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“Kochland”: Christopher Leonard on the Secret History of Koch Industries & U.S. Corporate Power

Web ExclusiveAugust 27, 2019
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Following the death of billionaire right-wing donor David Koch, we look at how he and his brother Charles Koch transformed the American economy and political system, from funding climate change deniers to fighting organized labor. We speak to Christopher Leonard, author of “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, as we bring you Part 2 of our look at the legacy of billionaire conservative donor David Koch, who died 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.

We’re continuing our conversation with Christopher Leonard, author of the new book, Kochland: The Secret History of Koch Industries and Corporate Power in America. Chris is joining us from Kansas City.

Christopher Leonard, your book has come out at a very interesting time. We’ve just come off the G7. You’ve got these two major issues going on: President Trump and his fight around trade with China and other countries, and then you’ve got, you know, the Amazon on fire. It’s ablaze. You’ve got the crisis of climate change at a level, well, that is only intensifying. Trade, climate change — two key issues of the Koch empire. First explain your title, Kochland, and then talk about how they have weighed in at this point. We ended the last conversation by talking about the Kochs’ relationship and their feelings about Donald Trump, and you can start there.

CHRISTOPHER LEONARD: Absolutely. So, Kochland refers to, first of all, the institution itself. I’ve been a business reporter for 20 years. I’ve never seen anything like this in my life. Charles Koch has written this detailed code of life, called Market-Based Management, and he says it’s the best way to run a company, best way to run a country, best way to run your personal life. The people inside this institution absorb this creed totally. They speak in their own vocabulary. And it’s like its own little world, Kochland. It is sort of Charles Koch’s utopian perfect society. But, of course, there’s a bigger picture here, as well. The United States, more and more, is reflecting what life is like inside that corporation. So, I feel like we’re becoming Kochland more and more all the time.

And this issue of climate change is a really important example. You know, as we said earlier, and we can talk about this, the Koch network is opposed to Trump in many respects. On the issue of climate change, they’re working hand in hand. And I think that that’s deeply significant. I say in the book, you know, if Donald Trump has a genius, it is the genius of reading a room. He knows what people want to hear. He knows what works with his crowds. And you see him again and again repeating this rhetoric that climate change is a hoax. You said earlier in this program — you had his comments that windmills cause cancer, that windmills are a hoax, and this kind of thing. Koch Industries played a superimportant role in injecting that concern into a real grassroots movement in 2010 with the “tea party” movement. Tea party voters were superangry at what they saw as a rigged system that gave bailouts to Wall Street. Koch would hold rallies. Koch would help them organize. But when they attended those rallies, Koch would give them the message: Regulating greenhouse gases is a form of tyranny. And they’ve really reshaped the debate in the Republican politics. And I think you see Donald Trump responding to that.

And if I could, please, make one point about renewable energy, like windmills, you know, Donald Trump was just promoting liquid natural gas from fracking. The federal government subsidized fracking for decades, through basic research, tax breaks, all the rest of it. The federal government built the fracking business. But now that the federal government wants to stoke competition to fossil fuels with windmills or solar, it’s crony capitalism, so to speak. And the Koch network is seeking to destroy it.

AMY GOODMAN: So, I want to go to a clip of an interview on Joe Scarborough’s show, Morning Joe. It was November 2015, and Charles Koch sat down for a rare interview —

CHRISTOPHER LEONARD: Yeah.

AMY GOODMAN: — on MSNBC’s Morning Joe with Joe Scarborough and Mika Brzezinski. Scarborough asked him about the 2016 presidential race.

JOE SCARBOROUGH: Do you see a candidate out there, that’s not —

CHARLES KOCH: Not — not in great measure.

MIKA BRZEZINSKI: “Not in great measure”? You sound like my dad.

JOE SCARBOROUGH: That is a —

MIKA BRZEZINSKI: Difficult.

JOE SCARBOROUGH: That is a very —

CHARLES KOCH: I’m trying to be diplomatic here.

JOE SCARBOROUGH: That is a very tactful way.

CHARLES KOCH: Yeah, thank you very much.

JOE SCARBOROUGH: Yeah, that’s pretty good.

CHARLES KOCH: I’ve worked hard on that answer.

JOE SCARBOROUGH: So, let’s do some word association. So, I take it it’s not Donald Trump.

CHARLES KOCH: I’m not — listen, I made a vow: I’m not going to publicly comment on any candidate. David said some nice words about Walker.

JOE SCARBOROUGH: Right.

CHARLES KOCH: And that was written up that we were giving millions to his campaign.

JOE SCARBOROUGH: Right, the next day.

CHARLES KOCH: You know how much we’ve given to his campaign?

JOE SCARBOROUGH: I hope none.

CHARLES KOCH: Zero.

JOE SCARBOROUGH: OK, good [inaudible].

CHARLES KOCH: Zero. And now —

JOE SCARBOROUGH: Good profit right there.

MIKA BRZEZINSKI: He would repeat that.

CHARLES KOCH: Yeah, yeah.

JOE SCARBOROUGH: No, no. I like Scott an awful lot.

CHARLES KOCH: Yeah.

JOE SCARBOROUGH: But things don’t turn out.

CHARLES KOCH: And then another example, Ted Cruz, we haven’t given any money to him. But another — some other people who support some of our things gave money, gave $15 million to him, so that was attributed to us.

MIKA BRZEZINSKI: Right.

JOE SCARBOROUGH: Right.

CHARLES KOCH: We had nothing to do with it.

MIKA BRZEZINSKI: All right. Are you a registered Republican?

CHARLES KOCH: Yeah. I’m in Kansas.

MIKA BRZEZINSKI: OK. Have you ever voted for a Democrat? Right, that’s a mistake.

CHARLES KOCH: Yeah, yeah, I’ve voted for a Democrat.

MIKA BRZEZINSKI: Ah, that’s interesting.

CHARLES KOCH: David’s voted for more of them, but he’s in New York.

AMY GOODMAN: So, that was Mika Brzezinski and Joe Scarborough interviewing Charles Koch. Can you comment on what he said? And then I want to go back with you, Charles Koch and David Koch and how they established their empire, going right back to the Kochs’ father, Fred Koch. But respond to this first.

CHRISTOPHER LEONARD: First of all, what you see there is very indicative of Charles Koch’s personality. I’ve met him. I’ve interviewed him. He’s a remarkably humble, congenial, soft-spoken guy, who is very charming. He’s built great loyalty in the people who worked for him over the decades, and he’s a very brilliant person. However, I think that this sort of “aw, shucks” Midwestern demeanor obscures what’s really going on.

You know, the reality is, is that in 2015 the Koch network was directly intervening in Republican politics. They had set the table for a group of primary candidates who they liked: Cruz, Rubio, Bush. And Donald Trump came along and flipped over the game table. And he is not beholden to them, really, in the beginning at all.

So, you know, I think a lot can get lost in these soft-spoken comments from Charles Koch that make it seem like he perhaps would vote for a Democrat, perhaps would vote for a Republican. That doesn’t reflect reality. When you read the statements and interview the people who work for him, he’s got a vision that is unbendable. And it is that our society must be organized as a marketplace; government intervention only causes more harm than good. I remember a senior Americans for Prosperity guy, Steve Lonegan, telling me Charles Koch has totally written off the Democratic Party as lost. And he’s trying to reshape the Republican Party to be libertarian. That’s the reality.

AMY GOODMAN: Now go back to the family’s history and how exactly David and Charles Koch got to dominate, become these oil barons. In fact, they were two of four brothers.

CHRISTOPHER LEONARD: That’s right. The Koch family has lived in Wichita for — since the beginning, essentially. And Fred Koch was the guy who started this company. Fred Koch owned some oil refineries, ranches, engineering things. It was kind of this motley assortment of assets. And Fred Koch was a vehement conservative, if you will, right-wing. He was a co-founder of the John Birch Society, which was a secret society that truly felt that the federal government had been infiltrated by communists, and that the sort of New Deal programs, like supporting labor unions, Social Security and all the rest of it, were a communist plot to increase tyranny in the United States. That’s the kind of political rhetoric that would have been spoken around the Koch dinner table when Fred Koch’s four children were growing up.

There was Charles and two twins, David and Bill, and then the oldest son, Freddie. Freddie never wanted to have anything to do with the business. The younger brother, Bill, tried to take over the business and was forced out. And that left David and Charles in control of this corporation. And to their credit, following the strategy of Charles Koch, they were patient. They’re brilliant. They built a corporate empire over 50 years that is unrivaled in America. They’re not dumb people, and they’re certainly not lazy. But it was their ownership of this company that made them the richest people — among the richest people in America.

AMY GOODMAN: And they didn’t go public, which was extremely significant, as you write about. They could have made a fast, well, to say the least, millions of dollars, but refused. Explain why.

CHRISTOPHER LEONARD: It’s one of the most fascinating parts of the story. The book opens in 1981, when some bankers from JPMorgan come to Wichita, try to convince Charles Koch to go public. He would have gotten $20 million that day, if they’d gone public, but he refused. And that’s because Charles Koch has a very specific vision of how to run a corporation. When you stay private, first of all, you keep control. But second of all, you’re not answerable to shareholders who are banging on your door every three months for your quarterly reports.

Now, this allowed Koch Industries to think on a long-term horizon. And I think this is important for anybody to study and anybody to think about, because long-term strategic thinking is in desperately short supply in America today. This is a corporation that thinks on a horizon of two, five, 10 years out. And that has given them a remarkable ability to outperform the competition at every turn.

One small example, in 2003, there were these massive nitrogen fertilizer plants in the Midwest that went belly up, because of an energy spike and natural gas prices. Nobody wanted to buy these fertilizer plants. Koch swooped in, bought these plants for pennies on the dollar, knowing that things were going to turn around in two to five years. Today, those nitrogen fertilizer plants are among the most profitable assets in Koch’s portfolio. So that shows you why they kept it private. It is to maintain strategic control, secrecy and to be able to think long term.

AMY GOODMAN: So, the Kochs establish this fortune. You talk about Freddie Koch. What happened to him, when you say he didn’t want to be a part of this? What was he a part of? What did he do, the older brother?

CHRISTOPHER LEONARD: The oldest brother, Freddie, I think, would have been seen as the natural heir apparent, firstborn son, the conservative culture in Wichita in the '60s. You know, Fred Koch loves the arts, did not want to be involved in the business, I think did not naturally take to this engineering life of oil refining that's central to the Koch business. And he moved to New York. I believe he’s even lived in Europe at times. He collects art. He’s kept a distance from Wichita and lives a rather quiet life in New York City, enjoying the money that he was paid as part of the family fortune to essentially leave the firm.

AMY GOODMAN: And Bill, the other brother, the twin of David Koch, who just died, Bill Koch very much alive. A lot came out in a lawsuit when he tried to take the family business.

CHRISTOPHER LEONARD: Bill Koch was fighting against his older brother, Charles, since they were kids. And the patriarch, Fred Koch, died suddenly in 1967, and Charles Koch took over the family firm at the age of 32. Bill Koch was never OK with that, essentially. Bill Koch organized a coup, tried to take over the company. And what’s interesting is, this really was a philosophical dispute: Bill Koch wanted to go public, and he wanted to pay the family fatter dividends; Charles Koch wanted to stay private, wanted to plow the money back into operations.

What resulted was a bitter legal dispute, that lasted 20 years and, frankly, went beyond the courtroom. Bill Koch hired private detectives to dig through Charles Koch’s trash. He hired detectives to pose as reporters. It was an ugly, ugly fight for control of this firm.

And Charles Koch won. The prologue of the book is called “The Fighter.” And that’s how I see Charles Koch. For all of this soft-spoken demeanor, he is a person who knows what he believes. He’s got a spine of steel. He fought Bill Koch at every step of the way and maintained control of the firm. And, you know, Bill Koch, since that time, has run some smaller energy companies, but nothing along the scale of Koch Industries.

AMY GOODMAN: Chris, can you talk about David Koch, in particular? Were David and Charles Koch of one mind? Also, his contributions to the arts, poured millions into — well, I was just at Lincoln Center. There was the David H. Koch Theater for ballet. I was at a David Crosby concert outside — it was all the Davids — David Crosby, David Koch and, across the way, David Geffen Hall. But his money in the arts, as well as into cancer research, poured money into PBS, was on its board for a long time, which may have changed the way the Kochs were covered. Talk about the significance of this.

CHRISTOPHER LEONARD: You know, the most important thing I think David Koch ever did was, back in the 1990 — or, I’m sorry, back in the 1980s, he picked sides. And he sided with Charles. And, in fact, he sided with Charles against his own twin brother Bill. By doing that, David Koch formed a truce with Charles Koch. They split their ownership of Koch Industries 50-50, no fighting, no litigation. And David Koch agreed to follow Charles Koch’s lead, strategically, operationally. In the business and in the politics, they were absolutely on the same page, and they work together.

But it cannot be denied that Charles Koch is the one who stayed home in Wichita, got to work before the sun was up most mornings, and studiously built this corporate empire. David Koch wanted to live the life of a more public billionaire. He moved to New York City. He made those donations you just mentioned. He put his name on ballet. He put his name on wings at the Smithsonian Museum in Washington, D.C., on cancer research centers. He lived in one of the most expensive apartments in New York City and lived a public life.

And what’s so interesting to me about his philanthropy is that a lot of this book was sort of an economic history of the United States, going back to the early 1900s, which is what we would call the Robber Baron Age or the Gilded Age. And that’s when the federal government really kept its hands off major corporations, and you saw the rise of these ultrabillionaires, like John Rockefeller, like Andrew Mellon. And one of the biggest things these titans did at the end of their life was donate huge gifts to put their names on these very positive institutions — educational institutions, galleries and the rest of it. And David Koch replicated that model. You see his name on a lot of virtuous institutions. And it’s because he has a fortune that a normal person would have to work thousands of years to earn.

AMY GOODMAN: And, you know, we’re reading a lot about the obituaries of David Koch now, where he’s talked about as a philanthropist. And you talk a good deal about this kind of philanthropy whitewashing what he does. He also poured millions into cancer research. He died of prostate cancer. The connections of the pollution of the planet, of the fossil fuel industry, and the increase in cancer in the world, if you could talk about that?

CHRISTOPHER LEONARD: I suppose what I’d say is, you know, back in 2008, David Koch was making very large gifts. And I forget the exact math, but if you earned $300 an hour and worked 365 days, it would take thousands of years to earn these billions of dollars. And David and Charles Koch, have earned that money because they own a corporation that is vital to the workings of society. And often it benefits from dysfunctions in our economic system. For example, oil refining is a very noncompetitive business. It’s monopolistic. Everyone depends on it. And it yields massive profits. And when you have a fortune of that size, it becomes easier to make gifts that, you know, gain a lot of attention and can sort of build a legacy separate and apart from the business empire. But I do think it’s really important to consider holistically the entire picture, how the fortune was made, what that says about the American system of economics and politics, and consider that alongside what you do have to consider good works of giving and philanthropy. But consider the whole picture.

AMY GOODMAN: So, what does Koch Industries, Kochland look like now without David Koch, with the death of David Koch, Charles Koch still in charge? And who is Chase Koch?

CHRISTOPHER LEONARD: I can personally report that Charles Koch is still arriving at work before dawn. He is in his early eighties, still patiently building this empire. But, of course, he can’t operate the company forever.

Charles Koch has a son named Chase Koch, who, when he was born in the 1970s, Koch employees raised a banner at the company headquarters that said, “Welcome, Crown Prince.” This is a young man who’s lived in the shadow of his last name his whole life. I interviewed Chase Koch for the book. I have to say, he’s a remarkably level-headed guy, for all of that pressure. And there is simply no question that he has been groomed his whole life, I think, to take over this organization. He’s been hesitant to do so. And I think that when Charles Koch steps away, we might see an interim CEO. But ultimately, it’s fair to say, I think Chase Koch, the son, will be CEO of this organization one day.

And it raises a lot of big questions. Where does this go from here? Where does the political network go from here? Where does the corporation go from here? I think Charles Koch would give the answer that he has created a sort of self-replicating machine with his corporate culture, and it will continue to operate as it has under Charles Koch without him at the helm. But, you know, only history will tell. And it is an open question as to where this organization, economically and politically, is going to go from here.

AMY GOODMAN: Christopher Leonard, Jane Mayer wrote the book Dark Money about the Koch empire. She was investigated by the Kochs. What happened to you as you wrote this book over years? You’re also a reporter, a business reporter, who have reported on the Kochs for years.

CHRISTOPHER LEONARD: Jane Mayer was an absolute path-breaking investigative reporter whose work shined a light for the first time on political operations of the Koch brothers that were obscured from view. And as you say, she had an extremely contentious relationship with the company. There’s a lot of, frankly, disturbing stories about what Koch did in response to her. That was in roughly 2011.

Things have changed. Koch Industries, I believe, realize that that tactic was not effective. They overhauled their entire public relations team. They have treated journalism differently now than then they did back then. You know, they did open the door somewhat to me. I was sort of patiently banging away on this story for years. I’d fly to Wichita. I’d knock on doors. Koch eventually let me in somewhat. I gave Koch 260 pages of controversial material from the book months ago to give them full, fair chance to comment. They engaged in that process. We had a back-and-forth. I’m not going to lie: The back-and-forth got tense, as we disputed terms such as “oil theft” versus “taking oil without paying for it” or agreements about whether someone was a whistleblower or not. But Koch has more or less engaged productively, and I’ve seen no evidence of any kind of negative activity from the Koch network at all.

I think what they’re trying to do is tell the story they want to tell about Charles Koch as an entrepreneur, about Charles Koch as an innovator. And I will agree on this one point, that Charles Koch is one of the most significant business figures of our time. I think people will be talking about Charles Koch for decades to come.

I do believe my job as an independent reporter is to consider the entire picture — the downsides, the blind spots, the negative consequences of having that much power, alongside the innovation and some of the brilliance in the long-term thinking,

AMY GOODMAN: What were you most surprised by in your research for this book?

CHRISTOPHER LEONARD: The stunning level of analytical rigor that is going on inside of this institution. I knew that these brothers had inherited oil refineries. I knew they were rich. Interviewing the people that run this corporate machine changed the way I see the world. It was mind-blowing. I mean, these are buttoned-down, quiet people who are not trying to get attention. They are sitting inside corporate suites, collecting a level of detailed knowledge about the world that is mind-blowing to me. I won’t go on and on, but, I mean, to trade electricity prices, for example, this company was sucking in databases about snowfall in California, because snowfall determines snow melt and reservoir levels and electricity supplies. And then they crunch this data with everything else they know about energy. I’m telling you —

AMY GOODMAN: And hiring the top meteorologists in the process.

CHRISTOPHER LEONARD: As you point out, they would go to the Weather Channel and poach the best meteorologist, so that when a Koch trader wakes up in the morning, they’ve got a weather prediction that’s better than anything available publicly.

This is important, because it translates into politics. They influence politics in the same way. And I think it’s a lesson for everybody to know as much about the world as possible, to learn as much about the world as possible, and to be engaged in the complexity of it. You know, again, the real action happens the day after the election. That’s when the rubber meets the road. And that’s where these people exert their expertise. And so, the level of knowledge and analytical rigor and strategic thinking was shocking to me. And it did change the way I see the world.

AMY GOODMAN: David Koch was the Libertarian Party’s vice-presidential candidate in the 1980 presidential election. Of course, he didn’t become vice president. But do you think he came to understand from this — years ago, I was questioning him as a Republican delegate during Romney’s race for president. But do you think he came to understand from all of this that you have much more power not as the politician him or herself, but as the money power behind the scenes in shaping politics in this country?

CHRISTOPHER LEONARD: I think that’s exactly the correct takeaway. This was the Koch brothers’ one foray into politics electorally. David Koch was the vice-presidential nominee for the Libertarian ticket. And I would like to point out that in true form, Charles Koch, behind the scenes, was corresponding with the head of the Libertarian Party, donating money, organizing donations and doing the backroom work. The Libertarian Party won something like 3% of the vote.

A lot of these ideas don’t gain massive public support. If there’s one lesson we’ve learned in American politics — Reagan learned it, Bush learned it — Americans are not willing to surrender many of the government programs that are the legacy of the New Deal and the Great Society. It’s very difficult to privatize Medicare. It’s very difficult to privatize Social Security.

So the Koch network backed away from these public-facing efforts, like running for president, and has focused more on the below-the-surface game, the day-after-the-election game, where they’ve been remarkably successful. I mean, the way I put it is, you know, the Koch network created a map of political power in America that’s something like a pipeline map. You’ve got your state legislatures. You’ve got your court system. You’ve got the United States Congress. You’re looking at this and how politics is moving like gas through a system, and you’re finding the best places to intervene and to have an effect. That is the patient, long-term approach that they’ve taken. And it has been remarkably successful.

AMY GOODMAN: Chris, Citizens United changed so much. And for people like David and Charles Koch, I mean, this was a panacea, the opening of the floodgates of money into politics, though they were certainly doing it before.

CHRISTOPHER LEONARD: You know, it’s no surprise to you, it’s not news, that money has swamped the political system. It has profoundly degraded the power of the actual political parties themselves. You can have one wealthy donor, like Sheldon Adelson, for example, affect Republican primaries for a long period of time. It’s not an easy one-to-one equation. Money doesn’t always win in politics. But I think that it’s the sustained pressure of money, when a group is patient and ready to be there donating cycle after cycle, and they can have this kind of huge impact that Citizens United allows, you can reshape politics over time. And that’s certainly what has happened in the Republican and Democratic Party.

AMY GOODMAN: Christopher Leonard, we want to thank you so much for being with us, business reporter, author of the new book, Kochland: The Secret History of Koch Industries and Corporate Power in America.

To see Part 1 of our discussion, go to democracynow.org. I’m Amy Goodman. Thanks so much for joining us.

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

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