The ways in which Koch could employ such companies to avoid tax payments was revealed in 2014, when a batch of tax documents was leaked to a watchdog group called the International Consortium of Investigative Journalists. The documents, prepared for Koch Industries by the tax consulting firm Ernst & Young, laid a roadmap for shifting money from Koch’s operations to tax havens in Europe. The arrangement, called “Project Snow,” created a complex web of obscure companies that shuttled hundreds of millions of dollars between them. Koch used its Invista division as a key component of Project Snow. It created an internal bank, called Arteva Europe Sárl, that coordinated cash flows between the various companies. The bank established a Swiss division that seemed designed to benefit from Switzerland’s low tax rates. Money was passed back and forth, shares were converted into debt, and companies were dissolved along the way. Some of the strategies seemed like financial alchemy—in one case, a loan for $736 million was shifted between companies until it eventually landed with a US subsidiary that was “both the debtor and the creditor of the same debt,” effectively cancelling the loan. The Center for Public Integrity reported that Arteva paid just $6.4 million in taxes on $269 million in profit between 2010 and 2013, and never had an annual tax rate higher than 4.15 percent. When the tax documents were leaked, Koch’s public relations team said that the company followed applicable tax laws.
Chase Koch’s education as a tax analyst at Koch would have taught him that paying a tax bill was no simple thing. It was an arena of complex strategy and potentially immense profits. In this way, tax analysis was similar to the next set of skills that Chase Koch would acquire. After working in acquisitions and taxes, he wanted to move to the part of Koch Industries that he knew was vitally important. “I said, ‘Send me to Houston. I want to be in the pit with the traders,’ ” Chase recalled.
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When Chase Koch was first given the chance to trade commodities, it was akin to the first time he gripped a tennis racket. He discovered an arena in which he could excel and in which he very much enjoyed spending time.
On the tennis court, Chase didn’t have to talk or explain himself. He only had to face his opponent. On a trading desk, something similar happened. Here, the market rendered a clear-cut verdict on whether Chase had made a good or a bad decision. The market didn’t care about Chase Koch’s last name. It only cared about what he did. Chase didn’t have to worry if anyone was pulling strings for him. The market numbers were clear and inarguable.
“That was the first time . . . my blood started to move in my body,” Chase recalled with a laugh. “You know what I mean? I got really excited about something. Because I liked that feedback of trading—the market feedback—and just the energy on the trading floor.”
Chase got a view of the trading operations that even most traders never got to see. He spent weeks shadowing Brad Hall, the CFO of Koch Supply & Trading, who gave Chase Koch a detailed overview of Koch’s entire trading group. Hall taught Chase about the intricate accounting and tax systems that supported Koch’s trading operations and gave Chase a view into forging large energy deals with Arab princes in the Persian Gulf, executives of Asian oil refineries, and CEOs of American companies like United Airlines.
It was clear to Hall and other leaders that Chase Koch was being groomed for a senior leadership position in the company. Chase worked like he wanted to earn it. “He was just full of questions and wanting to understand. He was the opposite of just going through the motions,” Hall recalled.
Chase only sat on the trading desk in Houston for about a year before he was rotated back to Wichita to work on the Koch Equity Development team. Around this time, in 2006, Chase started feeling restless. His rotation through different jobs at Koch gave him a perspective on the company that very few people could attain. But he felt that his education was wide and shallow. He hadn’t mastered anything.
The chance to settle down and master one part of Koch’s business came when a job opened up in Koch Fertilizer. Steve Packebush was still president of Koch Fertilizer, and he offered Chase a job that put Chase in the middle rungs of the division’s hierarchy. Chase became a regional salesman, traveling around the northern central United States and selling fertilizer to farmer co-ops.
Early in his tenure, Chase Koch tagged along with a more senior salesman on a call to a customer in Iowa. The customer was irate about an earlier deal and complained for a long time before he even noticed that Chase was in the room.
“Finally he looks at me, and he’s like, ‘And who are you?’ I was like, ‘Well, my name is Chase,’ ” Chase recalled.
“And he goes, ‘You don’t know shit about fertilizer!’ ” Chase said.
Chase replied“You’re right, sir. But I’m hoping you can help me with that.”
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Chase grinded it out as a salesman and learned about the nitrogen fertilizer business in an up-close and granular way. Then he shifted to the part of the business that he loved the most: he joined the small group that traded fertilizer for Koch and was given a small portfolio to trade a nitrogen-based product called UAN fertilizer.II His trading record was successful enough that he was given a larger and larger portfolio. He estimated that he was eventually trading roughly half of the entire trading book.
This was a time when Chase’s career accelerated, based solely on the money he was earning in the markets. No one could accuse him of getting ahead on his name alone, and coworkers said that Chase seemed happy.
Wes Osbourn, who traded oil in Koch’s Wichita office, arrived at work early. But he never seemed to arrive early enough to beat Chase Koch in the door. No matter how early Osbourn arrived, Chase Koch’s car was always already parked in the lot.
One evening, when a group of traders went out to dinner, they invited Chase Koch to come alone. Osbourn thought this was a mistake. He didn’t want to hang out with the CEO’s son.
“I was like, ‘Ugh. I don’t want to go to dinner with this guy because he’s going to be so arrogant. I’m not going to be able to take it,’ ” Osbourn said. As it happened, Chase Koch arrived at Osbourn’s house early, and the two of them sat around talking before dinner. Osbourn was shocked. Chase Koch was actually a nice guy, and he seemed genuine. Over the course of the evening, the façade never cracked. It seemed like he wasn’t faking it.
“If I hadn’t have known any better, I wouldn’t have known who he was,” Osbourn said. “I remember at the end of dinner, we’re sitting there having a cocktail, and I remember telling him how much I was not looking forward to that night. And I couldn’t believe how down to earth he was. And [Chase] was like, ‘Well, I appreciate that very much,’ ” Osbourn recalled.
The compliment was genuine, and Chase Koch must have appreciated it. But the compliment was also a sharp reminder. No matter how he acted or what he accomplished, he was still Chase Koch. The boss’s son.
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Chase Koch’s sister, Elizabeth, followed in the footsteps of her uncle Freddie. She left Wichita, moved to New York, and appears to have had no significant operational role with the family company. Elizabeth became a writer, producing essays, short stories, a book review, and other works of fiction that she published under a pseudonym.