Revealed: The Secret Money Trail Behind Kevin McCarthy’s MAGA Makeover

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RS-KEVIN-MCCARTHY-RGB-FULL - Credit: Illustration by Victor Juhasz for Rolling Stone
RS-KEVIN-MCCARTHY-RGB-FULL - Credit: Illustration by Victor Juhasz for Rolling Stone

The two men stand shoulder to shoulder, posing for the camera almost like father and son. On the left is former President Donald Trump, flashing that money grin, the light glinting off his golden-yellow tie. On the right is the Republican congressman who, more than any other, has hitched his fortunes to Trump and positioned himself to fill the vacuum left at the top of the Republican Party after Trump’s 2020 defeat. To Trump, he’s known as “my Kevin.” To the rest of us, he’s Rep. Kevin McCarthy of California.

For four years, McCarthy dutifully served as one of Trump’s most loyal wingmen in Congress, defending the president after the latest racist tweet, running interference in both impeachment cases, and generally making himself available to do whatever necessary to defend the MAGA cause. When Trump tumbled down the conspiratorial rabbit hole after the last election, McCarthy followed after him, adding his name to a long-shot lawsuit seeking to overturn the result in several blue states and voting to invalidate the vote count in Arizona and Pennsylvania mere hours after the January 6th insurrection. McCarthy’s alliance with Trump has served him well: He now stands at the precipice of becoming the most powerful member in Congress, next in line to be speaker of the House if the GOP wins back the majority in 2022.

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Yet McCarthy’s embrace of MAGAdom is rich with irony. Long before he was “my Kevin,” McCarthy was a “Young Gun” conservative, the face of a new generation alongside the likes of Paul Ryan and Eric Cantor (remember him?) that couldn’t be more aligned with big business and the K Street crowd. McCarthy was the swampy Beltway creature that Trump raged against, the kind of Republican who was more at ease at a corporate fundraiser than a tarmac rally, the sort of insider who said behind closed doors that Trump was on Russian President Vladimir Putin’s payroll. (He later said he was joking.)

McCarthy’s extreme MAGA makeover was an awkward one. Yet he didn’t have to do it alone. At a critical moment in McCarthy’s ascent, a network of swampy operatives mobilized in his defense and a mysterious dark-money group carpet-bombed the airwaves to position McCarthy as the heir apparent to lead the Trump-era Republican Party. And when you follow that money, you discover a campaign of deception that’s even phonier than McCarthy’s rebirth as a right-wing MAGA congressman.

This slimy story, which is laid out in documents obtained by Rolling Stone, reveals how a crew of lobbyists, political consultants, and big-money donors seemingly masqueraded as grassroots tea-party populists in a bid to bolster McCarthy’s credibility with Trump supporters. The point of this scheme was to help McCarthy defeat a far-right challenger in an important intra-party election, elevating him to become the House GOP leader and ensuring that a corporate ally remained at the head of the party. For all of Trump’s bluster about draining the swamp, the dark-money campaign to elevate McCarthy shows how the GOP’s corporate enablers not only endured but also adapted their tactics to be murkier than ever — all while ensuring that the future of the Republican Party remained in friendly hands.

And here’s the kicker: The country’s broken election system and the willingness of dark-money groups to push the legal limits mean that the public wouldn’t know about this deceptive campaign to help McCarthy until years later, far too late for anyone to act on it.

Election experts who’ve reviewed the details of McCarthy’s extreme MAGA makeover say it’s hard to envision a sequence of events more emblematic of the pathetic state of the campaign-finance system and the way in which anonymous cash now reigns king in American politics. With an under­funded and understaffed IRS and a barely functional Federal Election Commission, the U.S. political system hasn’t been this susceptible to corruption and undue influence since the lead-up to the Watergate scandal, campaign-finance and tax-law experts say. And without action from President Biden and Congress, it will only get worse.

In other words, it’s not only Trump supporters getting duped by dark money. It’s all of us, and it’ll continue to happen so long as the untraceable cash continues to flow. The McCarthy blitz shows just how convoluted the money trail can be. “Even amidst the constant flow of dark money that obscures who is influencing politics, this seems like a particularly stark case of misleading the public about who’s supporting a particular person,” Noah Bookbinder, president and CEO of the watchdog group Citizens for Responsibility and Ethics in Washington (CREW), says. “It is not at all the way our political system is supposed to work.”

Leadership Battle

In October 2018, a radio ad hit the airwaves across the country that painted a bleak picture of life along the U.S.-Mexico border. “A five-year-old brutalized,” the ad said. “Law-enforcement officers gunned down. These are the victims of illegal immigration ..” While then-President Trump was pushing to quell the violence at the border, it was McCarthy who was “leading the fight” in Congress, introducing bills to fund Trump’s border wall and crack down on “criminal illegal immigrants.” If listeners wanted to help Trump, they should “tell Congress to pass Kevin McCarthy’s Build the Wall and Enforce the Law Act now.”

Launching a few weeks before the 2018 midterms and continuing for several weeks after Election Day, the radio ad and others like it blanketed talk-radio stations in big markets including Orlando, San Diego, and Baltimore, but also in Huntsville, Alabama; Little Rock, Arkansas; Pueblo, Colorado; and New Haven, Connecticut. At the same time, pro-McCarthy ads started appearing on Google. Next to McCarthy’s grinning mug were the Trumpian messages “Fund the wall” and “Stop illegals from voting.” The ads urged people to “Tell Congress to support McCarthy’s bill” — a reference to the legislation he had introduced to provide $20 billion for Trump’s border wall.

At the time, the pro-McCarthy radio ads caught the attention of multiple Republican lawmakers. ­McCarthy faced little opposition for his own seat in Congress. The ads were viewed as air cover for a much tougher fight that would happen a few weeks after the midterms: McCarthy’s bid to become the next leader of the House Republicans.

With Speaker Paul Ryan retiring from office, McCarthy faced a challenger in Rep. Jim Jordan of Ohio. The McCarthy-Jordan contest was more than a leadership fight; it was a battle over the direction of the Republican Party and who would lead it for years to come. Jordan is a flamethrower of a congressman, known for his fealty to Trump and his conspiratorial style of questioning at high-profile congressional hearings. McCarthy, while loyal to Trump as well, was viewed as a more moderate choice, capable of uniting his party’s different factions. He was also a prolific fundraiser whose PAC donors included ­dozens of Fortune 500 corporations.

Yet the right wing of the party viewed McCarthy with skepticism, a Brooks Brothers-wearing RINO cut from the same cloth as outgoing Speaker Ryan. Conservative media outlets blasted him as soft on the “border invasion” because he didn’t include border-­wall funds in must-pass legislation, which would have given the money a better chance of getting approved by Congress. Now, as he eyed Ryan’s old job, he was introducing “meaningless” border bills that stood no chance of passage to prove his conservative cred. “Now this man has the nerve to grandstand in front of us when he knows there is a challenger?” read a story in The Blaze. “If we gullibly fall for this charade from the most failed House leadership of all time, we deserve the endless betrayal we will suffer.”

The pro-McCarthy advertising blitz, which blanketed conservative talk radio for weeks, was a ploy to shore up the congressman’s right flank by helping create the impression that McCarthy marched in lockstep with Trump. A week after the 2018 midterms, ­McCarthy won the leadership race in a landslide, putting him in a position to perhaps one day become speaker. Soon afterward, the pro-McCarthy ads stopped. Mission accomplished. (McCarthy’s office didn’t respond to a request for comment.)

But if you happened to hear one of those pro-­McCarthy radio ads or see one online, they said they were paid for by the same group, State Tea Party Express. The name evoked cosplay George Washingtons in tricorn hats and people marching in the streets with Gadsden flags and signs telling Barack Obama to keep his government hands off their Medicare.

A bare-bones website seemed to confirm that mental image, but anything of substance about State Tea Party Express was impossible to find — who ran the group day to day, who funded it, and why it cared about McCarthy. Because it held itself out as a nonprofit group, State Tea Party Express never had to disclose who funded McCarthy’s MAGA makeover. But once it had spent all that dark money in support of McCarthy, it went dark again.

“MY KEVIN”: McCarthy has climbed to the top of the Republican ranks, a whisker away from being House speaker, by getting as close as he can with former President Donald Trump. - Credit: David McNew/Getty Images
“MY KEVIN”: McCarthy has climbed to the top of the Republican ranks, a whisker away from being House speaker, by getting as close as he can with former President Donald Trump. - Credit: David McNew/Getty Images

David McNew/Getty Images

The Heart of the Swamp

Adav Noti, an election-law expert at the Campaign Legal Center, describes the flow of dark money that went to shore up McCarthy’s right flank as a “nesting­-doll situation,” one that requires peeling back layer after layer to get closer to the source of the funds. The centerpiece of this scheme is a nonprofit group with the nothing-to-see-here name of CLA Inc.

In 2018, CLA gave $1.5 million — its largest grant of the year — to State Tea Party Express, which in turn spent almost that entire amount, $1.46 million, on political activity. The readily available evidence suggests that State Tea Party Express did not spend any money on ads or political work other than helping elect McCarthy the next GOP leader.

So what do we know about CLA Inc.? For starters, the group made it extremely hard to know anything about its operations in 2018. CREW president Noah Bookbinder said his group had to file a complaint with the IRS to force CLA to produce its 2018 tax return.

The principal officer listed on CLA Inc.’s tax documents is Marc Himmelstein. He’s the opposite of a tea-party activist: A former executive at the American Petroleum Institute, the Big Oil lobbying group, Himmelstein now works as a lobbyist at National Environmental Strategies, a D.C. lobbying firm he co-founded with Haley Barbour, the former Mississippi governor, prolific fundraiser, and good ol’ boy head of the Republican National Committee. Don’t be fooled by the firm’s feel-good name: Himmelstein and his colleagues represent multibillion-dollar energy companies including Dominion Energy and ­Exelon, as well as large utilities like PG&E and DTE Energy. By all indications, Himmelstein’s decades-long career in the influence industry has proven lucrative: Lobbying records show payments to his firm totaling millions of dollars every year, and public records indicate he and his partner reportedly bought a ­nearly $2.7 million home in 2017 once owned by the political talk-show host John McLaughlin. A previous home boasted a 6,000-bottle wine cellar, according to public-­property listings. (Himmelstein did not respond to requests for comment and a detailed set of questions.)

The connection between National Environmental Strategies and CLA isn’t hard to find: They share the same address, according to tax records. Not only that, but the office listed for both outfits happens to be located at the Watergate complex, the site of the infamous 1972 break-in by Richard Nixon’s henchmen that unraveled a criminal conspiracy and led to Nixon’s downfall. Just the name Watergate conjures images of political skulduggery and Beltway elites.

Himmelstein’s services extend beyond inside-­the-Beltway lobbying. One of his clients is First­Energy, a scandal-plagued utility headquartered in Ohio. According to the Center for Public Integrity, CLA, Himmelstein’s dark-money group, spent thousands of dollars on ads in an Ohio congressional race attacking a state legislator who had refused to support a bailout of two of FirstEnergy’s nuclear power plants. “I didn’t budge when they came into my office to lobby me,” the candidate, state Rep. ­Christina Hagan, told CPI about her meetings with First­Energy ­officials. “I became the target of the company and the members of our leadership team who wanted to get it done but couldn’t because I wasn’t going to be supportive.” In the end, Hagan lost. (In June, ­federal prosecutors charged FirstEnergy with conspiracy to commit wire fraud related to the power-plant ­bailout scheme. FirstEnergy agreed to pay $230 ­million as part of a deferred-prosecution agreement in the case.)

As for State Tea Party Express, the other key link in this dark-money daisy chain, peel away the veneer of grassroots authenticity and you find a California political consultant named Sal Russo. A veteran of GOP politics, Russo has faced criticism in the past for operating tea-party-themed groups that raised millions from small-dollar donors and allegedly funneled a large percentage of that money back to Russo’s consulting firm. In 2009 and 2010, rival tea-party groups ripped Russo-backed organizations as phony front groups, calling them the “Astroturf Express” and a “Republican front organization.” More recently, Russo was sued by the California attorney general for allegedly defrauding donors who had ­contributed to a charity that sent care packages to U.S. service members overseas. (Russo told the Los Angeles Times the lawsuit was politically motivated and the allegations were “bogus.”)

Tax records and interviews with nonprofit experts reveal that State Tea Party Express has played fast and loose with even the meager requirements for a nonprofit. Only when Citizens for Responsibility and Ethics in Washington, the watchdog group, submitted a formal request did State Tea Party Express provide a 2018 tax return. There’s no record of the group having filed any tax return in any other year.

So to recap: The grassrootsy-named State Tea Party Express ran a bunch of ads to salvage Kevin McCarthy’s standing with the MAGA faithful just before McCarthy ran to become the new House GOP leader. Despite the name and branding, that tea-party group got most of its money from a D.C. outfit run by a veteran corporate lobbyist with extensive ties to massive power-utility companies and a taste for fine wine. And one of those firms just paid nearly a quarter­billion dollars related to an alleged racketeering and bribery scheme using the same kind of dark-money groups that were used to boost McCarthy.

In the Shadows

Judging by Himmelstein’s client list and the few rare instances when dark-money groups have been forced to reveal their actual funders, it’s possible that the funds used to help McCarthy came from corporations or wealthy individuals, CREW’s Bookbinder says. “In this instance, there are a number of indications based on what we know about the organization that put up the money that suggest strong ties to the energy industry,” he says. “It could well be that’s where the money is coming from.”

“Even amidst the constant flow of dark money that obscures who is influencing politics, this seems like a particularly stark case of misleading the public. It is not the way our political system is supposed to work.”

Even without knowing who the donors are for sure, tax and election-­law experts who reviewed the filings and other documents for CLA and the State Tea Party Express found many reasons for alarm.

The problems start with the information State Tea Party Express willingly gave the IRS about its 2018 spending. State Tea Party Express calls itself a tax-­exempt 501(c)(4) group. Such groups can spend money on outright political activities, but those activities can’t be a group’s primary purpose; otherwise, those groups would be political action committees subject to limits on donations. However, in its filing, State Tea Party Express told the IRS that more than 95 percent of its total spending in 2018 went to electioneering.

Marc Owens, a tax lawyer and former director of the IRS unit that monitored 501(c)(4) groups, says the law is clear that State Tea Party Express can’t do what it admitted to doing with most of its money going to political work. “There’s no way to reconcile that filing with entitlement to tax-exempt status for a 501(c)(4),” Owens says. “They’re doing what Al Capone didn’t do, which is telling the truth to the IRS about what their group did with the money.” (State Tea Party Express treasurer Kelly Lawler said she wasn’t authorized to talk to the media. She said she forwarded Rolling Stone’s extensive list of questions to the group’s leaders, but they never responded.)

Adav Noti of the Campaign Legal Center says State Tea Party Express’ disclosure about its political spending would get the attention of the IRS if the agency had the resources and willpower to regulate 501(c)(4) groups. “If there were anybody policing these lines at the IRS or FEC, this would be a big deal,” Noti says. “But nobody is.” Years of underfunding and political pressure from conservatives in Congress have left the IRS unable or unwilling to crack down on dark-money groups. The IRS’ budget is 20 percent below its 2010 peak. According to a Treasury Department inspector general’s report, the IRS audit rate for nonprofit groups was one of out every 742 groups that filed a tax return. That was five times less than the audit rate for businesses and three times less than for individuals. “The relatively low examination rate may embolden unscrupulous organizations to file returns with missing or erroneous information,” the inspector general concluded.

Without real enforcement, the ability of special interests to use dark-money groups to buy influence will only grow. “The real problem here is unfortunately we don’t have a good watchdog agency to ­enforce against these bad actors,” says Beth Rotman of the clean-government group Common Cause. “Unfortunately, what that means is when groups like this look to see whether they can get away with crossing the line like this, often the answer is yes.”

All the while, the policies that thrill the GOP’s ­corporate-donor class keep coming. When Trump was in office, the message was MAGA, but the ­policy wasn’t much different from the GOP of yore — tax cuts, deregulation, judges.

In the end, McCarthy’s dark-money makeover proved a winning proposition for all the worst people. McCarthy won his leadership race. State Tea Party Express wielded influence without accountability. The actual donors, whoever they are, saw a return on their money in the form of a friendly Republican without even having to be named.

The losers are the voters, whose “representatives” are in the debt of people who remain in the shadows. The crux of the Supreme Court’s ­majority opinion in Citizens United, the case that ushered in our big-­money era back in 2010, was that unlimited spending was no threat to democracy so long as there was transparency and the public knew where the money came from. Instead, corporate interests, lobbyists, political operatives, and wealthy donors funnel ­millions into dark-money nonprofit groups, big-money bazookas with silencers on them. “Some special interests spent all this money to curry favor with extremely powerful officeholders, and we don’t know who,” Noti says. “That makes it very difficult to figure out what that donor got in exchange for their money. It makes it very difficult to find the corruption that’s often at the core of many of these transactions.”

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