Ballen’s case grew stronger after he took a trip to Boston. He’d received a tip that there was a whistle-blower in Boston who might be able to shed light on Koch Oil’s alleged theft. The whistle-blower was in a good position to know about it. His name was William “Bill” Koch, and he was brothers with Koch Industries’ CEO.
Ballen learned that Koch Industries was a family-controlled company, founded in 1940 by a man named Fred Koch in Wichita, Kansas. Fred Koch had four sons. Three of the sons worked for the family company until 1967, when Fred Koch died. At that point, all hell broke loose. The second-oldest son, Charles, was left in charge of the firm. In that role, he oversaw his younger twin brothers, David and Bill. It became clear that Bill didn’t want to take orders from his older brother Charles, and so Bill left the company in 1983. Then he sued David and Charles, claiming that they had ripped him off by underpaying him for his share of the family business.
What interested Ballen was what Bill did next. Bill launched a private investigation into the very behavior that Ballen had stumbled upon: Koch Oil’s alleged theft of oil from remote wells. After arriving in Boston, Ballen met with Bill Koch for two hours in a conference room. He listened carefully while Bill Koch laid out detailed allegations that matched what the oil majors were already saying: Koch Oil practiced widespread theft, Bill Koch confirmed. He should know, because it was happening while he worked there.
The story was convincing, but it also made Ballen uneasy. Bill Koch’s testimony was tainted by the fact that he was suing his brothers. For that reason, he would not make a great witness at a public hearing, or in a courtroom.
Ballen went back to Washington and met with his team. He told them that there was only one path to follow: they would subpoena Koch Oil just as they had subpoenaed the other oil companies. And they wouldn’t proceed unless the company’s documents compelled them to.
Then Koch’s documents began to arrive. The parcels of internal company papers were hauled up to the ninth floor and opened by Ballen’s team, who began to tabulate them.
* * *
Ballen’s team narrowed its subpoenas to examine oil sales in the state of Oklahoma. This made it easier for the companies to comply with the request and made it easier for Ballen’s investigators to sift through the documents once they arrived. The financial results from Koch’s records were stark. They were so stark it seemed unbelievable. The numbers were checked, and checked again. And even then, they told the same story: In 1988, Koch Oil had taken 142,000 barrels of oil without paying for them and cleared pure profit on each of those barrels when it sold them. In 1986 and 1987, the other years that Ballen’s team investigated, Koch was over by 240,680 and 239,206 barrels, respectively. The second-highest overage of any other company in those years was the Phillips Petroleum Company’s overage of 2,181 barrels in 1987, still just 0.009 percent of Koch’s overage that year.
The set of numbers was the only clear thing that the Senate team could determine about Koch. As investigators dug further into the company, they discovered an organization that seemed built to obscure its very existence. There was a reason that no one had heard of Koch Oil, even though the company operated huge pipeline networks and two major oil refineries (one in Corpus Christi, Texas, and the other just outside of Minneapolis, Minnesota).
To begin with, Koch made the rare decision to remain privately owned rather than selling shares of the company on the stock market. Most firms go public after they reach a certain size because doing so gives them access to an almost limitless amount of money they can use to expand and fund their operations. The downside of this decision is that when a company goes public, it is required to disclose a lot of information to the public, so that investors know what they are buying. Publicly traded firms need to publish the salaries of their CEOs, the value of their debt, the amount of money they make or lose every quarter, and any risks that might be in store for investors who bought their stock. Koch had apparently decided that getting money from Wall Street wasn’t worth the headache of making such information public.
Even more confusingly, the firm was an intricate web of interlocking subsidiaries and divisions. Its pipeline unit, for example, had done business under different names over the years, such as Matador, without using the name of its parent company. Without the kind of public filings that most companies released to public investors, it was difficult for Ballen’s investigators to even puzzle out exactly what Koch owned and where. And Koch clearly made no effort to build its brand. The company didn’t even put a sign on some of the buildings where it operated, let alone invest in advertising to build a good reputation with customers. Koch clearly preferred being a dark box.
Koch was a difficult target to go after, but Ballen was convinced that the evidence was persuasive enough to warrant the effort. Ballen worked with FBI agent Jim Elroy to draw up a plan to build the case against Koch Oil. They came up with an audacious idea: Elroy and a team of experienced oil workers would arrive at oil tanks before Koch Oil employees were scheduled to get there, and Elroy’s team would measure how much oil was in the tanks. Then they would lay in wait until the Koch Oil man arrived and drained the tank. The Koch Oil employee would leave a document behind, called a run ticket, that stated how much oil Koch had carted off. If the firm was really taking as much oil as it appeared to be, the run tickets should show a smaller amount of oil than Elroy and his team had measured. That’s how Elroy ended up surrounded by cattle, secretly photographing the Koch Oil gaugers.
But there were two big obstacles to making this plan work. The first was the fact that the oil tanks were all located on private property—property owned by oil drillers like Exxon and Mobil. Elroy couldn’t just trespass on the land to take oil measurements. The second obstacle was figuring out when Koch Oil was due to arrive and drain the tanks. It would be cost prohibitive to have Elroy stake out the company around the clock for weeks at a time.
Ballen turned to the oil majors for help. While none were willing to attack Koch publicly for taking oil from them, they were more than happy to help Ballen behind the scenes. Their assistance was never publicly disclosed, even as videotape of the surveillance was shown publicly during a later Senate hearing. The companies gave Elroy permission to enter their property and to measure their oil. They also told Ballen’s team when the Koch Oil truck was scheduled to arrive, so that Elroy could be there to observe it.
With the secret help of the oil majors, Ballen and Elroy were ready to build the case against Koch. They had copius amounts of documentation and photographic evidence. They had the testimony of Koch’s own oil gaugers, whom Elroy had interviewed.
But Ballen knew that they needed more. So the Senate issued subpoenas to senior Koch Industries executives in Wichita—subpoenas that would compel the men to answer questions under oath. Then Ballen bought a plane ticket to Wichita. There he would question one of the men he had just subpoenaed. It was the man who had ultimate control over this enterprise: the chief executive, Charles Koch.
* * *
It is almost awe-inspiring to fly into the Wichita airport. During the daytime hours, airplane passengers can look out the window and see the Kansas prairie stretching away toward the horizon like an impossibly long tabletop covered in green. Wichita itself seems minuscule and stranded within this wide expanse, a small jewel of white buildings surrounded by residential neighborhoods and factories. Outside the city limits, the emptiness looked like the far edge of America.