It Started With the Phoenix

The Democracy Alliance began in the offices of the New Democrat Network (NDN) and on the computer of Rob Stein, who'd served as chief of staff to Clinton's Commerce Secretary Ron Brown. In 2002 and 2003 NDN, a creatively centrist Washington think tank, undertook a strategic review to figure out what the "higher purpose" of the organization and larger progressive movement should be. It called the effort the Phoenix Group, named after the mythical bird that rises from its own ashes and inspired by a character in a Harry Potter book. In the spring of 2003, NDN president Simon Rosenberg and Payne saw Stein's PowerPoint presentation, which he'd titled "The Conservative Message Machine Money Matrix."

"The narrative was not new," Rosenberg says. "But the degree of research and how he pulled it all together was the best explanation I'd seen of how we are where we are today." Namely, out of power. It wasn't a question of money--the five largest liberal foundations outspent their conservative counterparts annually by a 10-to-1 ratio--but rather how it was being spent. Back in the 1960s and early '70s, a handful of wealthy conservative businessmen like John Olin and Richard Mellon Scaife began generously bankrolling an array of policy centers, grassroots mass-based organizations, leadership institutes and intellectuals to beat back what the funders viewed as liberalism's assault on traditional structures like the family, the free market and the military. Major Democratic Party fundraisers and large foundations like Ford and Rockefeller mounted no similar coordinated defense of liberalism. It was this problem that Stein hoped to address through his presentation.

Payne set up a series of meetings for Stein on the East Coast with prominent Democratic Party donors. Stein presented his research using a lexicon the millionaires and billionaires understood. He called the largest conservative donors "philanthropic venture capitalists." The leaders of the conservative movement, such as Paul Weyrich and Grover Norquist, were "political investment bankers." The presentation helped convince the wealthy liberals that the Republican Party's recent successes were a logical outcome of determined movement building, not an accident of history.

During the fall of 2004, big donors were consumed with trying to oust Bush from office. But after Kerry's defeat, the nascent Alliance moved full speed ahead, officially beginning its existence in January 2005. Only the most committed and well-to-do donors were accepted into the high-priced club. Those joining included billionaires George Soros, Peter Lewis and Herb and Marion Sandler; major Clinton fundraisers Mark and Susie Buell and Bernard Schwartz; New York venture capitalist and longtime Clinton supporter Alan Patricof; Hollywood celebrities Rob Reiner and Norman Lear; wealthy high-tech Californians such as Working Assets founder Michael Kieschnick; and the AFL-CIO and the SEIU.

Joining the Club

Members, known as "partners," were required to pay a $25,000 entry fee, $30,000 in annual dues and a minimum of $200,000 per year to organizations recommended by the Alliance. The Alliance would not dole out money itself, but collectively the partners would meet twice a year through its auspices to decide which organizations to fund, forming working groups based on four priority areas: ideas, media, leadership and civic engagement. The working groups would present their recommendations to an investment committee made up of members of the board, who would pass them on to the entire group. Partners could then give money to the organizations they favored, voting with their checkbooks. An Alliance recommendation meant a valuable gold star for prospective progressive organizations. (The Alliance also put a premium on secrecy to protect the anonymity of its donors, actively discouraging members from speaking to the media and forcing grantees to sign nondisclosure agreements. Thus, of the dozens of partners and heads of organizations interviewed for this article, only a small number agreed to speak in detail on the record.)

In April 2005 fifty-plus partners arrived in Phoenix for a three-day conference. Stein, who announced at the outset of the 2004 Washington conference that he didn't want to run the organization, led the meetings on an interim basis. Even before Phoenix it had been decided that the Alliance would represent an ideological big tent of centrist Democrats, progressive Democrats and even a few disaffected Republicans. As a result, partners and staff, few of whom had known one another before or had a long track record in politics, downplayed their differences and agreed to govern by compromise--never an easy thing, especially among the rich. "We need infrastructure," says Rodger McFarlane, an adviser to Colorado multimillionaire Tim Gill, describing the views of the Alliance. "The right has taken over. That we agree on. Everything else is in play."

In those early days, much of the focus--and most of the problems--were internal, as chairman of the board Steven Gluckstern, a retired investment banker from New York, searched for a leader of the group. Meanwhile, for would-be recipients, the process of applying for money was bewildering: completely secret and seemingly changing all the time. Four days before the first round of funding, the board offered the plum $400,000-a-year title of managing director to Robert Dunn, president emeritus of Business for Social Responsibility. When Dunn declined they turned to Judy Wade, who'd been encouraged to run by former Clinton chief of staff John Podesta, although she had no prior experience in politics.

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