Franzen was put on a “last chance agreement,” meaning that one more work violation could get him fired. He said he remained on that agreement for six years. He had little doubt as to why he was getting in more trouble at work. “As far as being the lead negotiator—they had it out for me.” Koch Industries disputed that Franzen was disciplined for LMS violations and said he was only put on “last chance” status for losing his temper with a coworker. The company fired Franzen in early 2018 when he failed to return to work after taking leave for a worker’s compensation claim.
Ken Harrison retired in 2012 and opened a labor negotiating consulting firm. When asked about the workers at the IBU, Harrison seemed genuinely sympathetic. But Koch Industries had determined a market price for their labor, and that’s what it paid. “People always want more,” Harrison said.
* * *
It is unclear if Charles Koch was even aware of Georgia-Pacific’s battle to tame the IBU. It was just one contract negotiation among many. But even though the fight with the IBU was a small part of Koch’s overall operations, it was a microcosm of the bigger battles that Charles Koch and his company were just beginning to fight.
Charles Koch had been disturbed by the election of Barack Obama, and the ascendancy of progressive politics in America. Since the 2008 election, Charles Koch’s deepest concerns had been confirmed, and then heightened. The stimulus plan passed in early 2009 was worrisome enough. It helped entrench the notion that the federal government had a large role to play in solving economic problems, while simultaneously adding significantly to the nation’s debt. Charles Koch believed that each dollar in extra debt only increased the likelihood of further tax increases.
And the stimulus was just the beginning. Obama initiated a national fight over health care that was not dissimilar to the fight between Ken Harrison and Steve Hammond over the IBU health plan. Obama pushed for a national health care system built on the same ideological foundations as the IBU plan—Obama’s Affordable Care Act was built on the premise of solidarity. While there would be sliding scales of cost for the plan, it was designed to provide every American with health insurance, regardless of their income. To pay for this system, the Affordable Care Act levied more taxes on the richest of Americans, such as Charles and David Koch. The entire framework of the Affordable Care Act went against everything Charles Koch had been fighting for. Rather than having people pay for health care out of pocket, giving them “skin in the game,” the health care plan entrenched and increased a publicly subsidized insurance system that distorted prices and ruined proper economic incentives. The Affordable Care Act was passed in March of 2010.
And even this was not the end. The Obama agenda continued to roll on, backed by Democratic majorities in Congress. The administration targeted the banks next, imposing new regulations to cut back on speculation and derivatives trading. Regulators at the Commodities Futures Trading Commission started contacting Koch Industries, asking the company about its oil trading strategies. The tendrils of creeping government appeared in almost every industry where Koch operated.
But all of these things were insignificant compared to the biggest threat, the largest battle that loomed in front of Charles Koch in 2010. The Obama administration planned to attack the very core of Koch Industries’ business. The next item on the Obama agenda was to slow carbon emissions from the United States and around the globe. If this effort was successful, it was not at all clear how Koch Industries could continue to exist in its present form. At the very least, any hard cap on carbon emissions could cost Koch Industries hundreds of billions of dollars, if not more.
The Obama agenda put Charles Koch in the unfamiliar position of being “the holdout.” Now it was Obama, and his supporters, who sought to assemble a political pathway, paved with votes in Congress, to take America toward a future that Obama envisioned. This future relied less on fossil fuels. Charles Koch intended to deny Obama this path.
Barack Obama had seemingly unstoppable momentum behind him. But there was no indication that this intimidated Charles Koch. Perhaps that was because he’d been preparing for such a fight for at least twenty years, building a political influence operation in Washington, DC, that was without parallel in modern America. When it came time for Charles Koch to play the holdout, he was supremely prepared.
* * *
I. It’s true that pipeline companies can use eminent domain authority to force property owners to hand over rights to their land, but that option is reserved as a last resort. Even then, it is not free, as, under the law, the property owners must be offered “just compensation.” With eminent domain, the cost and time involved in pipeline construction increase dramatically if property owners hold out for higher prices.
CHAPTER 19
* * *
Warming
(2008–2009)
Every year, in December, Charles Koch hosted a private party at his home. It was a gathering for the elite group of Koch Industries employees who donated the maximum legal amount of money to Koch Industries’ political action committee. As the evening got underway, a parade of cars drove through the gates into the wooded compound of Charles Koch’s childhood home. The attendees parked their cars in neat rows on the spacious lawn and walked up the driveway through the winter wind and into the warm, brightly lit entryway.
There was a cheerful cacophony inside, with about two hundred people milling around in large rooms and hallways. The attendees were employees, executives, and their spouses, dressed in their holiday best, eating heavy hors d’oeuvres from the trays carried by uniformed waiters. Charles and David Koch held court in the living room, sometimes standing side by side, as guests filed past to pay their respects. Charles was courteous and smiling. But he also had a habit of managing the party like a company meeting. When David Koch and a guest began talking at length about David’s art collection, Charles Koch interrupted to remind the pair that there were guests waiting behind them in the line. “Charles says, ‘David, you’ve got to move it along,’ ” one guest recalled. “That’s kind of Charles. It’s kind of like ‘This is the process. We’re greeting everybody. We’re having pleasantries.’ And then they move.”
There was a sense of exclusivity, of special belonging, that animated the people in the room. The holiday party was held around the time of the annual board meeting, so many board members and senior executives found time to attend. To receive an invite, an employee needed to donate $5,000 during the year to Koch’s PAC. The money was bundled and donated en masse to political candidates who were favored by Koch’s PAC officials. It was understood that the PAC always needed donations and that Charles Koch paid close attention to its performance. Having one’s name listed in federal campaign disclosures was something akin to being listed in a country club directory. It looked good. There was another, unspoken perk to donating: it indicated that the employee in question had just finished a profitable year and had a big bonus to show for it. When employees didn’t show up from one year to the next, it created suspicion that maybe their bonuses hadn’t been so fat.
While the gathering was always festive, there was an air of tension hanging over the party in 2009. The attendees had put lots of money into the PAC during the previous election—a total of $2.6 million in 2008—and yet Barack Obama still won and Democrats held large majorities in Congress. Virtually every political cause that Koch Industries cherished was in retreat. The Republican Party seemed in danger of becoming a permanent minority. The Libertarian Party didn’t even rate as a political afterthought.