On a drizzly Monday morning in mid-September, about 200 staffers from the Koch brothers’ conservative advocacy network were summoned to the fifth floor auditorium of the Charles Koch Institute’s Arlington, Virginia, headquarters, and presented with some bleak news: their efforts to reshape American politics were faltering and were being scaled back amid concerns about lower-than-projected fundraising.

In recent years, the deep-pocketed network’s forays into federal elections and policy fights had resulted in “very little success,” the managers were told by top Koch official Mark Holden, according to three people familiar with the meeting.


Another official detailed plans for a merger of existing network groups, announcing that the groups would be narrowing the universe of voters they were seeking to mobilize from 10 million to 5 million.

Holden predicted “donor malaise” in 2017, and said the network was consolidating its groups to become “more effective” and to “avoid drama.” He predicted difficult changes ahead, comparing them to the years of cold-hearted but successful football player personnel moves by Bill Belichick, coach of Holden’s beloved New England Patriots.

When the staffers filed out of the auditorium, past a massive mural of the network’s lead benefactor Charles Koch — a piece of wall art composed of hundreds of photos of Austrian economists and network volunteers — they were in a state of shock.

“Nobody talked on the way back. It was somber,” said a staffer who attended the meeting. In the weeks that followed, numerous network staffers began sending out resumes looking for new jobs, while others left suddenly, according to operatives inside and outside the network.

The network’s staffers — and the political world as a whole — had grown accustomed to the rapid expansion of the constellation of advocacy groups helmed by the billionaire industrialist brothers Charles and David Koch. Over the last seven years, their operation grew to the point where it resembled a privatized political party, heading into the cycle pledging to spend $889 million through an infrastructure that rivaled that of the Republican National Committee.

Since then, though, the Koch operation has decided to sit out the presidential race, reduced its spending goal to $750 million, failed to maintain the support of some top donors including Las Vegas casino mogul Sheldon Adelson, announced that it was consolidating or eliminating some of the groups and initiatives in the network, and irked Republicans by opting not to advertise heavily on television in the final month of the campaign.

Now, with Republican Donald Trump on the verge of a crushing loss in the presidential race as the Kochs watch from the sidelines, there are mounting questions about whether their vaunted political and advocacy operation may have peaked. The answer could resonate well beyond Nov. 8, since the Koch network would otherwise be expected to play a major role in the post-Trump rebuilding of the conservative movement.

In interviews, some insiders traced the network’s decline — or at least its decline in growth — to its decision to sit out the presidential race, at first out of disagreement over whether to play in the crowded GOP primary, and then out of distaste for Trump.

Other insiders contend the network is shifting away from politics as a whole to focus on advancing policies rooted in the Kochs' libertarian-infused brand of small-government conservatism.

The network’s official line is that it is neither stepping back from politics, nor reducing its overall footprint, but is merely reorganizing its operations to become more efficient and effective at shaping electoral and policy fights well into the future.

“The world is constantly changing, and we have to do so in our network as well, and that’s why we reorganized last month — or announced it, and are still in the process of it,” Holden told POLITICO on Tuesday.

The general counsel of the Koch brothers’ multi-national industrial conglomerate Koch Industries, Holden has taken an increasingly central role in the Kochs’ advocacy operation in recent years. He chairs the board of the network’s central group Freedom Partners Chamber of Commerce and also chairs the executive committee of the network’s main grassroots arm, Americans for Prosperity, which absorbed a trio of smaller groups in the reorganization.

He rejected the idea that the consolidation represented a diminution of the network’s ambition, casting it instead as the first step towards the network’s post-election plans.

“Nov. 8 will be a big day — there are a number of senate races we’re engaged in that we hope go our way,” he said. “But then Nov. 9, we all have to move forward and we’ve already started on our plans for what 2017 is going to look like. That’s why we did this now before the election.”

Asked about his comments at the staff meeting, he acknowledged that “we’ve had very little success moving the needle at the federal level. It’s always difficult.” But, he added “we have had a lot of success at the state level and we hope that we will continue to do so.”

Ironically, though, some Koch insiders and critics alike agree that the conditions that are now challenging the Kochs are in some ways of their own creation. By helping to empower the anti-establishment tea party protests in 2009 and 2010, these people say, the Koch network inadvertently laid the groundwork for a movement that turned towards a strain of anti-immigrant protectionism that is anathema to the Koch’s ideology, and that proved fertile ground for Trump’s nationalist brand of populism.

“We are partly responsible,” said one former network staffer. “We invested a lot in training and arming a grassroots army that was not controllable, and some of these people have used it in ways that are not consistent with our principles, with our goal of advancing a free society, and instead they have furthered the alt-right.”

A major donor to the Koch network argued that the tea party’s early success at electing conservative champions “led to unrealistic expectations,” which then fomented disappointment with Washington gridlock and set the stage for Trump’s ability to tap into anti-establishment fervor.

“What we feel really badly about is that we were not able to educate many in the tea party more about how the process works and how free markets work,” said the donor. “Seeing this movement that we were part of creating going off in a direction that’s anti-free-market, anti-trade and anti-immigrant — many of us are really saddened by that. Unfortunately, there is little in the short term we can do about that.”

The 2010 midterm elections, when the tea party wave helped Republicans recapture the House of Representatives, was the first in which the Kochs and their allies spent heavily through non-profit groups in the network and others allied with it.

That attracted the attention of Democrats, who began trying to rally their base by attacking Charles and David Koch as shadowy puppeteers. But it also mobilized fellow Republican mega-donors. They poured tens of millions of dollars into the Koch network, which cast itself as applying the same principles that powered Koch Industries to the new big-money political landscape created by the Supreme Court’s 2010 Citizens United decision.

That allowed the network to spend a then-unprecedented $400 million in the run-up to the 2012 election, including on unsuccessful efforts to oust President Barack Obama and flip the Senate to Republican control. Afterwards, the network, under pressure from donors, commissioned a forensic corporate-style audit that determined its efforts were undermined by redundancies and infighting among Koch-backed efforts, an inability to measure impact and too much spending by consultants.

So the network centralized its operations headed into 2014, when it spent $300 million on political and policy advocacy and was credited with helping Republicans re-capture the Senate.

Outwardly, the network appeared to be in strong position to influence not just the 2016 election, but all of American politics and public life for years to come.

At a 2015 network gathering in Washington, D.C., Charles Koch’s right-hand man Rich Fink told staffers that Koch, who will turn 81 next month, intended to leave a significant portion of his fortune, currently estimated at $42.2 billion, to the network when he dies, according to two people who were present at the meeting. (It’s unclear how that cash would be allocated, but Charles Koch’s donations to the network have mostly gone towards academic research, think tanks and higher education programs, rather than politics, according to campaign finance filings and interviews with people familiar with his giving).

And the Koch network announced its jaw-dropping $889 million spending goal at a January 2015 gathering of its donors. It invited a handful of likely Republican presidential candidates — a group that did not include Trump, who was then considered a political sideshow — whose politics were deemed compatible with the Kochs. Not only was the network preparing to play a major role in the presidential general election, but it was openly toying with the prospect of wading into a GOP presidential primary for the first time ever.

All that careful planning was upended, though, when Trump unexpectedly surged to the front of the field. The Koch network couldn’t agree on a consensus alternative candidate to back. And, while sources say Charles Koch and his top lieutenants debated proposals to spend tens of millions of dollars to try to stop Trump, they ultimately decided against it.

In March, as Trump racked up a string of impressive primary victories that marked him as the prohibitive favorite to win the nomination, word began circulating in conservative circles that the Koch network was starting to shift its spending away from campaigns and more towards academic research and think tanks. When POLITICO asked a handful of network sources about the possible shift, a network official proactively reached out to claim that it was “completely wrong." The swift preemptive pushback suggested that the network was acutely sensitive to any perception of such a shift, which could have the effect of dampening donor enthusiasm in an election year.

And the network went into full-on damage control mode in May, a couple weeks after Trump effectively clinched the nomination, when National Review published a story in which sources pointed to “mounting evidence — reduced budgets, the shuttering and streamlining of departments, the elimination of grants to allied political organizations, and the departure of top executives — demonstrating a shift of resources and attention away from federal campaign activity.”

Network leaders were convinced that a leading source for the story was a veteran GOP operative named Will Adams, who had joined the network about a year earlier as political director for Freedom Partners. Two days after the article’s publication, Adams was gone, according to an autoreply message from his email account saying he was “no longer employed at Freedom Partners.” Sources say there was gossip among Freedom Partners staff about the possibility of legal action against Adams, who did not respond to inquiries from POLITICO.

Freedom Partners spokesman James Davis would not discuss the terms of Adams’ departure but rejected any suggestion that the organization considered legal action.

The network pushed back on the National Review story by pointing to its robust Senate television advertising campaign, including $30 million in reservations announced in the days after the National Review story. It said that the ads were evidence that it was “ fully engaged” in 2016 politics, even if it wasn’t playing in the presidential race.

Davis also said that the lessons learned from previous elections reveal that “TV ads are less effective at the end of a campaign, so our strategy was always to spend early on television and then to shift to grassroots for the get out the vote operation.”

Additionally, he said that the narrowing of the voter targets from 10 million to 5 million does not represent a scaling back of the get-out-the-vote effort, but rather the evolution of a sophisticated micro-targeting operation.

“As data comes in through the grassroots over the summer and voters make up their minds, you’re able to narrow in on key voter blocks,” he said, explaining that the network’s ground operation is substantially more robust than it’s been in previous cycles.

Under the planned shift from TV to ground game, not only would the network refrain from television advertising after Oct. 4, but it also would cancel a week of advertising it had reserved in late September and early October to support Florida Sen. Marco Rubio’s reelection campaign. Davis explained the decision by pointing to Rubio’s large lead over his Democratic challenger, and noting that groups supporting the Democrat also pulled their advertising in the state.

Freedom Partners also pulled out of the space it had reserved at the Republican National Convention in Cleveland in July. And the group stopped aggressive fundraising for its super PAC, Freedom Partners Action Fund, in recent months, reflecting the shift away from television advertising. The PAC, which had raised $8.1 million in May alone, has raised only $6.7 million in the four months since then, according to reports filed with the Federal Election Commission.

Donors who had collectively given tens of millions of dollars to the Koch network began pulling back or redirecting their contributions to other, often newer, big-money vehicles that were spending in the presidential race.

Mega-rich conservative families that had been Koch donors — including the Mercers (who had pledged $25 million from their hedge fund fortune to the Koch network one year, according to sources familiar with it) and the Chicago Cubs-owning Ricketts family — assumed control of their own super PACs or non-profit groups to boost Trump or attack his Democratic rival Hillary Clinton.

The Las Vegas casino mogul Adelson — who had donated millions to the network over the years, including $10 million in 2012 — had not given a dime in 2016, according to multiple operatives familiar with Adelson’s 2016 political spending. Instead, Adelson has donated or pledged $25 million to an outfit helmed by Todd Ricketts consisting of a super PAC called Future45 and a non-profit group called 45Committee.

Representatives for Adelson, the Mercers and the Rickettses either could not be reached or did not respond to requests for comment about their decreased support for the Koch network, or whether they expect to increase it after the election.

Holden conceded “we’re not engaged in the presidential election, and when you’re not engaged in the presidential, that’s a big chunk of cash that you’re missing, for sure.”

But a handful of major donors and fundraisers who have worked with the Koch network predicted that some benefactors who turned away from the network may not be so eager to come back, partly because other big-money operations offer them more say in choosing issues, campaigns and tactics.

Indeed, as the Koch network has expanded the range of policy areas in which it’s active, it has irked some of its donor constituencies who agree with the Kochs’ animating issue — fiscal conservatism — but disagree with the brothers on other issues.

For example, some neoconservative donors who had previously given to the Koch network were upset by an event hosted by the Charles Koch Institute in mid-May, featuring a range of foreign policy thinkers in conversation about how the network might become more involved in foreign policy, from which it had shied away.

The event included a pair of academics whose writing about the power of the Israel lobby has led to charges of anti-Semitism. A fundraiser with knowledge of the situation said the event “was clearly an issue to Adelson. It was made evident that was a problem, but it’s impossible to know for sure if that’s why he didn’t give to the network.”

The network’s ongoing reorganization is partly an effort to more closely coordinate all the policy and political efforts under the Koch umbrella, including community investment programs, for which the network created a new entity called Stand Together.

But perhaps the biggest feature of the reorganization is the contraction that was initiated when AFP absorbed a trio of smaller groups targeting specific slices of the electorate — Generation Opportunity (which is focused on millennials), the LIBRE Initiative (Hispanics) and Concerned Veterans for America (veterans and national security voters).

At the same time, operatives familiar with the situation tell POLITICO, the network has largely terminated its relationships with and payments to a pair of groups that were deemed unsuccessful or ill-fitting within the network — a for-profit political consulting firm called Aegis Strategic, and a religious-themed non-profit called the Institute for Faith, Work & Economics.

The tumult — combined with a handful of high-profile departures and widespread concerns that the network could find itself facing congressional investigations if Democrats retake the Senate — has some employees on edge, according to a handful of people around the network.

It was against that backdrop that staffers were summoned to the Charles Koch Institute’s auditorium on the rainy September Monday morning.

After Holden’s presentation about the reorganization, a pair of other network officials talked about the importance of destroying old physical and electronic files.

Earlier in the month, the network held a document clean-up and retention week during which shredding bins were brought to the offices of various network groups, and employees were encouraged to identify sensitive files for destruction. Since there is no evidence of any active investigation into the Koch network, there’s nothing prohibiting the groups from destroying old files — a security safeguard that’s becoming more common in politics and business as concerns rise about hacking and cyber-attacks.

And Holden on Tuesday told POLITICO that the document shredding was unrelated to concerns about possible investigations from a Democratic Senate, but rather was standard operating procedure “to protect our donors and their privacy and our strategy.”

The September meeting also featured a presentation on the political landscape. At the tail end of it, Holden predicted that Republicans had a 60 percent chance of keeping the Senate, while Michael Palmer, the head of the network-owned data company i360, predicted the party’s prospects of retaining control of the upper chamber were 40 percent.

Regardless of who wins on Nov. 8, the Koch network is not going away, said Frayda Levin, an AFP donor who chairs the board of one of the organization’s component groups. She said conservatives need the group and the network more broadly.

“Allies are constantly shifting, and after an election, time heals all wounds,” she said. “There will be other elections, there will be other issues. And who are they going to turn to? No one else has a grassroots network like we do. No one has outreach to Latinos like we do. We have a really good model and we have i360 to work with.”

Shane Goldmacher and Daniel Lippman contributed to this report.