Kochland Page 73

  Koch Refinery hired a private company called Wackenhut: Mike James, “OCAW Strikers Defy Koch’s Private Army,” Bulletin: Weekly Organ of the Workers League, April 9, 1973; Payton, Tromberg, Quinn, interviews by author, 2015.

  When the workers got violent: “Restraining Order Limits Pickets at Refining Plant,” Star Tribune, January 25, 1973; Paulson, interviews by author, 2015.

  On Friday night, February 23: “3 Charged in Violence at Refinery,” Associated Press, February 28, 1973; “Koch Strikers’ Case Continued,” Pioneer Press, March 6, 1973; Paulson, interviews by author, 2015.

  Around this time, Bernard Paulson’s wife: Paulson, interviews by author, 2015.

  On the night of March 15: Paulson, Quinn, Tromberg, Payton, interviews by author, 2015; “Train Run into Struck Refinery,” Star Tribune, March 16, 1973; “Reward Set in Refinery Derailment,” Pioneer Press, March 17, 1973.

  Charles Koch traveled to Pine Bend: Paulson, interviews by author, 2015.

  After the crash . . . the OCAW: Paulson, Quinn, interviews by author, 2015; “Koch, Union Talks Planned,” Pioneer Press, March 26, 1973.

  On the night of April 17, an OCAW man was driving: “Gunshots Fired Near Refinery, Police Hold Suspect,” Star Tribune, April 18, 1973; “Plant-Shooting Suspect Held,” Star Tribune, April 18, 1973; Grotjohn, Paulson, Payton, Tromberg, interviews by author, 2015.

  On June 2, 1973, John Kujawa traveled to Washington: Hearings before the Subcommittee on Consumer Economics of the Joint Economic Committee, Congress of the United States, 251; Paulson, interviews by author, 2015.

  Koch Refining Company offered a $25,000 reward: “Reward Set in Refinery Derailment,” Pioneer Press, March 17, 1973.

  But Bernard Paulson and Charles Koch seemed to understand: Paulson, Payton, Quinn, Tromberg, interviews by author, 2015.

  John Kujawa . . . did not talk about work: Martha Ann Kujawa, interview by author, 2015.

  Paulson said that he was prepared to break: Paulson, Payton, Quinn, Tromberg, interviews by author, 2015.

  On the evening of September 17: “Koch Workers Reject Offer,” Pioneer Press, September 18, 1973; “Koch Refining Strikers to Vote on Pact,” Star Tribune, September 22, 1973.

  After the vote, Paulson gave the Teamsters an ultimatum: Paulson, Payton, Quinn, Tromberg, interviews by author, 2015.

  On the evening of September 23: “Employees End Koch Strike,” Pioneer Press, September 24, 1973; “Koch Refining Workers Going Back to Work,” Minneapolis Star, September 24, 1973.

  OCAW workers like Ernie Tromberg and Joe Quinn: Paulson, Quinn, Tromberg, interviews by author, 2015.

  The OCAW agreed . . . Koch Refining: Paulson, Payton, Grotjohn, Quinn, Tromberg, interviews by author, 2015. Changes to the OCAW after the 1973 strike were also described by two sources, speaking on background, who currently work for the United Steelworkers union, which absorbed the OCAW many years after the strike of 1973. Sources also provided two labor contracts for the purpose of comparison with earlier agreements: USW Labor Agreement with Flint Hills Resources: November 3, 2006–June 13, 2011; and USW Labor Agreement with Flint Hills Resources: October 17, 2012–June 17, 2016. The sources provided a copy of the current USW labor contract for workers at Pine Bend, which could be compared with the 1972 contract as described by retired employees.

  Decades later . . . a sense of admiration, and almost awe: Markel, Hall, Paulson, and three former senior Koch Industries sources speaking on background, interviews by author, 2013–17.

  Charles Koch didn’t have any time to celebrate: Charles Koch, Good Profit, 53–54.

  On September 24, the St. Paul Pioneer Press: “Nixon Asks Wide Energy Power,” Pioneer Press, November 26, 1973.

  CHAPTER 4: THE AGE OF VOLATILITY INTENSIFIES

  The trouble started on October 6, 1973: Yergin, The Prize, 606–9.

  The price shock caused a calamity: Charles Koch, Good Profit, 53–54; Hall, interviews by author, 2013–15.

  Charles Koch . . . profit from them: Koch, Markel, Hall, Paulson, Williams, background sources, interviews by author, 2013–17; Leonard, “The New Koch.”

  Even in the face of a downturn . . . long-term profitability: Paulson, interviews by author, 2015; court transcripts and exhibits William I. Koch et al. v. Koch Industries Inc. et al.

  Bernard Paulson moved to Wichita: Paulson, interviews by author, 2015.

  Charles Koch quickly grasped the potential: Paulson, Hall, interviews by author, 2013–15.

  The strategy worked: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5011.

  Koch Industries’ own confidential financial documents . . . company’s fortunes: Koch Industries Consolidated Income Summary, 1981–1982, presented at Koch Industries Board of Directors Meeting, March 15, 1983.

  Bernard Paulson was often contacted: Paulson, Hall, interviews by author, 2015.

  Information analysis was only part of the strategy: Paulson, Markel, Hall, interviews by author, 2013–15.

  When Markel arrived at the club: Markel, interviews by author, 2013–14.

  Charles Koch told Markel that he was sorry: Ibid.

  Like many other people at the company, Markel: Markel, Hall, and former senior Koch Industries source speaking on background, interviews by author, 2013–14.

  Koch made full use of this strategy: Williams, interviews by author, 2014.

  During this time . . . thinkers like Hayek and von Mises: Charles G. Koch, “Anticapitalism and Business,” address to the Institute for Humane Studies, April 27, 1974.

  On November 7, 1973 . . . sweeping government response: Vietor, Energy Policy in America since 1945, 238–52; Joseph P. Kalt, Economics and Politics of Oil Price Regulation: Federal Policy in the Post-Embargo Era (Cambridge, MA: MIT Press, 1981), 9–15; Rick Perlstein, The Invisible Bridge: The Fall of Nixon and the Rise of Reagan (New York: Simon & Schuster, 2014), 162–63.

  “It will be essential . . . to live and work in lower temperatures”: Richard Nixon, address to the nation, November 8, 1973, www.youtube.com/watch?v=iuvEVwox5L8.

  FDR’s actions were a response to decades of economic stagnation: Michael Lind, interview by author, 2014; Joshua Waimberg, “Lochner v. New York: Fundamental Rights and Economic Liberty,” Constitution Daily (blog), National Constitution Center online, last modified October 25, 2015; Doris Kearns Goodwin, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon & Schuster, 2013); Arthur M. Schlesinger Jr., The Age of Roosevelt, vol. 1, The Crisis of the Old Order (Boston: Houghton Mifflin, 1957).

  When FDR was elected in 1932 . . . the hands-off era came to an end: Kennedy, Freedom from Fear; Arthur M. Schlesinger Jr., The Age of Roosevelt, vol. 2, The Coming of the New Deal (Boston: Houghton Mifflin, 1958); Hacker and Pierson, American Amnesia.

  The council put a hard cap on “old” oil of $5.25 per barrel: CAW, “National Energy Goals and FEA’s Mandatory Crude Oil Allocation Program,” Virginia Law Review 61, no. 4 (May 1975): 903–37.

  This incensed Charles Koch: Koch, “Anti-Capitalism and Business,” April 27, 1974; Charles G. Koch, letter in support of the Libertarian Party, addressed to “Dear Rocky Mountain Oilman,” dated December 23, 1975.

  He owned a small bookstore . . . conservative literature: “Two Birch Society Members Open Book Store,” Wichita Eagle, July 15, 1975.

  He attended and gave money to the Freedom School: Jane Mayer, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (New York: Doubleday, 2016), 44–46.

  In April of 1974, Charles Koch gave a speech at a gathering in Dallas: Koch, “Anti-Capitalism and Business,” April 27, 1974.

  By 1975 . . . not going to go under: Hall, Markel, Paulson, interviews by author, 2013–15; Charles Koch, Good Profit, 54–56.

  Standing before the gathering of his brain trust: Paulson, interviews by author, 2015.

  To a remarkable extent . . . pushed out: Paulson, Markel, Hall, Will
iams, Watson, interviews by author, 2013–15.

  CHAPTER 5: THE WAR FOR KOCH INDUSTRIES

  Bill Koch became a full-time Koch Industries employee in 1975: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 56, 5468; Roskind, interviews by author, 2015.

  Koch’s trading division . . . virtually every American: Howell, Roskind, Hall, background sources, interviews by author, 2013–16; The Global Source for Commodities: Koch Supply & Trading, company overview brochure, 2013; Charles Koch, The Science of Success, appendix A: “Products Traded,” 167.

  Bill came across . . . graduated from MIT: Roskind, Hall, interviews by author, 2013–15; Burrough, “Wild Bill Koch.”

  As a trader, Roskind . . . industrial chemicals: Roskind, interviews by author, 2015.

  Roskind went to Wichita . . . met Bill Koch’s older brother: Ibid.

  Roskind’s office opened at eight thirty . . . trading began almost immediately: Ibid.

  Chemical trading wasn’t a simple matter of buying low and selling high: Roskind, Howell, Hall, background sources, interviews by author, 2013–16.

  Like all senior executives at Koch Industries . . . provide updates: Herbert, Hall, Markel, Paulson, background sources, interviews by author, 2013–16.

  After his successes . . . Bill Koch got a promotion: Roskind, Hall, interviews by author, 2013–16; William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 21, 1999.

  One of Bill’s staffers . . . Brad Hall: Hall, interviews by author, 2013–18.

  Bill Koch became enamored of the kind of data-driven analysis: Ibid.

  Early in the afternoon, Bill Koch called the office to check in on Hall’s progress: Ibid.

  Hall finished the Monte Carlo simulations: Ibid.

  Like all vice presidents . . . battery of probing questions: Ibid.; William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vols. 21, 23, 24, and 28.

  Bill’s requests . . . started to take an accusatory tone: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vols. 52–59.

  There was a problem at a Koch Industries office in Denver: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 57, 5494–546.

  Bill Koch was doing more than asking questions: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5089; vol. 54, 5263–72; vol. 57, 5506.

  On April 27, 1980 . . . a handwritten note: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5089; vol. 54, 5271.

  On June 12, 1980, he sent a memo to Charles: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5089; vol. 54, 5274.

  In a lengthy interview with Vanity Fair: Burrough, “Wild Bill Koch.”

  Charles called Bill at the end of June: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5089; vol. 59, 5731–34.

  The memo was ten pages long, single-spaced: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 54, 5284.

  In early July, Koch Industries held an emergency meeting: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vols. 21 and 54.

  Starting in 1980 . . . political activity: Confessore, “Quixotic ’80 Campaign.”

  Chris Hocker, wrote Charles Koch a thank-you letter: Chris Hocker, letter to Charles Koch, dated July 14, 1978.

  Charles Koch advised . . . over the years: Charles Koch, letter to Chris Hocker, dated February 13, 1978.

  He wrote a Libertarian campaign letter in 1975: Charles G. Koch, letter in support of the Libertarian Party, addressed to “Dear Rocky Mountain Oilman,” dated December 23, 1975.

  While Charles Koch . . . David Koch contacted the Libertarian Party: Confessore, “Quixotic ’80 Campaign.”

  Charles wanted to share his thoughts on two issues: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 54, 5306.

  “I said, ‘Bill, what? Why are you doing this?’ ”: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 54, 5314.

  The day after Thanksgiving, Charles got a call from David: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 55, 5322.

  Charles Koch boarded a private jet Thanksgiving weekend: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 55, 5327–40.

  When they were children . . . polo mallet: Burrough, “Wild Bill Koch.”

  There was a board meeting on December 5: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 55, 5334–42.

  Charles pressed his case . . . a convincing one: William I. Koch et al. v. Koch Industries Inc. et al., Jury Trial Transcript, vol. 52, 5085–86.

  Bill and Fred Koch . . . Charles and David: Brian O’Reilly and Patty De Llosa, “The Curse on the Koch Brothers,” Fortune, February 17, 1997; Boulton, “Koch and His Empire.”

  When it came time to close the deal . . . Brad Hall: Hall, interviews by author, 2013–14.

  CHAPTER 6: KOCH UNIVERSITY

  In the early 1980s . . . Charles Koch began to reveal: Markel, Hall, Paulson, Dubose, interviews by author, 2013–15.

  These teachings—the “classic Sterling” guidelines: Ibid.; Boulton, “Straight-shooting to the Top.”

  W. Edwards Deming was not simply a business consultant: David Halberstam, The Reckoning (New York: William Morrow, 1986), 311–18.

  “Deming’s passion was for making better products”: Ibid.

  After rising through the company ranks: Dubose, interviews by author, 2014–15.

  All the while, he was in contact with managers from Wichita: Ibid.

  One of the most important elements . . . the need to expand: Markel, Hall, Paulson, Watson, background sources, interviews by author, 2013–15; Leslie Wayne, “Pulling the Wraps Off Koch Industries,” New York Times, November 20, 1994.

  Brooks was part of a small cadre . . . in the mid-1980s: Markel, Hall, interviews by author, 2013–14; Wayne, “Pulling the Wraps Off”; Boulton, “Koch and His Empire.”

  Over time . . . blue-sky studies: Hall, interviews by author, 2013–14.

  The development group made its first major deal: Paulson, interviews by author, 2015.

  In September of 1981, Koch Industries paid $265 million: Phillip Wiggins, “Sun to Sell a Refinery to Koch,” New York Times, September 25, 1981.

  In 1987, Phil Dubose got the promotion: Dubose, interviews by author, 2014–15; “Koch Brothers Head Back to Federal Court in Latest Squabble,” Associated Press, October 1, 1999; Loder and Evans, “The Secret Sins of Koch Industries.”

  CHAPTER 7: THE ENEMIES CIRCLE

  The issue of oil theft . . . focused exclusively on Koch Industries: Transcript of the Public Hearings of the Select Committee on Indian Affairs, May 9, 1989; Ballen, Elroy, DeConcini, background source, interviews by author, 2014–16.

  This legal threat coincided with another attack from Bill Koch: O’Reilly and De Llosa, “The Curse”; Burrough, “Wild Bill Koch.”

  the federal investigation . . . federal prosecutor named Nancy S. Jones: Nancy Jones, Timothy Leonard, Elroy, interviews by author, 2014–18; details of the investigation are also based on the FBI case file, released for the first time in 2018 to the author, with minor redactions, including several hundred pages of internal FBI memos and interview transcripts.

  Jones was skeptical, at first: Nancy Jones, interviews by author, 2015–2016. During interviews for this book, Jones refused to discuss what the grand jury learned, or the specific evidence presented to it, due to confidentiality rules. She refused to say whom the jury called as witnesses, or what documents it might have obtained. But the confidentiality rules allowed her to discuss her strategy in the case and how the case progressed over the months.

  As Jones pressed her case from the US Attorney’s office: United States o
f America ex rel. William I. Koch and William A. Presley, Plaintiffs, v. Koch Industries, Inc., et al., Defendants, Order, August 6, 1998, 7.a.

  Koch Industries responded by circling the wagons: United States of America ex rel. William I. Koch and William A. Presley, Plaintiffs, v. Koch Industries, Inc., et al., Defendants. Order, August 6, 1998.

  The standards of conduct said: Ibid., 5.a–c.

  On July 11, 1988, Koch’s president, Bill Hanna: Ibid., 5.d.

  Bill Koch only fed into the company’s sense of embattlement: Elroy, Dubose, interviews by author, 2014–15; FBI internal memorandum, “Koch Industries Incorporated, Wichita, Kansas; CRIME ON AN INDIAN RESERVATION—THEFT; RACKETEERING INFLUENCE AND CORRUPT ORGANIZATION,” July 26, 1989; Burrough, “Wild Bill Koch.”

  Charles Koch did more than circle the wagons: “Before the Special Committee on Investigations, Select Committee on Indian Affairs, United States Senate: Statement by Koch Industries, Inc.,” submitted June 7, 1989.

  But when faced with . . . Koch redirected his political efforts: Howell, interviews by author, 2015–16; Phillip L. Zweig and Michael Schroeder, “Bob Dole’s Oil Patch Pals,” Bloomberg Businessweek, April 1, 1996.

  Koch’s first tactical goal . . . issue of oil theft: Howell, interviews by author, 2015–16; Zweig and Schroeder, “Bob Dole’s Oil Patch Pals.”

  One of the primary victims . . . Osage tribe in Oklahoma: Charles O. Tillman, interview by author, 2015.

  Tillman and other Osage leaders went public: “Osages Deny Tribe Swindled in Oil Deals,” Tulsa Tribune, March 21, 1990; Bob Vandewater, “Osage Royalties Probe Calls Oil Payments Fair,” Daily Oklahoman, March 21, 1990.

  Koch Industries deepened its relationship with Kansas senator Bob Dole: Bob Dole, interview by author, 2016; Zweig and Schroeder, “Bob Dole’s Oil Patch Pals.”

  Dole helped Koch delegitimize the issue: “Investigation of Indian Oil Purchase,” Bob Dole submission to US Congressional Record, March 26, 1990.

  As senators fought . . . Koch put another piece of its plan into place: Howell, interviews by author, 2015–16; John J. Fialka, “How Koch Industries Tries to Influence Judicial System,” Wall Street Journal, August 9, 1999.