One Koch Brother Forces the Other Out of the Family Business

By Jane Mayer, The New Yorker

09 June 18

An arch-conservative political machine will be down one billionaire but have more clout than ever.

he retirement of David Koch from Koch Industries will make it easier to see more clearly what has been true from the start: Charles and David Koch, who came to be known as “the Koch brothers,” were equals in bloodlines and in wealth, but Charles has always been the brains behind the brothers’ vast corporate and political operations. Those who know the brothers well predict that David’s retirement will have scant impact, particularly in the political realm, where the Kochs exert enormous influence.

For the past four decades they have tapped their vast fortune from a hundred-and-fifteen-billion-dollar-a-year family business, Koch Industries, to finance a private political machine whose reach and size have been described as rivalling that of the Republican Party. By lavishly underwriting candidates, policy organizations, and advocacy groups—often through untraceable donations—they have pulled American politics toward their own arch-conservative, pro-business, anti-tax, and anti-regulatory agenda, particularly in the environmental area. Although David Koch is also stepping down from his role as chairman of the Americans for Prosperity Foundation, the foundation wing of the Kochs’ main political-advocacy group, their influence isn’t likely to wane anytime soon.

David Koch, who is seventy-eight and the wealthiest resident of Manhattan, is more socially prominent than his older brother. He is often chronicled on the social pages, having donated by his own estimate $1.2 billion to philanthropic causes, including many of New York City’s cultural, medical, and educational institutions, several of which bear his name. In contrast, Charles Koch, an eighty-two-year-old libertarian ideologue who continues to live in the brothers’ home town of Wichita, Kansas, has largely stayed outside of the limelight. But those familiar with the brothers suggest that although Charles is less well-known, he, not David, has long been the driving force behind both the phenomenal growth at Koch Industries and the duo’s ambitious political ventures.

Charles also appears to have dominated David’s decision to retire. According to two well-informed individuals close to the family, David, who has been in declining health for several years, had resisted resigning, but Charles forced him out. A business associate who declined to be identified, in order not to jeopardize his ties to the family, told me, “Charles pushed David out. It was done with a wink, and a nod, and a nudge.” A second longtime family associate confirmed this, saying, “Charles had been pushing him out for quite some time. David kept resisting. It was bad. Charles took control.”

The decision became public on Tuesday, when Charles, who is the chairman and chief executive officer of Koch Industries, sent a letter to employees announcing that David would be retiring as vice-president, a development that he attributed to David’s deteriorating health. “We are deeply saddened by this, as we miss David’s insightful questions and his many contributions to Koch Industries,” Charles’s letter said. The letter didn’t disclose the nature of David’s health problems, but he was diagnosed with prostate cancer twenty-four years ago. Multiple associates say that in the past year or so he had visibly declined, losing weight and losing his train of thought in conversations, as well as occasionally nodding off in meetings and public events. “As a result,” the letter said, “he is unable to be involved in business and other organizational activities.” Charles Koch, meanwhile, continues to work through the weekends, often arriving at Koch Industries’ Wichita headquarters earlier than many other employees. “He’s a workaholic, like Warren Buffet. He lives to work,” the well-informed business associate told me. “It looks like he’s going to be doing this into his nineties.”

It is unclear, however, what will become of David’s ownership of nearly half of Koch Industries, the second-largest private company in the country, which began as oil refineries and pipelines, and has grown into a multinational conglomerate encompassing lumber, paper, chemicals, coal, fertilizer, and sophisticated financial-trading operations. Because the company is private, there is minimal transparency. But Charles and David Koch reportedly own virtually all of its stock, splitting the shares equally among themselves and plowing most of the profits back into the company. Forbes magazine estimates that each brother is worth approximately sixty billion dollars, tying them as America’s ninth-richest men. Steve Lombardo, Koch Industries’ chief of corporate communications, did not respond to questions about who would exercise control of David’s shares, should he prove unable to function. David has three children, the oldest of whom is college-aged. Charles has two children, including a son, Chase Koch, who has assumed a growing role in running the company.

The Kochs’ future prospects are of public interest because of the oversized influence they have exerted in American politics. Beginning in the late nineteen-seventies, the brothers became the primary underwriters of hard-line libertarianism in the country. From the start, though, Charles was the instigator behind their political activism while remaining largely behind the scenes. This dynamic was evident as far back as 1980, when Charles convinced his younger brother David to run for Vice-President on the Libertarian Party ticket. The brothers regarded Ronald Reagan, who was running for President that year, as too liberal. The Libertarian platform called for abolishing all federal income taxes and virtually every federal agency, including the I.R.S., the F.B.I., the C.I.A., the F.E.C., the E.P.A., the F.D.A., and the S.E.C. The party also opposed Medicaid, Medicare, Social Security, public education, and minimum-wage and child-labor laws. Charles and David, former members of the John Birch Society, which their father, Fred, helped found, regarded centralized government as a scourge akin to Communism. At the time, however, such views were considered kooky even by most conservatives. The conservative stalwart William F. Buckley, Jr., called the Kochs’ views “Anarcho-Totalitarianism.” The voters’ verdict was equally harsh. David spent two million dollars of his own money on his candidacy in 1980, but he was trounced. The Libertarian Party earned only one per cent of the vote.

Afterward, Charles told a reporter that he had grown disillusioned with conventional electoral politics but had not given up his quest to advance libertarianism. “Politics,” he told a reporter, “tends to be a nasty, corrupting business.” His interest, he said, is “in advancing libertarian ideas.” Instead of just funding candidates, Charles set out to subsidize an ideology. He aimed to change the way Americans thought by creating and funding an interlocking array of libertarian think tanks, advocacy groups, and academic, legal, and other organizations. Even two years before his brother’s Presidential run, Charles declared, “Our movement must destroy the prevalent statist paradigm.”

Nearly forty years later, many of the Kochs’ policy preferences are now standard Republican orthodoxy, having been promoted from the fringes into the mainstream by the dozens of nonprofit organizations and candidates they funded. Small government, anti-tax, anti-regulatory, and pro-privatization policies, as well as skepticism regarding global warming, are commonplace.

After his 1980 bid for office, David Koch continued to be the more visible of the brothers. He spoke at Americans for Prosperity events and made head-turning political donations. But most of the planning for the Kochs’ political takeover was done by Charles Koch, various sources close to the process told me. It was Charles Koch, for instance, who came up with the idea, in 2003, of pooling political donations with like-minded wealthy conservatives, creating a huge, centrally controlled war chest for what is, in essence, a conservative millionaires’ movement. There are now some seven hundred members of this exclusive club, which meets twice a year at Charles’s invitation and calls itself the Seminar Network. Each member commits to donate a minimum of a hundred thousand dollars, and some donate millions. “David liked to rub shoulders with the other big donors, and to make large donations,” the well-informed business associate told me, “and so that part may now change. But Charles really runs the bus. Only when Charles goes will everything change.”

The election of Donald Trump, the single Republican Presidential candidate whom they had openly opposed, seemed to some to sideline the brothers. Charles had memorably described the choice between Trump and Hillary Clinton as like one between “cancer or a heart attack.” But while the Kochs didn’t get the candidate they wanted, under Trump they have nonetheless gotten many of the policies they wanted. Political allies, many of whom have have been subsidized by the Kochs in one way or another in the past, now fill numerous key Trump Cabinet and administrative posts.

At the E.P.A. and the Interior Department, for instance, two government agencies that are vital to the profit levels of Koch Industries, top personnel have deep ties to the Kochs. The career of the E.P.A. administrator, Scott Pruitt, in Oklahoma politics was financially supported by the Kochs. Daniel Jorjani, now the acting solicitor in the Interior Department, formerly worked for Freedom Partners, the Kochs’ political-funding group, and at the Charles Koch Institute and Charles Koch Foundation. Dozens of other key Koch-affiliated personnel encircle Trump, including Marc Short, the congressional liaison in the Trump White House; Secretary of State Mike Pompeo, who received backing from the Kochs as a businessman and a congressman from Wichita; Education Secretary Betsy DeVos, who was a billionaire donor in the Kochs’ Seminar Network; and Vice-President Mike Pence, whose financial ties to the Kochs run so deep, the former Trump White House strategist Steve Bannon told me, that he worried that if Pence were ever elected “he’d be a President that the Kochs would own.”

Recent news accounts have highlighted differences that the Kochs have had with Trump, including their plans to spend heavily against Trump’s imposition of tariffs on imports, and their opposition to Trump’s restrictive immigration policies. Some cite these fissures as evidence that the Kochs are changing or moderating their views. Frank Baxter, a longtime donor to the Kochs’ political operation, told the Washington Post that the Koch network was “evolving.” But the Kochs have long favored free trade and minimal immigration barriers, both of which are consistent with their free-market beliefs, and also boost the profits of their multinational corporation. What has been evolving is merely their messaging, which casts their industry-friendly immigration and trade stances in terms of helping Dreamers and protecting low-income consumers.

What is often overlooked, and is far more significant, is the large extent to which the Kochs’ policy preferences have prevailed under Trump. Trump’s only major legislative achievement, the tax bill, which reduced corporate taxes from thirty-five to twenty-one per cent, was passed with the support of a twenty-million-dollar campaign by Americans for Prosperity, the Kochs’ nationwide advocacy group. At the same time, the Kochs launched an equally effective political campaign to defeat the mechanism that Trump originally embraced to pay for these enormous tax cuts: a “border adjustment tax” devised by Republican Speaker of the House, Paul Ryan. Despite support from the White House and Republican leaders in Congress, the Koch network killed it. The final tax bill redistributed wealth from the bottom and the middle to the top and created gaping deficits that will likely require additional cuts in government spending, positions the Kochs have long embraced.

Trump’s rollback of the Obama Administration’s environmental policies, crippling of Obamacare, and dismantling of key provisions in the Dodd-Frank financial-services law all have been top items on the Kochs’ wish list. There is no sign that David Koch’s departure from public life will significantly affect any of this. The Kochs’ Seminar Network is promising to spend an estimated three to four hundred million dollars during the this fall’s midterm election. Evidently, even if there is only one Koch brother left at the table, the menu will remain exactly the same, and the tab will be larger than ever.