Rove's Crossroads Is Back in the Money

Republican victories last week served as a dose of Xanax for big donors still bummed about 2012 losses. Now, they are preparing for 2016.

American political consultant Karl Rove is seen at the Tampa Bay Times Forum in Tampa, Florida, during final preparations for the opening of the Republican National Convention on August 27, 2012.

BRENDAN SMIALOWSKI/AFP/GettyImages

Big Republican donors are back. The 2014 midterms victories lifted their lingering 2012 depression, ending that period of sadness and disbelief that began when the GOP lost the presidency and failed to retake the Senate despite spending record amounts of cash. Republican leaders are stoking these new feelings of glee. Karl Rove's American Crossroads is already turning to Hillary Clinton as its next target and GOP fundraisers are reminding the giving class that the 2016 Senate map won't be favorable and the party will contend with a presidential electorate that's been more supportive to Democrats in recent years. 

"You don't want to rest on your laurels," said Fred Malek, who founded the private equity firm Thayer Lodging Group and is a board member of American Action Network, which focused on winning Republican House races this year. "You don't want to be complacent. We're realistic enough to know that 2016 is a different ball game." 

The message seems to be getting across. New York-based GOP donor Steve Louro said the Election Night celebratory feelings have subsided since there's "too much work to be done." (His goal: "Paint New York red for the Republican Party.") The Republican wave was a warning to President Barack Obama and other Democratic leaders who support increased regulations, a "bloated government" and policies that "only benefit Americans who don't want to work like the rest of us," he said. "Americans hate all politicians," said Louro. "They hate Republicans less right now. We as Republicans need to capitalize on the momentum from last Tuesday or this past election victory will go for naught."

To get from the 2012 doldrums to the 2014 victory, GOP groups went through significant transformations. The network of groups backed by David and Charles Koch started buying attack ads with a new super-PAC instead of the nonprofit it used two years ago. The upside for them is the operation is more efficient (tax rules require nonprofits to spend at least 50 percent of their budget on nonpolitical activity, so every dollar on TV political ads must be matched with nonpolitical work). The downside is donor names are disclosed. 

Perhaps the greatest example of a turnaround is Rove's American Crossroads. The group was the biggest loser two years ago, dumping more than $120 million into campaigns and watching 10 of the 12 Senate candidates it backed go down in defeat. This time Rove's group won 8 of the 11 Senate races where it made investments. 

Crossroads went on a well-publicized soul searching mission last fall, including a donor meeting that kicked off the week of the government shutdown in 2013--an event that infuriated the business community. Despite the group's efforts to improve it's image, big checks were slow to come in. Over the summer Republicans were outspent in key races, Crossroads President Steven Law said in an interview. "Many of our candidates hit Labor Day and were underwater with their image," Law said.

The donor freeze started thawing in September when polling began to tighten in a number of races and big-names such as Sheldon Adelson started opening their wallets. He wrote a $10 million check to Crossroads GPS in September, a nonprofit arm of the Rove organization. GPS, as a nonprofit, is not required to disclose its donors. Adelson's windfall was leaked to the news media. "Typically donors who support Crossroads are pretty sophisticated consumers of political information," Law said. "My guess is donors paid attention to what they saw on sites like Real Clear Politics."  

The group scraped together $36 million to put into television for senate races in the last 90 days of the campaign, according to figures provided by Crossroads. It was the lead spender in Colorado, Arkansas and Alaska, where GOP Dan Sullivan is about 8,000 votes ahead of Democrat Mark Begich. 

However, resources weren't arriving evenly or predictably. That forced Crossroads and some of the other GOP groups to cooperate this year in ways they've never done before. One example came in October when Crossroads realized there was a "hole in our budget" for Colorado, Law said.

Law emailed Brian Baker at Ending Spending Action Fund, the super-PAC backed by TD Ameritrade founder Joe Ricketts and the two worked out a deal—the Ricketts group would go up on the air and continue pounding incumbent Democrat Mark Udall while Crossroads took a week off. "Ending Spending filled a gap," Law said. "The take away for all of us was sharing information and strategy was smart for all of us." Udall lost to Republican Cory Gardner.

Ending Spending took the lead in other places, including Georgia where Republican David Perdue beat back Democratic challenger Michelle Nunn, in a race that was widely thought would go to a runoff. 

Baker dined with a group of donors in New York the Monday before the election. "They were all very nervous," he said. "Every race was on the razor's edge. There was a sense of dread that 2012 would repeat itself." Days later, as the victories piled up, and he said the mood changed. Now they're "extremely happy," he said.  

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