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Deputy DC Bureau Chief
Dan is Mother Jones' deputy DC bureau chief. He is the New York Times best-selling author of Sons of Wichita(Grand Central Publishing), a biography of the Koch brothers that is now out in paperback. Email him at dschulman (at) motherjones.com.
Long before Charles Koch became the left's public enemy number one (or two, depending on where David Koch falls in the rankings), some of his most vocal detractors were not liberals but fellow libertarians. None of his erstwhile allies would come to loathe him more fiercely than Murray Rothbard, one of the movement's intellectual forefathers, with whom Charles had worked closely to elevate libertarianism from a fringy cadre of radical thinkers to a genuine and growing mass movement.
In the 1970s, Charles helped fund Rothbard's work, as the economist churned out treatise after treatise denouncing the tyranny of government. Rothbard was a man with a plan when it came to movement-building. Where some libertarians had bickered over whether to advance the cause through an academic or an activist approach, Rothbard argued that the solution wasn't to choose one path, but both. Charles was taken with his strategic vision.
Rothbard dreamt of creating a libertarian think tank to bolster the movement's intellectual capacity. Charles Koch made this a reality in 1977, when he co-founded the Cato Institute with Rothbard and Ed Crane, then the chairman of the national Libertarian Party. This was a high point for libertarianism, when a busy hive of libertarian organizing buzzed on San Francisco's Montgomery Street, home to Cato and a handful of other ideological operations bankrolled by Charles Koch.
But the relationship between Cato's co-founders soon soured.
"Charles Koch has a practice of misusing nonprofit foundations for his own personal ends. He wants to spend that money on things that will enhance his personal image and goals, even it these expenditures are not consistent with the publicly stated goals of the foundation."
Rothbard, who was feisty by nature, chafed under the regime of Crane and Koch—the libertarian movement's primary financier at that time. His breaking point came during the 1980 election, when David Koch ran as the Libertarian Party's vice presidential nominee. Rothbard and his supporters felt that, in a bid for national legitimacy, David Koch and his running mate, Ed Clark, had watered down the core tenets of libertarianism to make their philosophy more palatable to the masses. Americans today would consider their platform—which called for abolishing Social Security, Medicare, and Medicaid and eliminating federal agencies including the EPA and the Department of Energy—a radical one. But to Rothbard and his circle, it wasn't radical enough. For instance, the Clark-Koch ticket stopped short of calling for the outright repeal of the income tax. And Clark, to Rothbard's horror, had even defined libertarianism as "low-tax liberalism" in a TV interview.
Following the 1980 election, in which the Clark-Koch campaign claimed a little over one percent of the popular vote, Rothbard did not hold back. He penned a scathing polemic titled "The Clark Campaign: Never Again," in which he wrote that Ed Clark and David Koch had "sold their souls—ours, unfortunately, along with it—for a mess of pottage, and they didn't even get the pottage." Thanks in part to Rothbard's rabble-rousing, factional feuds and recriminations splintered the libertarian movement just as it was gaining momentum. A few months after Rothbard's diatribe, Charles Koch and Ed Crane tossed him out of the Cato Institute and voided his shares in the think tank (which was set up, under Kansas law, as a nonprofit corporation with stockholders), a rebuke that turned their libertarian brother-in-arms into a lifelong adversary.
Rothbard would later play a cameo role in the messy battle between the four Koch brothers. In 1988, when Bill and Frederick Koch sued their brothers over control of the family foundation that had been established by their father, they dredged up Rothbard as a possible witness, seeking to depose him in the case. They hoped his testimony would damage Charles Koch's credibility and support their contention that their brother was a tyrannical control freak who used nonprofit entities to advance his own aims.
A document summarizing Rothbard's anticipated testimony was filed in the case, and I came across it as I pored over thousands of documents at the district court house in the Koch family's hometown of Wichita. Rothbard, it seemed, was only too eager to denounce his onetime benefactor.
Charles Koch, Rothbard planned to testify, "involves himself in the minutest details related to the non-profit foundations with which he is associated…. He insists on personally approving even the minutest matters, such as $100 grants, stationery design and color of offices." Rothbard contended that Charles would go "to any end to acquire/retain control over the nonprofit foundations with which he is associated" and "considers himself above the law." And the economist further alleged:
Charles Koch has a practice of misusing nonprofit foundations for his own personal ends. Charles Koch wants absolute control of the non-profit foundations, but wants to be able to spend other people's money not his own. He wants to spend that money on things that will enhance his personal image and goals, even it these expenditures are not consistent with the publicly stated goals of the foundation. Amongst other things, Charles Koch uses his involvement with non-profit foundations to aquire access to, and respect from, influential people in government and elsewhere.
Rothbard died in 1995, taking his grudge to the grave. By then, Charles and David Koch had abandoned the libertarian movement and struck out on their long path to becoming Republican powerbrokers. As their influence has expanded within the broader GOP in recent years, I've heard echoes of Rothbard's past criticisms in the conservative nonprofit world by recipients of Koch network funding who complain of micromanagement by the Koch brothers' political adjutants. "Nobody really works with them," said the leader of one conservative group. "They work for them or not at all. They are kind of creating a monopoly" and attempting to "make the conservative movement theirs."
Sons of Wichitahit bookstores on Tuesday. The early reviews have been great. Vanity Fair calls Sons of Wichita "never less than engrossing" and "a stylishly written saga." The American Prospectsays "despite Schulman’s often-superb eye for the revealing and/or juicy detail…he never stoops to caricaturing his subjects as the Koch Ness Monsters of popular lore." Earlier this week, Mother Jonespublished an excerpt from the book that delved into the long battle between the Koch brothers, which played out in a series of scorched-earth lawsuits that earned untold millions for a small army of lawyers and private eyes.
As I write in the book, pugilism was a way of life for the Koch family—metaphorically, but also literally. In college, Fred Koch was one of the stars of MIT's boxing team, which he briefly captained. And he later taught his sons how to fight. During David and Bill Koch's teenage years, brawls would occasionally erupt between them that were so fierce that Morris, the foreman of the Kochs' 160-acre property on the outskirts of Wichita, would keep their boxing gloves close at hand to make sure they didn't seriously injure each other. (At boarding school, Bill joined the boxing squad.)
The clip above, circa the 1940s, shows a more good natured (even endearing) bout between David and Bill as young boys. It was included in a compilation of family footage that was submitted as evidence in the 1991 legal battle over the Koch matriarch's will.
The feud between her sons had devastated Mary Koch. In a last ditch bid to end the legal skirmishes, she included a clause in her will stating that if any of her sons were engaged in litigation against each other at the time of her death, they would be cut out of her estate unless they dropped the lawsuit.
This clause was aimed squarely at Bill and Frederick, who in 1985 had filed suit against their brothers and Koch Industries, claiming they had been misled about the true value of the company when Charles and David bought them out in 1983. Bill and Frederick had no intention of dropping their suit. Following Mary's December 1990 death they unsuccessfully contested her will, alleging that Charles and Koch family lawyer Bob Howard (whose firm both drafted Mary's will and represented Charles and David in the 1985 lawsuit brought by their brothers) had unduly influenced her to insert the disinheritance clause. Not long before her death, Mary gave copies of the tape, which she had compiled from old family footage and partially narrated, to her four sons. At trial, it was used to show that she was not of diminished capacity when she decided to revise her will to add the disinheritance clause.
She hoped it would stop the war. But it only ignited another battle.
Before the brothers went to war against Obama, they almost destroyed each other.
Daniel SchulmanMay 20, 2014 6:00 AM
Morris eased the pickup truck to the side of the road. The wide, busy thoroughfares of 1950s Wichita, Kansas, were just five miles southwest, but here on the largely undeveloped outskirts of the city, near the Koch family's 160-acre property, the landscape consisted of little more than flat, sun-bleached fields, etched here and there by dusty rural byways. The retired Marine, rangy and middle-aged, climbed out of the truck holding two sets of scuffed leather boxing gloves.
"Okay, boys," he barked, "get outside and duke it out." David and Bill, the teenage Koch twins, were at each other's throats once again. Impossible to tell who or what had started it. But it seldom took much. The roots of the strife typically traced to some kind of competition—a game of hoops, a round of water polo in the family pool, a footrace. They were pathologically competitive, and David, a gifted athlete, often won. Everything seemed to come easier for him. Bill was just 19 minutes younger than his fraternal twin, but this solidified his role as the baby of the family. With a hair-trigger temper, he threw the tantrums to match.
David was more even-keeled than Bill, but he knew how to push his brother's buttons. Once they got into it, neither backed down. Arguments between the twins, who shared a small room, their beds within pinching range, transcended routine sibling rivalry. Morris kept their boxing gloves close at hand to keep them from seriously injuring each other when their tiffs escalated into full-scale brawls. The brothers' industrialist father had officially hired the ex-soldier to look after the grounds and livestock on the family's compound. But his responsibilities also included chauffeuring the twins to movies and school events, and refereeing the fights that broke out unpredictably on these outings.
Morris laced up one brother, then the other. The boys, both lean and tall, squared off, and when Morris stepped clear, they traded a barrage of punches. A few minutes later, Morris reclaimed the gloves and the brothers piled breathlessly into the cab. He slipped back behind the wheel and pulled out onto the road.
This clip, circa 1940s, shows David and Bill Koch duking it out.
Pugilism was an enduring theme in the family. The patriarch, Fred Koch—a college boxer known for his fierce determination—spent the better part of his professional life warring against the dark forces of communism and the big oil companies that had tried to run him out of the refining business. As adults, Fred's four sons paired off in a brutal legal campaign over the business empire he bequeathed to them, a battle that "would make Dallas and Dynasty look like a playpen," as Bill once said.
The roles the brothers would play in that drama were established from boyhood. Fred and Mary Koch's oldest son, Frederick, a lover of theater and literature, left Wichita for boarding school after 7th grade and barely looked back. Charles, the rebellious No. 2, was molded from an early age as Fred's successor. After eight years at MIT and a consulting firm, Charles returned to Wichita to learn the intricacies of the family business. Together, he and David would build their father's Midwestern company, which as of 1967 had $250 million in yearly sales and 650 employees, into a corporate Goliath with $115 billion in annual revenue and a presence in 60 countries. Under their leadership, Koch Industries grew into the second-largest private corporation in the United States (only the Minneapolis-based agribusiness giant Cargill is bigger).
Fred was the kind of father, one relative recalled, who taught his boys to swim by throwing them into the pool and walking away.
Bill, meanwhile, would become best known for his flamboyant escapades: as a collector of fine wines who embarked on a litigious crusade against counterfeit vino, as a playboy with a history of messy romantic entanglements, and as a yachtsman who won the America's Cup in 1992, an experience he likened, unforgettably, to the sensation of "10,000 orgasms." Koch Industries made its money the old-fashioned way—oil, chemicals, cattle, timber—and in its dizzying rise, David and Charles amassed fortunes estimated at $41 billion apiece, tying them for sixth place among the wealthiest people on the planet. (Bill ranks 377th on Forbes' list of the world's billionaires.) The company's products would come to touch everyone's lives, from the gas in our tanks and the steak on our forks to the paper towels in our pantries. But it preferred to operate quietly—in David's words, to be "the biggest company you've never heard of."
But if Charles and David's industrial empire stayed under the radar, their political efforts would not remain so private. After spending decades quietly trying to mainstream their libertarian views and remake the political landscape, they burst into the headlines as they took on the Obama administration and forged a power center in the Republican Party.
Politicians, as one of Charles' advisers once put it, are stage actors working off a script produced by the nation's intellectual class. Some of the intellectual seeds planted by the Kochs and their comrades would germinate into one of the past decade's most influential political movements: Though the intensely private brothers downplay any connection, they helped to provide the key financing and organizational support that allowed the tea party to blossom into a formidable force—one that paralyzed Congress and ignited a civil war within the GOP. After backing a constellation of conservatives, from Wisconsin Gov. Scott Walker to South Carolina's Jim DeMint, Charles and David mounted their most audacious political effort to date in the 2012 presidential campaign, when their fundraising network unleashed an estimated $400 million via a web of conservative advocacy groups.
Just as their father, a founding member of the John Birch Society, had once decried the country's descent toward communism during the Kennedy era, the brothers saw America veering toward socialism under President Obama. Charles, entering his late 70s, had not only failed to see American society transformed into his libertarian ideal; with this new administration, things seemed to be moving in the exact opposite direction. Now he and David, along with other allies, would wage what he described as the "mother of all wars" to defeat Obama and hand Republicans ironclad congressional majorities.
Yet for all the attention the Kochs—including the "other brothers," Frederick and Bill—have received, America knows little about who they really are. Charles and David have gained a reputation as cartoonish robber barons, powerful political puppeteers who with one hand choreographed the moves of Republican politicians and with the other commanded the tea party army. And like all caricatures, this one bears only a faint resemblance to reality.
As with America's other great dynasties, the Kochs' legacy (corporate, philanthropic, political, cultural) is far more expansive than most people realize, and it will be felt long into the future. Already, the four brothers have become some of the most influential, celebrated, and despised members of their generation. Understanding what shaped them, what drove them, and what set them upon one another requires traveling back to a time when the battles involved little more than a pair of boxing gloves.
Fred Koch came up in a place where sometimes all that separated prosperity from poverty was an unfortunate turn in the weather. Quanah, Texas, located just east of the panhandle and eight miles from the Oklahoma border, was a town of strivers, and Fred watched his father's rise from penniless Dutch immigrant to successful newspaper owner. By the time his four sons were born—Frederick in 1933, Charles in 1935, David and Bill in 1940—Fred's technical talent and unrelenting ambition had made him the co-owner of a multimillion-dollar oil engineering firm.
Fred told his sons he wanted them to experience "the glorious feeling of accomplishment." If he handed them everything, what would motivate them to make something of themselves? "He wanted to make sure, because we were a wealthy family, that we didn't grow up thinking that we could go through life not doing anything," Charles once recalled. Fred's mantra, drilled repeatedly into their minds, was that he had no intention of raising "country-club bums."
Though his children grew up among Renoirs and Thomas Hart Bentons on an estate across from the exclusive Wichita Country Club, Fred went out of his way to make sure they did not feel wealthy. "Their father was quite tight with his resources," recalled Jay Chapple, a childhood friend of the Koch twins. "Every family was getting a TV set that could possibly afford one, but Fred Sr. just said no." The brothers received no allowances, though they were paid for chores. "If we wanted to go to the movies, we'd have to go beg him for money," David once told an interviewer. In the local public school, where the Koch boys began their educations alongside the sons and daughters of blue-collar workers from the Cessna and Beech factories, it was their classmates who often seemed like the rich ones, he remembered: "I felt very much of a pauper compared to any of them."
The Koch clan posed for a Christmas card, circa 1950s. Left to right: Charles, David, Fred, Mary, Bill, Frederick. Special Collections and University Archives, Wichita State Universtity Libraries
Fred rarely displayed affection toward his sons, as if doing so might breed weakness in them. "Fred was just a very stiff, calculated businessman," Chapple said. "I don't mean this in a critical way, but his interest was not in the kids, other than the fact that he wanted them well educated." He was not the kind of dad who played catch; he was the type of father, one Koch relative recalled, who taught his children to swim by throwing them into the pool and walking away. "He ruled the boys with an iron fist."
Fred traveled frequently on business, but when he was home, the household took on an air of Victorian formality. After work, Fred often retreated to his wood-paneled library, its shelves filled with tomes on politics and economics, emerging promptly at 6:30 p.m., still in coat and tie, for dinner in the formal dining room. "He just controlled the atmosphere," Chapple recalled. "There was no horseplay at the table."
Every dictatorship has its dissident, and Frederick played this part early on. While the three younger boys took after their father, he gravitated toward his mother's interests. Mary Robinson Koch helped to nourish Frederick's artistic side, and when he grew up they often took in plays and attended performing arts festivals. Frederick was a student of literature and a lover of drama who liked to sing and act. He wasn't athletic, displayed no interest in business, and loathed the work-camp-like environment fostered by his father, with whom he shared little beyond a love of opera.
By the late 1950s, when Frederick was in his 20s, many in the family's circle of friends assumed that he was gay. "You know, those things, especially in an environment like Wichita, were almost whispered," says someone who spent time with the family and their friends during that era. (Frederick told me he is not gay.)
Fred Koch chose Charles as his successor early on, intensifying a bitter sibling rivalry. Courtesy MIT museum
In the 1960s, mention of Frederick even vanished from one of his father's bios: "He and Mrs. Koch have three sons," it read. "Charles, William, and David."
Fred's disappointment in his eldest son caused him to double down on Charles, piling him with chores and responsibilities by the age of nine. "I think Fred Koch went through this kind of thing that 'I must have been too affectionate; I must have been too loving, too kind to Freddie, and that's why he turned out to be so effeminate,'" said John Damgard, who went to high school with David and remains close with David and Charles. "So he was really, really tough on Charles."
"I think Mary did a lot to protect the twins," Damgard added, but Charles grew up with the impression that he was being picked on. As an 11-year-old boy, pleading for his parents to reconsider, he was shipped off to the first of several boarding schools, this one in Arizona.
As Charles admits, there was little about his teenage self that suggested he was destined for greatness. He was smart, but with the type of unharnessed intellect that tends to land young men in trouble. He got into fights, stayed out late drinking and sowing wild oats. David has called his older brother a "bad boy who turned good." When it came time for high school, his exasperated parents sent him to Culver Military Academy in northern Indiana, an elite military school that had a reputation for taking in wild boys and spitting out upright, disciplined men (notable alumni include the late New York Yankees owner George Steinbrenner, actor Hal Holbrook, and Crown Prince Alexander II of Yugoslavia). Charles considered it a prison sentence, and during his junior year he was expelled after drinking beer on a train ride to school after spring break.
Asked later how old Fred took the news, the best Charles could say was, "I'm still alive." Fred banished Charles to live with family in Texas, where he spent the remainder of the school year working in a grain elevator until, after some begging, he was reinstated at Culver.
When Charles became Fred Koch's work-in-progress, he also became a lightning rod for his youngest brother's jealousy. Bill was in some respects the most cerebral of the brothers, but he was also the most socially awkward and emotionally combustible. In his baby book, Mary had scrawled notations including "easily irritable," "angry," and "jealous." As a young boy, Bill resorted to desperate gambits for attention. Once, according to Charles, when Mary warned her son to take a hog's nose ring out of his mouth, Bill proceeded to gulp it down instead, necessitating a trip to the hospital.
Bill's volatile emotions made it difficult for him to concentrate in school, and his worried parents eventually sent him to a psychologist, who advised that the only way to help Bill was to remove the source of his smoldering resentment—Charles. "We had to get Charles away [to boarding school] because of the terrible jealousy that was consuming Billy," Mary told the New York Times' Leslie Wayne in 1986.
"Everything goes back to their childhood," one relative reflected. "Everything goes back to the love they didn't get."
Bill recalled a Lord of the Flies-like childhood, in which his parents were frequently away—Fred to travel, Mary to attend social events—leaving him and his brothers in the care of the household help "to grow up amongst ourselves." He remembered Charles as a mischievous bully who perched astride the family storm cellar during backyard games of King of the Hill and flung his brothers down to the ground whenever they tried to scramble to the top. Still, Bill idolized his older brother, though Charles made it painfully clear that he preferred David's company.
Bill and David were twins, but David and Charles were natural compatriots. David was self-confident and athletic, with a mild temperament and a contagious, honking laugh. "Charles and David were so much alike, they were always really good friends. And Bill probably felt a little left out," said their cousin Carol Margaret Allen. "Charles always had quite a following of girls, and so did David. And Bill—I think he would have liked to have had more girls following him. He was not as gregarious and outgoing." Awkward and uncoordinated, Bill spent his childhood trying to keep up with his brothers. His self-esteem plummeted. "For a long time," he later reflected, "I didn't think I was worth shit."
When it came time for the twins to attend prep school, they had their pick of prestigious institutions. David chose Deerfield Academy, a boarding school in northwestern Massachusetts that groomed East Coast Brahmins for the Ivy League. He credited the school, where he would distinguish himself on the basketball and cross-country teams, with transforming him "from an unsophisticated country boy into a fairly polished, well-informed graduate." But Bill opted for Culver Military Academy, Charles' alma mater. This alarmed Mary, who later confided to an interviewer that her son had become unhinged in his fixation on Charles.
"This was not a lovey-dovey family," mused a member of the extended family. "This was a family where the father was consumed by his own ambitions. The mother was trapped by her generation and wealth and surrounded by alpha males. And the boys had each other, but they were so busy in pursuit of their father's approval that they never noticed what they could do for each other."
"Everything," the relative added, "goes back to their childhood. Everything goes back to the love they didn't get."
On Christmas Day 1979, the four brothers, now aged 39 to 46, gathered in the dining room of their childhood home, the long table set with lace placemats and gold-rimmed crystal wine glasses. Also at the table were Charles' wife, Liz, and Joan Granlund, the former model who'd become Bill's secretary and girlfriend.
As was the family custom, Mary was hosting the Christmas dinner. Fred, who had died of a heart attack 12 years before, peered down from an oil painting on a nearby wall. But over the course of the evening, the festive mood evaporated, largely thanks to Bill.
Ever since joining Koch Industries in 1974, Bill had felt like the third and lesser wheel to David and Charles. He brooded over his role within the company, as well as over how Mary, who had just turned 72, planned to distribute her estate.
"I'm not going to fight you over any property," Charles said, "but just leave Mama alone."
Seated across from his mother, Bill began to vent. Growing up, he had perceived Mary as cool and distant. Now he blamed her for laying the foundation for his emotional turmoil. She had not loved him; she had treated him unfairly. According to Charles, Bill also pressed her on the disposition of the family's art collection. Their father had given Charles some paintings before his death; Bill insisted Mary even things out by leaving more of the collection to him.
Charles tried to calm his brother down: "I'm not going to fight you over any property, but just leave Mama alone." Bill laid into Charles, too, whom he faulted for running their father's company like a dictator. Fred may have selected Charles as his successor, but Koch Industries belonged to all of them.
Mary struggled to hold back tears. The discord, occurring on one of the few occasions when the Kochs still gathered as a family, finally overcame her. Sobbing, she pushed back from the table and hurried from the room.
It was the last Christmas the Kochs spent together.
The family business, which Charles had named Koch Industries in his father's honor, had grown at a staggering rate with Charles at the helm. One of his first major deals was the acquisition of Great Northern Oil Company, owner of a Minnesota-based refinery that had ready access to a steady supply of Canadian crude. Fred had purchased a 35 percent stake in 1959; to gain a majority for the buyout, Charles had joined forces with his father's old friend, Texas oilman J. Howard Marshall II, who swapped his 16 percent share in Great Northern for Koch Industries stock. The refinery became a company cash cow, fueling Charles' expansion into natural gas and petrochemicals and pipelines. Koch had grown into a large company, but its success lay in the fact that it could still operate like a small one: Where its rivals lumbered along, it could make deals and strategic decisions without a laborious board approval process, moving decisively and swiftly.
Perhaps too swiftly for Bill. He'd risen from salesman to head the company's mining subsidiary, Koch Carbon, and like Charles had a reputation for being highly analytical. But in meticulously studying every facet of an issue, he could be prone to waffling. He sought the opinions of high-priced consultants, commissioned studies, and snowed in managers with reports and memorandums. He asked endless questions, many of them astute, but to what end? At Koch, it was results that mattered. Profits. And the division Bill ran, according to Charles, was not faring so well.
Bill nevertheless pressed for more and more responsibility. William Hanna, the executive to whom Bill reported, noted: "It was important for Bill to be important."
"You're embarking on a program that will destroy the company," Charles seethed. "You won't get your self-respect by attacking me."
By 1980, Bill was openly dismissive of his brother, referring to him as "Prince Charles." Over dinner one night at Boston's Algonquin Club with his brother David and George Ablah—a family friend with whom the Kochs had recently joined in a $195 million real estate deal—Bill commented that Koch Industries had a reputation for screwing over its business partners. David was outraged. "You've got to retract that statement," he said.
Bill's criticisms—intemperate as they could sometimes be—were not merely rooted in sibling rivalry. He and other shareholders had developed some legitimate worries about the company's direction. Koch Industries had run afoul of agencies ranging from the Department of Energy to the Internal Revenue Service, and it even faced a criminal indictment for conspiring to rig a federal lottery for oil and gas leases.
Bill had also grown troubled by the increasing amounts of company money Charles diverted to his "libertarian revolution causes"—causes Bill considered loony. "No shareholders had any influence over how the company was being run, and large contributions and corporate assets were being used to further the political philosophy of one man," Bill said later.
Charles' philosophy had been deeply influenced by their father, whose experiences helping to modernize the USSR's oil industry in the early 1930s turned him into a rabid anti-communist who saw signs of Soviet subversion everywhere. A staunch conservative and Barry Goldwater backer, Fred was among the John Birch Society's national leaders; Charles joined in due time, and by the '60s was among a group of influential Birchers who grew enamored with a colorful anti-government guru named Robert LeFevre, creator of a libertarian mecca called the Freedom School in Colorado's Rampart mountain range. From here, Charles fell in with the fledgling libertarian movement, a volatile stew of anarchists, devotees of the "Austrian school" of economics, and other radical thinkers who could agree on little besides an abiding disdain for government.
By late 1979, as tensions with Bill were escalating, Charles had become the libertarian movement's primary sugar daddy. He had cofounded the Cato Institute as an incubator for libertarian ideas, bankrolled the magazine Libertarian Review, and backed the movement's youth outreach arm, Students for a Libertarian Society. He had also convinced David to run as the Libertarian Party's vice presidential candidate in the 1980 election (Bill had declined). David was able to pour unlimited funds into his own campaign, circumventing federal restrictions on political contributions.
Their father had loathed publicity, scrupulously guarding the family's privacy. But, to Bill's dismay, Charles and David's activism was beginning to draw attention to the company and the family. Worse, at the very moment that the Energy Department was investigating Koch Industries for violating price controls on oil, David and his Libertarian Party running mate, Ed Clark, were on the campaign trail openly antagonizing the agency by calling for its eradication.
Before the storm: Bill, Charles, and David in Lincoln, Massachusetts, 1968 Photo: Mikki Ansin
Beyond politics, Bill and other Koch shareholders also had concerns about liquidity. Bill was one of the richest men in America, worth hundreds of millions of dollars. But only on paper. He had needed to borrow money to buy a mansion near Boston. Nearly all of his net worth was locked up in a closely held private company. The market value of Koch stock, unlike that of publicly traded companies, was opaque. If any of Koch's shareholders wanted to cash in their holdings, they would likely be forced to do so at an extreme discount.
Koch shares did pay a dividend (about 6 percent of the company's earnings), but Bill considered it stingy. Charles' growth-obsessed operating style called for plowing almost all earnings back into the company. This strategy expanded Koch Industries, but not the bank accounts of its shareholders—at least not immediately. Bill had interests he wanted to pursue: art, fine wine, yachting.
Bill began furtively meeting with Koch shareholders, some of whom shared his frustrations. The most obvious solution was taking the company public. Charles opposed this option. The last thing he wanted was more oversight from government bureaucrats.
On Thursday, July 3, 1980, an 11-page single-spaced letter landed on Charles' desk. His blood pressure rose as he read: This was not just another of Bill's regular, overheated missives. His brother was accusing him of keeping the board in the dark about key corporate matters, including its run-ins with regulators: "The directors and shareholders must look on helplessly as the corporation's good name is dragged through the mud."
Bill delved into the "extremely frustrating" liquidity issue, complaining that it was "absurd" that shareholders who were "extremely wealthy on paper" had almost no ability to utilize their assets. "What is the purpose of having wealth if you cannot do anything with it, especially when under our present tax laws on death they will undoubtedly end up in the hands of government and politicians?" If these problems were not solved, he warned, "the company will probably have to be sold or taken public." Though the letter was addressed solely to Charles, Bill had circulated it to some of the shareholders. It was a declaration of war.
Six days later, on July 9, 1980, Charles took his customary place at the head of the long, polished wooden table in Koch Industries' conference room. A large world map hung behind him. As usual, David sat to Charles' left, and Sterling Varner, the company's president, to his right.
Charles was known for his inscrutable impassiveness. But that afternoon, as the directors gathered for a board meeting, he was visibly angry. He had added a last-minute item to the agenda: "W.I.K. Has Leveled Serious Charges."
A list of one-on-one meetings between VIP donors and the Kochs and their operatives offers a revealing look into their mighty political machine.
Andy Kroll and Daniel SchulmanFeb. 5, 2014 12:59 PM
There's one main rule at the conservative donor conclaves held twice a year by Charles and David Koch at luxury resorts: What happens there stays there.
The billionaire industrialists and their political operatives strive to ensure the anonymity of the wealthy conservatives who fund their sprawling political operation—which funneled more than $400 million into the 2012 elections—and to keep their plans private. Attendees of these summits are warned that the seminars, where the Kochs and their allies hatch strategies for electing Republicans and advancing conservative initiatives on the state and national levels, are strictly confidential; they are cautioned to keep a close eye on their meeting notes and materials. But last week, following the Kochs' first donor gathering of 2014, one attendee left behind a sensitive document at the Renaissance Esmeralda resort outside of Palm Springs, California, where the Kochs and their comrades had spent three days focused on winning the 2014 midterm elections and more. The document lists VIP donors—including John Schnatter, the founder of the Papa John's pizza chain—who were scheduled for one-on-one meetings with representatives of the political, corporate, and philanthropic wings of Kochworld. The one-page document, provided to Mother Jones by a hotel guest who discovered it, offers a fascinating glimpse into the Kochs' political machine and shows how closely intertwined it is with Koch Industries, their $115 billion conglomerate.
The more than 40 donors courted by the Kochs include hedge fund and private-equity billionaires, real estate tycoons, and executives of top corporations, including Jockey International and TRT Holdings, owner of Omni Hotels and Gold's Gym. A number of them have never been identified as members of the Koch donor network, including Schnatter, one of the more prominent names on the list. An outspoken opponent of the Affordable Care Act, he is a longtime Republican donor who hosted a fundraiser for Mitt Romney's presidential campaign. The document notes that the pizza mogul was scheduled to meet with Ryan Stowers, the director of higher education at the Charles G. Koch Foundation. (Schnatter did not respond to requests for comment.)
The document suggests a close collaboration between officials of Koch Industries, AFP, and Freedom Partners, whose staff and board are stacked with numerous current and former Koch Industries employees.
Another top conservative contributor on the list is TRT Holdings' cofounder Robert Rowling, whose net worth is estimated at $4.9 billion. During the 2012 election, Rowling directed $3.5 million to American Crossroads, the super-PAC spearheaded by Karl Rove, and he cut a $100,000 check to the pro-Romney super-PAC Restore Our Future. According to the document, Rowling was scheduled to sit down with Charles Koch at the "Koch residence"—presumably a reference to the Wichita businessman's vacation home at the Vintage Club, a short drive from the resort where the donor conference was held. Top Koch operatives were expected to participate in this session, including Kevin Gentry, the Koch brothers' fundraising guru; Daniel Garza, the director of the Libre Initiative, a Koch-funded organization dedicated to Latino outreach; and Marc Short, who runs Freedom Partners, the centerpiece of the Kochs' political network, which distributes donor funds to a large web of conservative nonprofit groups. (Rowling did not respond to requests for comment.)
Other heavy hitters slated for meetings with the Koch brothers or their representatives included Carl Berg, a Silicon Valley real estate tycoon worth $1.1 billion; Ken Griffin, who founded the hedge fund Citadel and clocks in at No. 103 on the Forbes 400 (net worth, $4.4 billion); John W. Childs, a top private-equity investor; and Fred Klipsch, the chairman of the headphone and speaker company Klipsch Group.
The meeting list illustrates the interwoven nature of the Koch brothers' corporate, political, and philanthropic activities. The donor meetings featured various senior Koch Industries executives, including the company's chief financial officer, Steve Feilmeier. He was scheduled to join Charles Koch for a sit down with Berg. Charles Koch's 36-year-old son, Chase, the president of Koch Fertilizer, was also scheduled to take part in a meeting with a donor named George Gibbs. (Koch Industries spokesman Rob Tappan would not comment on the conference document, only confirming that company employees attend the donor summits. Freedom Partners spokesman James Davis said he was "uncertain" about the document and did not respond to further questions.)
At least half of the one-on-one sessions involved representatives of Americans for Prosperity, the political advocacy group founded by the Koch brothers and their top political adviser and strategist, Richard Fink, a Koch Industries executive vice president and board member. The AFP officials called to duty for these discussions included AFP's president Tim Phillips, chief operating officer Luke Hilgemann, vice president for state operations Teresa Oelke, and vice president for development Chris Fink (Richard Fink's son). The state directors for AFP's Wisconsin, Michigan, Pennsylvania, and Florida chapters were also slated for tête-à-têtes during the Koch summit. (AFP spokesman Levi Russell declined to comment on the meeting document.)
In the past, Koch Industries has distanced itself from AFP and its political activities. The company has said the group is just one of "hundreds of organizations" that receive funding from the Kochs and that it operates "independently" of Koch Industries. But the document suggests a close collaboration between officials of Koch Industries, AFP, and Freedom Partners, whose staff and board are stacked with numerous current and former Koch Industries employees. Michael Lanzara and Jeff Noble, who transitioned over to Freedom Partners from Koch Companies Public Sector—the company's legal, lobbying, and public affairs branch—were scheduled to meet with donors alongside AFP staffers. The Koch brothers and Richard Fink were also listed as taking part in some of these sessions. (Fink, a man of many hats within the Koch firmament, is also an AFP board member; David Koch chairs the board of the Americans for Prosperity Foundation.)
Heading into the midterm elections, AFP has emerged as one of the right's most active and well-financed political outfits. In recent months, it has spent more than $20 million on ads clobbering congressional Democrats for supporting Obamacare. And the group is merely one piece of the Kochs' massive political operation, which in size, scope, and fundraising prowess has come to resemble a political party in its own right. During the 2012 election cycle, in fact, the Koch network managed to raise as much as the Republican National Committee itself.
After the brothers and their allies failed to win the Senate or unseat Obama in 2012, David Koch told Forbes that this setback would do little to deter them: "We're going to fight the battle as long as we breathe." At the Palm Springs conference, as the left-behind-list of VIP meetings shows, the Kochs are lining up serious financial firepower for the political fights of 2014 and beyond.
Read the meeting list, along with a guide to the participants in them, below.
Carl Berg: Ranking No. 308 on the Forbes 400, Berg is a Silicon Valley real estate titan with an estimated fortune of $1.1 billion.
Ronnie Cameron: He runs agribusiness giant Mountaire Corporation. During a meeting of the Kochs' donor network in 2011, Charles Koch recognized Cameron (and other donors) for donating at least $1 million to their cause.
Charles Chandler: Based in the Kochs' hometown of Wichita, Kansas, Chandler is the CEO of Intrust Bank.
John Childs: He runs the Boston-based private equity firm J.W. Childs & Associates.
Jamie Coulter: Haling from Wichita, Coulter is the former CEO of the Lone Star Steakhouse and Saloon restaurant chain.
Bob and Steve Fettig: The Fettigs run the metal fabrication company Tankcraft, based in Darien, Wisconsin. Steve is the company's CFO; Bob is CEO.
Richard and Leslie Gilliam: Richard founded Virginia-based coal mining company Cumberland Resources Corporation, which he sold to Massey Energy for nearly a billion dollars in 2010.
Ken Griffin: A major conservative donor, the Chicago-based businessman founded the hedge fund Citadel and is worth an estimated $4.4 billion.
John Griffin: He's the founder of Blue Ridge Capital, a New York hedge fund.
Dick Haworth: He's the chairman emeritus of Holland, Michigan-based office furniture company Haworth.
Richard "Ric" Kayne: He's the founder and chairman of Los Angeles-based investment firm Kayne Anderson Capital Advisors.
Dan Kirby: He's president of Sioux Falls, South Dakota-based Kirby Financial.
Frank Kozel: He's the principal of Pittsburgh-based Keystone Energy Oil & Gas Inc.
Francis "Franc" Lee: He's the president and CEO of Flowood, Mississippi-based lender First Tower, LLC.
Robert "Bob" Luddy: He's president of CaptiveAire Systems Inc. in Raleigh, North Carolina.
Hugh Maclellan: He's the executive chairman of Chattanooga, Tennessee's Maclellan Foundation, which make grants to Christian causes.
Cecil O'Brate: He's the CEO of Garden City, Kansas-based Palmer Manufacturing & Tank.
Verl Purdy: He's the chairman and CEO of Charlotte, North Carolina-based AGDATA Inc.
Tom Rastin: He's a director and vice chairman of the Mount Vernon, Ohio-based Ariel Foundation, started by his wife, Karen Buchwald Wright, the CEO of Ariel Corporation. Rastin is the company's vice president of engineering, sales, and marketing.
George Records: A member of the Hoover Institution's board of overseers, Records is the retired chairman of Oklahoma City's Midland Group.
Robert Rowling: Ranking No. 93 on the Forbes 400 with an estimated fortune of $4.9 billion, Rowling is the cofounder of TRT Holdings, which owns Gold's Gym and Omni Hotels.
John Schnatter: He's the founder and CEO of Papa John's International.
Tina and Craig Snider: They are the children of Ed Snider, a founding contributor of the Ayn Rand Institute and chairman of Comcast Spectacor, a sports and entertainment company that owns the Philadelphia Flyers.
Dian Stai: Based in Texas, Stai cofounded Owen Healthcare Inc. with her late husband. She's a top conservative donor who gave $125,000 to the pro-Mitt Romney super-PAC Restore Our Future during the 2012 election cycle.
Jim Stephenson: He's the president and CEO of Georgia-based Yancey Bros. Co., "which provides Caterpillar, AGCO, and Blue Bird Bus Co. products and services throughout the state of Georgia." Stephenson is also an Americans for Prosperity board member.
Jim Von Ehr: He's the CEO and founder of Richardson, Texas-based Zyvex Labs.
Debra Waller: Since 2001, she's been the chairman and CEO of Jockey International Inc.
Lew Ward: He's the founder of Oklahoma-based Ward Petroleum Corporation.
Dick Weiss: He's the Core Equity senior portfolio manager at Wells Capital Management.
Karen Wright: She's the founder and CEO of the Ariel Foundation, a private philanthropy group based in Mount Vernon, Ohio. She's also CEO of the Ariel Corporation, a natural gas compression company.
*Mother Jones was unable to confirm the identities of some donors on the list, including Steve Clark, Paul Foster, George Gibbs, George Jenkins, Jerry Hayden, Kent McCarthy, Andrew Miller, Ted Saunders, Tom Smith, Jaime Snider, and Dean Williams.
Charles Koch: He's the chairman and CEO of Koch Industries.
David Koch: He's Koch Industries' executive vice president and a board member.
Michael Lanzara: A former director for special projects at Koch Companies Public Sector, Lanzara now works for Freedom Partners.
Steve Feilmeier: He's chief financial officer and executive vice president of Koch Industries.
Kevin Gentry: A vice president at Koch Companies Public Sector, Gentry is the Koch brothers' top fundraiser. He also serves on the board of Freedom Partners.
Daniel Garza: He's the executive director of the Libre Initiative, a Koch-funded nonprofit focused on Hispanic outreach.
Chase Koch: He's Charles' son and the president of Koch Fertilizer.
Richard Fink: He's the chairman and CEO of Koch Companies Public Sector and a board member of Koch Industries. A founder of the Mercatus Center and Americans for Prosperity, Fink is the Koch' top strategist and political adviser.
Ryan Stowers: He's the director for higher education at the Charles G. Koch Foundation.
Michael Palmer: He is the president of i360, which bills itself as the "leading data and technology resource for the pro-free-market political and advocacy community." Palmer's firm has worked closely with the Kochs' voter microtargeting operation, Themis.
Derek Johnson: He's a program officer for higher education at the Charles G. Koch Foundation.
Nathan Nascimento: He's an employee of Freedom Partners.
With the Republican convention in Tampa, Mitt Romney has launched the most ideological presidential campaign in recent history. At issue is not merely the current state of the economy and Romney's ability to become the CEO-in-chief and perform a turnaround. Romney is waging a battle for the opportunity to conduct a conservative social experiment that would remake fundamentals of American society. But he neglected to mention that Thursday night during his climactic—though hardly soaring—acceptance speech.
See our full coverage of the 2012 Republican National Convention.
The previous evening, his veep pick Paul Ryan, when he wasn't tossing out profoundly false talking points, married two ideas together: The first is that Romney is a successful businessman who can revive the flagging economy and return the nation to greatness. The second is that voters are now living in an American gulag, where basic freedoms have been destroyed and sanctimonious central planners dictate citizens' lives, smother initiative, and doom everyone to a life of entitlements and control. The first of these notions is upbeat and hopeful, addressing the immediate concerns of voters confronting economic challenges: Romney, the guy who looks like a president from central casting, is galloping in on a white horse to rescue you. The other is gloomy and of more concern to the arch-libertarians of the tea party and conservative movement: We are living in a place akin to the former East Germany and must break free of the chains.
On Thursday night, Clint Eastwood, the Academy Award-winning actor, director, and screenwriter, delivered one of the most bizarre political convention speeches in American history.
Speaking without prepared remarks, Eastwood carried on an imaginary conversation with an invisible President Obama seated in a chair next to him on the convention stage. I can't even begin to try to summarize Eastwood's rambling address to a bewildered audience and press corps. Rep. Paul Ryan (R-Wisc.), Mitt Romney's vice presidential pick, looked less than pleased with Eastwood's speech. And the Hollywood star's invisible Obama skit quickly spawned its own Twitter feed—@InvisibleObama—and a satirical 2012 presidential bid. As well as #eastwooding.