Koch Industries, a conglomerate with major oil and gas holdings, is the second-largest privately-held company in the United States. It is also the recipient of the largest civil fine ever imposed on a corporation for violating federal environmental laws. During the 1990s, the company's leaky pipelines were responsible for more than 300 oil spills in five states, prompting a penalty of $30 million. In 1996, a faulty pipeline caused an explosion outside of Dallas in which two teenagers were killed. In a lawsuit related to the deaths, a trial court returned a judgement of $376.69 million against the company.
The fines and lawsuits were hardly the company's first brushes with law. The corporate history of Koch Industries -- a company David Koch co-owns with his brother Charles -- reads like a laundry list of legal disputes. According to the Associated Press, the troubles began almost 20 years ago when David and Charles bought out the shares of two other brothers, Bill and Frederick, for $1.1 billion. Bill (David's twin) and Frederick then claimed that Charles and David had misrepresented the company's value, shortchanging them by $340 million. The dispute dragged on until last October, when the U.S. Supreme Court declined to hear an appeal in the case, letting stand a lower court's decision in favor of Charles and David.
Bill Koch has also alleged that Koch Industries underreported the amount and quality of oil it garnered from drilling operations on federal and tribal lands. In December 1999, a jury found the company guilty and recommended a penalty of $553,504.
In January, former Playboy centerfold Anna Nicole Smith joined the family feud, filing a lawsuit against Koch Industries for allegedly conspiring with her stepson to defraud her of $474 million in Koch Industries stock that she alleges was left to her by her late husband. The company has denied the allegations.
The most serious charges against the company, however, were brought by the U.S. Department of Justice. Last fall, Koch Industries and four employees were indicted on 97 counts of violating federal clean air and hazardous waste laws. Government prosecutors accuse the company of intentionally releasing fumes from benzene -- a suspected carcinogen -- into the atmosphere and then lying about it to state regulators in Texas. If convicted, the company could be fined up to $352 million.
That "if" depends in large part on whether the Bush administration prosecutes the case. David Koch and his wife Julie gave every penny of their $487,500 in campaign contributions during the last election cycle to the Republican Party, its candidates, and conservative political action committees. If President Bush follows through on his campaign promises to loosen environmental protections and limit jury awards against corporations found guilty of wrongdoing, the money that Koch Industries saves on fines and legal damages could make those political contributions look like pocket change.
-- Lila Byock
