The Koch Brothers Are Even Worse Than You Think
The phrase “The Koch Brothers” has become a shorthand for the insidious spread of radical right-wing power in America. But even those of us who devoured Jane Mayer’s book “Dark Money,” as well as the work of other journalists who illuminated the reach of billionaires Charles and the recently deceased David Koch, including their massive network of conservative and libertarian Political Action Committees and the lobbying efforts of those PACs, might have only a glimmer of an idea of the size and scope of Koch Industries. The business is headed by Charles (David was a shareholder, but not involved in day-to-day affairs), and it’s what gave the brothers their money and influence.
If you’ve eaten produce grown in America, pumped gasoline, or dried your hands on paper towels from an office building bathroom, you’ve used a product that is at least tangentially, if not fully, produced by Koch Industries. It’s a company so valuable, that as journalist Christopher Leonard, author of “Kochland,” said of the company in a phone interview, “Koch’s annual sales are bigger than those of Facebook, Goldman Sachs and U.S. Steel combined.”
The exact number however, remains a tightly guarded secret. As Leonard so meticulously details in his deeply researched and deeply revealing new book, Koch Industries is a privately held company, not beholden to shareholders, whose profits are continually reinvested in the business—to fund new projects, take over other companies, work the employees of those companies to the bone in the name of profits, and broaden and deepen their influence in multiple industries in order to broaden and deepen their influence on American politics and culture.
To understand how the Koch family, and Charles in particular, came to have that power, you must examine their business. That’s no easy task when the company in question is unburdened by such obstacles as quarterly reports, public shareholders and transparency requirements. Leonard, however (he spent seven years pouring over reams of documents, interviewing Koch employees, employees of the companies they bought, the government officials who investigated Koch, and the unions that tried to fight Koch), does a remarkable job of making a corporate history as compulsively readable as a thriller, if considerably more infuriating.
Leonard spoke with Truthdig’s Ilana Novick by phone about the business of Koch Industries, how the company is a microcosm of larger economic forces in America, and how the company uses its business interests to dictate public policy.
The conversation has been condensed and edited for clarity.
Ilana Novick: Your book details Koch Industries’ remarkable ability to keep their activities, their corporate structure, even the products they make, secret. How did you first learn about the company and its reach across so many different companies and areas of the American economy?
Christopher Leonard: I’ve been a business reporter since 1999-ish, always based in the Midwest. As a business reporter for all those years in this kind of tight orbit around Kansas City, I would encounter Koch frequently, more than I think a lot of people normally would, for example, if you lived in Portland, Ore., or New York City.
In late 2011, I had this “aha” moment that, if I wrote about this one company, it would let me write about so much going on in the American economy. This is a massive corporation. It specializes in the kinds of businesses that underpin civilization, the kind of stuff everybody uses every day: fuel, fertilizer, building material, sensors in your phone, clothing material. Koch is there under the surface making all the machinery work.
When you write about this corporation, you’re writing about blue-collar manufacturing workers. You’re writing about labor unions. You’re writing about high finance, because they’re so deeply involved in derivatives trading and commodities trading. You’re writing about corporate lobbyists. It’s like the whole system is encapsulated in this one corporation. They really prize not just confidentiality, but secrecy. They don’t want other people to know what they’re doing, and that’s a strategic asset for them.
IN: You mentioned in a previous interview that Koch Industries is “impossible to boycott.” What did you mean by that, and what does that say about the company?
CL: First of all, Koch, unbeknownst to most people, is the third largest producer of nitrogen fertilizer in the world. Nobody thinks they buy nitrogen fertilizer, but nitrogen fertilizer is literally the foundation of the modern food system. Every single farmer who grows the big staple crops, corn and soybeans, has to apply nitrogen fertilizer to their fields almost every year. Without nitrogen fertilizer, it is no exaggeration to say you don’t have food. And this business is stunningly profitable. Believe it or not, it’s processing natural gas into these chemicals that are fertilizers, like anhydrous ammonia. Koch is super expert at processing fossil fuels like natural gas. And the profit margins are stunning, because natural gas prices are so low and demand for food is so high.
So Koch is processing this gas cheap, it’s selling this fertilizer at a very high price and reaping billions of dollars in profits. Again, this is a business that’s buried down at the root level of our economic system. The profits are stunning. And to boycott nitrogen fertilizer, I’m not kidding, you’d have to not eat. And that’s not an option. That’s why I say this business is un-boycott-able. Gasoline is a great example. Yes, you can boycott Koch, but it means you can’t drive most cars, or you have to be able to afford an electric car. They trade global oil supplies. This is a product that, by and large, most people simply can’t function without.
IN: You write about how when Charles Koch inherited Koch Industries from his father, it was a mid-size energy company. It was extremely profitable, but not what it is today. How did he do that?
CL: Charles Koch operates with a very long-term, strategic view. He is extraordinarily patient, and extraordinarily adaptable to volatile circumstances. And he’s got this theory of plowing profits back into the system. He doesn’t take on a lot of debt for the company itself but has cash on hand to buy up other firms. I mean, there’s a lot of deep data work to know more about the world than anybody else so that they can make really smart acquisitions. So there’s deep analysis, deep data-gathering that’s going on inside this corporation. All of that is admirable, but there are, without question, these practices over the years that I think would be objectionable to a lot of people.
IN: What are examples of the more objectionable actions that Koch took, that makes the company a villain for so many people?
CL: Koch was found guilty of criminal conduct in many cases. One of the chapters in the book shows how oil refinery managers intentionally dumped polluted water into nearby wetlands to evade regulatory problems. And that was illegal. The company for years (at least) essentially stole oil from the people who ran oil wells, the oil-producers. Koch would go gather oil and always take more oil than it paid for.
There are also bigger-picture things, too, that reflect a lot of what’s going on in the American economy. Koch is an expert of the so-called “private equity” form of capitalism, whereby Koch will go out and buy smaller companies. There will be job cuts. The workers who are left behind have to do more work on their shifts. I’ve interviewed people at Georgia Pacific who have to work 30 days in a row with no day off, and a whistleblower inside Koch’s Georgia Pacific division gave me 10 years’ worth of data that shows that workplace accidents are on the rise. The workplace is becoming more dangerous under this constant pressure to produce profits.
And we haven’t even talked about politics yet. The billions of dollars in profits that are generated from these businesses have been seared into affecting our public policy in a way that a lot of people might disagree with.
IN: The government has forced Koch Industries to pay for its activities, particularly, as you describe, in the 1990s, when they were found guilty of dumping harmful chemicals in and around their Pine Bend oil refinery, stealing oil from Native American reservations, and even being responsible for the death of two teenagers near one of their oil pipelines. But they faced very small fines, barely any accountability, for their involvement in the deaths of workers at Georgia Pacific plants. Why? Was it a result of their increased lobbying power, political donations and influence since the 1990s?
CL: Charles Koch completely loathes government. He dismisses the effect of government. He says government only causes more problems than it solves. But the company, Koch Industries, is really a good advertisement for government intervention in the sense that it was found guilty of a lot of criminal conduct in the 1990s. It faced a series of record-breaking fines and criminal charges for some of its conduct, and that changed Koch’s behavior. The book talks about how, in the year 2000, Charles Koch is holding a series of emergency meetings with his top leaders, and they totally restructure the company. Charles Koch says, “I don’t want these federal regulators on my property anymore. Change this. Don’t make this happen anymore.”
And they made a very good-faith effort, I think, to tighten the ship [obey regulations]. Now fast forward to the year 2019. This is a different story in some ways today. Let’s look at the problem of the growing injury rate at Koch’s major division of Georgia Pacific. The injury rate, depending on which injury rate you use, [rose] by more than 50% since 2010, and workers are getting killed on the job. Workers are losing limbs on the job. Workers are being burned, electrocuted—you name it—at higher levels than they were about eight years ago.
Now, I looked at a series of six worker deaths in the year 2014, which was a particularly bad year, and the regulatory agency over this issue was OSHA, and the fines for a worker getting killed on the job are to the tune of tens of thousands of dollars. The fines for these worker deaths didn’t break $100,000 in most cases. That is literally a totally inconsequential financial number to Koch Industries.
And by contrast, when Koch was found polluting the area around its oil refinery in Minnesota that we just talked about a while ago, it was fined I think like $9 million. Still small, but a big enough fine to get national headlines. With these tiny little OSHA fines happening today, there’s virtually zero outside pressure for Koch to change its practices. And there’s ample evidence that Koch really hasn’t effectively changed its practices. So I think you can say that the lack of regulatory pressure seems almost to have certainly played a role in that.
IN: Koch Industries, through its corporate lobbying and Charles and David Koch, through their philanthropic and personal lobbying activities, are known for their hard-right libertarian views, and their attempts to shape American politics to reflect their views. Why are they so successful? And how are the corporate interests of Koch Industries related to the political interests of the Koch family?
CL: Since the 1970s, Charles Koch has been trying to reshape American society, and he’s funded Libertarian think tanks, which put out a lot of Libertarian papers. He funded university chairs to promote Libertarian ideas. But it was really only in the ’90s when Koch faced this massive legal threat that the company really started building this network of political pressure groups, hired more lobbyists, tried to essentially pressure the umpire and the government. And it’s only continued up through today.
IN: So is the company’s lack of accountability for their business practices, including workplace fatalities in recent years, related to an increase in political donations, lobbying and overall influence?
CL: There’s no question about it. I mean, in 1988, the United States Senate investigated Koch’s oil-gathering practices, and the United States Senate uncovered the systematic oil theft that we were talking about. The Senate held hearings. The Senate released a blistering report accusing Koch of theft, and the matter was referred to federal prosecutors in Oklahoma, where a lot of this theft had happened. And that moment is when Koch really ramped up its political influence system.
The political system under Koch, its political influence machine, dramatically expanded in 2008. And the reason why is because climate change regulation was looking almost like a certainty at that time. In ’08, John McCain and Barack Obama, Republican and Democrat, voiced the need to regulate greenhouse gas emissions on the campaign trail. It is not coincidental. I have interviewed several former senior Koch Industries lobbyists and political operatives who explained to me how vital the issue of greenhouse gas emission law is to Koch.
So in ’08 and ’09, you see the size of the political network once again explode in size, and that’s when Koch really heavily invested in what I call this boots-on-the-ground activist network called Americans for Prosperity. That group explodes in ’08 and ’09, a lot of it to make sure the federal government never puts a price on emitting greenhouse gases.
IN: The parts of the book about the cap-and-trade fight at the beginning of the Obama presidency, the rise of the Tea Party and the influence of Koch-backed groups like Americans for Prosperity were surprising to me, because I had associated that period and those groups with the fight over the Affordable Care Act. But your book shows that perhaps the more impactful fight was over carbon emissions and climate change.
CL: It’s totally true. Barack Obama comes into office posing an enormous threat, specifically to Koch Industries, the company, but also to Charles Koch’s worldview. Charles Koch views government intervention, like the New Deal programs that were passed back in the 1930s as a response to the Depression, Charles Koch thinks that was a huge mistake and detests New Deal-style programs. And Obama came in with this promise of basically a whole new New Deal, if you will.
And so what that threatened was a whole new era of government interventions in markets, which Charles Koch disagrees with philosophically but that also would have increased the regulatory burden on the massive industrial conglomerate he owns. Okay. So you’re right that the first fight Obama picked was over health care, and this was early in the administration, and there was a boiling anger at Obama across the country. And it wasn’t just Obama; it was the entire political system. And this anger boils over in the form of the tea party movement, which in the beginning really was driven by average people who were super upset at the direction they saw the country going.
IN: So how did the cap-and-trade fight intersect with the development of the Tea Party?
CL: Koch didn’t create the Tea Party, but it would charter buses to carry tea party activists to Washington. It opened Facebook groups to help tea party activists know where town hall meetings were, for example, and to meet up. This is the kind of really expensive backroom organizations that most movements have to work decades to develop. Koch kind of gave it to the Tea Party right of the box.
But strategically, at the core, what Koch really cared about was carbon and the greenhouse gas issue. And you can see the very beginning, there’s a scene in the book that the Americans for Prosperity [the Koch-sponsored conservative activist group] organized one of the very first Tea Party rallies in New Jersey, of all places, July 4, 2009. So you see Koch facilitating the Tea Party, but when the Americans for Prosperity get up on stage, what do they talk about? They talk about this cap-and-trade program, which would have regulated greenhouse gas emissions, not a central concern of tea party activists. Koch made it a concern.
They portrayed cap and trade as government tyranny, and they helped use the tea party momentum to destroy the cap-and-trade bill.
IN: So why didn’t fights over environmental policy get as much attention in the early Obama years, as the fight over health care?
CL: [Cap-and-trade] was a very complex, archaic bill based on Republican ideas that would have put a price on greenhouse gas pollution. To me, this is a very Koch-ian political dispute in the sense that all the action happened after the election. This is stuff happening inside the halls of Congress. The nitty-gritty, complex business of governing that doesn’t get as much attention, but that’s really vital to our lives. So Koch fought against regulating greenhouse gas emissions in the territory where it had the biggest advantage, which is away from the public eye.
IN: I also wanted to ask about Charles Koch in the Trump era. I think when Charles Koch didn’t endorse Trump it seemed like that may have hurt Trump’s election chances. But as your book shows, that’s not necessarily true, that much like a lot of different situations that Koch Industries has had to deal with, they found a way to exploit Trump for their purposes. And I wonder if you could talk a little bit about how they do that.
CL: Totally. Koch is riding public passion. It’s seizing on a public opportunity to play a bigger chess game. So here’s the chess game: Koch doesn’t like Trump, in essence. Trump is ideologically inconsistent. Charles Koch believes government ought to be tiny, government ought not intervene in markets. Trump has this America First, nationalist point of view, which embraces government intervention in some cases, like tariffs and tearing up trade deals. And, at least in his rhetoric, Trump supports entitlement programs like Medicare and Social Security, which Charles Koch does not.
The Koch network does not want to see Trump’s America First agenda take over the Republican Party. And once again, just as they did in the Obama era, the Trump network is fighting on the terrain where it has an advantage: the stuff that happens the day after the election, the complex governing administrative state of America.
Koch [seeks] to block the stuff out of the Trump administration it doesn’t like but support the stuff it does like, like dismantling EPA. And so the Koch network is trying to patiently contain the threat of Trumpism while getting out of Trump what it wants, basically.WAIT, BEFORE YOU GO…
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