Areas in RED should be noted.
From: Center for Public Integrity
Meet Koch Industries -
The ad we ran on a Times Square superscreen!
“The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”
- Charles Lewis, founder of the Center for Public Integrity
The Koch Brothers, Charles Koch (left) and David Koch (right), own and operate Koch Industries, the largest private company in the United States. Their combined net worth is over $40 billion. Below is a record documenting their environmental violations, funding of climate change deniers, political influence, and financial backing of the Tea Party.
ENVIRONMENTAL VIOLATIONS & POLLUTION
- In 2000, the Clinton administration leveled a 97-count indictment against Koch Industries forcovering up the discharge of 91 tons of benzene, a carcinogen, from its refinery in Corpus Christi, Texas. The company was liable for $350 million in fines; 4 Koch employees faced up to 35 years in prison. “The Koch Petroleum Group eventually pleaded guilty to one criminal charge of covering up environmental violations, including the falsification of documents, and paid a twenty-million-dollar fine” (Jane Mayer, “Covert Operations”, The New Yorker, August 30, 2010).
- The federal government sued Koch in 1995 over a reported 300 oil spills at pipelines owned by the company, which dumped an estimated 3 million gallons of oil into lakes and streams in 6 states. In 2000, Koch settled the case and agreed to pay $30 million in civil penalties.
- “In 1999, a jury found Koch Industries guilty of negligence and malice in the deaths of two Texas teen-agers in an explosion that resulted from a leaky underground butane pipeline” (Mayer). See the National Transportation Safety Board’s report on the accident.
- A jury found Koch Industries guilty in 1999 of stealing millions of gallons of oil from public and Indian lands through fraudulent mismeasuring. This concluded a 20-year long legal battle between Charles and David Koch and their estranged brother, Bill Koch, who revealed the scheme and spearheaded the lawsuit. See the 60 Minutes story about the case.
- The University of Massachusetts at Amherst’s Political Economy Research Institute released a study this year that named Koch Industries one of the top ten air polluters in the United States.From: Green Peace
CLIMATE CHANGE DENIAL
- “Since 1997, the Koch foundations have contributed over $48 million in grants to climate opposition groups. More than half that total, almost $25 million, was given since 2005″ (Greenpeace,“Koch Industries Secretly Funding the Climate Denial Machine”, March 2010).
- Opposition groups included the Mercatus Center (received over $9 million), which suggested in 2001 that global warming would be “beneficial, occurring at night, in the winter, and at the poles,” and Americans for Prosperity (received over $5 million), which organized a national “Hot Air Tour” to build opposition to clean energy legislation (Greenpeace).
- In January, Koch Industries sent out an internal newsletter article casting doubt on the climate change consensus.
TEA PARTY FUNDING
- Earlier this year, Americans for Prosperity, an organization David Koch started in 2004, held a summit, “which served, in part, as a training session for Tea Party activists in Texas” (Mayer).
- In a speech at the summit, Peggy Venable, the organizer of the event “explained that the role of Americans for Prosperity was to help ‘educate’ Tea Party activists on policy details, and to give them ‘next-step training’ after their rallies, so that their political energy could be channeled ‘more effectively.’ And she noted that Americans for Prosperity had provided Tea Party activists with lists of elected officials to target” (Mayer). Venable “has worked for Koch-funded political groups since 1994″ (Mayer).
- “Americans for Prosperity has worked closely with the Tea Party since the movement’s inception. In the weeks before the first Tax Day protests, in April, 2009, Americans for Prosperity hosted a Web site offering supporters ‘Tea Party Talking Points.’ The Arizona branch urged people to send tea bags to Obama; the Missouri branch urged members to sign up for ‘Taxpayer Tea Party Registration’ and provided directions to nine protests. The group continues to stoke the rebellion. The North Carolina branch recently launched a ‘Tea Party Finder’ Web site, advertised as ‘a hub for all the Tea Parties in North Carolina’” (Mayer).
- Two of the three Koch family foundations, the Claude R. Lamb Foundation (Charles Koch is a Director) and the David H. Koch Foundation (David Koch is the President/Director), have given Americans for Prosperity over $5 million since 2005.
- FreedomWorks, another Tea-Party-supporting organization, has received over $12 million in grants from the three Koch family foundations. See their “Tea Party HQ” website. FreedomWorks Chairman Dick Armey recently authored a book dubbed a “Tea Party Manifesto”.
- “Public tax records show that between 1998 and 2008 the Charles G. Koch Charitable Foundation spent more than forty-eight million dollars” on politics. “The Claude R. Lambe Charitable Foundation, which is controlled by Charles Koch and his wife, along with two company employees and an accountant, spent more than twenty-eight million. The David H. Koch Charitable Foundation spent more than a hundred and twenty million” (Mayer).
- “Koch Industries spent a total of $37.9 on oil and gas lobbying from January 2006 to December 2009” (Greenpeace). During the same period, that figure was exceeded only by ExxonMobil and Chevron.
- “From the beginning of the 2006 election cycle, Koch’s PAC spent more on contributions to federal candidates and committees than any other oil-and-gas sector based PAC. For that period, Koch Industries and its executives spent $3.55 million…” (Greenpeace).
- In 1997, the Senate “began looking into what a minority report called ‘an audacious plan topour millions of dollars in contributions into Republican campaigns nationwide without disclosing the amount or source,’ in order to evade campaign-finance laws” (Mayer).
- In 2004, non-partisan watchdog group Citizens for Responsibility and Ethics in Washington (CREW) accused Citizens for a Sound Economy, an organization founded by David Koch in 1984 and financed by his foundation, of illegally working to get Ralph Nader on Oregon presidential ballot (Bob Williams and Kevin Bogardus, “Koch’s Low Profile Belies Political Power”, July 15, 2004).
- “Americans for Prosperity… has announced that it will spend an additional forty-five million dollars before the midterm elections, in November. Although the group is legally prohibited from directly endorsing candidates, it nonetheless plans to target some fifty House races and half a dozen Senate races, staging rallies, organizing door-to-door canvassing, and running ads aimed at ‘educating voters about where candidates stand’” (Mayer).
Covert Operations: The billionaire brothers who are waging a war against Obama: Jane Mayer, The New Yorker, August, 30, 2010.
Koch’s Low Profile Belies Political Power: Bob Williams and Kevin Bogardus, Center for Public Integrity, July 15, 2004.
Koch Industries: Secretly Funding the Climate Denial Machine: Greenpeace, March, 2010.
Charles G. Koch Charitable Foundation at Media Matters Conservative Transparency.
David H. Koch Charitable Foundation at Media Matters Conservative Transparency.
Claude R. Lambe Charitable Foundation at Media Matters Conservative Transparency.
Americans for Prosperity at Media Matters Conservative Transparency.
Americans for Prosperity “Taxpayer Tea Party Update”.
FreedomWorks at Media Matters Conservative Transparency.
FreedomWorks “Tea Party HQ”.
Koch Industries at OpenSecrets.org.
Koch Industries: Corporate Rap Sheet
By Philip Mattera
Koch Industries is best known as the source of the fortunes of Charles and David Koch, billionaires who are major funders of right-wing activist groups such as Americans for Prosperity. The company itself—which began as an oil services business created by the Kochs’ father in the 1940s—was built by the Koch brothers into a privately-held conglomerate with more than $100 billion in annual revenue. Among its holdings are the paper products giant Georgia-Pacific (Dixie Cups, Brawny paper towels, etc.) and Invista, the synthetic fibers business (Lycra, Stainmaster, etc.) spun off by DuPont.
The Kochs claim to run their businesses in accordance with their laissez-faire beliefs—their term for it is Market-Based Management—which means that they have frequently come into conflict with government regulators and prosecutors. They are currently the target of protests over reports that they will try to purchase the Los Angeles Times and other newspapers being sold by the Tribune Co.
The Koch empire dates back to the late 1920s, when engineer Fred Koch invented a more efficient method for the thermal cracking of crude oil, which yielded higher proportions of usable products, especially gasoline. His innovation threatened the existing oil industry, which tied Koch up in patent infringement lawsuits. He responded by signing a contract with the Stalin regime to construct refineries in the Soviet Union. During the 1940s he built a domestic oil service business called Wood River Oil & Refining based in Wichita, Kansas. It was later renamed Rock Island Oil & Refining.
Koch maintained a low-profile for his company while getting involved in right-wing politics. He helped found the John Birch Society in 1958. After Koch died in 1967, the company was taken over by his 32-year-old son Charles. Another son, David, also joined the firm. The brothers initiated a period of rapid growth that would turn the family’s business, renamed Koch Industries, into one of the country’s largest privately held companies.
William, David’s twin, joined the company in 1971, but he reportedly never fit in. He clashed with Charles over issues such as the large sums the latter was contributing to the Libertarian Party and the limited sums that were being paid in dividends to family shareholders. In 1980 Bill tried to seize control of the company. The effort failed, and William was ousted. He sued Charles and David for corporate mismanagement; they countersued with a $167 million libel action. The situation became ugly as the brothers traded endless accusations. The case was settled in 1983; as part of the deal, William (and a fourth brother, Fred, who took his side) sold their interests back to the company. Two years later, however, William and Fred sued Charles and the company, claiming that the value of their holdings had been misrepresented to them. That charge was rejected in court.
The family squabbles did not slow the growth of Koch Industries, which benefitted from shrewd acquisitions of properties shunned by larger oil producers and by the run-up in oil prices in the 1970s. The company also moved into businesses such as oil pipelines, chemicals, cattle ranching, coal mining and commercial real estate, the latter through the acquisition of Chrysler Realty Corporation.
In 1998 Koch purchased Invista, the synthetic fibers business of DuPont, for $4.4 billion. In 2005 it made its largest deal ever: the $21 billion acquisition of paper products giant Georgia-Pacific. In 2012 Koch acquired a large stake in glass, automotive and building products producer Guardian Industries.
After the Obama Administration took office, the Kochs became known more for their ideological activities than their business operations. The Kochs were backers of Americans for Prosperity, which starting in 2008 waged an intense campaign against the climate bill being considered by Congress. Even after the bill was dead, it went on getting lawmakers to sign a pledge against such legislation.
In 2009 Greenpeace issued a report identifying the Kochs as leading funders of climate science denial groups. In a widely read 2010 article by Jane Mayer in The New Yorker, David Koch was described as “best known as part of a family that has repeatedly funded stealth attacks on the federal government, and on the Obama Administration in particular.“
Many of these political initiatives served the Kochs’ business interests. Their industrial operations stood to gain if regulation of greenhouse gases and other pollutants remained weak. The Mayer article pointed out that Koch Industries was lobbying vigorously against tougher federal regulation of formaldehyde—widely viewed as a carcinogen though heavily used by the company’s Georgia-Pacific unit in its wood products—at the same time that David Koch was making large contributions to cancer research centers.
In 2010 the Kochs spent heavily to get conservatives elected governor in various states. One of the successful candidates, Wisconsin’s Scott Walker, ended up in an embarrassing situation in 2011 after he had a phone call with someone who identified himself as David Koch and encouraged Walker in his effort to strip public employees of collective bargaining rights. The caller turned out to be an imposter who made a recording of the conversation public. Koch Industries was the target of activists who posted a fake news release in its name purporting to announced that it was ending its funding of climate denial groups. Koch’s consumer brands were a target of a boycott by groups protesting Walker’s policies.
In 2011 and 2012 the Kochs were at the center of a new controversy over their role in funding the American Legislative Exchange Council (ALEC), an organization that disseminates corporate-written model legislation on a wide range of issues (such as paid sick leave) to state legislators. An article that year in Politico reported that, in addition to using their own money, the Kochs were mobilizing other conservative donors to contribute more to groups such as Americans for Limited Government and the American Future Fund.
A December 2012 report by the International Forum on Globalization accused the Kochs of paralyzing U.S. climate policy and thus helping to undermine UN talks on addressing the climate crisis.
A new controversy emerged in 2013 in response to reports that Koch Industries was considering a bid to purchase the Tribune Co.’ s eight regional newspapers, including the Los Angeles Times and the Chicago Tribune. The reaction was most intense in Los Angeles, where labor unions and others launched a campaign to mobilize both newspaper subscribers and holders of Tribune stock to oppose such a deal.
The Tribune Co. issue spilled over into a controversy over David Koch's relationship to public television. A new article by Jane Mayer in The New Yorker questioned whether the fact that Koch sat on the boards of two PBS stations played a role in the decision by PBS to cancel plans to broadcast a film called Citizen Koch about the Koch empire. (Koch was was apparently not happy about the airing on PBS of a previous film about him called Park Avenue).
In September 2013 Politico reported that Freedom Partners, a low-profile political funding vehicle linked to the Koch Brothers, had been responsible for some $236 million in grants to conservative groups.
Fraud, False Claims, Bribery, Price-Fixing and Other Corrupt Practices
In 1974 Koch was one of four oil companies accused by the Federal Energy Administration of overcharging customers by some $58 million. In 1980 Koch Industries was fined $50,000 by a federal court for manipulating a Bureau of Land Management lottery of oil and gas leases. That same year, the Carter Administration’s Council on Wage and Price Stability chastised Koch for refusing to cooperate with a price survey designed to assist a program to combat inflation (AP, March 7, 1980).
As part of his feud with his brothers, William Koch hired private investigators to document claims that Koch Industries had engaged in fraud while purchasing oil from Indian reservations. A Senate committee looked into the matter and in 1989 found some validity to the charges. Itsubmitted its findings to the Department of Justice, but a grand jury declined to issue indictments. In 1999 a federal jury, acting in a whistleblower case that had been initiated by William Koch, found that Koch Industries had underreported the amount of oil it obtained from federal and Indian leases. In 2001 the company agreed to pay $25 million to settle the case.
In 2002 KoSa, a Luxembourg-based producer of synthetic fibers controlled by Koch, pleaded guilty to U.S. Justice Department charges of participating in a price-fixing cartel involving polyester staple and paid a $28.5 million criminal fine.
In 2006 Koch paid a fine of $75,000 and signed a consent decree with the Federal Communications to resolve charges that the company’s applications for private radio licenses failed to mention that it had been convicted of felonies on three occasions in federal and state courts. The consent decree did not provide details of the cases, but they presumably involved the environmental violations below.
In November 2011 the magazine Bloomberg Markets published a lengthy article entitled “The Secret Sins of Koch Industries” that made some explosive accusations against the company: “For six decades around the world, Koch Industries has blazed a path to riches—in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.”
The environmental cases had been previously reported and are summarized below. What Bloomberg revealed for the first time were the allegations involving bribery and dealing with Iran. The article reported that the company’s subsidiary Koch-Glitsch paid bribes to secure contracts in six countries (Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia) and that it violated U.S. sanctions by doing business with Iran, including the sale of materials that helped the country build the world’s largest plant to convert natural gas to methanol used in plastics, paints and chemicals.
The Kochs’ free-market ideology has not prevented their companies from taking economic development subsidies from state and local governments. In 2013 it was reported that Koch Industries was the largest investor in the Big River Steel project in Arkansas that was slated to receive some $139 million in state and local financial assistance.
Watchdog Groups and Campaigns
Key Books and Reports
Axis of Ideology: Conservative Foundations and Public Policy (National Committee for Responsive Philanthropy, March 2004).
Faces Behind a Global Crisis: US Carbon Billionaires and the UN Climate Deadlock(International Forum on Globalization, December 2012).
Koch Industries: Secretly Funding the Climate Denial Machine (Greenpeace, March 2010).
Koch’s Web of Influence by John Farrell (Center for Public Integrity, April 2011).
The Koch Brothers: What You Need to Know About the Financiers of the Radical Right (Center for American Progress Action Fund, April 2011).
Uncloaking the Kochs: A Closer Look at the Chairmen of the Billionaires' Caucus (Public Campaign Action Fund and Common Cause, 2011).
Last updated September 23, 2013
From: Green Peace