Kochland Page 72

  Together the two men are worth $120 billion: Forbes Billionaires list, 2018.

  His portrait hangs . . . his videotaped speeches: Notes from reporting in Koch Industries headquarters, Wichita, in 2013, 2015, and 2018; author interviews with dozens of current and former Koch Industries employees.

  America operated under . . . the New Deal: Political analysis based on interviews and research including: David M. Kennedy, Freedom from Fear: The American People in Depression and War, 1929–1945 (New York: Oxford University Press, 1999); Arthur M. Schlesinger Jr., The Age of Roosevelt, vols. 1–3 (Boston: Houghton Mifflin 1957–1960); Glenda Elizabeth Gilmore and Thomas J. Sugrue, These United States: A Nation in the Making, 1890 to Present (New York: W. W. Norton, 2015); Jacob S. Hacker and Paul Pierson, American Amnesia: How the War on Government Led Us to Forget What Made America Prosper (New York: Simon & Schuster, 2016).

  Koch Industries . . . lobbying operations in the United States: Center for Responsive Politics, Lobbying Database, Koch Industries Lobbying Disclosures, Office of the Clerk, US House of Representatives; author interviews with Koch Industries Lobbyists, including Philip Ellender, 2014–18.

  Charles Koch frequently derides the current political era: Charles Koch, “Corporate Cronyism Harms America,” Wall Street Journal, September 9, 2012.

  The entire economy depends on refined oil: See endnotes, ch. 21.

  The legacy oil refiners . . . exploited arcane sections of the law: See endnotes, ch. 21.

  In 2018, the company’s headquarters . . . resembled a fortified kingdom: Author’s notes, observations, and photographs reporting at Koch Industries headquarters, 2018.

  Adherence to the creed is nonnegotiable . . . at Koch Industries: Author interviews with current and former Koch Industries employees and executives, 2013–14; Charles Koch, The Science of Success.

  Readers will meet: Paulson, Watson, Heather Faragher, Philip Dubose, Steve Hammond, Brenden O’Neill, interviews by author, 2013–18.

  One of those people is . . . James Elroy: James Elroy, interviews by author, 2014–16.

  CHAPTER 1: UNDER SURVEILLANCE

  FBI special agent James Elroy stood on . . . pastureland: Elroy, interviews by author, 2014–16; Final Report and Legislative Recommendations: A Report of the Special Committee on Investigations of the Select Committee on Indian Affairs, United States Senate, November 20, 1989; James Elroy, Testimony, Public Hearings of the Select Committee on Indian Affairs, May 9, 1989.

  For a long time, it was just Elroy . . . all alone: Elroy, interviews by author, 2014–16.

  Elroy’s new bosses in the Senate were increasingly: Elroy, Kenneth Ballen, Senator Dennis DeConcini, interviews by author, 2014–17; Final Report and Legislative Recommendations, November 20, 1989.

  Elroy’s photos were developed in a darkroom: Elroy, interviews by author, 2014–16.

  Elroy wasn’t the typical FBI man: Oliver Revell, former FBI agent in charge, Oklahoma City, interview by author, 2014; Elroy, interviews by author, 2014–16.

  The Senate had gotten a tip that Koch Oil was stealing: FBI internal memorandum, “Koch Industries Incorporated, Wichita, Kansas; CRIME ON AN INDIAN RESERVATION—THEFT; RACKETEERING INFLUENCE AND CORRUPT ORGANIZATION,” July 26, 1989; Elroy, Ballen, interviews by author, 2014–16; Final Report and Legislative Recommendations, November 20, 1989.

  It seemed that nobody in either the Senate: Elroy, Ballen, interviews by author, 2014–16.

  David Koch, one of the company’s primary owners and executives: Nicholas Confessore, “Quixotic ’80 Campaign Gave Birth to Kochs’ Powerful Network,” New York Times, May 17, 2014.

  Elroy visited their houses in the evenings: Elroy, interviews by author, 2014–16.

  Koch managers never told their employees to . . . steal: James Elroy, Testimony, Public Hearings of the Select Committee on Indian Affairs, May 9, 1989; Gene Poteet, James Spaulding, James Elroy, Testimony, Public Hearings of the Select Committee on Indian Affairs, May 9, 1989; Elroy, interviews by author, 2014–16.

  Instead, the company put relentless pressure: Doyle Barnett, Dubose, Elroy, interviews by author, 2014; further insight into Koch Oil management practices were derived from the sworn statements of senior Koch Oil managers and executives, taken during depositions by US Senate investigators on April 24, 1989. The depositions transcripts, labeled “Confidential,” were made public for the first time to the author. The account in this book draws on the depositions of Charles Koch, Bob Dix, Steven Scates, Keith Langhofer, Wesley Stanford, Donnie Alsobrook, William Hougland, Jack Chism, Darrell Brubaker, Thomas Kivisto, Gary Baker, and David Nicastro.

  It was almost an accident . . . Elroy’s efforts: DeConcini, Ballen, interviews by author, 2014–16.

  The story was the first in a series: Chuck Cook, Mike Masterson, and M. N. Trahant, “Fraud in Indian Country,” Arizona Republic, October 4, 1987; Mike Masterson, interview by author, 2014.

  The looting happened in a complicated and insidious way: Chuck Cook, Mike Masterson, and M. N. Trahant, “Honor System License to Loot,” Arizona Republic, October 4, 1987.

  In particular, the series . . . Dennis DeConcini: “Senate Panel to Begin Probe of Indian Affairs Bureau,” Associated Press, October 16, 1987; DeConcini, interview by author, 2014.

  By the late 1980s, the results . . . were truly ruinous: Final Report and Legislative Recommendations, November 20, 1989.

  In Washington, the Senate Select Committee: “Senate Panel to Begin Probe of Indian Affairs Bureau,” Associated Press, October 16, 1987; “Committee Approves Funding of Indian Affairs Investigation,” Associated Press, October 30, 1987.

  In the spring of 1988, Ken Ballen walked: Ballen, interviews by author, 2014–16; scenery description taken from author’s notes reporting in Washington, DC, 2014.

  Early in the investigation, Ballen knew: Ballen, Revell, interviews by author, 2014.

  In the beginning, Ballen decided: Ballen, interviews by author, 2014–16.

  With his subpoenas, Ballen was able to: Ibid.; Final Report and Legislative Recommendations, November 20, 1989.

  The large oil purchaser Kerr-McGee: Final Report and Legislative Recommendations, November 20, 1989; Ballen, interviews by author, 2014–16.

  The oil companies also pointed out: Ballen, interviews by author, 2014–16.

  This time the villain was the public: Daniel Yergin, The Prize: The Epic Quest for Oil, Money & Power (New York: Simon & Schuster, 1990).

  This was a message that was delivered: Ballen, interviews by author, 2014–16.

  Ballen’s case grew stronger after he took a trip: Ballen, Elroy, interviews by author, 2014–16.

  The story was convincing, but it also made Ballen uneasy: Ballen, interviews by author, 2014–16; FBI internal memorandum, “Koch Industries Incorporated, Wichita, Kansas; CRIME ON AN INDIAN RESERVATION—THEFT; RACKETEERING INFLUENCE AND CORRUPT ORGANIZATION,” July 26, 1989.

  Ballen’s team narrowed its subpoenas: Ballen, Elroy, interviews by author, 2014–16; Final Report and Legislative Recommendations, November 20, 1989.

  Even more confusingly, the firm was: Ballen, interviews by author, 2014–16.

  Ballen turned to the oil majors for help: Ibid.

  It is almost awe-inspiring to fly: Notes from reporting in Wichita, Kansas, 2013.

  On April 24, the two Washington attorneys: Ballen, interviews by author, 2014–16; Charles Koch deposition with US Senate investigators, transcript, April 24, 1989.

  They passed through a metal detector: Ballen, interviews by author, 2014–16.

  When Charles Koch entered the room: Ibid.

  “Could you please state your full name for the record?”: All quotes from this exchange are taken directly from a transcript of the deposition of Charles Koch, April 24, 1989.

  For a prosecuting attorney like Ballen: Ballen, interviews by author, 2014–16.

  “I don’t think there is such a thing as an exactly accurate measurement”: Ibid.

  At one point dur
ing the hearings: Transcript of the Public Hearings of the Select Committee on Indian Affairs, May 9–11, 1989.

  CHAPTER 2: THE AGE OF VOLATILITY BEGINS

  It was a Friday in mid-November: Dick Dilsaver, “Fred Koch, Industrialist, Dies in Utah,” Wichita Eagle and Beacon, November 18, 1967; ibid., November 19, 1967.

  Fred Koch was a large man . . . forceful personality: Bryan Burrough, “Wild Bill Koch,” Vanity Fair, June 1994; Charles Koch, video presentation to Koch employees, “Lessons of My Father,” 2008, 1:05, uploaded to YouTube by Kochfacts TV on April 13, 2012, www.youtube.com/watch?v=3U3NyKoMrlw; Charles Koch, Good Profit, 21–33.

  He was a cofounder of a right-wing political group: “Birch Society Leader Warns of Red Danger,” Wichita Eagle, October 16, 1960; Carl T. Bogus, Buckley: William F. Buckley Jr. and the Rise of American Conservatism (New York: Bloomsbury Press, 2011), 198.

  The ranchlands spoke to Fred Koch in a special way: John Lincoln, Rich Grass and Sweet Water: Ranch Life with the Koch Matador Cattle Company (College Station: Texas A&M University Press, 1989), 7.

  One of Charles Koch’s earliest memories: Charles Koch, interview by author, 2015.

  Charles Koch was not completely surprised: Ibid.

  During the summers . . . access to the Wichita Country Club: Charles Koch, panel discussion, Wichita Metro Chamber of Commerce, November 2, 2015, www.youtube.com/watch?v=f6UHTCdPLzY&t=1253s; Charles Koch, Good Profit, 30; descriptions of Wichita country taken from reporting trips to Wichita, 2013, 2015, 2018; Markel, Dean Watson, interviews by author, 2013–16.

  But Charles Koch was denied that kind of summer: Charles Koch, Good Profit, 31.

  Fred implored Charles to come home: Roy Wenzl and Bill Wilson, “Koch Relentless in Pursuing His Goals,” Wichita Eagle, October 14, 2012.

  “I thought, My God”: Ibid.

  Over the years, Fred Koch gave Charles increasing authority: Charles Koch, interview by author, 2015; Charles Koch, Good Profit, 34–37; Guy Boulton, “Koch and His Empire Grew Together,” Wichita Eagle, June 26, 1994.

  On Monday, November 20, 1967: “Industrialist Fred Koch Dies on Hunting Trip,” Wichita Eagle and Beacon, November 19, 1967; Daniel Schulman, Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty (New York: Grand Central Publishing, 2014), 73–74.

  But Frederick, or “Freddie,” as everybody knew him: Daniel Schulman, “The ‘Other’ Koch Brother,” Vanity Fair, May 19, 2014.

  He worked with an intense purpose: Charles Koch, Williams, Paulson, Markel, interviews by author, 2013–16; Dick Dilsaver, “Koch Report Shows Firms Rank Among ‘Big Ones,’ ” Wichita Eagle, June 27, 1968. This article quotes an anonymous source close to the Koch family as saying of Charles: “It’s not easy to be a rich man’s son and build a reputation of your own.”

  The first pillar of the plan: Pete Wittenberg, “Koch Building Cornerstone Falls on Walk,” Wichita Eagle, August 14, 1967.

  The second pillar of Charles Koch’s plan: Williams, interview by author, 2014; Steve Sells, “Koch Companies Renamed: Sales Hit $250 million,” Wichita Eagle, June 27, 1968.

  The third pillar was personal: Brad Hall, Markel, Paulson, Williams, interviews by author, 2013–16; Guy Boulton, “Straight-shooting to the Top: Varner Quietly Helped Koch Prosper,” Wichita Eagle, June 26, 1994.

  Charles Koch relied on Sterling Varner: Markel, Hall, Paulson, Williams, interviews by author, 2013–16; Boulton, “Straight-shooting to the Top.”

  “It’s an orderly world”: Charles Koch, interview by author, 2015.

  Koch read the work of Karl Marx: Charles Koch, interview by author, 2015; Wenzl and Wilson, “Koch Relentless”; Jim Tankersley, “ ‘I Don’t Like the Idea of Capitalism’: Charles Koch Unfiltered,” Washington Post, August 1, 2016.

  In Hayek’s view: Jerry Z. Muller, The Mind and the Market: Capitalism in Western Thought (New York: Knopf, 2002), 347–87. Selected readings from Friedrich Hayek, including The Constitution of Liberty (Chicago: University of Chicago Press, 1960), and Law, Legislation, and Liberty (Chicago: University of Chicago Press, 1976).

  Roger Williams was an engineer: Williams, interviews by author, 2014–16.

  Charles Koch wasn’t wild about the idea: Ibid.

  When he was in Wichita, Roger Williams: Ibid.

  Varner was “opportunistic”: Ibid.; Markel, Hall, interviews by author, 2014–16.

  A ritual was formed at these meetings: Williams, Markel, Hall, Watson, background sources, interviews by author, 2014–16.

  The company directives that came out of Wichita: Dubose, interviews by author, 2014–15.

  In 1968, Phil Dubose was working in a grocery store: Ibid.

  Koch Industries hired Dubose: Ibid.; Renee Ruble, “Koch Brothers Head Back to Federal Court in Latest Squabble,” Associated Press, October 1, 1999, featuring court testimony from Dubose; Asjylyn Loder and David Evans, “The Secret Sins of Koch Industries,” Bloomberg Markets, November 2011.

  The Koch method for oil measurement: Dubose, interviews by author, 2014–15; Gene Poteet, James Spaulding, James Elroy, Testimony, Public Hearings of the Select Committee on Indian Affairs, May 9, 1989.

  At the end of each month, Koch tabulated: Dubose, interviews by author, 2014–15.

  “You wanted to keep your company operating for sure”: Barnett, interview by author, 2015.

  Keith Langhofer . . . Texas and New Mexico: Keith Langhofer, deposition with US Senate investigators, transcript, April 24, 1989.

  It was clear to Dubose: Dubose, interviews by author, 2014–15.

  Since the late 1950s, Fred Koch had owned: Charles Koch, Good Profit, 33; court transcripts and exhibits, William I. Koch et al. v. Koch Industries Inc. et al.

  But the Pine Bend refinery . . . had a secret source of profits: Richard H. K. Vietor, Energy Policy in America since 1945: A Study of Business-Government Relations (Cambridge, MA: Cambridge University Press, 1984), 128–30.

  Pine Bend was one of only four: Ibid., 129.

  In 1969, Charles Koch executed a secret plan: Charles Koch, Good Profit, 44–47.

  Workers at the Pine Bend refinery . . . the 1950s: Paulson, Ernie Tromberg, Joseph Quinn, Lowell Payton, interviews by author, 2015.

  Paulson was living in Corpus Christi: Paulson, interviews by author, 2015.

  In 1971, Paulson joined Koch Industries: Ibid.; “Bernard A. Paulson, Executive Profile,” Bloomberg; “Bernard A. Paulson Presented with the Albert Nelson Marquis Lifetime Achievement Award by Marquis Who’s Who,” Marquis Who’s Who press release, September 7, 2018.

  CHAPTER 3: THE WAR FOR PINE BEND

  Bernard Paulson arrived for his first day: Paulson, interviews by author, 2015; physical descriptions of Pine Bend refinery from notes from reporting at Pine Bend, March 2015.

  Good-paying jobs were scarce: Quinn, Payton, Tromberg, Jim Grotjohn, interviews by author, 2015.

  At the base of the giant towers . . . squat office building: Notes from reporting at Pine Bend, March 2015.

  Bernard Paulson often wore cowboy boots: Paulson, interviews by author, 2015.

  Oil arrived . . . giant, white tanks: Payton, Quinn, Grotjohn, interviews by author, 2015; notes from reporting at Pine Bend, March 2015.

  After the oil is heated up, it undergoes a series: Morgan Downey, ch. 7, “Refining,” in Oil 101 (Echo Park, CA: Wooden Table Press, 2009), 143–65.

  Paulson knew this business very well: Paulson, Quinn, Payton, Tromberg, interviews by author, 2015.

  Men took an oath when they joined the OCAW: Quinn, Payton, interviews by author, 2015.

  The union president . . . quantities of alcohol: Ibid. (Joseph Hammerschmidt could not be interviewed for this book because he was killed in a roadside accident before reporting on the book began. Coworkers said he had pulled his car over to the side of the road, exited the vehicle, and was struck down by an oncoming car in the highway. Descriptions of Hammerschmidt are taken from his coworkers, including Bernard Paulson.) The Fact
s Involved in the Strike Between Local 6-430, Oil, Chemical and Atomic Workers, AFL-CIO, and Red Wing Potteries, Inc. (pamphlet, OCAW, 1967).

  During the . . . Pine Bend refinery: Quinn, Payton, Tromberg, Grotjohn, Paulson, interviews by author, 2015.

  Paulson talked often to Charles Koch: Paulson, interviews by author, 2015.

  Hammerschmidt, apparently, did not want to work on Easter: “Refinery Union Leader’s Dismissal Is Upheld,” Minneapolis Tribune, June 26, 1973; Paulson, Quinn, interviews by author, 2015.

  In the late fall and early winter of 1972: Quinn, Payton, Tromberg, Paulson, interviews by author, 2015; “Oil Refinery Workers Walk Out of Refinery to Defend Seniority,” Bulletin: Weekly Organ of the Workers League, January 22, 1973.

  On January 9, 1973, at four in the afternoon: “300 Workers Strike at Area Fuel-Oil Firm,” Star Tribune, Minneapolis, January 10, 1973; “Plant Struck at Pine Bend,” Pioneer Press, St. Paul (MN), January 10, 1973; Quinn, Payton, Tromberg, Paulson, interviews by author, 2015.

  Joseph Quinn, for example: Quinn, interviews by author, 2015.

  Others showed up to get picket signs: B. Wills, “Twin City Labor Rallies to Defend Oil Strikers,” Bulletin: Weekly Organ of the Workers League, March 12, 1973; Quinn, interviews by author, 2015.

  On a typical day at the refinery, about two hundred: Jim Jones, “Pine Bend Pickets Can Only Watch Oil Trucks Roll Along,” Star Tribune, September 19, 1973.

  Paulson was prepared: Paulson, interviews by author, 2015.

  Many members of this new workforce: Quinn, Payton, Tromberg, Paulson, interviews by author, 2015; “Scabs Attack Oil Strikers,” Bulletin: Weekly Organ of the Workers League, February 12, 1973.

  On the first night of the strike: Paulson, Tromberg, interviews by author, 2015.

  Weeks passed: “Strike Continues at Koch Refinery,” Star Tribune, January 11, 1973; Robert Hagen, “Two-Week Strike Hampers States Largest Refinery,” Star Tribune, January 22, 1973.

  Ernie Tromberg, an OCAW employee: Tromberg, interviews by author, 2015; “Scabs Attack Oil Strikers”; “Both Sides Take Shots at Sheriff,” Star Tribune, January 24, 1973.