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What Are the Latest Revelations About Koch Industries?

Our guide to the latest allegations about America’s second-largest private corporation.

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The Koch Industries headquarters in Wichita, Kan., on Nov. 14, 2005. (Larry W. Smith/AP Photo)

Bloomberg Markets Magazine has published an in-depth investigation into business practices at Koch Industries, run by politically influential brothers Charles and David Koch. The story lays out what it suggests is a decades-long pattern of illegal and unethical behavior at Koch.

Both Bloomberg Markets Magazine's story and Koch's official response are long and full of complicated details, and it's not easy to untangle it all. Here's our guide to what seem to be the newest, most significant allegations.

Undisputed: Koch's subsidiaries in Europe got contracts through bribes in at least six countries.

In 2008, in the wake of a $1.6 billion settlement by the German engineering giant Siemens for bribing officials around the world, Koch conducted an internal investigation of its own payment practices. The company found that Koch-Glitsch France had paid illegal bribes to secure contracts in India, Africa and the Middle East, including bribes to government officials, a practice banned by the Foreign Corrupt Practices Act. In response, Koch fired several employees and sales agents, including the business director of Koch-Glitsch France.

Disputed: Was Koch's response sufficient?

According to Bloomberg Markets Magazine's analysis of French court documents, Koch failed to hold higher-level officials accountable for the bribery payments. Koch said Koch-Glitsch's president for Europe and Asia "had no knowledge" of the misconduct. Koch also ended up firing the ethics manager who first conducted its investigation, and French labor courts upheld the firing as fair.

Context: Many corporations make bribes—and pay fines for breaking the law.

Many large companies have been investigated for bribery of foreign officials, including Hewlett-Packard and Motorola. The United States has recently stepped up its enforcement of the Foreign Corrupt Practices Act, including a preliminary investigation this year into whether News Corp. may have violated the act. A recent survey of business executives found that only 30 percent were "very confident" that their existing policies would prevent bribery.

Undisputed: Koch's European subsidiary sold petrochemical equipment to Iran, which seems to be perfectly legal.

While American companies have been banned from trading with Iran since 1995, Koch's European subsidiary, Koch-Glitsch, sold equipment to a unit of Iran's National Petrochemical Company for nearly a decade. The equipment helped construct an ethanol processing plant. Koch's legal counsel told the Washington Post that the sales totaled roughly 15 million euros over nine or 10 years, and that the equipment sold had "no military, weapons, or nuclear application whatsoever."

As Bloomberg Markets Magazine notes, while the sales to Iran may be controversial, they appeared to be legal since no U.S. citizens or U.S.-based divisions of the company were involved. Instead, Koch did the business at arms length through Koch-Glitsch offices in Germany and Italy.

Disputed: Was it wrong for a Koch subsidiary to do business with Iran?

Bloomberg Markets Magazine described internal documents demonstrating that Koch took a rigorous approach to following the letter of the law, but the article suggested more investigation might be appropriate. Koch's general counsel told the Washington Post that the company voluntarily ended all sales to Iran in 2005 or 2006. (Bloomberg Markets Magazine reported records of sales to Iran until 2007.) Koch dismissed comments by what it called a "disgruntled former employee" who told Bloomberg he felt the company's dealings with Iran had betrayed its stated core principle of integrity.

Context: Koch is one of many corporations that have done business with Iran.

Many other American companies, including Halliburton and GE, have done business with Iran through subsidiaries, and as the Washington Post's Jennifer Rubin pointed out, a few were still doing so after Koch ended its ties to Iran.

As well as these new criticisms of Koch's corporate behavior, the Bloomberg Markets Magazine article and Koch's response revisited several previously reported scandals, including millions of dollars in settlements the company paid after it failed to pay for $31 million worth of crude oil it took from Indian landmade false statements to cover up illegal emissions of the toxic chemical benzene at a Texas plant and accepted responsibility for the deaths of two Texas teenagers who died in an explosion caused by a leak in a gas pipeline with a well-documented history of corrosion.

Correction (10/5/2011): We originally referred to Koch-Glitsch as “France-based.” It has offices around the world, including in France; its main European office is in Italy.

Clarification: We originally referred to the Koch investigation as a Bloomberg story. It is from Bloomberg Markets Magazine.

So this article acknowledges that many large corporations bribe officials to get contracts and deal with our declared enemies. This is to be reasonably assumed given that they bribe and lobby our own government and much of that is perfectly “legal”. They pay to play, that is why they are large.

Barry Schmittou

Oct. 4, 2011, 12:16 p.m.

I agree Steve. Here are a few examples of crimes and/or violations committed by major campaign contributors for Obama and Bush and no one was prosecuted. I have not had time to add Goldman Sachs and others yet.

(1) Wachovia Bank laundered $378 billion for Mexican drug cartels that are responsible for 35,000 murders. No one was prosecuted by Obama !! Wachovia was fined 110 million which is only one third of one percent of the money they laundered !! (Wachovia gave Obama and other candidates $1.3 million in contributions in 2008. Wells Fargo bought Wachovia and they also gave huge contributions during this time period)
(2) Bank of America, American Express Bank International and Western Union also laundered drug money and no one was prosecuted.
(3) AIG received a Non Prosecution agreement for rigging huge bids to increase sales of Workers Comp;
(4) AIG received a Second Non Prosecution agreement for Aiding & Abetting Securities Fraud;
(5) AIG and Prudential received a Non Prosecution agreement for accounting frauds;
(6) Prudential was also fined $600 Million in Securities Fraud Fines
(7) Prudential, Unum Insurance, and MetLife also committed similar bid rigging violations regarding health care plans and have received multiple Non Prosecution agreements from multiple government agencies;
(8) Metlife still endangers patients lives by ignoring life threatening medical conditions when patients file claims on the policies that MetLife committed frauds to sell;
(9) JP Morgan received a non prosecution agreement for bid rigging in 32 States !!

You can see links to the actual Non Prosecution Agreements later by pasting obamadrugmurdersconnection.blogspot.com

Businesses in America know they can commit crimes and even kill many citizens and they face almost no chance of prosecution!! You can paste the following later to see 32 Non Prosecution agreements in 2010. If you scroll down to page three and look in the second column you’ll see how many of the crimes are health care or financial fraud and kickbacks !!

gibsondunn.com/publications/Documents/2010Year-EndUpdate-CorporateDeferredProsecutionAndNon-ProsecutionAgreements.pdf

(11) AIG endangers injured war Zone Contractors lives. CNA endangers injured American Workers and injured War Zone contractors !!
(12) During the time AIG rigged bids to increase sales o Workers Comp policies WFAA - TV in Dallas wrote :

“a remarkable number of Texans committed suicide because they could no longer endure the pain caused by their injuries and they had been repeatedly turned down for worker’s comp care.”

(13) Additionally according to ProPublica.org :
“Drugmaker Eli Lilly pleaded guilty to illegally marketing its blockbuster antipsychotic Zyprexa for elderly patients. Lilly paid $1.4 billion in criminal penalties”

(No one was prosecuted)

“A doctor named as a co-defendant in one suit - for allegedly taking kickbacks to prescribe the drug extensively at nursing homes - never was pursued.”

“Alpharma paid $42.5 million to settle fraud allegations that it paid kickbacks to doctors to prescribe its painkiller Kadian. At least 15 drug and medical-device companies have paid $6.5 billion since 2008 to settle accusations of marketing fraud or kickbacks.”

(No one was prosecuted)

“None of the more than 75 doctors named as participants were sanctioned, despite allegations of fraud or of conduct that put patients at risk, a review by ProPublica found.”

ProPublica wrote these quotes :

“Workers fought long battles for medical care, including such things as prosthetic devices and treatment for post-traumatic stress disorder. The Labor Department seldom took action to enforce the law. Labor officials can recommend cases for prosecution to the Justice Department–but have only done so once in the past two decades, according to Labor officials.”

(end of ProPublica quotes)

Barry you should leave out any references to any particular President sitting or past because this has been going on in the Republican party and the Democratic party alike for the last 70 years or so. If you put them all in a bag and shake it up when you poured them out you’d never be able to tell the difference, they are all the same.

Also Barry, dont you think you’re being just a little bit rough on all those financial corporations . Dont you realize Barry they have feeling too and according to the Supreme Court of the USA Corporations are people too.
(They’re all criminals are’nt they, and we just keep lying to ourselves that they are trying to do the greater good, its so sad but true)

Barry’s detailed comments on corruption are sad to read.  Corruption is like weeds in my garden.  I get rid of them and next spring there are new weeds.

“While American companies have been banned from trading with Iran since 1995, Koch’s European subsidiary, Koch-Glitsch, sold equipment to a unit of Iran’s National Petrochemical Company for nearly a decade.”

The Koch Brothers are our national nightmare and anything that shines a bright light on them is a good thing.  That said, the nature of the essentially stateless multi-national corporation is both amusing and dangerous, and ultimately pathetic.  A Koch subsidiary in France cal legally ignore the laws of the parent company’s country of origin.  Wonderful.  The only good thing that comes out of this is a potential fracture between radical Zionists and the Koch Brothers.

It gets crazier even within a U.S. based corporation, including not-for-profits.  When I worked for Medicare our private sector fiscal intermediaries that screened and paid our bills were allowed to own HMOs that provided care and services and were reimbursed - wait for it - by another part of the same company.  They assure us one part of the company won’t talk to the other, except at the Christmas Party.  We do this to ourselves and we allow ourselves to be victimized by these corporate bandidos.

Is this article finished?  Given what the Bloomberg article dishes out, this one makes the Koch’s seem like the minor leagues, with their practices only unlawful if you’re extremely liberal about the reach of the law.

They handled the bribes well within the letter of the law.  It isn’t illegal for a French company to do business in Iran.  This article sounds as if it’s inventing a controversy, which is a shame, since it’s only going to get ProPublica branded as biased and the remaining encyclopedia of more substantive crimes ignored.

Even the official response linked above admits to more wrongdoing (though with convenient scapegoating in most cases) than the article above.

James B Storer

Oct. 4, 2011, 3:40 p.m.

Michael, you make a good point that we might just lump all the administrations (Republican and Democrat) of the last hundred years in a sack and blame the shenanigans on all of them at once.  However, we are presently in a tremendously dangerous situation, and I feel we must specifically target the conscienceless administrations and government at large over the last thirty years.
  Barry Schmittou, we all (I think) are grateful for bringing to our attention the horrid tragedies you uncover.
  Skartishu, Granby MO

John,

This article isn’t meant to be comprehensive, but to discuss Bloomberg’s two major new allegations, and note that their investigation and Koch’s response included others, as well.

Putting Koch’s entire legal and environmental record in the context of what other, less politically contentious companies have done would be an important service to readers—but that’s out of the scope of a shorter piece like this.

Lois

Barry Schmittou

Oct. 4, 2011, 5:04 p.m.

Thank you James, Michael, Jack and Max (more below)

It’s also nice that Lois and ProPublica actually respond to readers like Lois just did.

New evidence ! Here are quotes written in the comments by JS on the ProPublica “Secret Documents” story :

“Need further confirmation of the Administration’s intent?  Consider that they brought in as chief of staff, the former head of lobbying for JPMorgan Chase ”

I have not confirmed this but it seems to be standard operating procedure !!

Micheal, thank you for the smiles I got from your comments approach : )

James, I greatly appreciate your gratitude. I do get on some peoples nerves because I am sure we are in a “tremendously dangerous situation” like the one you wrote about, and I believe we should do everything possible to help foster life instead of endanger and destroy life like the worlds leaders are doing.

There are many politicians from the past decades who have engaged in a treasonous and deadly destruction of Democracy and justice in the U.S. and worldwide.

“The story lays out what it suggests is a decades-long pattern of illegal and unethical behavior at Koch.”

So the take-away from some is that everyone does it. The inference there is that it’s perfectly ok. We don’t know that everyone does it. There is no proof of that. What should be done, is to prosecute those that do it. And that is being done. See also CitizensForEthics.org

Les54torn, your post got me to thinking, do we really prosecute the perpetrators? I remember the infamous taped phone conversations of traders at Enron who caused the energy price spike and the rolling blackouts in California who joked about it being at the expense of grannies. Does anyone know what happened to these traders? Were they ever charged with fraud or with commodities price fixing or manipulation? Other than Skilling was anyone else charged?

les54tom:  The takeaway hould be that Koch did a good job of shutting the bad stuff down when they found out about it, and taking responsibility, paying a lot of money, and firing those who actually did the bad stuff.  If our own government had that kind of accountability for government employees then we might waste a lot less money.  But all in all, this shows me that Koch is a heck of a lot more responsible than the US Government.

I wasn’t aware that these issues were the new ones on the pile, Lois.  I’m coming in on this topic fresh.  That makes a bit more sense.

Bloomberg’s new 14 person investigative team has it’s work cut out for them investigating the rest of American Industry—unless they’re goal was only the narrow political one of painting the Koch brothers with a broad brush.

Powerline has been covering this story since before it was published. The problems in the story that have been aptly pointed out here (among other problems) were clearly outlined before the story published. It is clear that Bloomberg tried to make a scandal out of the types of problems that are inevitable in huge multi-national conglomerates. That doesn’t excuse violations of law or lack of regulatory compliance, but as long as corporations hire people, they will make mistakes and break laws. All we can ask of a corporation is that they act responsibly in these situations. To the extent that Koch did not behave responsibly, they should be held to account.

But why Koch? Surely more fertile ground could be found with General Motors, General Electric, IBM or AT&T. If you spend over a year digging for dirt and can’t find anything interesting, isn’t that the universal signal to either a) keep digging or b) give up? And who devotes a gross of man months researching a company with little to show for it unless they are determined to find something regardless of cost? That smacks of witch hunting and agenda-based reporting.

Okay, I’m kidding. I know, you know and everyone knows why Bloomberg did this odd thing, which is only odd if you assume Bloomberg has some pretense toward objectivity. I’m saying this not so everyone who reads it might discount their story on Koch. I’m saying this to remind everyone that a news service that will toss aside journalistic ethics to smear a multinational conglomerate with vast resources will not hesitate to mislead about lesser things.

The Bloomberg article is a smoking gun, against Bloomberg. If they cannot be bothered to elimination the salacious innuendo that constitutes this story, then they don’t deserve my patronage (or yours).

Tom,

I don’t think its fair to accuse Bloomberg of a witch hunt and smearing, while citing Powerline as a credible source.

John Hinderaker, one of the bloggers at Powerline, is an attorney for Faegre and Benson, who happens to count Koch as a major client. It’s safe to say there is some bias in his habitual defense of Koch.

“The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”

To all action in complicity of Koch Brothers are guilty as well…

The Comments are as good as the article. Thanks everyone!

I would take a wild shot at imagining an Earth that had fallen victim to such as the Koch brothers, but…somebody already beat me to it:  Frank Herbert in his novel Dune.  That “future Earth” (unless such as the Koch brothers are defanged) is named Giedi Prime:

http://www.en.wikipedia.org/wiki/Giedi_Prime

It may seem a little odd to point to a science fiction novel as an example of the risks we run, but what is science fiction today has a way of becoming reality tomorrow; much of science fiction is an extrapolation of current reality into predictable outcomes.  E.g., the next time you use your cell phone, recall Star Trek’s “communicators”. 

Or read the collected works of H.G. Wells; much of his work includes vignettes of social problems extant in his time that he transplanted into what was, to him, the distant future…a future that is our reality.

Complete with the continued evolution of the social and governmental issues that he foresaw.

Barry Schmittou

Oct. 6, 2011, 4:18 p.m.

@ Steve,

Maybe add Soylent Green to the plot.

@Barry:  The likelihood - however distant - of your possibly facetious addition (or a variation thereof) troubles me, actually.  Given that our right and the neoliberals among the Democrats have exported so many of our jobs, we have an ever poorer population.  Meanwhile, those countries that received our jobs are getting wealthier.  That introduces a couple of factors the United States has not had to deal with before.

One thing is a given:  In keeping with Big Energy’s (among whom I would count the Koch brothers, so this is actually on topic) attitude towards our carbonaceous (coal/oil/natural gas) reserves of energy, anybody who can outbid the American people will be given priority over the American people for the food grown here if our huge food conglomerates have any say in the matter - just as is now the case with our energy reserves.

An ever poorer population with ever higher food costs and a right-wing government that destroys social safety nets opens the door for some pretty horrendous possibilities.  We don’t have the latter - yet - but we have the surging food prices

http://www.ft.com/intl/foodprices

and the increasing disparity in wealth

http://www.robertreich.org/post/9789891366

And the right - people such as the Koch brothers - are certainly moving to take control of government.

It is a historical fact that increasing desperation drives desperate behavior, which may range in scope from atrocities committed by individuals or small groups all the way up to the acceptance of government programs that once would have been rejected with horror…

Human desperation is the surest path to barbarism, and with barbarism comes barbarity.  Words not often used, today - but contained within all humans like seeds awaiting the right conditions in which to sprout.  A right that begins frothing at the mouth when they say phrases like “European socialism”...a right whose greed will not permit them to look to the nation’s future…a right that dehumanizes tens of millions of Americans with phrases like “entitlement spending” and “parasites”...

They’re just the kind of people to bring those seeds to life.

Barry Schmittou

Oct. 7, 2011, 1:49 p.m.

@ ibsteve2u

Hi Steve,

I read many of your comments because I learn new information and share similar beliefs with many of your thoughts.

You mentioned that I might have been facetious regarding my comment about Soylent Green.

I looked up a definition of facetious:

“To make an attempt at being funny, while being sarcastic at the same time.”

(In my previous work and life I’ve enjoyed being friendly and funny, and received recognition including winning “The Friendly Award” when I represented Disney movies in major retail outlets)

But I was not being facetious regarding Soylent Green.  In your last comment you mentioned horrendous possibilities. I believe the desperate times seen in Soylent Green, Mad Max and similar movies are a possible variation or similarity of the future.

I say this because I am certain a small group of very wealthy humans have bought and control the government leaders of the U.S. and the world. 

I believe every life on this planet is in great danger because of the insane leadership of the world.  I used to think the Republicans were the primary destroyers, but now I know it is the leaders of both parties and the global leaders too.

In addition to Soylent Green and the other fiction we’ve mentioned, I also believe this desperation is described in the Bible.

The Bible sometimes seemed fictional to me until 2001, when numerous crimes were openly committed by huge corporations, my health benefits were openly stolen while I needed cancer surgeries, and the State and U.S. government always protected the criminal corporations.

I believe all the corporate corruption is very connected, complex and intricately planned at the same time, so when ProPublica’s article is about bribery and “unethical behavior at Koch”,  I still feel comfortable posting comments about Wachovia laundering $378 Billion for mass murdering Mexican cartels, and many corporations rigging bids and committed frauds, but no one is ever prosecuted. People can scroll past me if they don’t see the connection.

Regarding facetious, I have tried to be funny once or twice in my comments on ProPublica but generally choose not to. There is so much overwhelming factual evidence of corruption, if we use humor and sarcasm in our comments the reader’s mind may easily misinterpret as they read information that is new to them. I also believe it’s is very possible that some of the mainstream corporate media use slapstick humor, sex, graphic violence and graphic by section of crime victims to distract and/or dumb down the masses. 

Steve, if I remember correctly you and John don’t always agree, but both of you and many other commenters have great input and information.  If I were ever allowed to manage or have input to a real Department of Justice I would pray you and John and many other commenters and ProPublica writers would be part of the team.

I believe ProPublica’s worldwide comment forum is one of the best opportunities that any average citizen of the world has to try to help all living beings have the best life and eternity. 

This forum is also a way that the average citizens of the U.S.  can show the world that we have sincere, caring and loving qualities.  That is greatly needed now since the leaders of the U.S.  and world are busy stealing all the world’s resources and they don’t care how many die in the process.

michael whittaker

Oct. 26, 2011, 8:13 p.m.

Wow, just wow.  I thought I was pretty hep but, youse guys are a whole different level.  I think I am starting what is called an apprenticeship.  Unlike others, I choose to stand on the shoulders of giants and resist each generations desire to “re-invent the wheel.”  Thanks to Barry, ibsteve2u, sue bee etc.  Bookmarked you are.

“I say this because I am certain a small group of very wealthy humans have bought and control the government leaders of the U.S. and the world.” 
Barry Schmittou

Thank you Barry as I too believe that 147 multinational corps. control the planet…. sigh

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