A new book on the Koch brothers released today, Sons of Wichita, details the Kochs’ history and the rise of their empire. The book further reveals what is becoming a clear portrait of these powerful tycoons: two billionaire brothers who have always put their personal fortune and oil empire first.
The stories recounted about the Kochs’ business practices are both astounding and yet utterly predictable. According to the book, in 1995, Koch Industries was sued by the federal government under the allegation that it had spilled millions of gallons of oil into US water, with the Department of Justice (DoJ) having identified 300 separate spills between 1990 and 1995. Worse, the DoJ prosecutor reportedly said that Koch Industries had “repeatedly lied about the amount to avoid penalties” and that the company “would call in two barrels when they had something that was a shocking amount of oil.”
It was an allegation that was reinforced by former Koch workers themselves. According to the book, the Kochs “had taken a shockingly cavalier approach to pipeline safety” as reflected by the testimony of former employees. One employee explained the technique they utilized called “wheel washing” to mask oil spills and cover up the extent of them. The same employee reportedly said that “crews often did so on their own initiative, since they wanted to protect their jobs.” According to Schulman, when several Koch officials were asked by prosecutors if they “had ever knowingly downplayed the size of spills,” they pleaded the Fifth Amendment.
But it wasn’t just the environment or the law that the Kochs were willing to disregard in their pursuit of greater riches. Former Pipeline Manager Kenoth Whitstine reportedly recalled warning a supervisor about a hazardous, even potentially fatal situation. According to Schulman’s recounting of Whitstine’s testimony:
The supervisor’s callous response chilled him. He said “that I needed to understand that money spent on certain projects could make a lot more money than on other projects and that they could come back and pay off a lawsuit from an incident and still be money ahead.” The message was that it was more profitable “to take a gamble of something happening later and handle that situation when it arose,” even when human lives might be at stake.
The evidence just keeps mounting: There is nothing the Kochs won’t do for another dollar.
Environment, Lawsuits, Worker Safety, Business Methods
Former Department of Justice Attorney Who Prosecuted Koch Industries Said Koch “Repeatedly Lied” About Size of Oil Spills “To Avoid Penalties. According to Sons of Wichita: “Meanwhile, in Washington, a dogged, platinum-haired prosecutor named Angela O’Connell was also taking on Koch Industries. She had grown up in the DC area and joined the Justice Department in 1982, after graduating from Georgetown Law School. She was now the lead attorney on one of the largest environmental cases in the agency’s history. In 1995, the federal government had filed suit against Koch under the Clean Water Act, alleging that the company’s pipelines and storage facilities had leaked millions of gallons of oil into the waters of six states across the South and the Midwest. One of the reasons for these spills, the agency believed , was the decrepit state of the company’s pipeline system. Koch had grown into a business behemoth by shrewdly buying up undervalued oil assets that Sterling Varner called “junk”— and in some cases it was now starting to show. The Justice Department had documented over 300 spills since 1990. The worst of them had occurred in October 1994, when a pipeline in southern Texas disgorged nearly 100,000 gallons of crude and painted a 12-mile oil slick on Nueces and Corpus Christi Bays. Spills happen in the oil business, but the scope of Koch’s violations and the company’s disregard for the environmental consequences had attracted federal scrutiny . In the event of a spill in U.S. waters, oil companies are required by law to report the estimated amount to the Coast Guard, which marshals resources accordingly and responds to the scene. But Koch “repeatedly lied about the amount to avoid penalties,” O’Connell said. “These guys would call in two barrels when they had something that was a shocking amount of oil.” (In the case of the Corpus Christi spill, the company had originally reported that just 420 gallons of oil had spilled.)” [Sons of Wichita, Daniel Schulman, 5/20/14]
When Asked by Government Lawyers If “They Had Ever Knowingly Downplayed The Size Of Spills, Several Koch Officials Pleaded The Fifth Amendment.” According to Sons of Wichita: “Asked by government lawyers whether they had ever knowingly downplayed the size of spills, several Koch officials pleaded the Fifth Amendment.” [Sons of Wichita, Daniel Schulman, 5/20/14]
26 Year Koch Employee and Division Manager of Marine Subsidiary Said Many Koch Spills Occurred In Remote Areas and Were Never Reported to Authorities; When Authorities Did Respond, Dubose Said Koch Employees Were Instructed to Cover Up Extent of Accident Using Technique Called “Wheel Washing.” According to Sons of Wichita: “‘Many of Koch’s spills… occurred in remote areas and were never reported to any authorities. Many of these were in the amount of 5 to 6 barrels, although I estimate that there were dozens of spills of over 50 barrels which entered the water,” noted Phil Dubose , who worked for Koch Industries for twenty-six years, rising to become a division manager of its marine subsidiary. When the authorities did respond, Dubose said, Koch employees were instructed to cover up the extent of the accident by using techniques like “wheel washing,” in which a boat’s engine blade churns up the oil slick to mask it. “It was understood that we should either ‘wheel wash’ the spill, or to cover it up with soil if it was on land,” he noted. ‘’Wheel washing’ was a standard practice for Koch in my division. Crews often did so on their own initiative, since they wanted to protect their jobs.’ [Sons of Wichita, Daniel Schulman,5/20/14]
Kenoth Whitstine, Former Koch Pipeline Manager In Southern Texas, Testified In Deposition About “Shockingly Cavalier Approach To Pipeline Safety.” According to Sons of Wichita: “Kenoth Whitstine, who had resigned in 1994 as a Koch pipeline manager in southern Texas, testified in a deposition that the company had taken a shockingly cavalier approach to pipeline safety.” [Sons of Wichita, Daniel Schulman, 5/20/14]
Former Koch Pipeline Manager Whitstine Said That When He Told Supervisor of Danger Posed to Workers by Specific Pipeline, Supervisor Responded By Telling Him “That I Needed To Understand That Money Spent On Certain Projects Could Make A Lot More Money Than On Other Projects And That They Could Come Back And Pay Off A Lawsuit From An Incident And Still Be Money Ahead.” According to Sons of Wichita: “He recalled taking his supervisor out to inspect one stretch of pipeline that he believed posed a hazard . Portions of the once-buried pipeline were now fully exposed, and Whitstine worried that it could be punctured. “You know,” Whitstine said, “one of them logging trucks could drive over this line here and it could very possibly drag the Dresser off or something and cause a blow-out and possibly burn, catch on fire, and kill… whoever might be in the logging truck.” The supervisor’s callous response chilled him. He said “that I needed to understand that money spent on certain projects could make a lot more money than on other projects and that they could come back and pay off a lawsuit from an incident and still be money ahead.” The message was that it was more profitable “to take a gamble of something happening later and handle that situation when it arose,” even when human lives might be at stake. “Given the time-value of money and the rate of return on money invested, Koch made a profit from its repeated decisions to delay implementing standard maintenance procedures and necessary repairs,” said Texas’s onetime deputy attorney general Linda Eads, who joined forces with the Justice Department in prosecuting the Clean Water Act case.” [Sons of Wichita, Daniel Schulman, 5/20/14]
Employees Found by Bill Koch In Family Lawsuit Said They Had Ethical Concerns With Koch Industries Methods for Measuring Oil; Former Koch Gauger Said “I Felt That It Was Stealing Oil.” According to Sons of Wichita:
“In the weeks that followed, a parade of former Koch employees testified, in person and via videotaped depositions displayed on the large screen facing the jury. Seeking to stoke negative coverage of Koch Industries ahead of the trial, a Dallas-based detective working for an investigative firm hired by Bill circulated a highlight reel of the depositions to a host of Midwestern journalists. The investigator, Jack Taylor, also sent copies of the tape— dubbed “The Koch Method”— to trial lawyers suing Koch Industries, including Ted Lyon and Marquette Wolf, enclosing articles detailing the company’s legal entanglements and environmental misdeeds. Seated at the cramped counsel’s table, Bill scribbled notes and cracked an occasional smile as the gaugers testified. Hailing from at least a dozen different states, these ex-employees (some of whom had been fired or laid off by the company ) told of learning to gauge oil the “Koch way,” by adjusting their measurements to “bring home the barrel”— make sure, in other words, that if Koch paid for a barrel at the wellhead, that much crude or more arrived at the transfer station. “I felt that it was stealing oil,” Dana Ehrhart, an ex-Koch gauger in Texas, testified. “It was enough to bother my conscience,” admitted James Spalding, who’d gauged oil for Koch in New Mexico in the 1980s before becoming an evangelist. “I feel like I’m up here telling the whole world I was a thief, and at the time I thought what I was doing was the right thing,” Curtis Henson, a twenty-five-year Koch veteran, tearfully told the court.” [Sons of Wichita, Daniel Schulman, 5/20/14]
Sons of Wichita: Company’s Insistence On Conformity to Market Based Management Caused Some to Complain of “Cultlike Atmosphere; Former Employee Compared Atmosphere to Orwell’s 1984. According to Sons of Wichita: “Because of the company’s insistence that its employees conform to the Market-Based Management model, some have complained of a cultlike atmosphere. “Everyone is walking around like they are in the George Orwell book, 1984,” commented one former employee.” [Sons of Wichita, Daniel Schulman, 5/20/14]