Koch Industries

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Koch Industries (pronounced "coke") has been described by Hoovers as "one of the largest (if not the largest)" privately owned company in the United States. [1] The company states that it "owns a diverse group of companies involved in refining and chemicals; process and pollution control equipment and technologies; minerals; fertilizers; polymers and fibers; commodity trading and services; forest and consumer products; and ranching."[2] The company was started in 1927 by Fred Koch, an early member of the John Birch Society.[3] The company is led by Charles Koch and David Koch, arguably two of the leading and most influential financiers of anti-regulation and right-wing ideology in the United States.

Koch Connection

The Koch Brothers are the conservative billionaire co-owners of Koch Industries. As two of the richest people in the world, they are key funders of the right-wing infrastructure, including the American Legislative Exchange Council (ALEC) and the State Policy Network (SPN). In SourceWatch, key articles on the Kochs include: Koch Brothers, Koch Industries, Americans for Prosperity, American Encore, and Freedom Partners.

Koch Industries is a privately-held company. It is reported to have a revenue of over $100 billion in revenue per year.[4]

Contents

Ties to the American Legislative Exchange Council

Koch Industries is a long-time member and funder of the American Legislative Exchange Council (ALEC), and a long-time member of the ALEC corporate Private Enterprise board. [5]

A list of ALEC corporations can be found here.

About ALEC
ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC's operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy's ALECexposed.org, and check out breaking news on our PRWatch.org site.


Mike Morgan, Director of Public and Government Affairs, represents Koch Industries on ALEC's corporate Private Enterprise Board, as of 2011; he was previously Chairman. [5]

It was a "Vice-Chairman" level sponsor of 2011 American Legislative Exchange Council Annual Conference, which in 2010, equated to $25,000.[6]

In 2009, the Charles G. Koch Charitable Foundation gave $75,858 to ALEC. [7] Additionally, In 1996, the Charles G. Koch Foundation gave ALEC a $500,000 loan. [8]

In 2009, the Kochs' Claude R. Lambe Charitable Foundation gave $125,000 to ALEC ($75,000 education + $50,000 general operating support). [9]

Koch Industries financially supported the publication of ALEC's 1995 Sourcebook, the annual publication in which it released its "model" legislation until it moved to online publication.[10]

Koch Sponsorship of 1995 Sourcebook.png

Business interests

The Koch "conglomerate boasts 60,000 employees, 4,000 miles of pipeline and enough refinery capacity to supply 5% of U.S. daily fuel demand," according to Forbes.[11] Charles Koch has vowed that the company will become publicly traded "only over my dead body."[11]

In 2010, Koch Industries was named one of the United States' top 10 air polluters in a study released by the University of Massachusetts at Amherst’s Political Economy Research Institute. [12].

Subsidiaries

  • Invista polymer company
  • Koch Minerals which handles bulk commodities
  • Koch Carbon which trades and transports petroleum coke, coal, cement, pulp and paper, sulfur and other commodities
  • Koch Exploration Company which acquires, develops and trades petroleum and natural gas properties in the United States, Canada and Brazil[13]
  • Flint Hills Resources which operates crude oil refineries in Alaska, Minnesota, and Texas, ethanol plants in Iowa and petrochemical plants in Illinois, Michigan and Texas.[14][15]
  • Koch Pipeline Company owns and operates approximately 4,000 miles of pipelines used to transport crude oil, refined petroleum products, natural gas liquids and chemicals
  • Koch Alaska Pipeline Company owns an approximate 3 percent interest in the Trans Alaska Pipeline System
  • 28% interest in the Colonial Pipeline Company which it describes as the "owner and operator of the world’s largest-volume refined products pipeline."[14]
  • Koch Supply & Trading companies "provide risk management services in crude oil; refined petroleum products; natural gas and gas liquids; gas, power and emissions; industrial metals; and other commodities and financial instruments. It also "operates an 80,000 barrel-per-day refinery in Rotterdam, the Netherlands."[16]
  • Koch Fertilizer is, according to Koch's website, the world's "third-largest maker of nitrogen fertilizer," and Koch owns or has interests in fertilizer plants in the United States, Canada, and Trinidad and Tobago.[17]
  • Georgia-Pacific, which has approximately 300 manufacturing facilities across North America, South America and Europe. Georgia-Pacific facilities include pulp, paper and tissue operations, as well as gypsum plants, box plants and building products operations.[18] Well-known products include Brawny paper towels and AngelSoft toilet paper.[11]
  • Subsidiaries of Koch Agriculture Company have cattle ranching businesses in Montana, Kansas, Texas, and South America.[19]

Koch Brothers' Fortune vs. Koch Industries' Employment

Koch Net Worth vs Unemployment.jpeg

On Thursday, September 22nd, MSNBC's Rachel Maddow commented on the publication of the 2011 Forbes 400 and the growth of the Koch brothers' fortune, noting that, rather than being "job creators," as their fortune has risen since 2007, the number of people employed by Koch Industries has fallen. She showed the following chart:

The "Rachel Maddow Show" associate Will Fernia summarized the source of this information as follows:

The net worth of the Koch "job creators" comes from the individual profiles of the Forbes 400 list, with the worth of each brother added together. We took just the October number for each year.
The employee number comes for different souces depending on the year but basically the source is Koch Industries itself. In their current company description they say, "With a presence in nearly 60 countries and about 67,000 employees..." So that's where the 67,000 number comes from for 2011 on the chart. But the 2007 number comes from this 2007 Forbes profile of Koch Industries in which they are ascribed 80,000 employees.[20]

Affiliations and Funding of Interest Groups

"Koch's Web of Dirty Money and Influence" graphic from Greenpeace, originally published in "Koch Industries Secretly Funding the Climate Denial Machine," 2010.

Koch Family Foundations

Charles G. Koch and David H. Koch run Koch Industries as well as the Koch Family Foundations, which together are one of the largest single sources of funding for right-wing organizations in the United States. Organizations and think tanks that have been supported by the foundation include: Americans for Prosperity, the Heritage Foundation, the Cato Institute, the Institute for Humane Studies, Citizens for a Sound Economy, the Mercatus Center, the Reason Foundation, and the Manhattan Institute, among others.

David Koch is the chairman of the Americans for Prosperity Foundation, a director of the Cato Institute and a trustee of the Reason Foundation.

In addition to providing funding to co-found the Cato Institute and the Mercatus Center, Charles Koch serves on the boards of both Mercatus and the Institute for Humane Studies.[21][22] Richard Fink, an executive vice president and director of Koch Industries, is president of two of the Koch Family Foundations as well as founder, president or director of numerous front groups the Koch foundations support.

David H. Koch ran for Vice President on the Libertarian Party ticket in 1980. Author Thomas Frank wrote in "What's the Matter with Kansas?" that "Koch money flowed through Triad Management Services"[23], an advisory service to conservative donors groups and candidates, for the 1996 Senate campaign of Sam Brownback.[24] Other sources only hint at a connection of Koch family members and Triad.[25]

Cato Institute

Charles G. Koch co-founded the Cato Institute, a think tank based in Washington DC, with Edward H. Crane in 1977. [26] David Koch presently serves on its Board of Directors. Koch Industries is an aggressive opponent of climate legislation and a major funder of climate skeptics, including the Cato Institute. [27]

Americans for Prosperity

Americans for Prosperity (AFP) was started by David Koch and Richard Fink, a member of the board of directors of Koch Industries. AFP helps fund activities related to the "Tea Party" efforts. AFP's message is in sync with that of other groups funded by the Koch family’s other special interest groups working against progressive or Democratic initiatives and protections for workers and the environment. AFP has opposed health care reform, stimulus spending, and cap-and-trade legislation, which is aimed at making industries pay for the air pollution that they create. AFP was also involved in the attacks on Obama’s "green jobs" czar, Van Jones, and has crusaded against international climate talks. According to an article in the August 30, 2010 issue of The New Yorker, the Kochs are known for "creating slippery organizations with generic-sounding names," that "make it difficult to ascertain the extent of their influence in Washington." [28]

David Koch launched AFP in late 2003 as a successor to the Citizens for a Sound Economy Foundation (which David Koch had launched in 1987).[29] following an internal rift between Citizens for a Sound Economy and its affiliated foundation.[30] The October 2003 Washington Times report on the formation of AFP stated, "Nancy Pfotenhauer, an executive of Citizens for a Sound Economy [CSE] in the 1990s who helped defeat Hillary Rodham Clinton's health care reform proposal, has been tapped to head a new national advocacy organization to protect 'every American's fundamental right to pursue prosperity.'"[31] Before joining the Independent Women's Forum in 2001 and AFP in 2003, Pfotenhauer headed the Washington office of Koch Industries.[32]

Tea Party Movement and Funding

An April 2011 report by Tony Carrk of the Center for American Progress entitled "The Koch Brothers: What You Need to Know About the Financiers of the Radical Right," notes, "The Koch brothers use their considerable wealth to bankroll the right wing, including the Tea Party. This serves the purpose of furthering not only their right-wing ideology but also their bottom line. Koch Industries has a lot to gain from gutting government oversight and electing candidates who oppose government regulation, especially in the oil-and-gas industry."[33] Carrk & others have identified "at least $85 million the Koch brothers have given to at least 85 right-wing think tanks and advocacy groups over the past decade and a half."[34]

See also Tea Party movement funding.

Direct Lobbying and Campaign Contributions

"Koch's Web of Dirty Money and Influence" graphic from Greenpeace, originally published in "Koch Industries Secretly Funding the Climate Denial Machine," 2010.

Political Contributions

As of March 10, 2014, Koch Industries PAC made a total of $2,397,855 in political donations for the 2014 election, including $1.0 million to the Republican Governor's Association.[35] They donated $1.38 million to congressional candidates, with 98% of the money going to Republicans.[36] Top recipients include Mike Pompeo (R-KS), Speaker John Boehner (R-OH), John Cornyn (R-TX), and Lynn Jenkins (R-KS).[37]

During the 2012 election cycle, Koch Industries PAC made $4.9 million in federal campaign contributions.[38] This included $2.1 million to the Republican Governor's Association, $250,705 to the Republican State Leadership Committee, and $161,250 to the Republican National Committee.

The Kochs or the Koch PAC "donated directly to 62 of the 87 members of the House GOP freshman class" during the 2010 election campaign cycle.[39] At the state level, they spent "$5.2 million on candidates and ballot measures in 34 states since 2003. They donated directly to 13 governors that won election" in 2010.[40] They have "pledged to raise $88 million for the 2012 election and have started scheduling events for potential Republican presidential candidates."[41]

Koch Industries is the single largest oil company contributor to both Republican and Democratic candidates for Congress. These contributions total $1,065,750 to the 110th US Congress (as of the third quarter), the largest of which has been to Rep. Todd Tiahrt (R-KS) for $42,950. Rep. Tiahrt, for his part, has consistently voted with the oil industry on energy, war and climate bills. [9]

Additionally, Koch:

  • Spent $5.74 million in PAC money for candidates, committees, and campaign expenditures since the 2006 election cycle.
  • Contributed at least $270,800 to federal political party committees since the 2006 election cycle.
  • Gave $10,000 to Senator Lisa Murkowski in 2010,[42] who, in January, proposed stripping the EPA of its ability to regulate greenhouse gases under the Clean Air Act, and lamented that BP's Deepwater Horizon oil disaster has temporarily halted exploratory offshore drilling in the arctic planned by Shell Oil for summer 2010, a topic that even many conservative opponents of climate action have remained silent on in the face of the unfolding historic despoiling of the gulf.[43][44]

Contributions like this from fossil fuel companies to members of Congress are often seen as a political barrier to pursuing clean energy. More information on oil industry contributions to Congress can be found at FollowtheOilMoney.org, a project created by the nonpartisan, nonprofit organization Oil Change International.

Lobbying

Koch wields significant influence on climate change and other issues by direct federal lobbying. Open Secrets reports that Koch Industries :

  • Spent $10.4 million lobbying in 2013.[45] Top issues lobbied on were energy & nuclear power, homeland security, taxes, and clean air & water.[46]
  • Spent $10.5 million lobbying in 2012[47]
  • Spent $37.9 million from 2006 to 2009 for direct lobbying on oil and energy issues, outspent only by ExxonMobil ($87.8 million) and Chevron Corporation ($50 million).[48]

The April 2011 Center for American Progress report presents the following chart of the Koch brothers' issue agenda:

Issue Agenda.jpg

Koch Industries' Political Activities

Voting Advice to Employees

According to an article in The Nation, "on the eve of the November midterm elections, Koch Industries sent an urgent letter to most of its 50,000 employees advising them on whom to vote for and warning them about the dire consequences to their families, their jobs and their country should they choose to vote otherwise." [49]The authors also wrote that "The Nation obtained the Koch Industries election packet for Washington State—which included a cover letter from its president and COO, David Robertson; a list of Koch-endorsed state and federal candidates; and an issue of the company newsletter, Discovery, full of alarmist right-wing propaganda. Legal experts interviewed for this story called the blatant corporate politicking highly unusual, although no longer skirting the edge of legality, thanks to last year’s Citizens United Supreme Court decision, which granted free speech rights to corporations.""[49]

Koch strategy retreat, 2011

See also Koch network.

On October 19, 2010, the New York Times reported on a personalized invitation signed by Charles Koch to prospective members to “develop strategies to counter the most severe threats facing our free society and outline a vision of how we can foster a renewal of American free enterprise and prosperity.” The invitation discussed meetings called “Understanding and Addressing Threats to American Free Enterprise and Prosperity” that he hosts twice a year to plan and expand its efforts “to review strategies for combating the multitude of public policies that threaten to destroy America as we know it.” Those efforts, the letter makes clear, include countering “climate change alarmism and the move to socialized health care,” as well as “the regulatory assault on energy,” and making donations to higher education and philanthropic organizations to advance the Koch agenda. The goals for the twice-yearly meetings include attracting more investors to the cause, and building institutions “to identify, educate and mobilize citizens” and “re-establish widespread belief in the benefits of a free and prosperous society.”[50]

Attendees

June 2010 participants

See Koch Event 2010-06 Attendees for the names and affiliations of roughly 200 participants from the June 2010 meeting in Aspen Colorado, including hedge fund executives, Republican donors, and free-market evangelists[50] - and for the actions some have taken.

Earlier guests included politicians and Supreme Court justices (Scalia & Thomas)

The letter from Charles Koch also noted that previous guests have included politicians and Supreme Court justices.

The politicians included Governors Haley Barbour and Bobby Jindal; Senators Jim DeMint and Tom Coburn and Representatives Mike Pence, Tom Price and Paul Ryan. [50]

Supreme Court Justices Antonin Scalia and Clarence Thomas have attended these events. (According to Salon, "Thomas claimed he just made "a brief drop-by" at the Koch brothers' January 2008 Palm Springs political retreat to give a talk; in fact he was reimbursed for four days of “transportation, meals and accommodations” by the Federalist Society.[51]"). The attendance of Thomas and Scalia has sparked debate over judicial ethics and the 2010 Citizens United decision.[52] Common Cause filed a petition with the Justice Department in January 2011 alleging a conflict of interest for these Justices, as David and Charles Koch operate foundations that contribute to political groups, which might benefit from relaxed campaign finance rules. [53] Common Cause has also noted that the Cato Institute, which Charles Koch founded, filed an amicus brief in Citizens United opposing campaign finance. [54] The Center for Competitive Politics also filed a brief in the case; the Center is headed by Bradley Smith, who is affiliated with the Institute for Humane Studies where Charles Koch is Chair of the board and funder. [55]

Linked to union-busting efforts

In Wisconsin and nationally, 2011

In a Spring 2011 article, Andrew Stern of Reuters tied the Koch brothers directly to the union-busting effort, writing that "Charles and David Koch, who both rank 24th on the Forbes list of the world's richest people with $17.5 billion each, are behind campaign donations of tens of thousands, if not millions, of dollars to Republicans leading the anti-union effort." Brian Doherty, editor of Reason Magazine (which is published by a Koch-funded think tank), wrote "this is all a wave of political belief that the Kochs unquestionably have funded in various ways for years and years," [56]

The New York Times reported that, between 1997 and 2008, David and Charles Koch collectively gave more than $17 million to groups lobbying against unions[57]; the Kochs are one of (Republican) Governor Walker's largest corporate supporters.[58]

Climate denial and delay

A 2012 report by the International Forum on Globalization (IFG) describes the role of David and Charles Koch as leaders in the opposition to climate change policy in the U.S. The report, titled Behind a Global Crisis: U.S. Carbon Billionaires and the U.N, Climate Deadlock, explains how the Kochs are using their immense wealth to kill U.S. climate legislation and convince America that "energy independence" is more important than addressing adverse climate change. Contained in the report are details of how the Kochs' activity in campaign contributions, lobbying legislators, funding climate denialists, attacking clean air laws, and stopping the shift in subsidies from fossil fuels has helped to halt any serious progress on climate policy in the United States. The result is a deadlock in addressing the global climate crisis.[59]

Meena Raman of the Third World Network and an IFG Board Member noted that, "The world cannot expect U.S. negotiators to do anything but lead a race to the bottom toward a total climate crisis as long as they speak for their oil billionaires and not for the American people. How many more must die from climate disruptions before U.S. negotiators align their position with the scientific reality that says the world needs ambitious actions to cut carbon now?"[60]

Fighting greenhouse gas regulations

Regional Climate Change Accords

With the collapse of federal cap-and-trade legislation, a total of 32 states became active participants or observing members in the Regional Greenhouse Gas Initiative in the Northeast, the Midwestern Greenhouse Gas Reduction Accord, or the Western Climate Initiative. Some commentators have suggested that Koch family foundations and ExxonMobil have opposed these initiatives, and that the American Legislative Exchange Council has advanced model legislation to that end. [61]

New Hampshire

On Feb. 23, 2011, New Hampshire's overwhelmingly Republican House of Representatives voted to support HB 519, a bill that would repeal participation in the Regional Greenhouse Gas Initiative, which has cut greenhouse gas emissions and other pollution and made improvements in energy efficiency. The bill passed by a nearly party-line vote of 246 to 104 (13 Republicans voted against, two Democrats for). The bill has to pass through the finance committee before a final house vote and consideration by the senate. Gov. John Lynch (D-NH), who has touted the success of RGGI in making the air healthier while increasing economic prosperity, is expected to veto the bill, but Republicans hold veto-proof majorities in both chambers of the New Hampshire legislature. The bill was aided by robocalls from the Koch-funded Americans for Prosperity group, which flooded the state with calls in support the bill. Rep. Sandra Keans (D-Rochester), told the Nashua Telegraph that AFP’s calls were “sleazy” and deliberately false: “I have never seen such a cowardly perpetration pulled on the citizens of New Hampshire."[62]

In July 2011, New Hampshire Gov. John Lynch vetoed the effort, stating ""I am vetoing this legislation because it will cost our citizens jobs, both now and into the future, hinder our economic recovery, and damage our state's long-term economic competitiveness." [63]

EPA, 2011

The Energy Tax Prevention Act of 2011 is proposed by Sen. Jim Inhofe (R-OK), Rep. Ed Whitfield (R-KY), and House Energy and Commerce Committee Chairman Rep. Fred Upton (R-MI), who describe the bill as "a sensible, narrowly crafted 'fix' to clarify that the Clean Air Act was never intended to be used to impose cap-and-trade by regulation." The bill seeks to prevent the EPA from regulating greenhouse gas emissions that contribute to climate change.[64]

The House Energy and Commerce Committee, under Republican control, held a hearing on Feb. 9, 2011 to discuss the bill, chaired by Whitfield, who has received $9,000 from Koch Industries since 2008. Koch operatives reportedly met with Rep. Upton on the first day of the 112th Congress to discuss such a bill. Upton received $20,000 from Koch employees in 2010, making them among his top 10 donors. Nine of the 12 new Republicans on the panel signed the Koch-funded Americans for Prosperity “No Climate Tax” pledge that opposed any government action to reduce carbon dioxide pollution.[64]

California, 2010
Koch subsidiary donates $1 million to stop Calif. GHG law

In September 2010, a company controlled by the Koch brothers donated $1 million to the campaign to pass Proposition 23, the Suspend AB 32 California ballot initiative that would halt the state's global warming law. The contribution came from Flint Hills Resources, a Kansas petrochemical company that is a subsidiary of Koch Industries. The Koch donation came a day after Tesoro, a Texas oil company that has been bankrolling the pro-Prop 23 campaign, put $1 million into the campaign coffers. According to the No Prop 23 campaign, 97 percent of the $8.2 million raised by the Yes forces has been given by oil-related interests and 89 percent of that money has come from out of state. Three companies, Koch Industries, Tesoro, and Valero -- another Texas-based oil company -- have provided 80 percent of those funds.[65]

Other Koch funding

Koch-funded organizations

According to the 2010 report by Greenpeace, Koch Industries: Secretly Funding the Climate Denial Machine, Koch has out-spent ExxonMobil in funding climate change denial. From 2005 to 2008, ExxonMobil spent $8.9 million, while the Koch Industries-controlled foundations contributed $24.9 million in funding to organizations of climate change skeptics. Efforts include:

The reports says such contributions are only part of the picture, because the full scope of direct contributions to organizations is not disclosed by individual Koch family members, executives, or from the company itself.

Organizations' messaging on "ClimateGate"
  • ClimateGate Echo Chamber—At least twenty Koch-funded organizations have repeatedly rebroadcast, referenced and appeared as media spokespeople in the story, dubbed “ClimateGate,” regarding stolen emails from the University of East Anglia in November 2009. These organizations claim the emails prove a “conspiracy” of scientists and "proves" climate change is a hoax.

Tar Sands, 2011

In 2011, TransCanada requested permission to build a 1,661 mile pipeline from Canada's tar sands oil fields to U.S. refiners in Texas. The so-called Keystone XL pipeline would import as much as 510,000 barrels per day. Koch Industries is responsible for close to 25 percent of the oil tar sands crude that is imported into the United States, and are one of the biggest refiners of Alberta oil sands crude oil. [66] Some speculated that Koch Industries would benefit significantly from the project. [67]

In May, 2011, Reps. Henry Waxman (D-Calif.) and Bobby Rush (D-Ill.) formally requested more information from Republican leadership on the House Energy and Commerce Committee about how the project might benefit Koch Industries. They wrote:

Publicly available information indicates that the company is involved in several aspects of Canadian tar sands development. Koch’s Pine Bend Refinery in Minnesota currently processes roughly 25% of the tar sands fuel imports to the United States. Koch owns Flint Hills Resources, LLP, in Calgary, Canada, which is “among Canada’s largest crude oil purchasers, shippers and exporters.” Flint Hills Resources also operates a crude oil terminal in Hardisty, Alberta, where the Keystone XL pipeline will begin. According to the Government of Alberta, Koch Industries has both proposed and producing tar sands projects in the province. The Oil Sands Developers Group also indicates that Koch is a tar sands project developer. Koch’s Corpus Christi refinery is positioned near the end of the proposed Keystone XL pipeline and would be a potential buyer for the tar sands crude shipped through the pipeline.

[68]

Actions during and before the GW Bush administration

Lobbying

In 2006, the company spent $3,528,750 on lobbying. $820,000 was to outside lobbying firms with the remainder spent on in-house lobbyists.[69]

In February 2005, the Hill reported, "Top White House official Matt Schlapp is joining the Washington office of oil-and-gas conglomerate Koch Industries, the latest example of high-level administration and congressional staffers making post-election leaps to the lobbying world." Schlapp had headed the White House’s Office of Political Affairs. At Koch, Schlapp will be the executive director of federal affairs, directing Washington lobbying. [10]

Elizabeth Stolpe, previously in-house lobbyist for Koch Industries, became Associate Director For Toxics & Environmental Protection at the White House Council on Environmental Quality.

Pollution - Spills, fines and indictments

During the 1990s, faults in Koch Industry pipelines were responsible for more than 300 oil and chemical spills in five states, prompting a landmark penalty of $35 million from the Environmental Protection Agency (EPA). In Minnesota, it was fined an additional $8 million for discharging oil into streams.

According to an August 30, 2010 article in The New Yorker magazine, "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. (In 2001, the company paid an undisclosed settlement.)

During the months leading up to the 2000 presidential elections, the company faced even more liability, in the form of a 97-count federal indictment charging it with concealing illegal releases of 91 metric tons of benzene, a known carcinogen, from its refinery in Corpus Christi, Texas. The company faced liability for three hundred and fifty million dollars in fines, and four Koch employees faced up to thirty-five years in prison. [70]

Off the hook after GWBush became president

After George W. Bush became president the U.S. Justice Department dropped 88 of the charges. Two days before the trial, John Ashcroft settled for a plea bargain, in which the company pled guilty to falsifying documents. All major charges were dropped, and Koch and Ashcroft settled the lawsuit for a fraction of that amount.

David Uhlmann, a career prosecutor who, at the time, headed the environmental-crimes section at the Justice Department, described the suit as “one of the most significant cases ever brought under the Clean Air Act.”[70]


The Koch Industries PAC had donated $332,000 to Republican candidates in the 2010 elections. [71]

Koch representation in Bush's cabinet

Alex Beehler, assistant deputy under secretary of defense for Environment, Safety and Occupational Health, was previously Koch Industries' director of environmental and regulatory affairs and concurrently served at the Charles G. Koch Foundation as vice president for environmental projects. [72] Beehler was later nominated and re-nominated by the Bush White House, to become the U.S. Environmental Protection Agency's Inspector General. [73]

2011 Bloomberg Markets Exposé

On September 22, 2011, business media outlet Bloomberg released an extensive report detailing the results of an investigation it had conducted into allegations by several former Koch employees turned whistle-blower. One whistle-blower detailed her termination after her compliance check had discovered a number of bribery payments made in order to secure contracts in six countries, including Nigeria, Egypt, and Saudi Arabia. Reporters also discovered that Koch companies had traded with Iran through foreign-held subsidiaries, possibly violating US law. Other sources within the article detailed a culture of poor ethics and allegations of outright theft.[74]

Bribery of Foreign Officials

In 2008, an internal investigation found numerous instances of bribery to foreign officials to secure contracts by Koch Industries subsidiary Koch-Glitsch. One incident which came under investigation was the payment of an unusually high premium to a sales agent who admitted in a French court that the payment had been passed on to someone representing a partially state-owned Egyptian company in order to secure a contract there.

The company attempted to blame the sales agent and terminated him with a six page letter detailing the company's illicit payments to interests in Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia and placing blame for them on the sales agent. However, the court found that "[the sales agent] was not giving authorizations" for the payments, instead indicating that Charles Ender, a major Koch executive and president of Koch-Glitsch for Europe and Asian operations at the time, was responsible.[75]

Firing of Compliance Officer

Meanwhile, the compliance offer initially assigned to the investigation was removed from the inquiry almost immediately and fired a short time later. After a seven week hospitalization in 2009, saying that she failed to share documents within the company and didn't have the skills she'd claimed on her resume, she was terminated.

The compliance officer argued that she her termination was retaliation for uncovering the illegal payments.[76]

Trading with Iran

Bloomberg also found that Koch companies had traded and worked extensively with Iran over a ten year period. Notable Koch-Iranian collaborations include the construction of the world's largest methanol plant for the National Iranian Petrochemical Company at the city of Bandar Assaluyeh. The plant is being used to tap into Iran's extensive natural gas resources.

A purchase order for refining equipment at the plant was sent the day after President George W. Bush outlined the concept of an "axis of evil" in his 2003 State of the Union address, where he articulated his view that Iran was a direct threat to the United States and specifically advocated for economic sanctions that Koch companies may have been violating. “Every single chance they had to do business with Iran, or anyone else, they did,” said one whistle blower of Koch Chemicals' dealings with Iran.[77]

Falsifying Benzene Emissions

In April 2001, the Koch Petroluem Group (now Flint Hills Resources) "pleaded guilty to a felony charge of lying to the government about its benzene emissions". A report to the Texas Natural Resource Conservation Commission disclosed only 1/149th of the actual benzene pollution. The company was fined $10 million and ordered to fund an additional $10 million in costs for environmental cleanup in South Texas.

The extremely profitable plant earned almost $200 million for the company in 1995, the year of the violation; the benzene emissions would have cost $7 million to control. After an environmental technician reported the false report that led to the fines, Koch Petroleum Group moved the whistle blower to an empty office with no tasks and no e-mail access. She quit a short time later.[78]

Stealing Oil on Indian Reservations

In May 1989, the Senate held hearings on what the Senate special committee on investigations called "a widespread scheme to steal oil on Indian land." According to data the committee compiled, Koch took 1.95 million barrels of oil it didn’t pay for from 1986 to 1988.

The Senate referred the case to the Justice Department, but no indictment followed. In December 1999 in a civil trial, the jury found that "Koch Industries had made 24,587 false claims in buying oil, underpaying the U.S. government for royalties on Native American land from 1985 to 1989." Koch settled the case in 2001 for $25 million.

Koch's current PR line on the scandal? Melissa Cohlmia, Koch’s director of corporate communications, said in an email to Bloomberg reporters, "We believe that our practices were consistent with industry practice."[79]

Deadly Butane Explosion

In 1996, two Texas teenagers, aged 16 and 17, were killed after their car stalled in a cloud of butane vapor that disabled the vehicles internal mechanisms. The butane vapor was leaking from a corroded steel pipeline owned by Koch Industries. As the driver attempted to re-start the vehicle, the leaked butane cloud caused a massive explosion that killed both teenagers, burning them alive. A jury later awarded nearly $300 million to family members in a wrongful death lawsuit.

In the Bloomberg expose, a Koch spokesperson argued that this was only an isolated incident.[80]

The 'Koch Method'

In detailing past regulatory action against Koch businesses, the article interviewed whistle-blowers who had testified about their role in actions that drew enforcement. Court testimony details one man who testified under oath that he was taught to steal and cheat in business dealings, using techniques he was taught by superiors, who referred to them as the "Koch Method." [81]

Company background

On its website, Koch Industries states that the company is named after Fred C. Koch "who developed an improved method of converting heavy oil into gasoline in 1927."[82] In one profile on the evolution of the company, published by Koch Industries, he "spent most of 1924 and 1925 in England as an employee of the Medway Oil and Storage Company." Subsequently he became the third partner in Keith-Winkler, a Wichita Kansas engineering firm which had been founded by Lewis Winkler and Dobie Keith. Keith left the firm in approximately 1926 and Winkler and Koch's firm struggled by on "small, low-margin projects." The pairs fortunes changed when Koch developed a thermal cracking process which was sold to "several independent refineries in 1928 and 1929." By 1931 the company was known as the Winkler-Koch Engineering Company. When Winkler and Koch "ended their partnership in 1945" Koch established Koch Engineering Company.[83]

In 1940, Koch co-founded the Wood River Oil & Refining Company which six years later bought the Rock Island Oil & Refining Company's refinery in southwestern Oklahoma. In 1959 Wood River Oil & Refining Company's name was changed to Rock Island Oil & Refining Company. The company's name was changed once more in 1968 to Koch Industries following the death of Fred Koch.[84]

From its foundation in the 1940's up until the late 1980's Koch Industries business interests were dominated by oil and gas industry operations, along with some ranching and engineering subsidiaries.[84]

Koch Industries has 70,000 employees globally,[85] and annual sales of $100 billion in the fiscal year ending December of 2008.[1]

Cargill comes in second for privately owned companies.

Early history

Fred Koch, father of Charles and David, was the Koch who initially grew Koch Industries, which grew from an oil delivery business in Texas. According to the John Birch Society's New American publication, Koch "was an early member of the The John Birch Society’s National Council, an advisory group to JBS founder Robert Welch." [86]

Koch Industries' earliest founding statistics are mixed. The NYTimes said it was "founded in 1927 by Fred Koch with a fleet of oil delivery trucks"[87]; the Koch website pegs the founding year at 1940 ("What is now Koch Industries, Inc. began as Wood River Oil and Refining Co. in 1940")[88]; and a detailed early history from a Koch Industries internal newsletter says Fred Koch joined an existing struggling enterprise, and implies that he joined in the year 1926.[89]

Mergers & acquisitions

Entergy (2001)

In 2001, power company Entergy formed a partnership with Koch Industries to form Entergy- Koch, LP.[90]

Invista (Lycra, etc), 2003

In 2003, Koch announced a $4.4 billion cash purchase of Invista, the world's largest fibers company and owner of brand names such as Lycra and Teflon; from DuPont. [91]

Georgia-Pacific (mills, paper products), 2005

In 2005 Koch Industries acquired the American pulp and paper products giant Georgia-Pacific, which now operates as a subsidiary.[92]

Product brands

Georgia-Pacific's brands include Quilted Northern, Angel Soft, Brawny, Sparkle, Vanity Fair, and Dixie cups. Internationally, its brands include Lotus, Colhogar, Delica, Tenderly, and the Vania brand of personal care products.

Lumber mills

Georgia-Pacific owns and operates the following mills:

  • Naheola mill in Pennington, Alabama, which began operations in 1958. Currently, the principle products from the Naheola mill include both plate stock and cup stock for use in the food service market.
  • The Crossett mill, located in Crossett, Arkansas, produces bleached paperboard grades, including folding carton, plate stock, bleached linerboard, and various cup stock grades.
  • The recently acquired Brewton mill, located in Brewton, Alabama, produces folding carton, blister packaging, and skin packaging grades.
  • Fort James Muskogee Mill Power Plant is a coal-fired power station in Muskogee, Oklahoma that provides power to Georgia-Pacific's Muskogee paper mill. [93]

Contact

Wichita, KS

4111 E. 37th St. North
Wichita, KS 67220-3203
Phone: 316-828-5500
Fax: 316-828-5739
Web address: http://www.kochind.com

Washington, DC

600 14th St. NW
Washington, DC[94]

Articles and resources

Related SourceWatch articles

External resources

External articles

References

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