The revolution began with a purge: “Koch Industries Names New Vice Chairman, President; New President Only Fourth in Company’s History,” BusinessWire, August 3, 1999; Corliss Nelson, biography and work history, Ryder System; Mike Sutten, biography and work history, Royal Caribbean Cruises; Rex Clevinger, biography and work history, Reliant Energy; Jim Imbler, announcement of replacement by David Robertson, January 24, 2000; Seth Vance, executive profile, Bloomberg; Pedro Haas, departure announcement, Kosa, July 24, 2000; Markel, LinkedIn profile, interview by author, 2016.
The change in personnel was only the beginning: Source with direct knowledge of events speaking on background to author, 2016.
This change . . . ushered in a decade of unprecedented growth: See endnotes, chs. 11–17; Leonard, “The New Koch.”
During this decade . . . impervious strength of its corporate veil: The use of the corporate veil strategy was first revealed to the author by a source with direct knowledge of Koch’s legal and financial strategies. It was later confirmed by a second senior source at Koch Industries with direct knowledge of the matter. Finally, the strategy can be seen by the footprint it leaves at Koch companies, which indeed are operated with a level of autonomy that can seem, at times, to be curiously redundant for a company so focused on efficiency.
Koch Industries . . . institutionalized this drive to expand: Charles Koch, Hall, Feilmeier, Packebush, Hannan, current and former Koch Industries employees, interviews by author, 2013–16; Leonard, “The New Koch.”
Koch was seen by outsiders . . . was seen quite differently: Charles Koch, Hall, Feilmeier, O’Neill, Packebush, Hannan, current and former Koch Industries employees, interviews by author, 2013–16; Leonard, “The New Koch.”
In Washington . . . bitter rain and gray skies: George W. Bush inauguration coverage, January 20, 2001, ABC News.
The broad, national political consensus . . . no new consensus at all: Readings include: Hacker and Pierson, American Amnesia; Mounk, The People vs. Democracy: Why Our Freedom Is in Danger and How to Save It (Cambridge, MA: Harvard University Press, 2018).
Bush ran as a . . . “compassionate conservative”; Gore ran as a right-leaning liberal: Gimore and Sugrue, These United States, 591–95.
In fact . . . Koch Industries built a financial trading desk: Accounts of Koch’s trading operations are based in large part on interviews with senior executives inside Koch’s trading operations, including Brad Hall, who was CFO of Koch Supply & Trading. Senior traders also offered insight, including Brenden O’Neill, Wesley Osbourn, Cris Franklin, Melissa Beckett, and Adam Glassman. Three former senior sources in Koch’s trading division described its operation in detail, on the condition that they not be identified. Also, “Koch Supply & Trading,” Discovery: The Quarterly Newsletter of Koch Companies, January 2009; “Koch Smooths Volatile Waters,” Risk.net, November 10, 2003.
Koch began trading crude oil . . . in the 1970s: Howell, Hall, interviews by author, 2013–16.
In the late 1970s, Ron Howell made one of the most significant investments: Howell, interviews by author, 2016.
In fact, there was no global market for oil: This key insight into the structure of oil markets was first provided in a 2016 interview with Matthew Burkley, CEO of Genscape, which provided real-time intelligence on energy supplies to commodities traders. The insight was bolstered by interviews with Hall, Howell, Osbourn, Beckett, Glassman, and former senior Koch traders speaking on background between 2013–16.
This supervaluable information . . . Koch Industries had access to: Hall, Howell, senior Koch trading executives speaking on background, interviews by author, 2013–16.
Other traders began dropping into the room: Howell, interviews by author, 2016.
Merc . . . also called the NYMEX for short: Emily Lambert, The Futures: The Rise of the Speculators and the Origins of the World’s Biggest Markets (New York: Basic Books, 2011), 151–163, 181–187.
At first . . . a threat to Koch’s business model: Howell, interviews by author, 2016.
Koch Industries . . . expertise in trading over the years: Hall, Howell, senior Koch trading executives speaking on background, interviews by author, 2013–16.
In the stock market, it is illegal to trade on inside information: Nancy Doyle, general attorney at the Commodity Futures Trading Commission; Bart Chilton, former commissioner at the Commodity Futures Trading Commission; source speaking on background, interviews by author, 2016.
Koch exploited this advantage: Hall, Howell, senior Koch trading executives speaking on background, interviews by author, 2013–16.
Koch Industries . . . in energy futures markets: Former senior Koch trading official speaking on background, interview by author, 2016; Saule T. Omarova, “The Merchants of Wall Street: Banking, Commerce, and Commodities,” Cornell Law Faculty Publications, Cornell Law School, 2013.
“We kept getting approached by banks”: Former senior Koch trading executive speaking on background, interview by author, 2016.
Throughout the 1990s . . . derivatives trading: Gimore and Sugrue, These United States, 583–84.
After analyzing the McKinsey report, Koch Industries decided: Three former senior Koch trading employees speaking on background, Hall, interviews by author, 2013–16.
Naturally, the consolidated office . . . was based in Houston: Monica Perin, “Koch Investment Group Moves Base from Kansas to Houston,” Houston Business Journal, June 17, 2001.
CHAPTER 12: INFORMATION ASYMMETRIES
It was still dark when Brenden O’Neill drove: O’Neill, interviews by author, 2016.
There was no single morning for a commodities trader: Glassman, former Koch Industries derivatives trader, interviews by author, 2014.
The headlights . . . as he approached: O’Neill, interviews by author, 2016; notes from reporting at Koch Supply & Trading office, 2016; historic weather reports for Houston.
The interior lobby . . . like a geode hidden inside a black stone: Notes, photos, and video from reporting in lobby of 20 Greenway Plaza, 2016.
Koch’s trading floor . . . several thousand square feet: Photos of trading floor taken from David Barboza, “Energy Traders Continue to Prowl the Floor That Enron Helped Build,” New York Times, December 6, 2001; other photos of trading floors taken from LinkedIn profile pictures of Koch Supply & Trading employees; descriptions of trading offices taken from Franklin, O’Neill, Osbourn, two sources speaking on background, interviews by author, 2013–16.
Koch’s in-house meteorologist was hard at work: Former employee of Koch Supply & Trading meteorologist team speaking on background, interviews by author, 2016.
O’Neill settled into his desk and turned on his computer: O’Neill, interviews by author, 2016.
overseen by a man named Sam Soliman: Franklin, O’Neill, Hall, Lou Ming (former Koch Industries quantitative trader), interviews by author, 2013–16; Perin, “Koch Investment Group Moves Base.”
Koch maximized the advantage . . . other assets: Hall, Beckett, Osbourn, three former senior Koch Industries trading executives (executives in this case, including senior managers of the rank of vice president or higher), interviews by author, 2013–16.
On the first day he reported to work: O’Neill, interviews by author, 2016.
Koch purchased these pipelines and the company that owned them: Larry Foster, “United Flashes New Wealth—and New Faces—After Koch Takeover,” Inside FERC, November 16, 1992; “Koch Industries Buys United Gas Pipeline,” PR Newswire, November 9, 1992.