“There was no reason why those records shouldn’t still exist. But when the grand jury wanted them, then they were not available,” Jones recalled.
The investigation had led them all the way to this batch of documents, and without those documents they didn’t feel they could go any further. But that didn’t mean that they were going to give up. Jones and Elroy began discussing other ways they could move forward with the case, other investigation tactics they might use, such as wiretapping and gaining informants inside Koch Industries. They would keep pressing, whether important documents were destroyed or not.
Then something happened that punctured a hole in the case—something that would derail the investigation, arguably killing it. Jim Elroy quit. He left Oklahoma for personal reasons. The FBI had offered him a transfer to the Miami office. As a California boy, Elroy had a strong desire to get back to the ocean. He wanted to spend time on a boat and travel on the sea. He had been in Oklahoma for many years and was ready for a change.
Jones wasn’t too happy about it. She told him, “You are leaving me now?! And you said you would help me do this case!” Elroy recalled. Elroy was a driving force behind the investigation, and there was no guarantee that the FBI agent replacing him would be as passionate or as skilled. But he was determined to go.
Decades later, Elroy would regret the decision. “It was really selfish. I should have stayed and finished this job,” he said. He was pursuing the two brothers who had control over Koch Industries and was confident he would have gotten them. “I know if I had stayed, that Charles and David would be in jail now,” Elroy said.
In Elroy’s absence, however, the investigation took a sharp turn in Koch’s favor. There was a growing body of evidence that Koch Industries might be innocent. Now, in the summer of 1990, the FBI interviewed dozens of Koch gaugers throughout Oklahoma and Texas, and the gaugers all said essentially the same thing: Koch had never instructed them to steal, they had never heard of the “Koch method,” and they never falsified their measurements. The gaugers said this even when they were alone with their FBI interrogators—one gauger was interviewed in a Dairy Queen parking lot. Other gaugers would contradict this testimony under oath in later court cases, but the litany of interviews undermined the case dramatically. The FBI was searching for corroboration, but just as the interviews started to cloud the picture, there was a management shakeup at the US Attorney’s office. Nancy Jones’s boss, US Attorney Bill Price, quit his job to run for higher office. Price’s replacement would be selected by Oklahoma senator Don Nickles, a close ally of Koch’s. Nickles had previously spoken about the case with Koch’s lobbyist Ron Howell, who remembered pulling Nickles aside at a luncheon to discuss the case. Nickles would later leave office and open a lobbying shop in Washington, DC, where Koch Industries was one of his clients.
In 1989, Nickles chose a politician and lawyer named Timothy Leonard to fill the US Attorney’s job.III This shocked Jones, who had expected one of Price’s deputies, a longtime prosecutor name Bob Mydans, to be selected. Mydans had years of experience in the office, while one of Leonard’s primary qualifications seemed to be his tenure as a Republican state senator, where he had briefly served with Don Nickles.
Jones quickly developed her own opinion about Leonard. She considered him to be a “political hack.” Leonard was aware of her opinion, and the two of them never had an easy relationship. Leonard thought that Jones was an intelligent lawyer, but he became concerned about her work when a judge ruled against her in a high-profile case. Jones was particularly offended by Leonard’s reaction. He assigned Jones’s boss, Arlene Joplin, to be the “second chair” on one of Jones’s major fraud cases. Being second chair essentially meant that that Joplin would oversee Jones’s work. Jones pressed ahead. Eventually, Joplin approached Nancy Jones to talk about the Koch Industries investigation. Joplin’s comments were not encouraging. She said there was lukewarm enthusiasm over at the FBI for the Koch case. The FBI wasn’t sure it would dedicate more resources to the Koch investigation.
Jones ended up quitting her job. She was tired of working for a boss she didn’t like and was tired of feeling that she was being micromanaged. She was also tired of the lack of cultural life in Oklahoma City. She and her husband wanted to live in a more cosmopolitan city. She said that the Koch Industries investigation was not a major factor in her decision. It wasn’t unusual for an assistant US Attorney to move on to another job and leave a case behind. Jones organized her material and left the case in good shape to be pursued by another attorney.
It would be up to Timothy Leonard to determine how to pursue it.
* * *
In April of 1991, as the Koch case was still moving forward, Don Nickles nominated Timothy Leonard to become a federal judge. It was a prestigious distinction for Leonard. He’d been born and raised in the small town of Beaver, Oklahoma, and now he was offered a lifetime appointment to the federal bench.
In November, President George H. W. Bush confirmed Leonard’s appointment. Less than four months later, while he was still US Attorney, Leonard dropped the case against Koch Industries and his office sent a letter to the company saying that it would not be indicted. Leonard did not explain publicly why the case was dropped, even though Jones said that the grand jury had obtained evidence showing criminal conduct of Koch Industries employees and managers. Whatever evidence Jones obtained could never be made public because of secrecy rules that govern grand juries.
For years afterward, Leonard’s decision raised suspicion that Koch used its political influence to kill the investigation. Koch had obviously deployed its lobbyists and think tanks to influence public figures in Oklahoma, and the trail of influence between Koch, Nickles, and Judge Leonard seemed straightforward: Koch’s political ally Nickles appointed Leonard to the US Attorney’s office, then Nickles nominated Leonard to the federal bench, and Leonard decided to drop the charges. It seemed like Leonard might have been rewarded for dropping the charges.
There is no evidence, however, to support this claim and there is strong evidence to refute it. The FBI’s case file in Oklahoma, released in 2018, shows that there was plenty of reason not to file charges. Dozens of FBI interviews with gaugers failed to corroborate the accusations against Koch. Internal FBI memos also show that it was Assistant US Attorney H. Lee Schmidt, not Leonard, who recommended that the case be dropped.IV It seems that the dozens of FBI interviews convinced Schmidt there simply wasn’t enough evidence to file charges. A handful of interviews pointed to wrongdoing, but they seemed outweighed by dozens that undermined the case. The FBI files did not show what evidence Jones obtained from the secret grand jury proceedings, but Leonard later said that Jones never told him or anyone in his office that there was enough evidence to file charges against Koch managers before she left.
There is also evidence to suggest that Leonard actually fought to protect the investigation from political interference. Leonard said that shortly after he arrived, the FBI briefed him about the US Senate investigation into Koch and the political controversies it had ignited. In late 1989, Leonard sent a letter to the FBI in response, chastising the agency for sending him statements about the Koch case made by US senators in Kansas and Oklahoma. “Your presentation of this letter to this office both puzzles and concerns me,” Leonard wrote. He went on to say that the investigation was independent, and that the “view of any elected official” regarding the Senate investigation of Koch would “have no bearing on the course of the grand jury investigation.”