Bloomberg has a good, old-fashioned investigative piece on the private business empire of David and Charles Koch, the billionaire conservative political activists who inherited their father’s small oil company and now produce everything from Dixie cups and Stainmaster Carpet to petrochemical equipment.
“Koch Industries tells all of its employees around the world that its top two values, which it calls Guiding Principles, are integrity and compliance,” Bloomberg says. The reporters, Asjylyn Loder and David Evans then methodically detail the actions taken by the company over the years that fly in the face of those principles.
In what Koch itself concluded last year “constitute violations of criminal law”, a subsidiary in France authorized improper payments dating back to 2002 to secure contracts in six countries where they did business. The Koch ethics manager who uncovered the practices was fired for incompetence.
Koch Industries “rigged prices with competitors, lied to regulators and repeatedly [ran] afoul of environmental regulations, resulting in five criminal convictions since 1999 in the U.S. and Canada,” says Bloomberg.
From 1999 through 2003, Koch Industries was assessed more than $400 million in fines, penalties and judgments. In December 1999, a civil jury found that Koch Industries had taken oil it didn’t pay for from federal land by mismeasuring the amount of crude it was extracting. Koch paid a $25 million settlement to the U.S.
Phil Dubose, a Koch employee who testified against the company said he and his colleagues were shown by their managers how to steal and cheat — using techniques they called the Koch Method.
Sally Barnes-Soliz, who’s now an investigator for the State Department of Labor and Industries in Washington, says that when she worked for Koch, her bosses and a company lawyer at the Koch refinery in Corpus Christi, Texas, asked her to falsify data for a report to the state on uncontrolled emissions of benzene, a known cause of cancer. Barnes-Soliz, who testified to a federal grand jury, says she refused to alter the numbers.
“They didn’t know what to do with me,” she says. “They were really kind of baffled that I had ethics.”
Koch’s refinery unit pleaded guilty in 2001 to a federal felony charge of lying to regulators and paid $20 million in fines and penalties.
Working through overseas subsidiaries, Koch Industries circumvented a 1995 ban on trade with Iran, selling the state-owned National Iranian Petrochemical Co. products to help build what is now the largest methanol plant in the world. “Every single chance they had to do business with Iran, or anyone else, they did,” said German engineer George Bentu who worked for Koch from 2001 to 2007, according to Bloomberg.
Bentu says he felt dismayed because Koch Industries clearly tells all of its employees around the world that integrity is the company’s No. 1 value.
“You feel totally betrayed,” Bentu says. “Everything Koch stood for was a lie.”
There’s a lot more there–a lot more, like allegations of stealing oil on American Indian reservations, allegations of toxic waste dumping, the deaths of two teenagers in an explosion of a butane pipeline–and the piece is worth reading from start to finish.
By the end the Koch’s supposedly patriotic libertarianism takes on a different cast:
For six decades around the world, Koch Industries has blazed a path to riches — in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.
“My overall concept is to minimize the role of government and to maximize the role of the private economy and maximize personal freedoms,” David Koch told the National Journal in May 1992.
In his 2007 book, Charles Koch says his company had difficulty keeping up with changing government regulations and that it did eventually build an effective compliance program for 20 areas ranging from environmental to antitrust to safety regulations.
“We were caught unprepared by the rapid increase in regulation,” he wrote. “While business was becoming increasingly regulated, we kept thinking and acting as if we lived in a pure market economy.”