The Billionaire Brothers Take on the US

On election night 2012, Charles and David Koch were confident of a Republican victory, as so many Mitt Romney partisans were. Pre-election polls, which showed Barack Obama narrowly but consistently ahead in a number of key states, simply had to be incorrect, infested with liberal bias; the same was surely true, they said, of Nate Silver, the statistics guru who foresaw a comfortable Electoral College win for Obama and ended up predicting every state correctly.

Republicans and conservatives tend toward a kind of certitude that they, far more than Democrats and liberals, embody and represent real American values. So they spent October 2012 persuading themselves that there was simply no chance that Americans would reelect this professional leftist who (it was so obvious to them) was, by both incompetence and intention, bringing the country to ruin. Pundits of the right attempted to conjure this specter into reality by the act of repeatedly saying it, an effort that hit bottom when George Will advised viewers of ABC’s This Week the Sunday before the election that the thoroughness of America’s rejection of Obama would be seen in the results from Minnesota, where he predicted a Romney victory. Obama won the state by eight points, an outcome so utterly foreordained that neither man even bothered to campaign there.

The brothers Koch (pronounced “coke”), who, we can imagine, would have watched Fox News and heeded writers like Will, had poured an estimated $407 million of their own and others’ money into defeating Obama. They did so through a network of groups with names like Freedom Partners, the Center to Protect Patient Rights, and the well-known Americans for Prosperity, collectively described by The Washington Post’s Matea Gold as “a far-reaching operation of unrivaled complexity, built around a maze of groups that cloaks its donors.”¹ They spent most heavily in Ohio, where at least the margin was close (1.9 percent), and Pennsylvania, where it wasn’t very (5.2 percent).

David Koch was at home that night in New York, “monitoring the election results with disbelief,” according to Daniel Schulman in Sons of Wichita. Charles was similarly disconsolate, and mystified as well. “He wasn’t blaming people,” said a friend quoted by Schulman.

It’s just that they perceived that there would be more people that would want a freer society and less governmental intervention and less people dependent upon the federal government. He thought…that people would see it, and they didn’t.

From their perspective, the Kochs had endured much over the preceding couple of years, since publicly announcing their intention to spend whatever it took to rid America of the socialist evil. They’d been subject to vigorous public denunciation, heightened scrutiny of their business empire and private lives, and, according to Schulman, death threats (although he doesn’t tell us how serious or offhand these may have been). And now it had all been for naught. Some backbiting ensued; a head rolled here and there in the vast organization; but given a month to reflect and collect himself, Charles Koch decided that extremism in the defense of liberty was no vice and his important work must continue. “Our goal of advancing a free and prosperous America is even more difficult than we envisioned,” he wrote to his donor network, “but it is essential that we continue, rather than abandon, this struggle.”

Americans even moderately up to speed on the political news would have started hearing of Charles and David Koch in 2009, when the Tea Party uprising began. It was at that point that Americans for Prosperity—seizing on the right-wing populist anger aimed at the “moochers” who took mortgages they couldn’t afford and who wanted the government to give them health care—started helping to foment the rebellion that resulted in that summer’s rage-stoked town hall meetings, where many a purple-faced constituent inveighed against the evils of big government.

The Kochs, as Schulman tells it, had been waiting for such a moment for many, many years. They’d been active in political circles for decades, going back to the 1960s. And by “political circles” I don’t necessarily mean Republican ones. They donated to Republicans, but they were and are libertarians, and radical libertarians at that. Indeed, Schulman notes that they tend to be to the left of the GOP on issues like civil liberties and same-sex marriage, as many true libertarians are. But I’ve found no record of a Koch brother objecting to the Republican Party’s intolerance on gay issues. Their beef is with government oversight of private enterprise, which enslaves the man of business, saps the workingman of his resolve, and turns America into a nation of supplicants.

These views were inherited, as views of men such as these often are, from their father, Fred. Born in 1900 in the small Texas oil town of Quanah, the son of a frontier newsman, Fred grew up in reasonably comfortable circumstances. The town was fairly bustling. Modern living was coming to the prairie. The family even had a telephone with its own number (3—just 3). But Fred had much bigger things in mind, so off he went to Rice University, and then to MIT to become an engineer. He went into the refinery business with a friend and got rich fast. By the time he married Mary Robinson in his early thirties, he was wealthy enough that, on their around-the-world honeymoon trip, he was able to hire an airplane to fly her clothes over the Andes after a train clerk told her she would have to leave the trunk behind due to space limitations on board.

The couple settled in Wichita. The business grew and grew. A mansion was built, whose walls were festooned with the kinds of manly artifacts Fred favored (the head of an antelope he’d killed, say) and the refined ones that were more to Mary’s taste (Renoir, Remington). They had four boys: Frederick first, then Charles, and finally the twins, David and William.

Fred was a tough guy and, toward his children, frugal and stern. The family owned no television until “well into the 1950s.” The boys received no allowances. He was the kind of father, a relative told Schulman, “who taught his children to swim by throwing them into a pool and walking away.” And he was fiercely right-wing in his politics. When he found himself largely frozen out of the domestic oil market by major companies like Standard Oil, his work took him abroad, even to Stalin’s USSR. Fred Koch helped Stalin get the Soviet economy moving by pumping much oil from the Caucasus. But when he saw the conditions in which people lived under communism, he vowed, as he wrote in 1964, that “I must do everything in my power to fight it, which I have done since that time.”

He was intense enough in this pursuit that he was one of the founding members of the John Birch Society—invited to the meeting in Indianapolis in December 1958 called by Robert Welch, who gathered a small number of industrialists and intellectuals he’d identified as simpatico. Fred’s business trips around the world had shown him collectivism’s evils firsthand, in such locales as “violently socialistic” New Zealand. He did, however, encounter one reinvigorated populace, in 1938, that gave him some suspicion of hope for a benighted world:

When you contrast the state of mind of Germany today with what it was in 1925 you begin to think that perhaps this course of idleness, feeding at the public trough, dependence on government, etc., with which we are afflicted is not permanent and can be overcome.

Any home in which four boys are being reared is likely to be a raucous one, rich in mischief and competition, and the Koch household was no exception. Born in 1933, Frederick, or Freddie, the eldest, displayed no interest in business or politics or hunting and was drawn to the arts. While the other three brothers all studied engineering at MIT, Freddie matriculated at Harvard in the humanities. For reasons that are never quite clear, he was a great disappointment to his father, whose disgust grew to the point that, in one of Fred’s accounts of the family from the 1960s, Frederick was stricken from the record entirely, and mention was made of only three sons.

Charles came next, in 1935, and then the twins, David and Bill, four and a half years behind Charles. All three, to varying degrees, obeyed their father and competed for his approval, although as the years passed it became clear that resentments were welling up in “Billy”—he was less self-confident and athletic than his brothers and quickly developed a short fuse. When Fred died in 1967—with Frederick, whom his father had accused of stealing, written out of the will—it was apparent that Charles would be the one to take over the family business.

One must give Charles his due as a businessman. Schulman writes:

Charles had inherited an enterprise with 650 employees and a value of about $50 million. Over the next fifteen years, Koch Industries’ value rose to $1.5 billion and the company employed 7,000 people. Its small group of shareholders reaped rewards of this growth in dividend checks that kept adding zeros, increasing from the thousands into the millions; the year of Fred Koch’s death, the company paid out less than $300,000 a year. By the early 1980s, the Koch brothers and the other shareholders divided up a pot of close to $28 million.

The business expanded from oil into pipelines, chemicals, fertilizers, ranching, and numerous other fields. Charles chose to stay in Wichita, where he worked himself, and his employees, very hard. He put off marriage, to an Italian-American Catholic heiress of a department store chain, until age thirty-seven, and proposed to her, Schulman writes, “over the phone while paging through his calendar for an opening in his schedule.”

David joined the family firm, turning Koch Engineering from a local concern into a worldwide business. For a time, even Bill worked amicably with his brothers, heading Koch Carbon, which produced “petcoke,” the carbon residue created by the petroleum-refining process that was used in the steel, titanium, and aluminum industries.

Before all this, Charles and David—to whom we refer today when we speak of “the Koch brothers”—began to immerse themselves in radical libertarianism. With a friend, Charles helped open a Birch Society bookstore. In the early 1960s, the brothers attended a series of lectures by Robert LeFevre, a kind of anarcho-libertarian guru of the day whose Freedom School hosted guest lecturers such as Milton Friedman and Rose Wilder Lane, the daughter of Laura Ingalls Wilder and a blazing antigovernment polemicist. LeFevre saw virtually no legitimate role for modern government. Charles attended a two-week immersion course and was smitten by LeFevre’s ideas, eventually even making a donation to his school and joining its board.

It was now the late 1960s and early 1970s. America, from the point of view of the heartland industrialist, appeared to be on the verge of self-destruction. As we know, Koch was not alone in thinking these thoughts. In 1971, two months before Lewis Powell was nominated to the Supreme Court by Richard Nixon, the United States Chamber of Commerce asked for his advice on how capitalists could save the country. The resulting (and now famous) “Powell Memo” advised concerned parties to immerse themselves in politics and public debate: “It is essential that spokesmen for the enterprise system—at all levels and at every opportunity—be far more aggressive than in the past.”

Not long after this, the Heritage Foundation, the conservative think tank, with consultation from the Kochs opened its doors in 1973. The next year, Charles met with an aide to start thinking strategically about grooming an intellectual class to compete with the liberals and creating a home for them. The movement had, in Charles, a benefactor willing to lay out whatever moneys were needed; it had intellectuals around the country eager to put his largesse to use; one of the most prominent was a genuine Upper West Side Jewish intellectual, the radical libertarian economist Murray Rothbard. By 1977, the libertarians had their own think tank, the Cato Institute, which set up shop in San Francisco of all places, because that was where Ed Crane, the man chosen to lead it, wanted to live.

In September 1979, Schulman writes, the Libertarian Party, which had been organized largely by Crane and Charles, opened its national convention in Los Angeles at a hotel that “teemed with libertarians from every strain of the eclectic movement: Miseians and Hayekians, anarcho-capitalists, shaggy-haired peaceniks, and black-clad anarchists.” David was nominated as the party’s candidate for vice-president and before it won one percent of the national vote he had spent over $2 million. It took a while for Charles and David to decide they would do better by funding conservative Republicans at the state and national levels in order to change the national balance of power.

Schulman is a senior editor at Mother Jones magazine, and Sons of Wichita is his first book. He writes that he conducted “hundreds of interviews,” and in that sense the book is an impressive piece of reporting. It can’t have been easy for a reporter from Mother Jones (the ideological enemy) to get most of these people to talk, so Schulman deserves credit for that.

Yet for all his effort, the book, which was released under an unusually ominous embargo, contains no earth-shaking revelations or scoops that I could find. In fairness to Schulman, that would be difficult, since the brothers’ political activities have now been thoroughly examined by some of America’s best reporters, like The New Yorker’s Jane Mayer, whose 2010 profile broke considerable new ground, and by many other writers as well.

Schulman can be faulted, however, for being a bit stingy in citing other journalists’ work. The Nation’s Lee Fang, for example, when he was with the website Think Progress in 2009, delivered a tremendous amount of fresh reporting on Americans for Prosperity, on which Schulman relies; it seems to be rather grudging of him, then, that while he cites Fang as “a reporter for the liberal blog Think Progress,” he never names him, not even in the relevant footnote.

The nonpolitical aspect of the Koch story—indeed, the one to which Schulman devotes more space than politics—is the long-running and wretched saga of the brothers’ personal relationships. In sum, Bill confronted his brothers, Charles in particular, at a family Christmas dinner in 1979. Charles, he charged, kept other board members in the dark about company practices and prevented shareholders from being able to benefit from the company’s assets. The diatribe shocked the other brothers and their mother, Mary, who was present, and “it was the last Christmas the Kochs spent together,” writes Schulman.

In 1982, Bill—having recruited Freddie to his cause—sued Charles and David, alleging various forms of mismanagement, including Charles’s “lavishing of company funds on libertarian causes.” Charles and David retaliated with a $400 million defamation countersuit. Bill started spying on his brothers and said publicly that they were running not an upstanding corporation but an “organized crime” operation. The brothers managed to put aside some time for the kinds of pleasure and comforts that having a few billion dollars can buy—Bill led a yachting team that won the America’s Cup in 1992, and David bought Jackie Onassis’s Manhattan co-op in 1995. But the warring dragged on and on. Finally, in 1998, a Kansas jury ruled for Charles and David. Bill got nothing (although he still had plenty).

There’s more of all this in Sons of Wichita than I’d have thought the world would need to know, but more readers are probably interested in the antics of rich people than in their political activism. The brothers are mostly two-dimensional in these pages, although ever so occasionally, a whisper of humanity shows through. David almost died in a fire aboard an airplane in 1991. It was his lengthy, firsthand exposure to the medical industry that led him to become an extremely generous medical benefactor, contributing, for example, some $170 million to three New York hospitals.

The brothers’ admiration for their mother, who introduced them to life’s finer things, apparently managed to instill in all but Charles a genuine passion for art; they appear to have assembled impressive collections, and they give generously to cultural causes; a $100 million contribution converted the New York State Theater at Lincoln Center to the David Koch Theater. The Metropolitan Museum will soon open fountains on Fifth Avenue to which David contributed $55 million.

If Sons of Wichita were a novel, a bildungsroman after the classic nineteenth-century style, Bill would easily have been its central character. He has what it takes: the vexed childhood and the scars to prove it, the temper, the grudge, the desire to “prove” himself to his brothers by winning a prestigious yacht race—and, finally, the remorseful conscience that compels him to seek rapprochement. David, his twin, accepted this offer and even served as best man at Bill’s subsequent wedding. Charles can’t quite forgive Bill’s vicious attacks, but the two men do behave civilly toward each other. Bill even joined the anti-Obama crusade in 2012. Through his corporation, Oxbow Carbon LLC, he gave $3.75 million to a Romney-related political action committee—peanuts compared to his brothers, but by normal standards, a very high contribution, made possible only by the Supreme Court’s Citizens United decision, which allowed corporations for the first time to make limitless contributions.²

So far this year, Charles and David have spent an estimated $25 million on television ads attacking the Democratic candidates who support Obamacare and Obama himself. Their efforts have been focused on nine Senate races and fourteen House contests, where, overall, their spending has far eclipsed that by all outside Democratic groups combined. They’re placing their biggest bet in North Carolina, where by mid-March they’d spent nearly $8 million attacking the Democratic incumbent senator Kay Hagan.³

It’s far from clear what all this money is getting them. Hagan is vulnerable, certainly, but still running even in the polls with her GOP opponent, Thom Tillis. The brothers are also heavily invested in Louisiana and Arkansas, where the prognosis for Democratic incumbent senators Mary Landrieu and Mark Pryor has improved just a little as of late.

It’s been a rough year so far for the brothers. Their claims in a number of anti-Obamacare ads featuring regular Americans complaining about premium hikes under the new law have not survived close examination. Perhaps the most notorious example comes from Michigan, where an ad featured a woman named Julie Boonstra. She has cancer, and in a Koch-financed ad, she claimed that Obamacare was making her medication so expensive that she would die. The Detroit News looked into the matter and found that in fact, the new plan she enrolled in would save her $1,200 a year. When informed of this by the News, she said she simply didn’t believe it. There was a similar ad in Washington state. The Kochs and their allies keep saying that millions of Americans are paying more because of Obamacare, and no doubt some people surely are. But the Kochs have yet to find one such person.

They also suffered a defeat on their home turf of Kansas, this one having to do with energy, another fight into which they’re pouring millions at the state level. Kansas has a law mandating that 20 percent of the state’s electricity come from renewable energy sources. The Kochs’ Americans for Prosperity worked with big utilities and others to overturn the law, opening the prospect of purchases of fossil fuels. They succeeded in the state senate but lost in the lower house.

Perhaps it was frustrations like these that drove Charles to write an Op-Ed polemic in The Wall Street Journal, a rare public intervention on his part, avowing that he’s trying to save free society. “The more government tries to control, the greater the disaster, as shown by the current health-care debacle,” he wrote. “Collectivists…promise heaven but deliver hell.”⁴

Koch used his Op-Ed to boast about his company’s commendations from the Environmental Protection Agency. On this matter, Schulman tells a starkly different story. He interviewed or got his hands on the testimony of a handful of former Koch Industries employees who said lying to regulators about the size of oil pipeline leaks and spills was not merely permitted but expected. One jury found the company guilty of nearly 25,000 false claims against the government. A separate case in 2000 forced the company to pay a $35 million fine under the Clean Water Act, the largest in history up to that time. The fine was levied by the Clinton administration, suggesting that perhaps the brothers’ zeal to see Republicans elected is not based solely on ideological principle.

Despite their failure in 2012, Charles and David emerged in Republican circles, as Schulman notes, with their reputations somehow enhanced. They were fighting the good fight, putting big money where their mouths were, taking the bullets from the liberal media that other corporate titans weren’t willing to absorb.

What might happen, though, if this year’s effort fails, and the Republicans don’t recapture the Senate? Will the Kochs keep at this forever? Or will they give up on their movement (or it on them)? And how might they react in 2016 if, after another half-billion dollars, Hillary Clinton of all people is sitting in the White House? Suppose it turns out that they’ve been wrong all this time, that the Democratic coalition represents most of America. It may be that at some point the Kochs will conclude that such an America just isn’t worth saving.