written by Robert Schimenz, a teacher at the Queens Vocational and Technical School in New York. Schimenz is also the varsity baseball coach there.  One fascinating lesson plan focuses on “Needy Seniors or Greedy Seniors?”  It asks: “Are our senior citizens living at the expense of our youth? Shouldn’t senior citizens pay for their own health care? What was the purpose of Medicare?”  Then it turns to a programmed learning approach to launch class warfare between junior and grammy:

From the Stossel in the Classroom teacher’s Guide:

“Directions: as you watch the video, fill in the blanks with the correct words.

1. It’s an issue that dwarfs everything else. Isn’t it time America did less for the ___________?

2. And even though these folks are doing quite well, they get a bonus. Thanks to __________, you pay for most of their health care.

3. ______________ likes getting free stuff.

4. Harvard Business School Professor Regina Herzlinger says Medicare cheats the __________.

5. How do they feel ___________ that they’re living in these $300,000, $500,000 homes and they’re still, you know, not paying for their own health care.”

(My answer to question 1 is: billionaires.  2. Rigged question. 3. Everyone. 4. Grim reaper. 5. Teacher needs to hire an editor.)

In 2007, Teacher Education Quarterly took a hard look at Stossel’s ties to right wing front groups.  In an exhaustive piece written by David Gabbard and Terry Atkinson, the authors concluded:

“Everyone who cares about the future of our schools needs to be aware of the heavy influence of neoliberal think tanks on Stossel’s “reporting” and the sorts of reforms promoted through programs such as ‘Stupid In America.’  In all likelihood, he will continue his attacks on public schools as part of the previously-mentioned neoliberal strategy of pressuring schools to teach to high-stakes tests or risk having their schools placed under the management of a private corporation.  For neoliberals, this presents a win-win situation. So long as teachers succeed in maintaining satisfactory test scores by teaching only to the tests—and even sometimes from scripted lesson plans aligned with the tests—they will have little opportunity to engage students in activities that might be destructive of their allegiance to the corporate order. If they fail to maintain satisfactory test scores, this failure serves to rationalize handing over the management of schools directly to private corporations.”

Between 2007 and 2008, Donors Capital paid the following sums to groups associated with Stossel in the Classroom:  $300,000 to Center for Independent Thought; $393,607 to Free to Choose Network, Inc.; $1.8 million to the Palmer R. Chitester Fund. (The Free to Choose Network, Inc. and Palmer R. Chitester Fund have the same IRS tax identification number.)  In the past, Stossel has said he turned over his enormous speaking fees to the Chitester Fund, which, at one time, owned the trademark to Stossel in the Classroom.  The Center for Independent Thought currently owns the domain name for Stossel in the Classroom.

Big name personalities like Kudlow, Moore and Stossel are to be aided in the mother of all wars for the winning slate in the 2012 elections by an interconnected network of  “news bureaus” being funded by Donors Capital.  In 2009, the most recent year for which tax documents are available at, Donors Capital earmarked millions specifically for “news bureaus” and “journalism projects.”  The money flowed into right wing nonprofits and came out as independent news coverage of individual state issues.  Specific reporting work was also earmarked.  Here’s one example: The Heartland Institute received $150,000 “for GW reporting for one year.”  I’m going to muster a wild guess that GW stands for “global warming.”  The Heartland Institute holds annual climate change conferences where it brings together global warming  skeptics.  It got another $520,940 for a “GW-end.”  I’m guessing that’s Global Warming Weekend.  All told, Heartland received $2,171,530, just in the one year of 2009.

Big Brothers or Big Brother?  You decide who’s scarier.

Related articles by Pam Martens:

Koch Footprints Lead to Secret Slush Fund to Keep Fear Alive

The Koch Empire and Americans for Prosperity

The Far Right’s Plot to Capture New Hampshire

This article originally appeared at




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