The Koch Method Versus Crony Capitalism

By Pam Martens: September 12, 2012

At first I thought someone had emailed me a piece from The Onion, the on-line satire magazine; Charles G. Koch lecturing Americans on business integrity and crony capitalism – what else could it be but satire? 

So I went directly to the opinion pages of the Wall Street Journal last Sunday evening and there it was – a piece by Charles G. Koch titled “Corporate Cronyism Harms America,” — the equivalent of  Mitt Romney lecturing Americans on  compassionate pet care. 

Koch puts forth the premise that when businesses collude with government and receive corporate welfare, we all lose.  But along the way in this argument, he makes a number of highly hypocritical comments. 

Koch tells us that the role of business is to “act lawfully and with integrity.”  Should someone with Koch’s baggage dare to make that assertion, and in a newspaper owned by Rupert Murdoch’s voice-mail hacking  Newscorp? 

Charles G. Koch is Chairman and CEO of Koch Industries.  He and his brother, David Koch, tied for 4th place, with $25 billion each, in the current Forbes’ list of the richest Americans.  The company is a private global conglomerate with a presence in over 60 countries, including interests in oil, refining, pipelines, paper products, chemicals, and fertilizer. Its commodities trading operations are based around the world, from New York to Geneva.  Because the company is not publicly traded, despite the Koch brothers’ incessant lectures on free markets, we have no idea what goes on in the sprawling Koch enterprises because they are not required to make public filings. 

Twelve years ago, we did have a brief window of sunshine into whether Koch should be the moral champion for business integrity. In 2000, 60 Minutes did a story on Koch Industries, revealing the details of what one of the dissident brothers, Bill Koch, was alleging in Court documents. “Bill Koch filed a lawsuit in federal court claiming that much of the oil collected by Koch Industries was stolen from federal lands. At the trial, 50 former Koch gaugers testified against the company, some in video depositions. They said Koch employees had a name for cheating on the measurements.” It was called the Koch Method. “The company used the Koch method with virtually all its customers. In the 1980s alone, Koch records show those so-called adjustments brought the company 300 million gallons of oil it never paid for. And it was pure profit. Bill Koch says that profits from that oil were a minimum of $230 million…In December 1999, the jury found that Koch Industries did steal oil from the public and lied about its purchases – 24 thousand times.” 

The Koch Method also includes a dizzying array of corporate front groups whose roots date back decades.  The business model is to dump tens of millions of dollars into groups that have the outward appearance of spontaneous grassroots movements.  Behind the curtain, the levers are being pulled by corporate masters vying for more deregulation.  The masters of this game were Big Tobacco in the 70s, 80s and 90s.  The Kochs learned well. 

One of the key organizations funded by Koch money is Americans for Prosperity (AFP). While it has been widely documented that the group is funding the Tea Party, AFP is also a veritable smorgasbord of other “grassroots” personalities. The AFP or the AFP Foundation have spawned the following identities in recent elections: 

  • (D.C. summit for right wing strategizing and rally); 

  • (kill tax on production of greenhouse gases); 

  • (attacks on the Federal Communications Commission); 

  • (“…how to recruit, educate, organize, and mobilize fed up Americans to stop the radical left-wing agenda…”); 

  • (“…educate citizens about the EPA’s attempt to implement radical global warming regulations…”); 

  • (phone bank; go door to door to beat back those liberals); 

  • (don’t raise taxes on the rich); 

  • (shrink the Federal government); 

  • (killing an Amendment in Florida that would give voters more say in local legislative decisions; an ironic position for people who say they want to promote more liberty). 

  • Americans for Prosperity also created and orchestrated hundreds of rallies to help kill the public option in health care reform. 

In his OpEd, Koch also ridicules the idea that entrepreneurs don’t build their own businesses singlehandedly.  He’s a big Ayn Rand fan, favoring the archetype of the self-made businessman-backbone-of-all-that-is-worthy-in-America platform. But behind the curtain, there is the Koch Method that pollutes the political process and is more harmful to America than anything Koch might legitimately rail against. 

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