Kochland Read online

  Hoffmann, David. Senior compliance attorney at Koch Industries’ Invista division from 2005 to 2010. Hoffmann helped implement Charles Koch’s 10,000 percent compliance doctrine at Invista’s facilities. Hoffmann later transferred to Koch’s lobbying office in Washington, DC, where he attended strategy sessions to defeat the cap-and-trade bill.

  Howell, Ron. Longtime Koch Industries employee who began as a gasoline trader with the company. He oversaw an expansion and transformation of Koch’s trading operations in the early and mid-1980s as electronic trading emerged. Howell later retired and entered politics, becoming a Koch Industries lobbyist in Oklahoma. He led the political effort there to combat the legal case against Koch’s oil theft.

  Inglis, Bob. Republican congressman from South Carolina. Inglis was once an ally of Koch Industries and took campaign donations from the company. His stance on global warming, however, turned the company against him. Koch Industries funded an opponent to challenge Inglis in a primary election during 2010 and helped unseat him.

  Jones, Jeremy. Koch Industries executive who ran the venture capital group called Koch Genesis. Jones worked closely with Charles Koch but left the company when Koch Genesis was shut down after the crash of 2008.

  Jones, Nancy. Assistant US Attorney in Oklahoma City who oversaw the office’s investigation into Koch’s oil theft. Jones says she developed evidence showing that multiple managers at Koch Industries directed the theft. She quit her job as she was pursuing evidence against senior Koch executives. After she left, the case was dropped.

  Jones, Wesley. Georgia-Pacific manager whom Koch promoted to run the company’s pulp mill division. Jones was later promoted again to become executive vice president over operations. He saw firsthand how G-P’s operations changed under Koch, and was allowed to reinvest in the company with far less bureaucracy than before.

  Koch, “Bill” William. Charles Koch’s younger brother and David Koch’s twin. Bill Koch led an attempted coup to unseat Charles Koch as CEO in the 1980s. After the coup failed, Bill Koch launched a legal battle against his brother that lasted for years. He eventually ran his own, smaller company, called Oxbow.

  Koch, Charles. CEO and chairman of Koch Industries. Charles Koch took over the company in late 1967 after his father, Fred, died, and has run the firm ever since.

  Koch, Chase. Charles Koch’s son, born in 1977. Chase began working for the family company as a teenager and joined it full-time a few years after graduating from college. He rose through the ranks to become president of Koch Fertilizer before leaving the position to eventually launch the Koch Disruptive Technologies division. Chase is widely viewed as an heir apparent who might one day succeed his father as CEO.

  Koch, David. Bill Koch’s twin brother and Charles Koch’s younger brother. David Koch joined the family company after graduating from MIT and splits ownership of the firm equally with Charles Koch. Longtime Koch executives describe David as a “silent partner” who largely deferred to Charles Koch’s vision. David Koch retired in 2018 due to health problems.

  Koch, Elizabeth. Charles Koch’s daughter, born in 1975. While she holds seats on many Koch boards, she has not held significant positions inside Koch Industries. She runs a publishing company in New York.

  Koch, Fred. Founder of Koch Industries. Fred Koch was raised in a small town in Texas. Over many years, he built a small corporate empire with holdings in refining, oil transportation, and ranching. He died of a heart attack in 1967.

  Koch, Frederick “Freddie,” Jr. The oldest of the four Koch brothers, named after his father. Freddie, as he is known, avoided the family company and moved to New York.

  Koch, Liz. Charles Koch’s wife of more than forty-five years. She is involved in Koch’s community efforts and philanthropies.

  Leonard, Timothy. Former US Attorney in Oklahoma City who oversaw the criminal investigation into Koch’s theft of oil. Leonard was appointed to become a federal judge and dropped the case against Koch Industries before he took the job on the bench.

  Lonegan, Steve. The New Jersey state director of Americans for Prosperity. Lonegan was one of the first paid directors hired to run a chapter of the activist group. He helped stoke opposition to the cap-and-trade bill and punished Republicans who voted for it.

  Markel, F. Lynn. Koch’s former chief financial officer, serving in that position during Koch’s period of explosive growth in the 1990s. Markel was hired as an accountant and rose through the ranks as Koch transformed its financial control systems. He left the company in 2000 after twenty-four years.

  Markey, Ed. Democratic senator from Massachusetts. When he was a congressman from that state, he helped lead the effort to pass a cap-and-trade bill to control greenhouse gas emissions. Markey led a select subcommittee that spent years crafting the measure.

  Mawer, Steve. President of Koch Supply & Trading from 2000 until 2014. Mawer held a social event at his home to host Charles Koch, who gave a salon-style talk to traders about politics and economics.

  McKinney, Travis. Forklift driver at Georgia-Pacific’s warehouse in Portland, Oregon. He was grateful to get the job, and started just as G-P implemented its Labor Management System. He was an active member of the the Inlandboatmen’s Union, or IBU, as its power declined.

  Meadows, Mark. Republican congressman from North Carolina and leader of the House of Representatives’ Tea Party–aligned Freedom Caucus during 2017. Meadows was often caught in the middle of policy differences between the Koch network and the Trump administration.

  Nesmith, Tom. Salesman with the utility company Public Service Company of New Mexico (PNM). Nesmith pitched the “parking” strategy to Koch Energy Trading, which allowed Koch to game electricity markets in California. PNM’s participation was vital to making the parking strategy succeed.

  Obama, Barack. The forty-fourth president of the United States, elected in 2008 and reelected in 2012. Obama ushered in a liberal political wave that Charles Koch considered dangerous to the nation’s future.

  O’Neill, Brenden. Koch Industries derivatives trader who earned millions of dollars during the natural gas price spike. O’Neill was an engineer in Koch’s oil refinery in Corpus Christi before he shifted to the trading group. He was briefly Chase Koch’s boss when Chase worked at the Corpus Christi refinery.

  Osbourn, Wes. Energy and gasoline trader with Koch Supply & Trading in Wichita and Houston. Osbourn traded physical gasoline supplies in Wichita and traded paper products like futures contracts in Houston.

  Packebush, Steve. Former president of Koch Fertilizer. Packebush was on the team of Koch Nitrogen employees who executed the 2003 acquisition of Farmland Industries’ fertilizer plants. He later became president of the new division. He was a key mentor to Chase Koch, bringing him into the fertilizer business and encouraging Chase to later become president.

  Paulson, Bernard. Oil refining executive hired by Charles Koch to oversee the Pine Bend refinery in the early 1970s. Paulson led the efforts to break the OCAW labor union there during the strike of 1972–73. He was later promoted to oversee Koch’s oil refining operations from Wichita, where he worked closely with Charles Koch.

  Peace, Steve. The California state senator who was widely seen as the “father” of the state’s electricity deregulation bill, which he cosponsored. Peace shepherded the bill into law and later tried to warn regulators that the system was being manipulated by companies like Enron and Koch Industries.

  Phillips, Jonathan. Congressional staffer who helped draft key parts of the Waxman-Markey cap-and-trade bill. Phillips, a Harvard graduate, came to see global warming as a fundamental threat to the environment.

  Phillips, Tim. National president of Americans for Prosperity. Phillips was an activist in conservative religious groups before joining AFP. He led the group during a period of explosive growth during the Tea Party movement of 2010.

  Pruitt, Scott. Former attorney general of Oklahoma who was EPA administrator from 2017 t
o mid-2018. Pruitt carried forward many deregulatory efforts long sought by the energy industry and Koch Industries.

  Quinn, Joseph. Member of the OCAW labor union at Pine Bend who participated in the nine-month labor strike of 1972–73.

  Razook, Brad. Former CEO of Koch’s oil products division, Flint Hills Resources. Razook played a key role in helping Koch exploit the fracking boom in the Eagle Ford Shale region of Texas. He was later promoted to CEO of Koch Resources, a large division that includes Flint Hills and other natural resource companies. Razook is seen as a candidate to become CEO of Koch Industries after Charles Koch leaves the company.

  Robertson, David. Koch Industries’ current president. He joined the company in 1984. Robertson oversaw large parts of Koch’s disastrous foray into the beef and agribusiness during the 1990s. He later moved to Koch’s oil refining division. Robertson is seen as a strong contender to replace Charles Koch as CEO.

  Roos, Brian. Manager, or “process owner,” of the Utilities Profit Center division of the Pine Bend refinery during the mid-1990s. Oversaw the wastewater facilities that released ammonia into nearby wetlands.

  Roskind, Herbert. Manager of Koch Industries’ chemical trading division who hired Bill Koch. Roskind oversaw Bill Koch’s early trading activities and tried to diminish the tension between Bill and his brother Charles.

  Rothbard, Murry. Libertarian activist who cofounded the Cato Institute with Charles Koch.

  Rudd, Leslie. Longtime friend of Charles Koch and the Koch family in Wichita. Rudd encouraged Chase Koch to join the family company after he graduated from college. Rudd died on May 3, 2018, at the age of seventy-six.

  Ryan, Paul. Republican congressman from Wisconsin who was Speaker of the House in 2017 and 2018. Ryan was often caught in the middle of policy differences between the Koch network and the Trump administration.

  Schnare, David. Longtime EPA employee who later became a critic of what he called the agency’s regulatory overreach. Schnare helped lead the Trump administration’s transition efforts at the EPA and helped draft a transition plan for the agency that aligned with Koch Industries’ interests.

  Seibert, Walter. Father of twelve-year-old Zachary Seibert, a pedestrian killed in a 1993 car accident involving Chase Koch, who was driving. Walter Seibert spoke with Chase Koch after the accident, at the urging of Liz and Charles Koch.

  Sementelli, Tony. Chief financial officer at Flint Hills Resources who played a critical role in helping the company exploit the fracking boom in the Eagle Ford Shale region of Texas.

  Sharp, Jeff. Communications director for the House select subcommittee that wrote the cap-and-trade bill in 2010. Sharp was among the first to notice the Tea Party activism that eventually derailed the effort.

  Sobotka, David. President of Koch Energy Trading from 1997 through 2001. Sobotka came to Koch from Lehman Brothers, and he brought Wall Street practices to Koch’s trading floor. He promoted a new compensation model that gave derivatives traders a bonus based on a percentage of their profits.

  Soliman, Sam. Former head of trading operations at Koch’s trading desk in Houston. Soliman became CFO of Koch Industries in 2000 and was replaced by Steve Feilmeier when Soliman left the company.

  Sollers, Wick. Assistant investigator to Ken Ballen in the US Senate. Helped oversee the Senate’s investigation into Koch’s oil theft in Oklahoma. Traveled to Wichita with Ballen to depose Charles Koch.

  Trimm, Dennis. Manager at Georgia-Pacific’s warehouse in Portland, Oregon. Trimm was a manager when Koch Industries took over and watched the company implement its new policies. He told employees during meetings that Koch could shift their work to nonunion facilities. He was later fired for committing a safety violation.

  Tromberg, Ernie. Onetime member of the OCAW labor union at Pine Bend who later left the union to join the ranks of Koch management at the refinery, where he spent his entire career.

  Trump, Donald. The forty-fifth president of the United States, elected in 2016. Trump was never close with Charles Koch and operated outside of Koch’s political network.

  Varner, Sterling. Longtime Koch Industries employee and protégé of Fred Koch. Varner was a father figure to Charles Koch in the late 1960s and is credited with deeply influencing Koch’s corporate culture. Varner became president of Koch Industries in 1974 and held that position for thirteen years. He retired as vice chairman of Koch’s board of directors in 1989 but remained active in the company and advised Charles Koch.

  Voyles, James. Koch Industries attorney involved with the pollution case at the Pine Bend refinery in the mid-1990s. Voyles undermined whistle-blower Heather Faragher as she tried to contain illegal pollution at the refinery.

  Watson, Dean. A rising star at Koch Industries who was put in charge of Koch’s rapid expansion into the agribusiness sector. Watson oversaw the failed Purina Mills acquisition and was later fired.

  Williams, Roger. One of the earliest executives at Koch Industries hired by Charles Koch. Williams oversaw Koch’s sprawling pipeline division.

  Winn, Abel. Leader of Koch’s experimental economics lab, run in partnership with Wichita State University, which tested the tenets of Market-Based Management. Winn ran a large-scale experiment to find ways to beat “holdouts” who bargained for higher prices.

  More from the Author

  The Meat Racket

  ABOUT THE AUTHOR

  © TINA KRAFTS

  Christopher Leonard is a business reporter whose work has appeared in the Washington Post, the Wall Street Journal, Fortune, and Bloomberg Businessweek. He is the author of The Meat Racket and Kochland, which was the recipient of the J. Anthony Lukas Work-in-Progress Award. A graduate of the University of Missouri School of Journalism, Leonard lives outside Washington, DC.

  SimonandSchuster.com

  Authors.SimonandSchuster.com/Christopher-Leonard

  @simonbooks

  ALSO BY CHRISTOPHER LEONARD

  The Meat Racket: The Secret Takeover of America’s Food Business

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  NOTES

  The following notes establish sources for the information in Kochland. Some facts are cited to a single source when, at times, they came from multiple sources that reinforced the given fact. For the sake of clarity, the author chose to cite the primary and most reliable sources for these facts, rather than listing every interview or comment that supports it. Fred Koch’s domineering personality, for example, was related by dozens of interviewees and written sources, but only a select few sources were chosen as citations.

  A handful of sources agreed to be interviewed for this book only on the condition that they remain unidentified. Information that they provided was only included in this book if it could be verified by another source or documents independently obtained by the author. When information from those sources is used, it is identified as being from a source speaking on background.

  PREFACE: THE FIGHTER

  On May 18, 1981 . . . Wichita, Kansas: Morgan Stanley interoffice memorandum, May 20, 1981, marked confidential.

  Charles Koch was forty-five years old: Analysis and description of Charles Koch based in part on author interviews with Charles Koch and dozens of current and former Koch Industries executives and managers who worked with him at various times between 1975 and 2018. Physical description of Charles Koch in 1981 based on photo in article “Wichita’s Koch a Private Man with Money,” Wichita Eagle, April 30, 1978.

  “He does not want this cash”: Morgan Stanley interoffice memorandum, Ma
y 20, 1981, marked confidential.

  “Certain of [Koch’s] commodity traders”: Ibid.

  Secrecy was a strategic necessity for Koch Industries: Analysis of Koch Industries based in part on notes from reporting in Wichita and several other locations between 2013 and 2018, and author interviews with Charles Koch and dozens of current and former Koch Industries executives and managers.

  When he was challenged by his own brothers: See endnotes, ch. 5 and ch. 7.

  When he was challenged . . . first years as CEO: See endnotes, ch. 3.

  When the FBI . . . criminal investigation: See endnotes, ch. 1 and ch. 7.

  When a liberal Congress: See endnotes, ch. 19 and ch. 20.

  After prevailing . . . true to his vision: Author interview with Charles Koch, 2015; also author interviews with Roger Williams, F. Lynn Markel, Bradley Hall, Bernard Paulson, Herbert Roskind, Dean Watson, Randy Pohlman, Steve Feilmeier, David Robertson, Chase Koch, Jim Hannan, Steve Packebush, and other current and former Koch Industries executives between 2013 and 2018.

  An internal think tank and deal-making committee: See endnotes, ch. 9, ch. 11, and ch. 14.

  In 2003 . . . bought a group of money-losing fertilizer plants: See endnotes, ch. 14.

  This strategy laid . . . decades of continuous growth: Charles Koch, The Science of Success: How Market-Based Management Built the World’s Largest Private Company (Hoboken, NJ: John Wiley & Sons, 2007); Charles Koch, Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies (New York: Crown Business, 2015); Christopher Leonard, “The New Koch,” Fortune, December 19, 2013.

  It specialized in the kind of businesses that are indispensable: Leonard, “The New Koch.”

  Charles Koch and his brother . . . Koch Industries: Bryan Horwath, “Charles and David Koch Jointly Named 5th-Richest Americans,” Wichita Eagle, October 15, 2015; court transcripts and exhibits, William I. Koch et al. v. Koch Industries Inc. et al.