Cruz's faltering campaign shows the risks of depending on a few wealthy donors

Republican presidential candidate Ted Cruz speaks during a rally in Lafayette, Ind., on Sunday.

May 2, 2016 6:54 AM PT

Reporting from Washington — Ted Cruz, in his outsider’s bid for the White House, has depended heavily on the largesse of just three wealthy donors to establish credibility and stay afloat amid a chaotic nominating process that killed off most of his rivals.

Now, at perhaps the most desperate moment in his quest to win the Republican nomination, Cruz is learning the perils of relying on strong-willed magnates who carry their own agendas and have demanded an unprecedented level of control in how their money is spent.

One of the three primary donors to Cruz’s presidential efforts, a private equity manager who recruited the other two top donors, has refrained from spending the vast majority of his $10 million contribution to bolster the Cruz campaign. He is instead fighting openly with the top strategist for the super PACs that were set up to spend the money.

The man at the center of the fight, Toby Neugebauer, is a close friend of Cruz and his wife, Heidi. Neugebauer and his own wife have vacationed with the Cruzes, and he still counts himself a major supporter. But he has refused to spend $9 million of the $10 million he put into a super PAC.

“He was going to go up with ads in October or November. That came and went, and then he said he’s saving it for Super Tuesday,” said Kellyanne Conway, who oversees a network of super PACs supporting Cruz.

“I don’t know if he’s having a $10 million party in Cleveland, or what. It became apparent almost immediately that his money wasn’t really there.”

Neugebauer, though, said he was alarmed by the profligate spending of other super PACs that spent vast sums on candidates who flamed out. He said he is relieved to have set up a strategy where he and two other major donors dictate how their money is spent.

“How we set up in these big PACs was a response to how unhappy people were in 2012,” he said in an interview. “Trust me, all the other big donors wish their PACs were set up the same way.”

After Citizens United and other court decisions opened the door to nearly unlimited campaign donations, many donors became frustrated with the control they surrendered to campaign consultants, who blew through millions of dollars on TV ads in a fruitless effort to elect Mitt Romney in 2012. This year, an outside group supporting former Florida Gov. Jeb Bush spent more than $100 million from big donors in a disastrous endeavor that saw Bush falter as soon as the first primary voters went to the polls.

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To counter the risk of a repeat of 2012, Neugebauer, the son of Texas Rep. Randy Neugebauer, helped set up three super PACs last year to support Cruz, each using a variation of the name Keep the Promise — one for each major donor. The groups, forbidden by law to communicate with the Cruz campaign, planned to divvy up responsibilities for aiding his candidacy.

But that strategy proved unwieldy, and the super PACs united in early March under the name Trusted Leadership PAC to raise more money. Neugebauer, however, has yet to come aboard. He complained that the political consultants remain addicted to buying negative television ads, a strategy that has proven particularly ineffective against the star power of front-runner Donald Trump. Neugebauer said he has instead pressed for positive ads placed in social media, but has been rebuffed.

“There were some political consultants, especially the establishment’s favorites, who didn’t know they were extinct,” Neugebauer said. “People are going to be looking for a completely fresh set of talent.”

Neugebauer said he would not start spending money on Trump during the primary but declined to disparage Trump’s credentials for office, as many other Cruz backers have done.

“Ted and I are close friends. I am going to support the nominee. I’m not ‘Never Trump,’” he said, referring to the effort among some Republicans to deny Trump the nomination. “I think all that talk is just disgusting and shows a complete lack of understanding of what the middle class is going through in America. I want those voters for Ted in November.”

If the other two donors are frustrated that the man who helped recruit them to the effort appears to be bailing on it, they have not said so publicly. Neither Robert Mercer, who has donated $13.5 million to help Cruz, nor Farris Wilks, who along with his family donated $15 million, agreed to be interviewed or responded to written questions submitted to their representatives. The Cruz campaign did not respond to a request for comment.

Conway said the division of labor among the funders was “baked in the cake from the beginning” and that Neugebauer knew his money was to be used for television ads. The other super PACs, she said, were concentrating on contacting voters directly, sending direct mail, radio ads and digital advertising campaigns.

“The guy could be a hero,” Conway said. “He could be a white knight right now.”

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The separate super PACs raised eyebrows from political consultants and other campaigns, who wondered whether it made sense to hand over so much control to donors.

But Cruz’ former communications advisor Rick Tyler said the $38 million infusion from the big three was critical to establishing Cruz’s bona-fides as a serious presidential contender, disproving early doubts that he could compete with establishment candidates.

“One of them was ‘Cruz might be able to raise grass-roots money, but he’ll never be able to raise big money,’” Tyler said. “It was important for people to understand this was a well-funded campaign, and it was balanced.”

Yet the power and lifestyles of the Cruz mega-donors have also highlighted the wide gulf between Cruz’s populist critiques of “crony capitalism,” and the relationships he maintains with the ultra-wealthy to fuel that message. Ten donors have given a total of $48 million to his super PACs, more than three-fourths of the money he has raised from outside groups. Many of them made their money in oil and gas, industries that have received strong support from Cruz.

They make an eclectic group.

Neugebauer, for example, lives in Puerto Rico with his family among a community of mega-wealthy Americans who are taking advantage of the island’s generous income tax breaks.

Farris Wilks and his brother Dan founded Frac Tech, which provided equipment and services for hydraulic fracking; they sold the company, of which they owned a majority, for more than $3 billion in 2011. Wilks serves as a pastor in Assembly of Yahweh, a church that forbids the celebration of Christian holidays such as Christmas and Easter.

Wilks has called climate change God’s will and condemned homosexuality as “a perversion tantamount to bestiality, pedophilia and incest,” according to recordings of sermons reviewed by Reuters.

Mercer, a hedge fund executive, is a strong advocate for returning to the gold standard who has funded groups that have cast doubt on the science of climate change.

Cruz also has criticized the consensus scientific view of climate change, and has suggested he too would welcome a return to the gold standard, an idea that has little backing among mainstream economists.

“The Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold,” Cruz said last year during a debate.

Neugebauer said he and the other donors were not motivated by personal issues or gain, nor do all of them necessarily agree with Cruz’s sharply conservative views on social issues. Rather, he said, they are united by a concern for the country’s debt.

“I know it sounds crazy,” he said. “We are anti-establishment and we all think the country is on the precipice of insolvency.”

With Neugebauer on the sidelines, the other super PACs have begun spending money on television ads. In Indiana, where Cruz desperately needs an upset Tuesday to slow Trump’s rise, the super PAC is spending nearly $2 million. Strangely, the biggest chunk, $1.3 million, is going toward a television ad attacking John Kasich for his support of Obamacare; after the money was spent, Cruz and Kasich announced a deal where Kasich would not compete in Indiana.

Neugebauer said he still is weighing whether to spend money in California before its June 7 primary.

“There have been a lot of opportunities to waste money this political cycle,” he said in an email.

Staff writers Maloy Moore and Anthony Pesce contributed to this report.

Twitter: @noahbierman, @jtanfani

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