The Extraordinary Lives of the Koch Brothers
Boogeymen billionaires. Brothers trying to buy America. Philanthropists. David and Charles Koch, better known as the Koch brothers, have been called all this (and much worse).
They’re two of the world’s richest people, but they tend to stay out of the limelight — and as such, there’s an air of mystery about them. For some, they’re a foreboding presence in the background of American politics. For others, they’re just free-market idealists. To themselves, they’re just trying to make America better.
And if you ask their other two brothers? They won’t be saying anything nice.
However you feel about them, there is no denying that the Kochs are, and were, some of the most influential people in America. David Koch passed away on August 23, 2019 at the age of 79. Charles Koch is 84 and remains head of Koch Industries.
Here are 18 fascinating facts about these complex industry titans, from where they came from to their current unbridled political spending.
It All Began With $300
In his 2014 book “Sons of Wichita,” author David Schulman recounts how the brothers’ father Fred Koch, a Dutch immigrant, made a $300 buy-in stake in an oil refinement engineering firm, which made him a sizable fortune.
But he wouldn’t get filthy rich hanging around the United States, and he soon left for the more lucrative opportunities in the Soviet Union, where he built oil refineries to make his first million.
Although Koch increased his fortune there, his experience in Russia helped shape his staunch anti-communist ideology,
"The most dominant influence, in Schulman’s telling, is that of the family patriarch, Fred Koch, an early leader of the red-baiting John Birch Society," according to a Washington Post review of the book. "Hard-charging and emotionally remote, Fred became a zealous anti-communist after doing business in the Stalin-era Soviet Union. His ideology filtered into the next generation in the form of staunch libertarianism."
There Are Four of Them — Bitterly Divided in Half
There are actually four Koch brothers, but we usually only hear about David and Charles — the infamous Koch brothers. The other two brothers, William and Fredrick, aren’t involved in the mega-billionaire’s business affairs. This is due to years of bitter fighting and lawsuits.
According to “Sons of Wichita,” Fredrick never got along with his father and instead of joining the family business pursued the arts. During the '80s and '90s, William, with some help from Fredrick, went on a lawsuit and muckraking spree which raked them in “very large” settlements from the other brothers.
David and Charles each own 42 percent of Koch Industries. Frederick and William sold off their company stakes in 1983 to David and Charles for more than $700 million.
They Didn’t Grow Up Soft
While all four of the Koch brothers grew up rich, their father was insistent on making them perform difficult farmhand labor, which included milking cows, bailing hay and a series of “’whatever else he could think of’” in a series of “never-ending routine of chores,’” according to the Washington Post.
Their father encouraged a childhood rivalry between David and William, who are twins, by giving them boxing gloves and letting them go at it.
They Were Not Your Typical Loving Family
Initially, all four sons had an equal share of their father’s company.
Fredrick, the first born, became the odd-one out. While in his 20s, he took to the arts instead of business, and his brothers suspected he was gay — something their father would disown him for, meaning his fourth of the company stake would be divvied up among them.
The three brothers tried to blackmail Fredrick in what journalist Jane Mayer, author of “Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right,” described as a “kangaroo court.”
Mayer told NPR in an interview: "He [Fredrick] walked in the room, found his three other brothers sitting there in chairs facing him, and they confronted him and conducted an inquisition to see if he was gay. … It's come to be known within the family as the blackmail attempt by the brothers to get Frederick's shares of the company.”
It didn’t work — Fredrick stood up, told them he never wanted to hear of it again, and walked out.
“I think it gives you an idea of a family that is not the usual cozy, all-American family,” said Mayer.
However, eventually Fred Koch wrote Fredrick out of his will — allegedly because the eldest son stole from his father, although Fredrick denied it.
The Koch Brother’s Free-Market Ideals Have Deep Roots
To understand the Koch Brother’s free-market philosophy, you need to know of their father’s work in the Soviet Union. In the '30s, Fred Koch built refineries in the USSR, and his business in Russia soured him to the corrupted and invasive nature of communism.
As David Koch told The Wichita Eagle in 2012: “‘He [Fred] was extraordinarily fearful of our government becoming much more socialistic and domineering .... So from the time we were teenagers to the present, we’ve been very concerned and worried about our government evolving into a very controlling, socialist type of government.’”
Some of the Kochs hated communism so much that, during the 1960s, Charles asked a visitor to leave a copy of Ernest Hemingway's “The Sun Also Rises” outside because he believed Hemingway was a communist.
Koch Industries Has Grown Insanely Fast
Koch Industries’ value has increased 4,200 fold since the 1960s, outpacing Standard & Poor’s 500 index by about 30 times, according to Rolling Stone.
The company, the magazine says, aims to double its revenue every six years.
In 1961, Koch Industries was valued at $21 million.
Today, it’s worth somewhere around $115 billion.
They’re the 8th Richest People in the World
On Forbes’s 2017 ranking of the richest people in the world, Charles and David are tied for 8th place at an estimated $48.3 billion each.
With their powers combined they outmatch the moola of the world’s richest man, Bill Gates, whose net worth is an estimated $86 billion.
David Owned a $17 Million NYC apartment
New York City’s 740 Park Ave. is teeming with the ultra-wealthy.
One such resident was David Koch, who reportedly paid $17 million for an 18-room duplex on the fourth and fifth floors in 2004.
"It is one of, if not the finest building in New York," he told the New York Times. "I know quite a number of people there and they are good, decent and unbelievably hospitable.''
In 2006, David reportedly sold an apartment on Fifth Avenue — former home of Jacqueline Kennedy Onassis — for $32 million. When he died, David was the second-richest man in the state of New York, with Michael Bloomberg being the first, according to Forbes.
Koch Industries Employees Can Make More Than Managers
Koch Industries is based on something called “market-based management,” which encourages (and incentivizes) employees to challenge their leaders with better ideas or ways to do something more efficiently.
Asked if an employee’s salary topping that of their manager would create turmoil, Charles Koch told the Freakonomics radio show that the structure motivated people more than it sowed discord.
He said, “Look at basketball: Does the coach quit because LeBron James makes more? He says, ‘LeBron, go for it because you’re making me look good. Keep it up and I hope you make five times what I do.’ That’s the culture we try to build here.”
They Produce a lot of Goods — Many of Which You Probably Use
Koch Industries has its hands in many pots, from fertilizer to oil to paper goods. Chances are, you’ve bought a Koch Industries product at one point in your life.
Here are just a few of its more notable products:
· Angel Soft and Northern toilet paper
· Dixie cups
· Brawny paper towels
· Georgia-Pacific products (printer paper and office supplies)
· Sprinkle, Vanity Fair and Zee napkins
· Guardian Industries glass products
· Molex products (electronics)
· Stainmaster carpet
David Ran as V.P. of the Libertarian Party
In the '80s, David had invested hundreds of thousands of dollars into the libertarian movement and ran as vice president for the libertarian party.
The party didn’t win, but his free-market ideals were clearly taking a stronger shape, and the Koch brothers would go on to get heavily invested in politics.
The Washington Post reported that David called his run his “proudest achievement” on a questionnaire given out during an MIT class reunion.
The '90s Cost Them a Fortune
Several legal problems struck Koch Industries in the late '90s, like a $296 million wrongful death lawsuit due to a pipeline blast which killed two teenagers in 1996.
In 2000, a jury ruled that Koch industries had to pay a record-setting $30 million civil penalty as well as instituting prevention programs and an additional $5 million to be spent on environmental projects. The ruling came after Koch Industries had more than 300 oil spills across six states.
Afterwards, Charles made safety a priority and demanded “10,000 percent compliance with all laws and regulations” while also ramping up its lobbying efforts and selling off parts of its pipeline system.
This appears to be catalyst that began the Koch brothers investing money into politics, and trying to stay out of the limelight.
They’ve Donated Hundreds of Millions to the GOP
To say the Koch brothers are heavyweight political donors would be an understatement.
While it’s difficult to say exactly how much the brothers have spent on politics, OpenSecrets.org estimates Koch Industries has spent about $41 million in contributions since 1990 and $127 million in lobbying efforts since 1998.
However, the Koch brothers have a much longer reach than just Koch Industries. Numerous outlets such as The New York Times reported the Kochs allotted an $889 million budget just for the 2016 election cycle.
But the thing is, it’s difficult to track just where the Koch money is coming from. The brothers’ political money is often done anonymously and funneled through other organizations and nonprofits—so-called “dark money.”
Their Political Network is Bigger than the GOP
According to Politico, the Koch brothers employ around 1,200 full-time employees as their own private political machine.
That’s three-and-a-half times the amount of workers the Republican National Committee employed in 2016.
They Just Became Media Owners
In November 2017, the Koch brothers contributed $650 million to Iowa-based publisher Meredith Corporation's $3 billion takeover of Time Inc.
This gives the brothers a huge stake in, and potentially outsized control over, a host of powerful media properties, including Time magazine, People, Fortune and Sports Illustrated.
In announcing the deal, Meredith said the Koch involvement was purely financial and would not impact nor give the brothers influence over editorial policies and decisions.
They Tried to Dig Up Dirt on a Reporter
Their history with journalists has had rough spots. While researching her "Dark Money" book Jane Mayer said the Koch brothers did not take kindly to her inquiries.
“’They play very rough,’” Mayer told Rolling Stone. “I've been a reporter for a long time, covering wars, the CIA, presidencies and a lot of very powerful organizations. But the Kochs are the only people I've ever covered who have hired a private investigator to try to dig up dirt and plant untrue stories about me in order to hurt my reputation. And it's not just me; they've used private eyes to try to discredit people throughout their lives, including their own brothers.’”
They’re Also Philanthropists
Despite their boogeyman image, the brothers have also given some of their money back to society.
For example, they’ve given contributions to the various colleges and college-based programs like the United Negro College Fund and a $10.5 million gift for an arts complex in Wichita.
Forbes ranked Charles at No. 13 in their Top 50 Givers List of 2016, estimating he gave $180 million that year.
But Their Political Views Are Complex
The Koch brothers have a fascinating, almost contradictory political stance. While they routinely funnel money squarely into the Republican side of politics, their core libertarian values of the free market are oddly unwavering. Charles and David are vehemently against any type of ‘corporate welfare,’ even such policies are beneficial to Koch Industries.
For example, Charles opposed the Trump Administration’s tax bill on border taxes. He explained that even though a border adjustment fee subsidizing exports and punishing imports would likely be good for his own business, it was bad policy for the country.
"It will allow us to raise our prices and probably reduce our taxes at the same time," he told the Freakonomics show. "It will enable us to increase our profits by over a billion dollars a year, at the expense of working Americans. Now what kind of policy is that? It makes no sense.”
At the same time, the Kochs oppose climate change regulations, not because they don't believe the science but because they believe such curbs would stymie the very innovations which could ultimately prove to be the most beneficial in reducing climate change.
“Every position is to get rid of cronyism, corporate welfare and to liberate the people,” Charles said.
Whether or not people believe them is one thing — and many don’t, even those in Wichita — but it does seem like they believe it and are willing to put their money where their mouths are.