The publicity culminated in August of 2010 when the New Yorker magazine published a detailed report of Koch’s political history, with contemporary accounts of Americans for Prosperity’s coordination with Tea Party activists. The article, “Covert Operations: The Billionaire Brothers Who Are Waging a War Against Obama,” was written by Jane Mayer, one of the most prominent investigative reporters in America. It cemented the Koch brothers’ role as public figures who were deeply influencing political affairs. A widespread narrative raced through American politics, a narrative that the Koch brothers hadn’t just assisted the Tea Party but had created it. The story line was inflamed by the 2010 Supreme Court decision Citizens United v. Federal Election Commission, which lifted restrictions on campaign donations to independent political groups. This opened the gates for unlimited cash to be poured into the third-party groups that Koch became masterful at employing. It appeared that there were no constraints on the political power that billionaires could wield. The Koch brothers were seen as the primary beneficiaries of the new landscape.
The whale had breached. The harpoons began to fly. When Charles Koch arrived in Rancho Mirage for the eighth donor conference, he found that the veil of secrecy had been lifted for good. Roughly a thousand protestors were gathered outside the Omni Rancho Las Palmas Resort & Spa. The resort was a collection of low-slung buildings built in the style of adobe haciendas, encircling a pool and a golf course. The protestors filled the street just outside, standing between the row of palm trees that swayed in the placid breeze. Security officers stood on the hacienda roof, looking down at the crowd, while cordons of local police officers in riot gear squeezed the big crowd inward from the sides. The police justified their militarized presence based on the fact that there were several federal judges inside the resort at Koch’s gathering.
The protestors were raucous and wore brightly colored costumes. They carried big banners that read: “Quarantine Koch,” alongside neon biohazard symbols. They carried placards that read: “Uncloak the KOCHS!” and “TEA PARTIERS ARE KOCH SUCKERS!” They chanted and sang songs into loudspeakers.
The din could be heard throughout the resort. But inside the conference rooms, the seminar proceeded. Charles Koch made it clear to the attendees that the event was not a junket; not “fun in the sun,” as he put it. The gathering was a work trip, a chance to press their strategy. He spoke about the political struggle in nearly apocalyptic terms. At a donor conference in 2011, he told the crowd that America’s future could literally be endangered if Barack Obama won reelection. “This is the mother of all wars we’ve got, over the next eighteen months, for the life or death of this country,” Koch said.
Charles was the star of the seminars, but he was a reticent one. He didn’t like the business of shaking hands with politicians and getting his photo taken with them. When given the chance, he passed up opportunities to meet even very senior political leaders who asked for one-on-one time with him. If anything, he seemed to look down on them.
“I remember talking to him. I think he viewed the folks in Congress as victims of the system. I know he did,” said one person familiar with Koch’s political operations. Charles Koch, who prized long-term thinking and who preached about the importance of creating incentive systems and bonus payments to reinforce it, looked at Congress and saw a dysfunctional system that was riven by toxic incentives. Politicians were just caught up in that system. They almost couldn’t help but do the wrong thing.
“He understood what the process was. You have members of Congress. They get elected every two years. And it’s hard to be independent. It’s hard to get things done. It’s hard not to spend a lot of time being political and raising money. And he just—I think he saw the system as broken,” the person said.
The political machine that Charles Koch built was immensely successful—not at fixing this broken system, but at ensuring that it remained hobbled and incapable of passing the kind of sweeping business regulations that defined the New Deal. He applied long-term thinking to a system defined by short-term election timetables, and he won many of the most important fights he cared about.
After the Palm Springs conference wrapped up, Charles Koch traveled back to Wichita. He reported for work at the Koch Tower and found paperwork waiting for him in his executive suite on the third floor. While he spoke about politics in terms of war and destruction, the state of affairs inside Koch Industries told a different story. One of the surprising truths about life under the Obama presidency was that it was very good, economically speaking, for Charles Koch and Koch Industries.
During the Obama years, Charles Koch’s net worth doubled. His fortune would grow larger and faster than during any previous period. One reason for this explosion in wealth was the death of the cap-and-trade bill. There would be no price on carbon to constrain the fossil fuel business. Instead, the new drilling technique called fracking would help enshrine fossil fuels as a central part of American economic life.
Koch Industries stood at center stage during this shift in America’s energy industry, and it reaped rewards in ways that people on the outside could not see. When it came to the business side of Charles Koch’s life, the whale was still deep underwater, growing larger and more powerful than ever before.
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I. No version of the Affordable Care Act ever proposed to implant a microchip in every American. The theory that such a provision was part of the law appears to be based on early draft versions of the bill that were never passed. The proposal would have allowed the US Department of Health and Human Services to collect data on medical devices like pacemakers. This data collection would have helped speed recall notices of such devices and could also help gauge their efficacy.
II. This story was not true. When Pelosi became Speaker of the House, she was afforded the use of a military aircraft to travel to her home district in California. She did request a plane that was larger than that of her predecessor, Republican Dennis Hastert. He had used a smaller plane because his home district was in Illinois, and the smaller plane could not make the trip to California without refueling.
III. The other three pillars were: media outreach, litigation, and political influence (or lobbying).
IV. The connection between IER and the Institute for Humane Studies was first revealed by the journalist Lee Fang. He reported in 2014 that the IHS temporarily lost its charter, and then reformed as the IER.
V. Greenpeace’s analysis might overstate Koch’s support for so-called climate-denial groups. Greenpeace’s tally includes the total funding for entities like the Cato Institute, which created doubt about climate-change science but which also engaged in other antigovernment activities. Still, the difference in funding is so dramatic that it seems almost certain that Koch invested more than Exxon did during this period.
CHAPTER 21
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The War for America’s BTUs
(2010–2014)
In the winter of 2010, while the cap-and-trade bill was languishing in the US Senate, Koch Industries began to quietly execute a series of business deals. The deals might have looked strange—maybe even irrational—to outsiders. In March of 2010, for example, Koch announced that it was expanding its pipeline capacity in southern Texas by 25 percent. This was akin to building a very large parking garage outside a shopping mall that no one visited anymore. Southern Texas was a sleepy backwater of the oil business, an oasis of barren scrub brush and scattered towns with lonely oil derricks. Oil production in South Texas had stagnated for years. But Koch was spending millions to increase its pipeline network there.