By Pam Martens: March 12, 2012
The oil billionaire brothers, Charles and David Koch, are adept at planning ahead. In 1984, the Kochs formed Citizens for a Sound Economy Foundation with Richard Fink and Jay Humphreys. After CSE received too much publicity suggesting it was just a front for corporate interests, the Koch brothers changed the foundation’s name to Americans for Prosperity in 2004. By 2009, planning ahead for the midterm elections in 2010, Koch money, through Americans for Prosperity, was sluicing through the “grassroots” campaign called the Tea Party.
Watch the video as David Koch stands before a crowd of Tea Party leaders (reporting to him on their progress) and explains how he and his brother, Charles, provided the start up funds and are so proud of the results.
Now, in an effort to make good on their promise of launching the “mother of all wars” to take the White House in the 2012 Presidential election – a pledge they made to their wealthy cabal gathered at the luxury Ritz-Carlton resort in Colorado in June of 2011, the power duo has filed a shareholder lawsuit in an effort to obtain majority control of the influential nonprofit think tank, the Cato Institute.
How does a pair of oil billionaires own shares in a nonprofit? They planned ahead. As their lawsuit explains: “The Corporation was formed on December 19, 1974 as a Kansas non-profit corporation under the name of ‘The Charles Koch Foundation, Inc.’ On July 28, 1976, the name of the Corporation was changed to ‘Cato Institute.’ ”
Today, Charles and David Koch own 25% each of the shares of the corporation; Ed Crane, the President of Cato, owns 25%. Kathryn Washburn, the widow of William Niskanen who died in October of 2011, has claimed ownership of his 25% interest. The Koch brothers are asking the court to force Washburn to turn in her shares to the corporation. They would then have majority control of one of the most powerful policy institutes in the Beltway heading into the “mother of all wars” election season.
Under the eyebrow raising structure of this tax-subsidized nonprofit, only the owners (shareholders) can vote to elect the Board of Directors; the Board itself does not elect its members. And the owners can fire the whole Board if they choose. They can then take all the assets and hand them over to their favorite nonprofit.
Under this bizarre structure, if Charles and David Koch gain majority control, they could fire the problematic members of Cato’s Board and hand all the assets over to another nonprofit more compatible with the Koch brothers’ goals.
Below is the amazing text of the governing documents of an institution that has received hundreds of millions in tax-deductible donations. (Bold emphasis has been added.) Notice how business can continue to be conducted even when a quorum of stockholders is no longer present. This is what Robert’s Rules of Order has to say on that matter: “In the absence of a quorum, any business transacted…is null and void…The prohibition against transacting business in the absence of a quorum cannot be waived even by unanimous consent, and a notice cannot be validly given. If there is important business that should not be delayed the meeting should fix the time for an adjourned meeting and then adjourn.”
From Shareholder’s Agreement, dated 1985:
That each of the undersigned shall vote his stock in the Corporation so long as he is a stockholder in such a way as to assure that each of the undersigned is elected to the position of a Director on the Board of Directors of the Corporation.
Excerpts from the Restated Bylaws of the Cato Institute, March 9, 2007; amended April 1, 2011:
An annual meeting of the shareholders shall be held on the first business day of the month of December; the shareholders shall elect a board of directors and transact other business. If an annual meeting has not been called and held within six months after the time designated for it, any shareholder may call it. [Amended 1/14/06]…
At every shareholders’ meeting the holders of shares of common stock shall be solely vested with the right to vote as provided by the statutes of the State of Kansas, and the Articles of Incorporation of the Corporation, as amended, including the right of cumulative voting for directors…
The presence, in person or by proxy, of the holders of one-half or more of the shares outstanding and entitled to vote shall constitute a quorum at meetings of shareholders. At a duly organized meeting stockholders present can continue to do business until adjournment even though enough stockholders withdraw to leave less than a quorum…
At a meeting of the shareholders called for that purpose the entire board of directors or any individual director may be removed from office without assignment of cause by the vote of a majority of the shares entitled to vote at an election of directors…
Excerpts from the Restated Articles of Incorporation, dated December 30, 1994:
Upon dissolution of the corporation, the Board of Directors shall, after paying or making provision for the payment of all of the liabilities of the corporation, dispose of all of the assets of the corporation exclusively for the purposes of the corporation in such manner, or to such organization or organizations organized and operated exclusively for charitable, educational, religious, or scientific purposes as shall at the time qualify as an exempt organization or organizations under Section 501(c)(3) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law), as the Board of Directors shall determine. Any such assets not so disposed of shall be disposed of by District Court of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.
