Ken Ballen arrived in Wichita with his assistant attorney, Wick Sollers, in late April of 1989. They had a grueling schedule ahead of them.
On April 24, the two Washington attorneys drove to Koch Industries headquarters. They were scheduled to depose, or interview under oath, eleven of the company’s senior executives and employees. As they drove to the headquarters, Ballen and Sollers might have thought they’d been given wrong directions. One of the largest and most profitable companies in Wichita wasn’t located in a skyscraper downtown. Instead, Ballen and Sollers kept heading west on Thirty-Seventh Street, away from the city center, until they reached the far northeastern corner of Wichita’s city limits. On the north side of Thirty-Seventh, the city ended and gave way to a limitless horizon of tall prairie grass. On the south side of the street was their destination: a squat office building of steel and glass with darkened windows.
They arrived early in the morning. Their first deposition would take place just after nine o’clock, and it was arguably their most important: they would start the day by interviewing Charles Koch.
Lower-level investigators like Jim Elroy became convinced that Charles Koch must have been aware that his firm was taking far more oil than it paid for from oil wells throughout the Midwest. It seemed that the behavior was so widespread that it must have been directed from the top. It was almost inconceivable that Koch would not be aware of it. Now Ballen would have the chance to question Charles Koch directly.
But first, they had to get into the building. This turned out to be no easy task. Ballen and Sollers were stopped at a security checkpoint, where security guards asked them to show their identification. They passed through a metal detector. Then they walked down a hallway into the center of the building and came to yet another security checkpoint. They showed their identification for a second time and once again passed through a metal detector. They walked down yet more hallways, twisting and turning through the labyrinthine interior of the building. Then another security checkpoint. It seemed to Ballen that they went through concentric rings of security as they progressed deeper and deeper into the complex. The setup reminded him of traveling to CIA headquarters in Langley, Virginia.
Eventually, Ballen and Sollers were led into a windowless conference room. They sat down at a table and were joined by four attorneys representing Koch Industries. Two of the attorneys were from Washington, and the other two were in-house Koch lawyers based in Wichita. The contingent of attorneys was clearly led by Don Cordes, a vice president at Koch Industries and the company’s top lawyer.
When Charles Koch entered the room, it became clear almost instantly that this man was the master of this domain. The people around him treated Charles Koch with deference—a deference that seemed to go deeper than simple respect for a boss. Sollers and Ballen had no way of knowing that Charles was not, in fact, just the boss of the company. He was its leader. Charles Koch did not order people around him to do what he said. He inspired them to do so. He had a command of the people around him that was difficult for outsiders to understand. Visitors like Ballen and Sollers couldn’t have known that Charles Koch had spent decades building up the loyalty and admiration of the people who worked for him. They didn’t know about his management seminars, the classes and lectures that he held to impart his philosophy.
But what they could see clearly was that Charles Koch’s authority was complete. He was trim and, at fifty-three, still had an athletic build. He had thick blond hair, a square jaw, and bright blue eyes. He sat down at the table across from Ballen and Sollers and he looked at the two of them, these Washington lawyers. Whatever he might have thought about them, it was impossible to say. But it was clear that he was not intimidated.
“Could you please state your full name for the record?” Ballen began.
“Charles de Ganahl Koch.”
“Sir, what is your position with Koch Industries?” Ballen asked.
“I am chairman and chief executive,” Koch replied.
Chairman and chief executive. This was much more than a job title. It was a statement that there was no higher authority within Koch Industries than Charles Koch. And this authority was greater than most CEOs’ because Koch Industries was privately held. Charles Koch and his brother David were the primary shareholders; they’d bought out any shareholders who might have challenged them. Many people could criticize Charles Koch, but it was difficult to see how anyone could actually fire him. As long as his brother David agreed with him, Charles Koch had total command over the enterprise.
Ballen didn’t treat Koch with deference; he certainly wasn’t inspired by Koch. There might have even been a note of disdain in his voice. As Ballen had done in many depositions and many interviews before, he began to bore in with a list of questions.
“Sir, what were the company’s overall sales in 1988?” Ballen asked.
“I think about ten billion dollars.”
“What was the net profit figure for the company last year?”
“It was about four hundred million.”
Ballen could not have known exactly how offensive those simple questions were to Charles Koch. The CEO prized his privacy and his ability to keep Koch’s financial performance concealed behind a wall of secrecy. It was privileged information to know what Koch’s annual revenue was. The level of profits was considered top secret. And here was this lawyer, stomping all over Koch’s secrets with total disregard.
“What percentage of the business involves crude oil—crude oil purchases?” Ballen continued.
“Percent in what sense?” Koch shot back.
Percent in what sense? Ballen gamely tried to define the word percent, and the sense in which he meant it.
“Of sales and profit, approximately,” Ballen said.
“I would guess about ten percent of the profit and—this is a guess again—about twenty percent of sales,” Koch replied.
Ballen gave Charles Koch a set of documents—the same documents that had shocked Ballen’s investigators in Washington. These were Koch’s own internal figures showing that Koch had taken far more oil than it paid for from oil wells. Ballen would see how Charles Koch responded to these documents. Charles Koch might say that the documents were forgeries, or that they did not actually show what they appeared to show. But Charles Koch said none of those things as he looked over the figures.
“Have you ever seen any of these documents?” Ballen asked.
“Yes, I typically see the quarterly—”
“All right,” Ballen interrupted.
“—figures,” Koch finished.
Charles Koch said he didn’t review monthly figures that showed whether the firm was long or short on the oil it bought. But he didn’t dispute the authenticity of the numbers.
Ballen pushed further. Referring to one of the documents, he asked, “And then what is indicated in the first quarter ’86? What do those numbers show?”
“Well, Louisiana was about two thousand barrels long.”
“And that would be long?”
“That would be long.”
For a prosecuting attorney like Ballen, Charles Koch had just done two important things: he had confirmed that Ballen’s evidence was authentic—that the numbers on oil sales Ballen obtained through the subpoena were correct—and Koch had also confirmed that he had been aware of those numbers, that he had known that Koch was long on its oil sales.