“ORGANIZED CRIME” VS “KOCH INDUSTRIES”….SO, WHAT’S THE DIFFERENCE?

…Charles & David Koch

 

The Rolling Stone Magazine has once again done their homework on the 2^nd largest private US company.

As with most Americans that value hearing the truth, I am a long-time follower of the exposé’s that the Rolling Stone publication has produced over the years.  Well, this time, they seriously out-did even themselves when their investigative reporter, Tim Dickenson, took on doing a total exposé of the privately held family business of Koch Industries.

Weeks before the actual publication, Mr. Dickenson had contacted Koch headquarters in Wichita, Kansas, on behalf of Rolling Stone, asking to engage them in a discussion about their so called, “Market Based Management”. As is usual with the highly private Koch operation, the request was totally ignored.  Of course, once the large exposé was then published, they started howling loud and clear.  Oh, they never questioned the statements or facts as presented in the long article.  They instead, just personally attacked the author, Mr. Dickenson.

After the article was published, which I absolutely recommend that everyone Google, “Inside the Koch Brothers' Toxic Empire” by Tim Dickenson.  Then, just sit back and spend about an hour learning about: a wrongful death judgment; six felony and numerous misdemeanor convictions; tens of millions of dollars in fines, and finally, Koch’s past illegal trading business with Iran.  That, and much, much more, is all included in the very complete story.  It’s well worth your time to see how, and what, this 2^nd largest private US company is doing in their buying of a political party and in attempting to also buy the White House.

So, just how big and influential is Koch Industries?  For expediency, listed below are some excerpts from the Dickenson article to give you a thumbnail of just how big they are, and what the two brothers are up to.

·       Brothers Charles and David are each worth more than $40 billion.

·       Their political network helped finance the Tea Party and powers today's GOP

·       Koch-affiliated organizations raised some $400 million during the 2012 election, and they aim to spend another $290 million to elect Republicans in this year's mid-terms.

·       Koch publishes only one top-line financial figure: $115 billion in annual revenue, as estimated by Forbes. That is larger than IBM, Honda or H-P, and is the 2^nd largest private company after Cargill Agri.

·       So far, in this cycle, Koch-backed entities have bought 44,000 political ads to boost Republican efforts to take back the Senate.

·       Under the nearly five-decade reign of CEO Charles Koch, the company has paid out record civil and criminal environmental penalties

Here is a total Dickenson excerpt describing Koch Industries’ issues on their air and water pollution activities:

“The volume of Koch Industries' toxic output is staggering. According to the University of Massachusetts Amherst's Political Economy Research Institute, only three companies rank among the top 30 polluters of America's air, water and climate: ExxonMobil, American Electric Power and Koch Industries. Thanks in part to its 2005 purchase of paper-mill giant Georgia-Pacific, Koch Industries dumps more pollutants into the nation's waterways than General Electric and International Paper combined. The company ranks 13th in the nation for toxic air pollution. Koch's climate pollution, meanwhile, outpaces oil giants including Valero, Chevron and Shell. Across its businesses, Koch generates 24 million metric tons of greenhouse gases a year.”

The Freedom Industries pollution leak in West Virginia.  This company is related to Koch Industries.

You will many-times hear that Koch Industries is in the “oil business”, but that is only partially true.  They don’t drill for oil.  Instead, the company is in every nook of the vast industry that transforms raw fossil fuels into usable goods. Koch-owned businesses trade, transport, refine and process fossil fuels, moving them up the value chain until they become things we have all forgotten began as a hydrocarbon.  That includes items such as fertilizers, synthetic Lycra, and even to items that are the innards of smartphones.

Koch controls at least four oil refineries, six ethanol plants, a natural-gas-fired power plant and 4,000 miles of pipeline. At one point, Koch refined 5% of the oil burned in America.  However, the percentage has been reduced because it had to close down its 85,000-barrel-per-day refinery in North Pole, Alaska.  This was mainly because it was discovered that a toxic solvent had leaked from the facility which had fouled all of the town's groundwater wells.  Classic Koch pollution activity.

The less than stellar actions and activities of both of the Koch Brothers is inherited directly from their father, Fred Koch, that started it all in the oil business.

In 1920,a company called Universal Oil Products introduced a new and cleaner (and hugely profitable) way to "crack" heavy crude oil by breaking it down to boost gasoline yields. In 1925, Fred Koch, who had earned a degree in chemical engineering from MIT, partnered with a former Universal engineer named Lewis Winkler.  Together, they knocked-off a near carbon copy of the Universal cracking apparatus by making small tweaks to the system.  Fred soon landed his first client which was an Oklahoma refinery owned by his maternal uncle, L.B. Simmons. In a flash, the new Winkler-Koch Engineering Co. had contracts to install its knockoff cracking equipment all over the heartland.  This was all done by heavily undercutting Universal Oils system and by charging a one-time fee rather than ongoing royalties.

All was great until Universal Oil sued in 1929, accusing Winkler-Koch of stealing its intellectual property. While fighting Universal Oil in court, Fred started looking for partners abroad and was soon doing business in the Soviet Union.  Stalin had decided to fund his country's industrialization by selling oil into the lucrative European export market. But the Soviet Union's oil reserves were notoriously hard to refine. The USSR needed cracking technology, and the Oil Directorate of the Soviet’s Supreme Council of the National Economy had agreed to go with Winkler-Koch.  Well, actually Winkler-Koch was the only available game-in-town because Koch's oil-industry competitors were unwilling to deal with the totalitarian Communists.

Eventually, the US Courts decided that Fred's oil cracker, by virtue of small technical differences, did not violate the Universal Oil patent. Fred countersued on antitrust grounds, arguing that Universal had wielded its patents anti-competitively. Fred Koch won a $1.5 million settlement in 1952.

What is bizarre is that with a record for the most industrial fines as a functioning US manufacturer, Charles Koch, the 78-year-old CEO and chairman of the board of Koch Industries actually considers himself an honest business man of moral clarity and high integrity.  Per Charles, "The role of business is to produce products and services in a way that makes people's lives better.  It cannot do so if it is injuring people and harming the environment in the process."  Tell that to those people, companies and those parties that have been bulldozed or torpedoed by Koch Industries billions of ill-spent dollars.

Today, Charles Koch points to awards it has won for safety and environmental excellence. "Koch companies have a strong record of compliance," Koch's top lawyer, told Rolling Stone. "In the distant past, when we failed to meet these standards, we took steps to ensure that we were building a culture of 10,000 percent compliance, with 100 percent of our employees complying 100 percent."  He added, "Koch's pipeline practice and operations today are the best in the industry."

However, even as compliance began to improve among its industrial operations, the company aggressively expanded its trading activities into the frontier of risky financial instruments.

In 2000, the Commodity Futures Modernization Act had exempted many of these products from regulation.  Of course, Koch Industries with all of its billions, was among the key players shaping that law. Koch joined up with those other major polluters; Enron, BP, and Exxon-Mobil in a collaboration called the Energy Group. This corporate alliance fought to prohibit the federal government from policing oil and gas derivatives. "The importance of derivatives for the Energy Group companies . . . cannot be overestimated," the group's lawyer wrote to the Commodity Futures Trading Commission in 1998. "The success of this business can be completely undermined by . . . a costly regulatory regime that has no place in the energy industry."  Another pure Koch-instigated statement.

The following comment by a Ms. Joan McCarter of the Daily Kos pretty much says it all about the Koch’s:

“The Koch’s clearly do not stand up well to close scrutiny, and clearly are not prepared for it. For some reason, probably because they're richer than god, they seem to assume that they should be able to swoop into our political system and attempt to buy it without being subject to close examination. That attitude, along with their long history of abusing people, the environment, and the political system, is doing them no favors. They've made themselves the subject of this [mid-term] election, and if Democrats hold the Senate, it will largely be because the Koch’s have made themselves such good enemies.”

Nuff said for now, but obviously not the last word.

Copyright G.Ater  2014