“Kochland”: How David Koch Helped Build an Empire to Shape U.S. Politics & Thwart Climate Action

StoryAugust 27, 2019
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Billionaire conservative donor David Koch died Friday at the age of 79 from prostate cancer. David Koch — who was worth some $42 billion — and his brother Charles poured massive amounts of money into funding climate change denial through conservative think tanks and politicians. The Koch brothers founded the political advocacy group Americans for Prosperity in 2004, which is credited with turning the “tea party” into a full-fledged political movement. They also backed “right-to-work” efforts, which aim to weaken labor rights and quash union membership. The brothers made their fortune running Koch Industries, the second-largest privately held company in the United States. We speak with the business journalist Christopher Leonard, who just last week published a major new book examining the business dealings of the Koch brothers. It’s titled “Kochland: The Secret History of Koch Industries and Corporate Power in America.”

Transcript
This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman. We turn now to look at the legacy of billionaire conservative donor David Koch, who died on Friday at the age of 79 from prostate cancer. David Koch, who was worth some $42 billion, and his brother Charles Koch poured massive amounts of money into right-wing and libertarian causes over the past four decades, including funding climate change denial through conservative think tanks and politicians. The Koch brothers founded the political advocacy group Americans for Prosperity in 2004, which is credited with turning the “tea party” into a full-fledged political movement. The Kochs also backed “right-to-work” efforts, which aim to weaken labor rights and quash union membership. The brothers made their fortune running Koch Industries, the second-largest privately held company in the United States. They were oil barons.

Just last week, the business journalist Christopher Leonard published a major new book examining the business dealings of the Koch brothers. It’s titled Kochland: The Secret History of Koch Industries and Corporate Power in America. He just wrote a piece for The New York Times headlined “David Koch Was the Ultimate Climate Change Denier.” Christopher Leonard joins us now from Kansas City.

Welcome to Democracy Now! Why don’t we start there, with your — it wasn’t really a synopsis of the book in any way, because this is a tome. Congratulations on writing it, Chris.

CHRISTOPHER LEONARD: Thank you.

AMY GOODMAN: But “David Koch Was the Ultimate Climate Change Denier.” Now, if he is one individual, that’s his own business. But this affected the entire country. Explain what Kochland is and how he and his brother had such a massive effect on the issue of climate change and denialism in this country.

CHRISTOPHER LEONARD: Yes, I will. And maybe to start, we could back up and look at the corporate empire that made David and Charles Koch the richest — some of the richest people in America. They’ve owned this privately held firm in Wichita, Kansas, for decades, Koch Industries. And as we said earlier, Koch Industries is one of the largest corporations in America. Its annual sales are bigger than Facebook, Goldman Sachs and U.S. Steel combined.

And the thing about Koch Industries is that it specializes in the kinds of businesses that underpin civilization. You couldn’t boycott Koch Industries if you wanted to. The company makes the fuel people use to drive to work. It makes the building materials in their office building, from the windows to the carpet. It makes the material in our clothing, like Lycra, spandex, nylon, the stuff in diapers and exercise clothing. It makes nitrogen fertilizer, which is one of these products that most people don’t think they even use, but it really is the bedrock of our modern food system. So what you see is that this corporation is sort of quietly working the gears and levers that make modern society work. And the results have been tremendously profitable for David and Charles Koch as they’ve owned this company. Together, the brothers owned 80% of the firm before David Koch passed away last week.

So, the important thing that you asked me about is climate denial and the political impact of this empire. And it traces back to the fact that Charles and David Koch, for decades, have been patiently working to reshape American politics. The brothers, the best term you could probably use for them is “libertarian.” They hold a very vehement anti-government view. They truly believe that society needs to be organized as a marketplace, with only privately run roads, hospitals, insurance. They don’t believe in Social Security. They don’t believe in Medicare. So they’ve been steadily pushing back government regulations and programs like that.

But of primary concern to them is any effort to regulate greenhouse gas emissions, because Koch Industries is deeply involved in the fossil fuels business. It owns oil refineries, pipelines. It trades global energy supplies around the world. And decades ago, this company realized that if the government regulates greenhouse gas emissions or even puts a price on emitting carbon into the sky, it could really hurt Koch’s profits for decades to come. So the company has been, I think, unique and vitally important in derailing any action on climate change, going back to the early 1990s.

AMY GOODMAN: So, you talk about carbon being at the heart of Koch’s business —

CHRISTOPHER LEONARD: Yeah.

AMY GOODMAN: — and also Koch’s future.

CHRISTOPHER LEONARD: Yes.

AMY GOODMAN: You talk about the refineries and how they built them around the country, and then the political wing of their operation, if you will, in having to ensure that carbon is not regulated. Explain what they built.

CHRISTOPHER LEONARD: Absolutely, I will. And I’d like to say, this came from — I remember an interview I did a few years ago with a former senior lobbyist to Koch Industries. And I said, you know, “What got you up in the morning? What was your front-burner issue?” And the answer was carbon. This is what motivated the company.

Fossil fuels put gigatons of greenhouse gas emissions into the sky every year for free, essentially. And the cost of that pollution will be borne by society for decades. It’s what we call in the business community an “externality.” You get to externalize the cost of that pollution. So, if a price is put on that pollution, it changes the entire economics of fossil fuels production. And the big threat to companies like Koch Industries, ExxonMobil, Chevron is that this could hurt demand for fossil fuels in future decades. So, when that happens, all these investments you have, billions of dollars sunk into oil refineries and pipelines, that investment becomes less and less valuable as demand for fossil fuels falls.

So, it’s not easy to change American public policy. That I learned reporting this book. And Koch Industries and Charles and David Koch have been remarkably smart, patient and strategic in their approach to affecting U.S. policy. And they built this machine to do it, that is unrivaled in corporate America. You know, when I started reporting this book, I thought I was going to be writing a lot about campaign donations and super PACs. Boy, was I wrong. The real action always starts the day after the election. That’s where Koch Industries has its real expertise, and that’s where it’s shaped public policy.

So, to do that, Koch has one of the largest corporate lobbying operations in the United States, located about a block from the U.S. White House. Then it funds and supports a constellation of think tanks in Washington, D.C., like the Cato Institute or the American Energy Alliance. And what these groups do is they seed the ground in Washington with Koch’s ideas. These libertarian, anti-government ideas are made mainstream by groups like the Cato Institute. And they help force the conversation. They help shape the conversation.

Along with that, you have this network of campaign donors, who will, in an election cycle, sometimes give more money to political campaigns than the actual political parties themselves — hundreds of millions of dollars to entice politicians to embrace the Koch point of view.

And then, finally, perhaps most importantly, Koch has built a nationwide activist network called Americans for Prosperity. And what this is is a boots-on-the-ground operation. So, Americans for Prosperity has chapters around the country. They can activate people to go knock on doors, take petitions. They will charter buses from West Virginia, North Carolina, Missouri, Ohio, you name it. They will get buses of angry voters to come to Washington, D.C., and then go visit congressional offices that have been specifically identified by that big corporate lobbying shop we talked about, where they can pressure lawmakers.

And Koch put this political machine into full force in 2009 and 2010, when it looked like the United States was going to regulate greenhouse gas emissions for the first time. You know, back then, there really was bipartisan support to do something on climate change. The Republican, John McCain, ran on doing something about climate change. But Koch Industries intervened, and, I think more than even Exxon or other companies, it sort of — it politicized this issue of climate change. And Koch went after any moderate Republicans who acknowledged that climate change was real, who supported any effort to put a price on carbon. And Koch helped to drive those people out of office. So it played a vitally important role in making it clear to Republicans that they could not support any effort on climate change.

AMY GOODMAN: The Kochtopus? Elaborate further.

CHRISTOPHER LEONARD: The Kochtopus, here’s a great example. In 2009, when we were debating climate change, my book shows that Koch secretly funded a think tank report from this group called the American Council [for] Capital Formation. And this report said that if we regulate climate change, it will be a disaster for the American economy. Then another Koch-funded think tank called the American Energy Alliance took the findings from that report, made political ads and targeted those ads at Republican politicians, like Lindsey Graham, who supported climate change legislation, so now Lindsey Graham has got these horrible campaign spots running back home. And then the corporate lobbyists from Koch will be visiting the offices of Lindsey Graham and explaining why they can’t support climate change bill.

So, the Kochtopus is this remarkably effective 360-degree machine that affects the public debate around issues like this, that has lobbyists who work on issues like this, and that can, finally, bring voters in. You know, Americans for Prosperity will — I’ve been at these events where they bus voters into Washington, D.C. They give them glossy printed protest signs. They feed them a boxed lunch. They take them to the congressional offices. And they can stoke what appears to be a real public revolt against legislation like this.

So, you know, the Kochtopus, as you call it, the political influence machine, really reflects Koch Industries’ business itself. It’s involved in the granular, complicated business of running our country that’s sort of below the surface, and they are truly masters of operating complex systems, whether it’s pipeline networks or political operations in Congress.

AMY GOODMAN: Chris Leonard, we have to break. We’re going to come back. And I want to ask you about — well, there was a particular chapter where you talk about warehouse operations, where they’re tracking workers’ activity down to the minute, and how they dealt with union organizing. I also want to ask you about how they gained their wealth off of Native American tribes, and some of their people almost went to jail for it. Christopher Leonard, business reporter and author of the new book, Kochland: The Secret History of Koch Industries and Corporate Power in America. Stay with us.

[break]

AMY GOODMAN: Arrigo Boito from Mefistofele. This is Democracy Now!, democracynow.org, The War and Peace Report. David Koch died last week of prostate cancer, well-known right-wing donor, major climate change denier, along with his brother Charles Koch. They are the subject of a new book that was written by Christopher Leonard, our guest today, called Kochland: The Secret History of Koch Industries and Corporate Power in America. So, let’s go to that chapter on workers and how the Kochs tracked the workers.

CHRISTOPHER LEONARD: Yes. You know, one of the big questions I wanted to explore going into this book is: Why have middle-class Americans been treading water economically for so long? We live in a country now where the economy can grow for 10 years, as it has over the last decade, but most middle-class Americans haven’t advanced economically. They haven’t kept the gains of their hard work. And I’m so curious as to why that is the case.

And you just can’t ignore the fact that labor unions in this country have gone from, you know, 33% of employees down to 7%. And the book shows labor unions sure as heck were not perfect. There were problems back in the ’70s. Some union bosses were corrupt. They used violence and intimidation. But when you fast-forward to today and see what the world looks like when labor unions have become truly broken and marginalized, you see this picture that I think is, frankly, disturbing.

I spent years reporting on a Koch Industries distribution center in Portland, Oregon, which is operated by Koch’s Georgia-Pacific division. And I interviewed many of these warehouse workers, who had been there since the ’70s, and they described a working life that is increasingly grueling and increasingly difficult.

After Koch bought this distribution in 2005, it used this software system called the Labor Management System, that tracks the warehouse workers every second of the day. So they show up at work. They log in. The computer tells them where to go and what to do for the 10 hours they’re on the shift, at least, until they’re done. And not only that, but it tracks how quickly they are doing their job. And what Koch Industries would do for years is that it would publicly post these rankings of the employees, with a green tier doing the best, yellow tier kind of in the middle, and the red tier doing the worst. And if you performed at the bottom of your co-workers, you would be disciplined or even fired. And what this did was it sort of systematically divided workers and made them compete against each other, which went directly against the strength of a labor union, which is everybody bargaining together, you know, and having solidarity.

And by the year 2016, you just see kind of a grim picture in this warehouse. I interviewed a woman named Debra Roberts, who was forced to work 30 days in a row without a day off. And on the 30th day, when she was told she would finally get a day off, she broke down in tears. She was so exhausted. And I obtained the labor contracts of these employees, going back to the 1970s. I had an outside compensation expert look at these labor contracts. And what he told me is that these employees are earning less money today than they did back in the 1980s, when you adjust for inflation. So, you really see this picture of American workers being swamped by this pressure to increase productivity and increase profits, and having less and less control over their working life.

AMY GOODMAN: Christopher Leonard, how they made their wealth, in many cases, it was off the backs of Native American tribes. Explain their business model and why Native American reservations were so important to them.

CHRISTOPHER LEONARD: So this is a pretty remarkable story from Koch’s early years. You know, this company has always been deeply involved in the fossil fuel business. And back in the 1980s, Koch was the largest collector of crude oil in the United States. What that means is Koch was the company that would go to an oil well, collect the oil and then deliver it to market.

What U.S. Senate investigators discovered and the FBI discovered in the late 1980s was that Koch Industries was systematically underreporting how much oil it gathered. So, to put it in simple terms, Koch would show up at the well, it would take a hundred barrels of oil and leave a little ticket behind that said it had only taken 98 barrels of oil. So it’s getting two barrels without paying for it. I interviewed senior Koch former vice presidents, the oil gaugers who collected the oil. I reviewed transcripts of the depositions of senior Koch executives on this matter, court records. And what it clearly shows is that for years Koch was systematically taking oil without paying for it. Koch officials admitted in court they reaped roughly $10 million in profit a year from oil they didn’t pay for. And I think what’s so —

AMY GOODMAN: So they stole the oil.

CHRISTOPHER LEONARD: Well, I’ll tell you what. I use the words “stole the oil” in my book. I think when you take something without paying for it, it’s stealing. For the record, Koch Industries’ public relations department really disputed that account, and we settled on the term “taking without paying for it.” But in the book, I do say “oil theft.” They took it without paying for it for years. And the people I interviewed on the record told me they did it with prior knowledge. They knew they were taking oil without paying for it.

And again, it was a small, small percentage, but it always made sure Koch was on top. They put their thumb on the scale, and they took enough to always be on top. And what’s so illuminating about this is that it is a very complex world, this oil collection. You can never quite measure oil perfectly. And Koch would often just, when they were in a gray area like this, push it to the absolute limit and often evade accountability for actions like that.

AMY GOODMAN: So, criminal charges brought or avoided, and how was that used as a model for how they operated in the future?

CHRISTOPHER LEONARD: The United States Senate investigated this and just categorically showed that Koch stole oil, as they said in a Senate report. The case was then shifted to the U.S. Attorney’s Office in Oklahoma City in 1989. I interviewed the senior investigators on that case, the assistant U.S. prosecutor on that case. The investigators were convinced Koch had broken the law. They were trying to push the case higher.

The case eventually fell apart. And a big part of that was that in 1989 Koch Industries realized they needed to become more politically engaged. As we’ve said, Charles Koch was a libertarian. He tried to let Washington do its thing. But he realized that if he didn’t have a large political apparatus, he could be the target of investigations like this. So, this was when Koch really built the political network as we know it. And Koch began lobbying U.S. senators, like Kansas — then-Senator of Kansas Bob Dole.

They began, actually, lobbying the Native American communities and convincing the local leaders of the Osage community that Koch had not stolen oil. And, you know, Osage leaders like Charles O. Tillman gave comments saying that Koch had not stolen oil, and then Koch’s political apparatus would amplify that message in Washington, D.C. And Charles O. Tillman told me later in an interview that he really regretted his statements, because he only later realized Koch had, in fact, stolen oil.

But these political efforts helped cloud the picture. They painted federal prosecutors as being overzealous. And you really did see the beginnings of a playbook here, of this multifaceted, 360-degree political effort that seeks to change the public conversation, lobby lawmakers and help sort of push the regulators back off the plate, if you will.

AMY GOODMAN: Chris, we only have a minute, and I wanted to get to a comment you made in your book: “In many ways, Donald Trump posed a greater political threat to Charles Koch’s political agenda than Barack Obama.” Explain.

CHRISTOPHER LEONARD: Charles Koch wants Republicans to be libertarian and back off the private enterprise. Donald Trump has a different vision. It’s this “America first” vision. Donald Trump has made clear he will intervene in markets, whether it’s through tariffs, trading up trade deals or all the rest of it. The Koch political network knows that if Donald Trump wins re-election, he will reshape the Republican Party for a generation. We will have an “American first” Republican Party, not a libertarian public party. And that’s why you see this tug-of-war between Koch and Trump. Now, Koch supports Trump’s efforts to deregulate, but it is fighting him on these other fronts. And who knows where this will ultimately end up?

AMY GOODMAN: Well, we’re going to do Part 2 with you and post it online at democracynow.org. Christopher Leonard, author of the new book, Kochland: The Secret History of Koch Industries and Corporate Power in America. Christopher Leonard is a business reporter whose works appeared in The Washington Post, Wall Street Journal, Fortune, Bloomberg Businessweek. This is Democracy Now! I’m Amy Goodman. Thanks so much for joining us.

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