Crime

Total Control

Koch Industries’ interlocking web of companies, foundations and front groups touch everything from the plastic cups you put out at parties, the gasoline you pump into your car, the votes you cast at the ballot box and even the wages your employer is willing to pay you. In short, this privately held enterprise, owned by two brothers, exerts arguably more influence over your life than the government they and their network of like-minded billionaires have been trying to undermine for over forty years.

Through theft, deception and secrecy the Koch’s have built a capitalist juggernaut and infiltrated the institutions of democracy in order to propagate its plutocratic designs upon the country; availing itself of a fringe political ideology rooted in the antebellum South, they have wrought environmental devastation, eviscerated the middle class and have managed to shift the political discourse in America to favor their self-serving, radical free-market policies.

Despite appeals to notions of liberty and so-called “sound economics”, at the core of the Koch business philosophy is little more than a justification for rapacious greed and a pathological inability to share. Those of us downstream from their unimaginable wealth are left to deal with the consequences of their massive, unchecked and wounded egos. But, it is only by dispensing with the pseudo-academic, quasi-legal arguments crafted by the purveyors of Koch’s proto-fascist gestalt, that we can begin to see the contours of their totalitarian dream.

Spiking the Water

In April 2014, the city of Flint, Michigan switched its water supply from Lake Huron to the contaminated Flint River. By June people were dying from a Legionnaires-associated disease caused by bacteria found in the water supply. The crisis became a national scandal as more people got sick even as municipal leaders claimed the water was safe to drink.

Five years later, Flint is still reeling. A fact recognized by the city’s new Mayor, Karen Weaver, who swept into office on a wave of anger and resentment. “It’s a community that’s still dealing with the trauma and the aftermath”, she told the New York Times “of having been poisoned at the hands of the government.”

But, the government was actually the first victim of this tragedy. Hidden in the depths of the rancid waters that killed twelve people and sickened nearly a hundred more, none other than the Kochtopus and its vast political influence machine thrashed about.

In the state of Michigan, it exerted considerable influence in the governor’s office through the Koch-funded and Koch-staffed think tank, Mackinac Center, which had been pushing for legislation that would place any community facing a “financial emergency” under direct state control and, in turn, hand over extraordinary powers to emergency managers. Among the powers accorded to these unelected bureaucrats was selling off local resources to private companies, outsourcing services and changing municipal suppliers at will.

True to the words of one state governor, who stated unequivocally, “When the Mackinac Center speaks, we listen”, their legislative recommendation made it into law and many cities were placed under this regime. More than half of the state’s black voters would come to be governed by such managers. The one assigned to oversee Flint made the fateful decision to switch the city’s water supply to “save money”.

Mind of the Kochtopus

The vital role Koch played in the Flint water crisis received little, if any, media attention because, as in this case, most of their machinations are carefully concealed behind front-groups, innocuous-sounding foundations and ostensibly noble causes.

Koch
AP Photo/David Zalubowski – Charles Koch and son Chase – June 29, 2019

Charles Koch began building this network, dubbed “Kochtopus” for its monstrous reach and multiple tentacles, almost as soon as he took the reins of Koch Industries in the 1970’s. His first mentor was a man by the name of F. A. “Baldy” Harper, author of a “free market primer” called “Why Wages Rise” in which he derides unions, public schooling and any kind of labor protection laws. A founding member of the Mont Pelerin Society along with Koch’s other idols F.A. Hayek and Edwin Von Mises, Baldy Harper would go on to found the Institute for Humane Studies with Koch’s generous and permanent funding.

The Mont Pelerin Society, in fact, would be the fountainhead for many beneficiaries of Koch money. Formed in 1947, the Society was the result of an historic gathering in Switzerland of free-market intellectuals led by their “guru”, F. A. Hayek, prophet of the rich propertied classes in a time when the rising power of unions and growing regulatory framework threatened to undercut their position. The infamous Chicago School of economics and its most polarizing figure, Milton Friedman, was a direct outgrowth of this post-war egghead club.

Friedman, however, was not radical enough for Koch and considered his approach to economics too technical to fulfill the more fundamental, philosophical and transformative changes Charles Koch wanted to bring about in America, turning his attention to other branches of the Mont Pelerin tree.

He found what he was looking for in another University of Chicago grad, who studied under yet another Mont Pelerin founder.

The Dictator’s Messiah

James M. Buchanan was more concerned with the political and social aspects of economic theory than with pesky numbers or statistics.

In 1956, he submitted a private proposal to the president of the University of Virginia for the creation of a department for Libertarian and conservative studies, misleadingly called the Thomas Jefferson Center for Political Economy and Social Philosophy. Buchanan was motivated to create his department by the watershed Supreme Court decision of Brown v.The Board of Education two years earlier, which put an end to racial segregation in the public school system.

The entrenched Southern White elites that ruled Virginia, led by one of the most powerful Senators in U.S. history, Harry F. Byrd, took the court’s decision as an affront and resisted desegregation with all the means at their disposal. Buchanan’s Center at UVA aimed to subvert what he and the Virginian ruling class perceived as federal incursion into states’ rights – a more palatable framing for their real problem: democracy.

The pull of history and strong resistance from Virginia’s White middle class doomed Buchanan’s project. The inevitable demise of the Byrd organization and the turnover of the university’s leadership eventually forced Buchanan to find refuge in a regular faculty position at UCLA, then a hub of radical right wing thought.

Buchanan’s ideas were popular enough in the tight knit circles he moved in, but they had yet to reach the broader audience he needed in order to generate the momentum required for them to actually affect policy. He began to acquire more widespread recognition after the publication of “Academia in Anarchy”, which put forward ‘solutions’ to expressions of social consciousness among the country’s student body. Along with his co-author, Nicos Devletoglou, he would propose remaking colleges and universities as “industries in which individuals sought to maximize their personal advantages and minimize their costs”. The idea was to eliminate dissent by turning higher education into a business and eliminating the humanities from the curriculum.

James Buchanan at George Mason in 1986 | Photo Credit – Sue Klemens

The book propelled Buchanan into the international spotlight and he would soon be heading back to Virginia to form a new department. Located in the less prestigious Virginia Polytechnic Institute, better known today as Virginia Tech, his Center for Public Choice was where he would first meet Charles Koch and become a regular recipient of the billionaire’s generosity.

Soon enough, Buchanan would have a chance to prove just how useful his anti-democratic vision of government could be to a select group of private interests and the Chilean Minister of Finance, Sergio de Castro, who hosted the American academic for a week of exclusive seminars in Augusto Pinochet’s military dictatorship. The main purpose of the five formal lectures he delivered during his 1980 visit was to explore how his “public choice” theory of economics could inform their new constitution.

Buchanan was credited – though not publicly – with providing the legislative tools the dictator needed to cement the governance structure he was running on behalf of the propertied classes. De Castro’s “modernizations” included such Buchanan staples as school vouchers, evisceration of the public university system, health care privatization and the creation of super majorities in the legislative chambers to make any future changes virtually impossible.

Six years later, James Buchanan would be awarded a Nobel Prize in economics and as his star rose, Charles Koch would single him out to lead his most important – and illegal – political operation on the banks of the Potomac. His name would serve to legitimize Koch’s project at George Mason University; very much the crown jewel of Koch’s by then well-established, multi-pronged political operation.

All About the Business

The engineering degree Charles Koch earned at MIT in 1957 served to sharpen a mind already predisposed to distillation. After his initial resistance, Fred Koch’s second-born settled in his role of heir-apparent and began to break down the parts of the corporation he would eventually rename after his father, selecting the best pieces and putting them back together for a more efficient performance.

He would tinker with it over and over again, reacting to changing markets, governmentally-imposed limitations and the ever-alluring siren call of more profits. Along the way, he would pick up the intellectual tidbits and political and economic theories that best suited his approach, cobbling together a personal business philosophy enshrined in what many a Koch employee would come to learn as Market-Based Management or MBM, for short.

An education in MBM, which some former employees described as a “cult”, was compulsory at the company and embracing its principles was a non-negotiable condition of employment. Ostensibly designed to attract and train free-market thinkers who thrived on the entrepreneurial spirit, Market-Based Management was a collection of tenets devised to produce clones of Charles Koch himself.

As Koch Industries expanded and devoured other gigantic corporations like Farmland and Georgia Pacific, it became harder to sell this glorified employee manual to the swelling number of people on its payroll. But, Koch’s ego and ambition grew along with the company assets. He began pouring more and more money into Libertarian causes and think tanks, as the need to keep the government at bay increased. He would invest in politicians and academics, like Buchanan, who could help him shape the public narrative and deflect negative attention from decidedly unfree market practices, such as the theft of resources from Native lands.

Measure Once, Take Twice

The rocky terrain in northeastern Oklahoma was thought to be of no particular value when the U.S. government relocated the Native American Osage tribe there from their original abode in what had become the state of Kansas. Only a decade earlier, George Bissell and Edwin L. Drake had successfully drilled for oil in Pennsylvania, kick-starting the age of fossil fuel extraction in the United States. The initially worthless land now part of the Osage Reservation soon revealed its rich deposits of crude. Oil leases were issued to the tribe, which oilmen all over the country would henceforth have to rent to gain access to the black gold.

The Osage would reap huge profits from the oil on their land, making them the wealthiest Native tribe in the country – indeed, the richest people per capita in the world. Decades later, Osage tribe members were driving around in expensive cars, wearing furs and exhibiting other signs of conspicuous consumption made possible by the ever-increasing dividends resulting from the oil gushing from the ground.

FILE PHOTO – Osage Nation delegation meets with U.S. President Calvin Coolidge

The story of the Osage takes a tragic but not so unexpected turn, as they began to be targeted in a criminal conspiracy to assassinate them and take over the fortune beneath their feet. The tribe would survive the ordeal with the help of nascent FBI and its fledgling director, J. Edgar Hoover who eventually cracked the multiple-murder case.

During the 1980’s, the Osage and the FBI would have to deal with a far more cunning and dangerous enemy in Koch Industries.

Koch President, Bill Hanna, sent out a company-wide memo instructing employees to “shred”, “burn” or otherwise destroy by “some equally effective method” any records that could benefit competitors. He did so in the midst of a U.S. Senate investigation into allegations of deliberate oil mismeasurement. The final report found Koch culpable of systematic oil theft.

For years, Koch had defrauded crude suppliers through manipulation of industry-standard oil gauging methods. They developed their own step-by-step procedure and drilled it into their oil gaugers with MBM-infused intensity with the understanding that their job depended almost exclusively on proper adherence to it. Gaugers were encouraged to always fudge the numbers they kept when siphoning crude from their suppliers’ tanks and loading it onto Koch’s barges. The practice was known as “cutting the top” and “bumping the bottom”, which simply meant that they took more than what they paid for.

This technique put millions of barrels of free oil into Koch’s refineries over the years. Among their victims were the Osage in Oklahoma, who they identified as the ideal target for a public relations campaign Koch mounted to undermine the Senate’s findings and stave off a criminal inquiry.

Understanding that the Osage had limited accounting expertise, Koch sent a former company trader, Ron Howell, to perform an ‘audit’ of the oil lease receipts against their own to prove that claims of oil theft were baseless. Howell came back with the incredible assertion that not only had Koch not stolen any oil, but in fact, had overpaid. In March, 1990, the Osage Nation News ran a story in which Osage chiefs cleared Koch of wrongdoing, based on the fraudulent audit results. Their statements were carried by the Daily Oklahoman soon after and Senator Bob Dole, beneficiary of almost a quarter of a million dollars from Koch throughout his career, submitted the article into the Senate record.

The criminal case never materialized. The FBI’s investigation was abruptly dropped by incoming U.S. Attorney, Timothy Leonard, a man with no relevant experience who was appointed by Oklahoma Senator and close Koch ally, Don Nickles.

Elbow Room

By 2016, Koch Industries would have grown into a fossil fuel behemoth with an annual revenue “larger than Facebook, Goldman Sachs and U.S. Steel combined”. Its insidious and calculated moves in local and state-level politics, academia and the law changed the political landscape of America. Their network would be instrumental in financing and amplifying the Tea Party zealotry. It would bring anti-union, anti-worker’s rights politicians like Scott Walker into the national spotlight. The radical right-wing rantings of Glenn Beck were written by the Koch-funded FreedomWorks, a tax-exempt group founded by former Republican House majority leader, Dick Armey. Beck would collect as much as $1 million dollars annually from the organization to spew his brand of free-market lunacy.

The Heritage Foundation, Cato Institute, The Reason Foundation, The Tax Foundation, The Club for Growth and Americans for Prosperity are just a partial list of the vast, multi-tiered operation initiated and maintained by the Kochs and their billionaire friends to shift the focus of political and economic discourse away from the majority and centering it around the interests of the 0.01 percent. The wealthy oligarch class coalesced around Charles Koch’s leadership to stage a coup on the rest of the country, couching their inhuman greed in populist rhetoric meant to seduce the masses of people they are intent on exploiting.

Along the way, Koch Industries’ shameful record of ecological destruction, subversion of democracy and death would soon be revealed as their true legacy.

The Bidders

The oil leases on the Osage territory began to be issued in 1912, drawing oil magnates from around the world to bid fortunes under the so-called “Million-dollar Elm”, where an auctioneer sold off the rights to extract from the wells. The tribe’s sudden stroke of luck didn’t come with the usual benefits associated with the accumulation of massive wealth familiar to most Americans. Much of it was kept behind a wall of racist paternalism expressed through government-appointed guardianships, that assigned White men to oversee the expenses of the tribal members and the power to cut them off at their discretion.

It was the sort of draconian government overreach that Koch and the various organizations he funded to promote the idea of limited government might uphold as examples of the dangers he was fighting to avert. But, that would have been empty rhetoric like most of the arguments put forth by many of his political front groups like Americans for Prosperity or Citizens for a Sound Economy. The endgame for Koch and his clique of preposterously wealthy (mostly) men was a government stripped of all responsibility beyond the responsibility to protect their property.

Among the bidders gathered under the tree in Pawhuska, Oklahoma in the 1920’s was a representative of the Gulf Oil company, owned by the Mellon clan, one of the original robber baron families and pioneers of the use of philanthropy as both a means of tax-avoidance and anti-government messaging. One of the heirs to the Gulf Oil, Mellon banking fortune would become one of the country’s biggest backers of radical right wing ideology and a strategically important partner to Charles Koch’s own efforts.

The Silverspoon Radical

Richard Mellon Scaife never gave any interviews or public speeches, but he exerted incalculable influence over America’s public affairs through the multiple foundations he and his family set up.

Inheriting an obscene amount of money at the age of 26 is probably not the easiest thing to deal with for even the most level-headed youngster. But, by all accounts, Richard Scaife was leading the kind of dissolute life most of us expect the scion of inter-generational wealth would. Kicked out of the Deerfield Academy prep school at 14 for drinking, his reputation for alcohol-induced benders would follow him to Yale University, which would also expel him for it.

Richard Mellon Scaife

After his father died in 1958, Scaife assumed the role of financial manager for the fortune passed on to his mother, Sarah. She would create several trusts, continuing the family tradition of using non-profits as tax shelters. Eventually, Richard would consolidate all of the foundations under the umbrella of the Scaife Family Charitable Trusts, which would be used to disburse hundreds of millions of dollars to radical right organizations, politicians and causes.

The most important of these may well have been the Institute for Contemporary Studies (ICS), based out of California. This Scaife-funded think tank initiated a slew of projects meant to influence policy. One of these sought to learn what was being taught in pre-collegiate economics classes and propose more free market-friendly curricula. Another put future president Ronald Reagan in front of every high school student in the state’s eleven hundred school districts via PBS.

Reagan’s deep ties to the ICS can be traced to the presence of Edwin Meese III on the foundation’s board. Meese, who would later serve as Reagan’s Attorney General and, arguably, his most trusted advisor, was among the invitees to Jim Buchanan’s 1973 unveiling of the Virginia academic’s “Third Century Project” outlining the way in which corporate America would transform the nation’s courts. Just a week earlier, Buchanan had presented his plan to another room-full of sympathetic business men. “Conspiratorial secrecy”, he warned them, “is at all times essential”.

The institute would soon count multinational corporations such as Exxon, IBM, Chase Manhattan Bank, Shell and Texaco among its ranks, making it one of the most influential think tanks in the nation.

Rise of the Oligarchs

In 1973, the brand new Environmental Protection Agency took aim at the Olin Corporation, which had started nearly a century earlier as a mine explosives and small arms company. Government contracts during World War I and II would greatly buttress its bottom line and the family-owned concern would go on to form a huge conglomerate producing everything from Winchester rifles to rocket fuel.

Its chemical division had a large rap sheet of environmental pollution and found itself being sued by the Environmental Defense Fund, the National Wildlife Federation and the Audubon Society for releasing DDT-laced effluents into a wildlife preserve. Three years before the EPA came down on the company, they were charged with dumping mercury into the Niagara River and were later found to have falsified records showing it had dumped 66,000 tons of toxic waste into a Niagara Falls landfill.

The Olin Corporation’s criminal negligence and outright disregard for human or environmental health spanned decades. But, as public outcry around these issues began to grow and regulations were put in place John M. Olin – who was not even running the company by then – created the Olin Foundation to, in his words, “see free enterprise re-established in this country. Business and the public must be awakened to the creeping stranglehold that socialism has gained here since World War II.”

Founder of the Olin Foundation, John M. Olin

Olin, along with many other members oligarch class, were galvanized by the infamous Powell memo calling for American business owners to mount a “counterrevolution” against what they saw as an existential threat. Powell, a former director of the Phillip Morris tobacco company, laid out the game plan in his 5,000-word manifesto, which identified the judiciary system as a central focus of their attack strategy. Nixon would appoint Powell to the Supreme Court just two years later.

The Olin Foundation immediately began funding projects focusing on the radical transformation of the American justice system. Among the first the Olin Foundation funded was a program run by an obscure law professor at the University of Miami, Henry G. Manne. Manne was his bringing corporate-oriented and cost-benefit analysis approach to regulation in his Law and Economics Center in the then marginally known campus in Coral Gables, Florida.

Charles Koch, in particular, would find Manne’s ideas very appealing as they dovetailed so perfectly with his own master plan.

Koch’s Law Manne

Charles Koch was following in the tradition of his covenant ideology forbearers. He saw his project to transform American politics akin to the Protestant Reformation, casting himself in the role of Martin Luther declaring that like the rebellious cleric, he stood firm against the established order. “I can do no other”, Koch boasted in a 1999 speech.

By that time, the project had made great, if largely unnoticed, strides. Henry G. Mane was Dean of Koch’s pseudo-academic operation at George Mason University. Over the previous two decades, Manne had been so successful with his Law and Economics program funded to the tune of millions of dollars by the likes of the Olin Foundation, Charles Koch and U.S. Steel, that by the middle of George H. W. Bush’s only term in office, 2 out of every 5 sitting federal judges had participated in Manne’s training sessions, applying free market economics to legal decision-making.

The “Henry Manne Camp”, which counts current Democratic presidential candidate and reportedly reformed liberal Elizabeth Warren among its alumni, doled out rich honorariums to legal scholars to write papers with his particular twist on legal questions that would be published in legal journals, spreading the meme throughout the profession. More than 600 institutions would end up sending their best legal minds to attend Manne’s intensive two-week courses; typically held in posh tropical locales such as Key West. Some institutions, like the University of Virginia’s law school, adopted Manne’s approach in its entirety.

Henry G. Manne, the libertarian legal scholar | Photo Credit: Benjamin Myers/Reuters

Koch and Manne identified what they considered the biggest threat to “economic freedom”. Together they determined that the environmental movement constituted the most clear and present danger to their designs as it sought to “control” corporate interests through “governmental regulation of business”. Government-backed health care also represented a danger since it “impaired the normal workings of labor markets”.

Tax policy, public education and feminism also sent shivers down their spines. The first because of the “inevitable egalitarian instincts” exhibited by “modern” democracies; education had to be curtailed because of the “community values” they considered to be “inimical to a free society”; and finally, feminism was too socialistic for their taste.

Bill Clinton’s re-election motivated Koch to take things up a notch and neutralize these threats, bringing the Nobel prize-winning James Buchanan directly into his operation. After years of funding Buchanan’s work through his various foundations, Charles Koch put up $10 million dollars to set up the James Buchanan Center at George Mason University. The new department would be an amalgam of Buchanan’s Center for Public Choice that the laureate had run at Virginia Tech and Koch’s long-time political hatchet man, Robert Fink’s Center for the Study of Market Processes.

The board of visitors would include William Kristol and Dick Armey, while Edwin Meese III sat as the board’s rector. Buchanan would ultimately be pushed out after getting wind of the illegal nature of the Center’s work. Ostensibly a philanthropic endeavor, registered as a 501 3(c) non-profit legally barred from engaging in politics, the Buchanan Center at GMU was being used as a political lobbying operation led by Koch operatives.

Koch Industries was growing at a frenetic pace, swallowing competitors and violating so many laws in the process, that attacking the system prosecuting them under these laws and imposing multi-million dollar fines on them made perfect business sense.

The Altar of Doom

In due course, the political discourse around the country would begin to reflect the radical, ant-government viewpoints espoused by the foundations and initiatives sponsored by the Kochs and partners like the DeVos family of the Amway fortune, the Coors brewing empire and many others.

Charles Koch issued his battle cry in 1978. “Our movement” he intoned, “must destroy the prevalent statist paradigm”. In the space of two decades his revolution had managed to seep into the national consciousness and its insane tenets would begin to spew from the mouths of his minion politicians. Thom Tillis, a U.S. Senator from North Carolina who owed his post to the Koch machine, wanted to do away with laws compelling restaurants to make employees wash their hands since, he claimed, “the market” would “take care of that”. The press was not immune, either. An editorial board member of the Wall Street Journal took a Koch-infused line against the need for public health officials, expressing her opinion that testing for lead levels in the blood of children was nothing more than an excuse to justify their jobs.

If we were to really look for justifications, we could simply take a closer look at the egregious practices Koch Industries has been employing in their pursuit of profit and unfettered growth. The lawsuit brought against them in 1995 by the EPA for spilling over 12 million gallons of oil across six states as a result of faulty pipelines is only one of many incentives this enormous corporation has to subvert the law and, the tremendous wealth at their disposal has allowed Charles Koch to go beyond mere court battles to burning the U.S. code itself upon the altar of free markets.

Labor Tamers

From the time Charles Koch took control of the company his father built, he declared war on the working class. The most profitable asset in Koch Industries’ early years was the Pine Bend refinery, whose massive profitability was made possible by several extraneous factors including its geographical location, government policy on the importation of Canadian crude, loopholes in the Clean Air Act and government subsidies. It also had the benefit of being run by a highly-skilled, unionized workforce that was operating the plant before Koch acquired it in full.

The local chapter of the Oil, Chemical and Atomic Workers Union, OCAW 6-662, had negotiated the framework for the conditions of their employment at the Pine Bend refinery between the 50’s and 60’s. The OCAW was a powerful union in a heavily unionized state, buttressed by interlocking loyalty oaths with other big unions like the Teamsters. But, the livelihoods of working class families and backbone of the local economy were not part of Charles Koch’s plans to streamline his business and within months of acquisition, he hired Bernard Paulson to take the union down.

Paulson had been managing Costal Oil & Gas down in Corpus Christi, Texas when Koch brought him on board to Minnesota specifically for his expertise in dealing with organize labor. Paulson started at Pine Bend in 1971 and only months later, in the early Spring of ‘72, he laid out his first trap. He scheduled OCAW local president, Joseph Hammerschimdt, to work on Easter Sunday knowing full well the irascible leader of the proud chapter would refuse. Paulson fired Hammerschmidt on the spot declaring war on the union.

The OCAW local’s contract was set to expire in the Fall of 1972 and when negotiations started, it was Hammerschmdit himself, in his capacity of chapter president, who was sitting across Paulson when the latter presented him with the new work rules rewritten by Koch Industries. Take it or leave it, Paulson informed the outraged OCAW representatives. In January, 1973, the men walked off the job and went on strike.

Pine Bend refinery in Rosemount, MN

Paulson had already gone over the strategy with his boss and immediately put a non-union “skeleton crew” to work in the posts vacated by the OCAW workforce. He put a cot in his office, stockpiled food and ordered the cafeteria remain open 24 hours. Koch’s union-buster was hunkering down for the long haul, but the bad omens didn’t wait to make their appearance. On the very first night of the strike, a large furnace that superheated oil exploded after leaks failed to be detected over the previous several hours.

Two months later, a saboteur pushed the throttle on a train diesel engine parked near the refinery, which had tracks running through the middle of it. Tragedy was averted by the derailing mechanism and the engine flipped over before crashing into the very large and very flammable refinery stacks and gasoline tanks. Incredibly, no one was killed in either incident.

As the strike dragged on, Paulson was able to leverage Koch Industries’ extensive contract work needs to induce the Teamsters to break the picket line. Teamster drivers accepted to carry out Koch’s deliveries in the midst of the strike, severely weakening the OCAW’s position.

After nine months, the strike ended with the union accepting a far less favorable deal than the one they once had. Charles Koch emerged victorious and imposed new work rules like mandatory overtime and a laughable grievance process that settled any successful claims by allotting overtime so workers could “earn” back the money they were owed. In addition, skill-based assignments were eliminated altogether; foreshadowing a developing trend in American workplaces that demanded wage laborers carry out tasks they were not necessarily trained to do.

A Future for Nobody

Koch’s contempt for workers would become a feature of their management style and as Charles Koch made inroads into the legal system to further erode workers’ rights, the company’s ability to impose onerous working conditions on its many factory floors became that much easier.

The 2003 acquisition of Farmland’s fertilizer plants revealed as much and crystallized the reality that had by then fully manifested as a result of the American oligarchy’s efforts to return to the days of robber barons and corporate monopolies.

Farmland Industries was a hugely successful co-op owned by thousands of farm families, which had thrived for three quarters of a century. They all shared in the profits and voted on the decisions that affected the business. Koch president, Dean Watson, derided the cooperative as “socialism” during the acquisition process. The bastion of modern agriculture had suffered a reversal of fortune during the natural gas shortage in the 90’s, forcing them to auction off their immensely profitable fertilizer plants.

Koch was already a large producer of a key component in industrial fertilizer, nitrogen. The purchase of Farmland’s network of fertilizer plants, which ran all along the corn belt between Iowa and Nebraska, was completed for the relatively paltry sum of $290 million dollars and put Koch at the center of America’s agricultural universe. The co-op model was summarily dismissed as Koch executives took over Farmland headquarters and asserted control over yet another vital aspect of American life.

Not content with this, Koch also flexed their political muscle to deregulate the energy markets themselves, putting them in a position to profit from virtually every link in the chain of basic necessities and holding it hostage to market forces.

Opening the Gates of Hell

Joseph Coors, of the brewing family fortune, wrote a letter to his senator, Republican Gordon Allot, after reading the Powell memo with a seemingly unlimited offer to fund “conservative causes”. Allot’s press aide was a man by the name of Paul Weyrich who immediately took advantage of the wealthy man’s generosity and founded The Heritage Foundation with Edwin Feulner Jr., a graduate of Wharton.

Both men had been intent on creating a policy-crafting organization that wouldn’t shy away from pushing legislation directly, as most think tanks did. Originally named Analysis and Research Association, the political influence operation grew to become the only outside organization allowed to caucus with members of Congress. The same year that The Heritage Foundation opened its doors in 1973, Weyrich created the American Legislative Exchange Council or ALEC, with the purpose of mounting legislative battles at the state level around the country. Most of ALEC’s funding came from Richard Mellon Scaife’s foundation, but would eventually count on much Koch money, too.

Paul Weyrich a conservative think tank chairman testifies before the Senate Armed Serviced Committee on Capitol Hill during the confirmation hearing of Defense Secretary-designate John Tower in Washington. Weyrich, who coined the phrase “moral majority” and helped turn social conservatives into a powerful force in the Republican Party, died Thursday, Dec. 18, 2008. He was 66. (AP Photo, File)

Koch became a key supporter of ALEC’s national push to deregulate the energy markets, putting his men on the task forces put together by the organization. ALEC’s “model bills” were introduced to many states with barely any modifications and greatly helped Koch Industries partake of the massive fraud that the new energy markets afforded companies like theirs. Pushing the changes along with Koch on ALEC’s task forces were representatives of Enron, which ended up taking the brunt of the press coverage when the chickens came home to roost.

Koch had been trading in the commodities market for years prior. In 1983, when NYMEX introduced oil futures contracts, Koch was well-positioned to take advantage of the seismic change this represented for the way oil was traded on the open market. Ron Howell, the man who years later carried out the fake audit of the Osage leases on Koch’s behalf, was then the head of the company’s oil trading division.

He would retire just two years later in 1985, but not before observing how things were about change. “It was the first time that there was a […] visible market signal for the price of oil”, he told Kochland author, Christopher Leonard. Until then, the price of oil was set over the phone between traders themselves; privately and far away from anyone not intimately involved in the industry. These were also real trades, in that the seller had to deliver the oil to the buyer. Koch had the advantage over independent traders because they already owned the oil and could execute delivery themselves. Oil contract futures, on the other hand, opened the door to the entire financial sector.

The NYMEX price of oil wasn’t the real price of oil. It was a bet on what the price of oil would be at some point in the future and Koch had built an intelligence-gathering operation on its own private trading floor that rivaled anything found in Langley, Virginia. Koch used data gleaned from every other division in their company; they utilized any data they could pry from competitors; they scoured news stories for information and even had a stable of the best meteorologists in the business to get a jump on weather patterns to predict consumption trends.

Charles Koch would bring all of it under one roof as Koch Supply & Trading after George W. Bush broke up the natural gas companies in 2001, spurring the fossil fuel giant to assume the management of the nation’s natural gas infrastructure. The potential profits promised by the new structure separating gas sellers from distributors and consumers were made even more attractive by the invention of yet another financial instrument: derivatives.

Unlike oil futures, which – while deferred – still required delivery of the asset, derivatives were pure bets based on the underlying value of the asset but without actual delivery of the asset at any stage of the transaction. Clinton’s Commodity Futures Modernization Act of 2000 would keep derivatives away from any regulation, setting the stage for the collapse of the financial system just eight years later. In the meantime, the derivatives market exploded and Koch was in perfect position to take full advantage.

Hoarding the Light

The whole Y2K “panic” would become the subject of much ridicule after the absurd warnings of a computer glitch apocalypse failed to materialize. But, behind the scenes, the new millennium was teeming with multi-millionaires and billionaires across corporate America frothing at the mouth about what many of them knew was coming.

Coupled with the recently deregulated energy markets and new financial instruments around oil and gas, the Kochs and the Enrons of the world could see what regular people couldn’t possibly imagine. These “titans of industry” had the inside track on the country’s consumption patterns. They knew people were buying more computers, gadgets and devices as the roll out of the Internet reached critical mass and that, as a result energy consumption was about to skyrocket.

One trader at Koch Supply & Trading spotted the trend early on in 2000. Brendan O’Neil started buying natural gas options as soon as an unusual cold snap made gas prices spike in the Spring of that year. O’Neil, like his peers, knew that major gas shortages were on the horizon. By December, the price of natural gas stood at $10.48, up from $2.88 in March. He alone would make Koch $70 million on the gas trades. His team, only one of many at the Houston offices, delivered $400 million to Koch’s coffers. Koch Gateway, the pipeline division, which actually delivered the gas to the buyers made only $15.3 million that year.

Enron Corporation headquarters in Houston, Texas

The artificial run up in gas prices caused rolling blackouts, store and factory closures, even car accidents from failing traffic lights around the country. But, it was clear to Koch where the biggest source of profits lay. So it was only logical that they would pour more money and effort into creating other speculative markets for the assets they already owned.

The obvious target was electricity. Paul Weyrich’s ALEC would take on the work of selling legislators around the country on the idea of an electricity market throughout the 1990’s and it would eventually take hold in several states, but none more disastrously than in California where a liberal Democrat state senator passed the bill that created the California Power Exchange (CPE).

The “megawatt-hour” was born. Equivalent to one hour of electricity needed to power 330 homes, it was the basic unit to be bought and sold on the exchanges and the national market value was calculated to be about $215 billon dollars. The CPE was set up in a way to allow the price of electricity to float with market conditions, but capped the amount Utilities could charge the end-consumer. To protect consumers from being left without power in the event no electricity was being bought on the exchange, an emergency authority called the California Independent System Operator (ISO) was created, whose sole purpose was to buy any shortfall in electricity the market left.

It was this peculiar agency that would be the target of Koch, Enron and other energy companies to inflate their profits at the expense of the Utilities through a fraudulent scheme known as “parking”. The fraud consisted of keeping megawatt-hours off of the CPE by making fictional sales to an out-of-state Utility and then turning around and selling the same megawatt-hours to ISO at a much higher price. The more power prices rose, the greater the temptation to manipulate the market in this way.

California’s Utility companies were driven to the verge of bankruptcy with losses of $10 billion and when the scandal finally broke in early 2001, governor Gary Davis worked out a bailout plan to save them. It took many more months before the underlying market “dysfunction” was addressed. Koch and friends continued to gouge their clients until the Federal Energy Regulatory Commission (FERC) finally stepped in. Koch quietly settled the charges brought against them for a cool $4.1 million.

Leviathan

The 21st century would find Koch Industries ready to indulge its voracious appetite. Just as it helped to create the economic conditions that would ultimately destroy the Farmland co-op and facilitate the purchase of its fertilizer plants, the success of its stealth political operation in tandem with other American oligarchs would free them up to act in their own interests while convincing others it was in theirs, as well.

FDR’s New Deal was truly a vestige. Workers’ rights were widely perceived as an evil of defunct communist systems of government and, thanks to the Supreme Court’s Citizens United ruling, the 0.01% could finally use their wealth openly to finance their preferred presidential candidates without the embarrassing need to actually run themselves, as Charles’ little brother David had done in 1980.

The internet and the rise of computerized, data-driven management systems would also give Koch the tools needed to finally dispense with the pretense of MBM or other such frills when it came to keeping employees in line. The engineer in charge of the most powerful private company in America could finally trade in all those messy, self-moving parts for real-time numbers.

Latter-day Nazis

If you were to call Charles de Ganahl Koch a Nazi to his face, you’d probably get escorted out of wherever you are by a member of his large security detail. But, you wouldn’t be very far from the truth. While his views on socialism or anything approaching the communist ideology are more than clear, the tacit approval of fascist ideology that runs in the family is less well-known.

In 1932, as told in a Koch-commissioned family history, Fred Koch collected $500,000 for building 15 oil refineries for Joseph Stalin, forming the backbone of the Soviet Union’s petroleum industry. The contract had been won through a referral, of sorts, after the senior Koch had helped build one in Great Britain with his future son’s namesake and mentor, Charles de Ganahl. Fred continued to provide technical assistance as the Soviets went on to build 100 more. The family-approved lore leaves this last detail out, contending Fred Koch’s distaste for the communist regime led him to renounce all future involvement.

An eight-year gap is left in the official Koch story, but various independent accounts have him traveling to Hitler’s Germany from 1933 onwards. According to archival records unearthed by Jane Mayer in her seminal book, Dark Money, Winkler-Koch Engineering of Wichita – Fred’s company – “provided the engineering plans and began overseeing the construction of a massive oil refinery” in Hamburg. The company that hired Koch’s firm was led by American Nazi sympathizer, William Rhodes Davis, who met with Hitler himself to secure the deal. Completed in 1935, the refinery had the capability to produce the high-octane fuel German Nazi war planes required.

Fred had a real soft spot for the Third Reich and the other fascist regimes. Just before hostilities broke out in ‘39, Fred Koch decried America’s “dependence on government” and expressed his wish that the “course of idleness, feeding at the public trough” he saw as an affliction the United States could “overcome”. Perhaps it was this desire to correct the nation’s “course” that inspired him to bring a fervently pro-Hitler, German governess to rear his two first-born sons, Freddie and Charles. The boys were subjected to the nurse’s rather harsh methods, which included force-feeding and enemas for much of their early years until she returned to Germany of her own accord in 1940.

Winkler-Koch unit at the Eurobank oil refinery
in Hamburg, Germany | Photo: United States Strategic Bombing Survey

Physical, emotional and psychological abuse in the Koch household was the price Fred Koch exacted from his offspring for being born. The patriarch was known to let his rage loose on them with tree branches and belts. A family member witnessed the “twins” get “whipped like dogs” after disturbing some rocks in a stone patio. For Freddie Koch, the eldest son, life offered more than this and he would never participate in the family business, choosing instead a career in the arts and a close relationship with his mother. Charles, on the other hand, would rationalize it as the actions of a man trying to instill a “work ethic” in him.

Younger brothers, Bill and David, would round out the Koch heir pool. But, Charles would prevail in the end wresting control from Bill who would challenge him in court before accepting a multi-billion-dollar buyout. David would assume a subordinate role, preferring to indulge in his Manhattan lifestyle, but still own half of Koch Industries. Eventually, he would join his older brother in pursuance of their shared goal to bring government to heel wherever their interests were threatened.

Scorched Earth Freedom

At the center of the fossil fuel barons’ nightmares was what Lew Ward, chairman of the Independent Petroleum Association of America, called “The radical environmentalist ‘off-oil’ agenda”. In 1997, when the Koch-connected and former Oklahoma oil man said this to a room-full of colleagues, the scientific consensus had already arrived at the conclusion, that 80% of the word’s fossil fuel reserves had to remain in the ground if we were to make it to 2050 with tolerable temperatures. Such warnings represented a death knell to an industry dominated by mostly private, but fabulously wealthy hands with a long tradition of bucking government regulation.

Historically and for obvious reasons, this powerful faction had maintained their position in the pecking order despite blatant anti-government stances and even public expressions of the racism, like that of Texas oil magnate Hugh Roy Cullen who, in defiance of FDR’s policies decided create a new political party promulgating “the restoration of the supremacy of the White race”. His grandson, Corbin Robertson Jr., a prominent member of the Koch network, owns one of the largest coal caches in the country, second only to that held by the government of the United States.

A full list of Koch’s donor network is yet to be compiled, but Jane Mayer’s tour de force accounting of this massive subversive political operation, provides a comprehensive sample that gives us a clear image of the scope and reach it has. The players are not limited to the fossil fuel industry either. Sheldon Adelson of the Las Vegas Sands casino empire and Stephen Schwarzman of the embattled Wall Street hedge fund, Blackstone Group are only two of the enormously influential characters with whom Charles Koch has partnered with to face off increasing pressure from a planet, which can no longer support the activities they profit from.

Koch was already years ahead of Lew Ward’s admonitions in the late 90’s, having poured millions of dollars to political front groups, foundations and think tanks dedicated to the Oligarch’s cause. But, the new century would, indeed mark a stronger push by the richest men in the country to put a stop to the “siege” their extractive industries were under.

We’re Not in Kansas Anymore

Koch’s political machinery was hard at work mounting attacks on what he and Henry Manne had identified as their number one enemy all those years ago and which Ward had warned against in his retirement speech at the IPAA. The environmental movement, in the mind of the fossil fuel oligarchy, was nothing more than an attempt by an entrenched government bureaucracy to restrict their property rights and rescind the divine edict passed down by the gods of “free markets” to devastate any ecosystem in the name of profit.

Foremost in their sights was the EPA; the single government agency they despised above all others. Taking it down required a long term strategy, which Charles Koch embraced. In concert with the vast array of think tanks and political lobbying organizations masquerading as foundations, as well as straight forward lobbying efforts, the Koch network went about the work to overturn, subvert or neutralize any environmentally-friendly legislation.

In Washington D.C., Koch Industry lobbyists were not only among the most active, but also among the most numerous. In a time when 90% of U.S. corporations did not employ one full time lobbyist, Koch Industries had five full time lobbyists who were industry leaders in their own right, fighting the company’s top issues: chemical safety, rate billing and tax rates. The bigger operation, however, was happening at the state level where Koch through ALEC and other groups like Americans for Prosperity (AFP) were pushing through legislation and even candidates favorable to their anti-environmental aims.

One of the most salient examples was the fight to reverse Kansas’ renewable energy mandates passed by the state legislature in 2009. Koch and friends zeroed in on state lawmakers two years later, sending Cato Institute scholars and other “heavy hitters” to testify about the “damaging” effects of wind power on the economy and other critiques of the mandate, which had been adopted as a compromise to the construction of a coal fired plant.

Republican Kansas state senator, Dennis Hedke, a geophysicist who had done consulting work for the oil and natural gas industry was the chairman of the House Energy and Environment Committee pushed a bill in 2013 to repeal the renewable energy mandate. The bill had been crafted by ALEC, which Hedke put forward with a few modifications. Parallel to this, Koch dumped $50,000 in the local primary races – a huge amount for the mostly rural state. The money was used to run negative ad campaigns against opponents, while the Koch-picked candidates were advised to simply stay home.

Hedke’s repeal passed in 2015 and, by then, Koch had managed to fill the Kansas state house with Koch Industry drones. Republican Senator Tom Moxley had joined the legislature in 2007 and sat in the same Energy and Environment Committee Hedke chaired. Himself a climate change skeptic, Moxley had changed his views after reading the science and, after witnessing the underhanded tactics used by the Koch network to defeat the bill and flip the house, he retired in disgust.

These same moves were executed in over a dozen states by the same Koch funded institutions and political operatives. Ohio and West Virginia passed similar bills against renewable energy. In these particular cases, the bills were not even modified from the drafts written by Koch-funded Heartland Institute and presented by ALEC. Through these machinations, Koch managed to redraw the country’s political map, setting the stage for the coup de grace in 2016.

Koch’s President

There’s no such thing as an outsider in American politics. No matter how seemingly removed from the established order an individual in either of the two sanctioned parties might be, a network of sponsors must exist behind the scenes to put wind in the sails of any prospective candidate for public office. Donald Trump, despite claims of being beyond the reach of special interests because of his wealth, is no exception. Certainly, no one can reach the highest office in the land, beset as it is by a multiplicity of foreign and domestic policy issues, without a powerful coterie of intensely interested patrons.

Donald Trump and Mike Pence during the 2016 Presidential campaign | Photo AP – Copyright 2016 The Associated Press.

Charles Koch had been working, greasing and diverting the political pipelines for decades by the time Donald Trump ran roughshod over the Republican Party and captured the electoral victory over Hillary Clinton in 2016. A narrative was quickly spread about Koch’s distaste for the New York real estate developer and media personality. Rumors of the billionaire brothers balking at Trump’s veiled, derisive references to their donor network fundraisers helped the NBC reality star appear to be a kind of anti-establishment, anti-oligarch maverick. Trump’s running mate would have been a red flag for anyone entertaining such ideas, if the Manhattan billionaire’s own status wasn’t a clear enough indication of the opposite.

Mike Pence was closely aligned with Koch’s Americans for Prosperity as Congressman and later Governor of the state of Indiana. Just six months into the new Trump administration, Charles Koch took an unscheduled, hour-long private meeting with Pence in Colorado where the fossil fuel baron, the Vice President and a few staffers discussed the President’s legislative agenda and, significantly, strategies to take after the midterm elections, which they already foresaw being a ‘blue wave’.

As Trump filled cabinet positions, Koch’s hand was more than visible to anyone with eyes to see. Rex Tillerson’s appointment as Secretary of State, while not directly tied to Koch Industries was, nevertheless, a blatant gift to the oil industry, in general. But, once Tillerson exited he was replaced with a Koch politician through and through in Mike Pompeo who was a member of the House Energy and Commerce Committee during the 112th Congress during Obama’s second term, when Republicans took control after the 2010 midterms.

Pompeo was then a freshman Republican from Wichita, Kansas, home of Koch Industries. Known as the “congressman from Koch”, Pompeo not only received funding for his political campaigns from Koch, but for his own aerospace company, as well. The future Director of the CIA even poached Koch’s lobbying team to find his Chief of Staff, Mark Chenoweth.

The Republican-controlled Committee featuring Pompeo had signed a “No Climate Tax” pledge invented by Americans for Prosperity. 156 Republican house members would go on to sign the same pledge and initiate the attack on their donors’ nemesis, the EPA, by taking away 27% of the Environmental Protection Agency’s budget.

Mike Pompeo (center) flanked by Senator Bob Dole (right) and Senator Pat Roberts (left) | Photo Joe Raedle – Getty

The radical transformation Koch and his cadre of billionaires had carried out in the nation’s political landscape was beginning to reach critical mass. The red lines their policy think tanks and front groups had drawn across the country had delivered a whole new species of politician to the halls of state and municipal power and, in turn, to the floor of the U.S. Congress. The next step was 1600 Pennsylvania Avenue.

Destroying the EPA

The plan to get rid of the Environmental Protection Agency would take six years to complete, according to David Schnare, the man tasked with putting it together. Schnare was a part of Trump’s EPA transition team, which also included AFP organizer, Charles Muñoz, senior research fellow at Weyrich’s Heritage Foundation and outspoken EPA opponent and climate change denier, Myron Ebell.

Schnare’s 47-page “Agency Action Plan” was a veritable wish list of the fossil fuel industry: elimination of the Clear Act Greenhouse Gas regulations, rescinding of federal fuel efficiency standards known as the CAFE standards and the end of Clean Coal laws. As for the agency itself, it would be broken up and its functions assigned to other agencies or ignored altogether.

Trump’s initial pick to lead the EPA, Scott Pruitt, was yet another creature of the oil interests. Attorney General of Oklahoma where oil reigned supreme, Pruitt ultimately proved to be to incompetent to see the job through and resigned a year later. His replacement, and EPA Administrator to this day, is former Coal industry lobbyist, Andrew Wheeler.

Koch Industries had been pegged as the largest toxic waste producer in the United States, responsible for 950 million pounds of hazardous material in 2012 alone. The company emitted the equivalent of 5 million cars a year in greenhouse gas pollution. Koch boasted of its “10,000%” compliance policy throughout its huge, cross-industry private corporation, but evidence of it is scant and often contradicted by the public record.

In 1998, the MPCA (Minnesota Pollution Control Agency) fined Koch $6.9 million for pollution from the Pine Bend refinery. An additional $11.5 million followed after federal criminal charges were brought against the company. One of Koch’s own employees, whose job it was to make sure the refinery was abiding by the clean water laws, had to blow the whistle on Koch after they tried to silence her when she tried to report the violations.

New Money, Old Game

The FBI’s case in the Osage murder investigation in the 1920’s revealed a plot so evil, that it transfixed the whole nation when the details were published in the biggest newspapers and projected on the earliest movie screens as news reels. William K. Hale had built a solid reputation in the Osage community as a stand-up citizen purporting to protect the interests and livelihoods of the Native Americans in this corner of Midwest America, who were sitting on a fortune beneath their feet. The people looked up to this White man as a beacon of righteousness and integrity.

Convicted murderer, William K. Hale; one of the
masterminds of the Osage murder plots

When it was discovered that he had masterminded the cold-blooded assassination of several Osage Indians in a plot to secure their headrights, worth millions of dollars, his name and face would become synonymous with the devil himself for the descendants of the Osage tribe. The satanic scheme was not limited to Hale, however, and while the FBI would never pursue any of the other leads in the epidemic of Osage murders, subsequent investigations have shown that dozens of other ‘masterminds’ and accomplices were killing hundreds of Osage Indians during this period in order to take over their oil fortunes.

The murderous “Indian business”, as it was called by the perpetrators themselves, reached high up the social ladder. Far beyond the relatively limited capabilities of a former ranch hand like W.K. Hale. But, Hale was enough for J. Edgar Hoover to establish himself as the nation’s top law enforcer. After all, the case was sensational enough to grab the public’s attention and peddle a reassuring tale of good triumphing over evil. But, the truth was that nobody really cared much about Native American lives and the 12 years Hale served of the “life sentence” he received for the single murder he was convicted of was more than most would have expected in those days.

A similar game, on a far larger scale, is being played out today with the calls for “liberty” and “free-markets” by the billionaire Koch network, posing as defenders of the everyman and patriots who seek only the best for America, have angled to trick an increasingly exploited and economically insecure population into supporting policies that, in the long run, cause us all irreparable harm.

The truth of their self-serving greed will make itself evident in its own time, much as it did when a repentant Koch oil gauger, unbeknownst to him, struck up a conversation with a relative of the very first victim in the Osage murder saga. Charles Whitehorn was shot between the eyes for his oil wealth and his corpse left rotting on a hill over a mile north of Pawhuska, Oklahoma. Osage Chief, Dudley Whitehorn, sat with the former Koch employee as his car was being repaired at a local gas station. “We did steal from you”, the remorseful man admitted.

 

Works cited in this article: Kochland, The Secret History of Koch Industries and Corporate Power in America by Christopher Leonard; Democracy in Chains, The Deep History of the Radical Right’s Stealth Plan for America by Nancy MacLean; Dark Money, The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer; Killers of the Flower Moon, The Osage Murders and the Birth of the FBI by David Grann

Part Four of Multi-part series | go to part one >> / part two >> / part three >> or go to long read >>

Latter-day Nazis

If you were to call Charles de Ganahl Koch a Nazi to his face, you’d probably get escorted out of wherever you are by a member of his large security detail. But, you wouldn’t be very far from the truth. While his views on socialism or anything approaching the communist ideology are more than clear, the tacit approval of fascist ideology that runs in the family is less well-known.

In 1932, as told in a Koch-commissioned family history, Fred Koch collected $500,000 for building 15 oil refineries for Joseph Stalin, forming the backbone of the Soviet Union’s petroleum industry. The contract had been won through a referral, of sorts, after the senior Koch had helped build one in Great Britain with his future son’s namesake and mentor, Charles de Ganahl. Fred continued to provide technical assistance as the Soviets went on to build 100 more. The family-approved lore leaves this last detail out, contending Fred Koch’s distaste for the communist regime led him to renounce all future involvement.

An eight-year gap is left in the official Koch story, but various independent accounts have him traveling to Hitler’s Germany from 1933 onwards. According to archival records unearthed by Jane Mayer in her seminal book, Dark Money, Winkler-Koch Engineering of Wichita – Fred’s company – “provided the engineering plans and began overseeing the construction of a massive oil refinery” in Hamburg. The company that hired Koch’s firm was led by American Nazi sympathizer, William Rhodes Davis, who met with Hitler himself to secure the deal. Completed in 1935, the refinery had the capability to produce the high-octane fuel German Nazi war planes required.

Fred had a real soft spot for the Third Reich and the other fascist regimes. Just before hostilities broke out in ‘39, Fred Koch decried America’s “dependence on government” and expressed his wish that the “course of idleness, feeding at the public trough” he saw as an affliction the United States could “overcome”. Perhaps it was this desire to correct the nation’s “course” that inspired him to bring a fervently pro-Hitler, German governess to rear his two first-born sons, Freddie and Charles. The boys were subjected to the nurse’s rather harsh methods, which included force-feeding and enemas for much of their early years until she returned to Germany of her own accord in 1940.

Winkler-Koch unit at the Eurobank oil refinery
in Hamburg, Germany | Photo: United States Strategic Bombing Survey

Physical, emotional and psychological abuse in the Koch household was the price Fred Koch exacted from his offspring for being born. The patriarch was known to let his rage loose on them with tree branches and belts. A family member witnessed the “twins” get “whipped like dogs” after disturbing some rocks in a stone patio. For Freddie Koch, the eldest son, life offered more than this and he would never participate in the family business, choosing instead a career in the arts and a close relationship with his mother. Charles, on the other hand, would rationalize it as the actions of a man trying to instill a “work ethic” in him.

Younger brothers, Bill and David, would round out the Koch heir pool. But, Charles would prevail in the end wresting control from Bill who would challenge him in court before accepting a multi-billion-dollar buyout. David would assume a subordinate role, preferring to indulge in his Manhattan lifestyle, but still own half of Koch Industries. Eventually, he would join his older brother in pursuance of their shared goal to bring government to heel wherever their interests were threatened.

Scorched Earth Freedom

At the center of the fossil fuel barons’ nightmares was what Lew Ward, chairman of the Independent Petroleum Association of America, called “The radical environmentalist ‘off-oil’ agenda”. In 1997, when the Koch-connected and former Oklahoma oil man said this to a room-full of colleagues, the scientific consensus had already arrived at the conclusion, that 80% of the word’s fossil fuel reserves had to remain in the ground if we were to make it to 2050 with tolerable temperatures. Such warnings represented a death knell to an industry dominated by mostly private, but fabulously wealthy hands with a long tradition of bucking government regulation.

Historically and for obvious reasons, this powerful faction had maintained their position in the pecking order despite blatant anti-government stances and even public expressions of the racism, like that of Texas oil magnate Hugh Roy Cullen who, in defiance of FDR’s policies decided create a new political party promulgating “the restoration of the supremacy of the White race”. His grandson, Corbin Robertson Jr., a prominent member of the Koch network, owns one of the largest coal caches in the country, second only to that held by the government of the United States.

A full list of Koch’s donor network is yet to be compiled, but Jane Mayer’s tour de force accounting of this massive subversive political operation, provides a comprehensive sample that gives us a clear image of the scope and reach it has. The players are not limited to the fossil fuel industry either. Sheldon Adelson of the Las Vegas Sands casino empire and Stephen Schwarzman of the embattled Wall Street hedge fund, Blackstone Group are only two of the enormously influential characters with whom Charles Koch has partnered with to face off increasing pressure from a planet, which can no longer support the activities they profit from.

Koch was already years ahead of Lew Ward’s admonitions in the late 90’s, having poured millions of dollars to political front groups, foundations and think tanks dedicated to the Oligarch’s cause. But, the new century would, indeed mark a stronger push by the richest men in the country to put a stop to the “siege” their extractive industries were under.

We’re Not in Kansas Anymore

Koch’s political machinery was hard at work mounting attacks on what he and Henry Manne had identified as their number one enemy all those years ago and which Ward had warned against in his retirement speech at the IPAA. The environmental movement, in the mind of the fossil fuel oligarchy, was nothing more than an attempt by an entrenched government bureaucracy to restrict their property rights and rescind the divine edict passed down by the gods of “free markets” to devastate any ecosystem in the name of profit.

Foremost in their sights was the EPA; the single government agency they despised above all others. Taking it down required a long term strategy, which Charles Koch embraced. In concert with the vast array of think tanks and political lobbying organizations masquerading as foundations, as well as straight forward lobbying efforts, the Koch network went about the work to overturn, subvert or neutralize any environmentally-friendly legislation.

In Washington D.C., Koch Industry lobbyists were not only among the most active, but also among the most numerous. In a time when 90% of U.S. corporations did not employ one full time lobbyist, Koch Industries had five full time lobbyists who were industry leaders in their own right, fighting the company’s top issues: chemical safety, rate billing and tax rates. The bigger operation, however, was happening at the state level where Koch through ALEC and other groups like Americans for Prosperity (AFP) were pushing through legislation and even candidates favorable to their anti-environmental aims.

One of the most salient examples was the fight to reverse Kansas’ renewable energy mandates passed by the state legislature in 2009. Koch and friends zeroed in on state lawmakers two years later, sending Cato Institute scholars and other “heavy hitters” to testify about the “damaging” effects of wind power on the economy and other critiques of the mandate, which had been adopted as a compromise to the construction of a coal fired plant.

Republican Kansas state senator, Dennis Hedke, a geophysicist who had done consulting work for the oil and natural gas industry was the chairman of the House Energy and Environment Committee pushed a bill in 2013 to repeal the renewable energy mandate. The bill had been crafted by ALEC, which Hedke put forward with a few modifications. Parallel to this, Koch dumped $50,000 in the local primary races – a huge amount for the mostly rural state. The money was used to run negative ad campaigns against opponents, while the Koch-picked candidates were advised to simply stay home.

Hedke’s repeal passed in 2015 and, by then, Koch had managed to fill the Kansas state house with Koch Industry drones. Republican Senator Tom Moxley had joined the legislature in 2007 and sat in the same Energy and Environment Committee Hedke chaired. Himself a climate change skeptic, Moxley had changed his views after reading the science and, after witnessing the underhanded tactics used by the Koch network to defeat the bill and flip the house, he retired in disgust.

These same moves were executed in over a dozen states by the same Koch funded institutions and political operatives. Ohio and West Virginia passed similar bills against renewable energy. In these particular cases, the bills were not even modified from the drafts written by Koch-funded Heartland Institute and presented by ALEC. Through these machinations, Koch managed to redraw the country’s political map, setting the stage for the coup de grace in 2016.

Koch’s President

There’s no such thing as an outsider in American politics. No matter how seemingly removed from the established order an individual in either of the two sanctioned parties might be, a network of sponsors must exist behind the scenes to put wind in the sails of any prospective candidate for public office. Donald Trump, despite claims of being beyond the reach of special interests because of his wealth, is no exception. Certainly, no one can reach the highest office in the land, beset as it is by a multiplicity of foreign and domestic policy issues, without a powerful coterie of intensely interested patrons.

Donald Trump and Mike Pence during the 2016 Presidential campaign | Photo AP – Copyright 2016 The Associated Press.

Charles Koch had been working, greasing and diverting the political pipelines for decades by the time Donald Trump ran roughshod over the Republican Party and captured the electoral victory over Hillary Clinton in 2016. A narrative was quickly spread about Koch’s distaste for the New York real estate developer and media personality. Rumors of the billionaire brothers balking at Trump’s veiled, derisive references to their donor network fundraisers helped the NBC reality star appear to be a kind of anti-establishment, anti-oligarch maverick. Trump’s running mate would have been a red flag for anyone entertaining such ideas, if the Manhattan billionaire’s own status wasn’t a clear enough indication of the opposite.

Mike Pence was closely aligned with Koch’s Americans for Prosperity as Congressman and later Governor of the state of Indiana. Just six months into the new Trump administration, Charles Koch took an unscheduled, hour-long private meeting with Pence in Colorado where the fossil fuel baron, the Vice President and a few staffers discussed the President’s legislative agenda and, significantly, strategies to take after the midterm elections, which they already foresaw being a ‘blue wave’.

As Trump filled cabinet positions, Koch’s hand was more than visible to anyone with eyes to see. Rex Tillerson’s appointment as Secretary of State, while not directly tied to Koch Industries was, nevertheless, a blatant gift to the oil industry, in general. But, once Tillerson exited he was replaced with a Koch politician through and through in Mike Pompeo who was a member of the House Energy and Commerce Committee during the 112th Congress during Obama’s second term, when Republicans took control after the 2010 midterms.

Pompeo was then a freshman Republican from Wichita, Kansas, home of Koch Industries. Known as the “congressman from Koch”, Pompeo not only received funding for his political campaigns from Koch, but for his own aerospace company, as well. The future Director of the CIA even poached Koch’s lobbying team to find his Chief of Staff, Mark Chenoweth.

The Republican-controlled Committee featuring Pompeo had signed a “No Climate Tax” pledge invented by Americans for Prosperity. 156 Republican house members would go on to sign the same pledge and initiate the attack on their donors’ nemesis, the EPA, by taking away 27% of the Environmental Protection Agency’s budget.

Mike Pompeo (center) flanked by Senator Bob Dole (right) and Senator Pat Roberts (left) | Photo Joe Raedle – Getty

The radical transformation Koch and his cadre of billionaires had carried out in the nation’s political landscape was beginning to reach critical mass. The red lines their policy think tanks and front groups had drawn across the country had delivered a whole new species of politician to the halls of state and municipal power and, in turn, to the floor of the U.S. Congress. The next step was 1600 Pennsylvania Avenue.

Destroying the EPA

The plan to get rid of the Environmental Protection Agency would take six years to complete, according to David Schnare, the man tasked with putting it together. Schnare was a part of Trump’s EPA transition team, which also included AFP organizer, Charles Muñoz, senior research fellow at Weyrich’s Heritage Foundation and outspoken EPA opponent and climate change denier, Myron Ebell.

Schnare’s 47-page “Agency Action Plan” was a veritable wish list of the fossil fuel industry: elimination of the Clear Act Greenhouse Gas regulations, rescinding of federal fuel efficiency standards known as the CAFE standards and the end of Clean Coal laws. As for the agency itself, it would be broken up and its functions assigned to other agencies or ignored altogether.

Trump’s initial pick to lead the EPA, Scott Pruitt, was yet another creature of the oil interests. Attorney General of Oklahoma where oil reigned supreme, Pruitt ultimately proved to be to incompetent to see the job through and resigned a year later. His replacement, and EPA Administrator to this day, is former Coal industry lobbyist, Andrew Wheeler.

Koch Industries had been pegged as the largest toxic waste producer in the United States, responsible for 950 million pounds of hazardous material in 2012 alone. The company emitted the equivalent of 5 million cars a year in greenhouse gas pollution. Koch boasted of its “10,000%” compliance policy throughout its huge, cross-industry private corporation, but evidence of it is scant and often contradicted by the public record.

In 1998, the MPCA (Minnesota Pollution Control Agency) fined Koch $6.9 million for pollution from the Pine Bend refinery. An additional $11.5 million followed after federal criminal charges were brought against the company. One of Koch’s own employees, whose job it was to make sure the refinery was abiding by the clean water laws, had to blow the whistle on Koch after they tried to silence her when she tried to report the violations.

New Money, Old Game

The FBI’s case in the Osage murder investigation in the 1920’s revealed a plot so evil, that it transfixed the whole nation when the details were published in the biggest newspapers and projected on the earliest movie screens as news reels. William K. Hale had built a solid reputation in the Osage community as a stand-up citizen purporting to protect the interests and livelihoods of the Native Americans in this corner of Midwest America, who were sitting on a fortune beneath their feet. The people looked up to this White man as a beacon of righteousness and integrity.

Convicted murderer, William K. Hale; one of the
masterminds of the Osage murder plots

When it was discovered that he had masterminded the cold-blooded assassination of several Osage Indians in a plot to secure their headrights, worth millions of dollars, his name and face would become synonymous with the devil himself for the descendants of the Osage tribe. The satanic scheme was not limited to Hale, however, and while the FBI would never pursue any of the other leads in the epidemic of Osage murders, subsequent investigations have shown that dozens of other ‘masterminds’ and accomplices were killing hundreds of Osage Indians during this period in order to take over their oil fortunes.

The murderous “Indian business”, as it was called by the perpetrators themselves, reached high up the social ladder. Far beyond the relatively limited capabilities of a former ranch hand like W.K. Hale. But, Hale was enough for J. Edgar Hoover to establish himself as the nation’s top law enforcer. After all, the case was sensational enough to grab the public’s attention and peddle a reassuring tale of good triumphing over evil. But, the truth was that nobody really cared much about Native American lives and the 12 years Hale served of the “life sentence” he received for the single murder he was convicted of was more than most would have expected in those days.

A similar game, on a far larger scale, is being played out today with the calls for “liberty” and “free-markets” by the billionaire Koch network, posing as defenders of the everyman and patriots who seek only the best for America, have angled to trick an increasingly exploited and economically insecure population into supporting policies that, in the long run, cause us all irreparable harm.

The truth of their self-serving greed will make itself evident in its own time, much as it did when a repentant Koch oil gauger, unbeknownst to him, struck up a conversation with a relative of the very first victim in the Osage murder saga. Charles Whitehorn was shot between the eyes for his oil wealth and his corpse left rotting on a hill over a mile north of Pawhuska, Oklahoma. Osage Chief, Dudley Whitehorn, sat with the former Koch employee as his car was being repaired at a local gas station. “We did steal from you”, the remorseful man admitted.

 

Part Four of Multi-part series | go to part one >> / part two >> / part three >>

 

Works cited in this series: Kochland, The Secret History of Koch Industries and Corporate Power in America by Christopher Leonard; Democracy in Chains, The Deep History of the Radical Right’s Stealth Plan for America by Nancy MacLean; Dark Money, The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer; Killers of the Flower Moon, The Osage Murders and the Birth of the FBI by David Grann

Part Three of Multi-part series | go to part one >> / part two >> or go to long read >>

Labor Tamers

From the time Charles Koch took control of the company his father built, he declared war on the working class. The most profitable asset in Koch Industries’ early years was the Pine Bend refinery, whose massive profitability was made possible by several extraneous factors including its geographical location, government policy on the importation of Canadian crude, loopholes in the Clean Air Act and government subsidies. It also had the benefit of being run by a highly-skilled, unionized workforce that was operating the plant before Koch acquired it in full.

The local chapter of the Oil, Chemical and Atomic Workers Union, OCAW 6-662, had negotiated the framework for the conditions of their employment at the Pine Bend refinery between the 50’s and 60’s. The OCAW was a powerful union in a heavily unionized state, buttressed by interlocking loyalty oaths with other big unions like the Teamsters. But, the livelihoods of working class families and backbone of the local economy were not part of Charles Koch’s plans to streamline his business and within months of acquisition, he hired Bernard Paulson to take the union down.

Paulson had been managing Costal Oil & Gas down in Corpus Christi, Texas when Koch brought him on board to Minnesota specifically for his expertise in dealing with organize labor. Paulson started at Pine Bend in 1971 and only months later, in the early Spring of ‘72, he laid out his first trap. He scheduled OCAW local president, Joseph Hammerschimdt, to work on Easter Sunday knowing full well the irascible leader of the proud chapter would refuse. Paulson fired Hammerschmidt on the spot declaring war on the union.

The OCAW local’s contract was set to expire in the Fall of 1972 and when negotiations started, it was Hammerschmdit himself, in his capacity of chapter president, who was sitting across Paulson when the latter presented him with the new work rules rewritten by Koch Industries. Take it or leave it, Paulson informed the outraged OCAW representatives. In January, 1973, the men walked off the job and went on strike.

Pine Bend refinery in Rosemount, MN

Paulson had already gone over the strategy with his boss and immediately put a non-union “skeleton crew” to work in the posts vacated by the OCAW workforce. He put a cot in his office, stockpiled food and ordered the cafeteria remain open 24 hours. Koch’s union-buster was hunkering down for the long haul, but the bad omens didn’t wait to make their appearance. On the very first night of the strike, a large furnace that superheated oil exploded after leaks failed to be detected over the previous several hours.

Two months later, a saboteur pushed the throttle on a train diesel engine parked near the refinery, which had tracks running through the middle of it. Tragedy was averted by the derailing mechanism and the engine flipped over before crashing into the very large and very flammable refinery stacks and gasoline tanks. Incredibly, no one was killed in either incident.

As the strike dragged on, Paulson was able to leverage Koch Industries’ extensive contract work needs to induce the Teamsters to break the picket line. Teamster drivers accepted to carry out Koch’s deliveries in the midst of the strike, severely weakening the OCAW’s position.

After nine months, the strike ended with the union accepting a far less favorable deal than the one they once had. Charles Koch emerged victorious and imposed new work rules like mandatory overtime and a laughable grievance process that settled any successful claims by allotting overtime so workers could “earn” back the money they were owed. In addition, skill-based assignments were eliminated altogether; foreshadowing a developing trend in American workplaces that demanded wage laborers carry out tasks they were not necessarily trained to do.

A Future for Nobody

Koch’s contempt for workers would become a feature of their management style and as Charles Koch made inroads into the legal system to further erode workers’ rights, the company’s ability to impose onerous working conditions on its many factory floors became that much easier.

The 2003 acquisition of Farmland’s fertilizer plants revealed as much and crystallized the reality that had by then fully manifested as a result of the American oligarchy’s efforts to return to the days of robber barons and corporate monopolies.

Farmland Industries was a hugely successful co-op owned by thousands of farm families, which had thrived for three quarters of a century. They all shared in the profits and voted on the decisions that affected the business. Koch president, Dean Watson, derided the cooperative as “socialism” during the acquisition process. The bastion of modern agriculture had suffered a reversal of fortune during the natural gas shortage in the 90’s, forcing them to auction off their immensely profitable fertilizer plants.

Koch was already a large producer of a key component in industrial fertilizer, nitrogen. The purchase of Farmland’s network of fertilizer plants, which ran all along the corn belt between Iowa and Nebraska, was completed for the relatively paltry sum of $290 million dollars and put Koch at the center of America’s agricultural universe. The co-op model was summarily dismissed as Koch executives took over Farmland headquarters and asserted control over yet another vital aspect of American life.

Not content with this, Koch also flexed their political muscle to deregulate the energy markets themselves, putting them in a position to profit from virtually every link in the chain of basic necessities and holding it hostage to market forces.

Opening the Gates of Hell

Joseph Coors, of the brewing family fortune, wrote a letter to his senator, Republican Gordon Allot, after reading the Powell memo with a seemingly unlimited offer to fund “conservative causes”. Allot’s press aide was a man by the name of Paul Weyrich who immediately took advantage of the wealthy man’s generosity and founded The Heritage Foundation with Edwin Feulner Jr., a graduate of Wharton.

Both men had been intent on creating a policy-crafting organization that wouldn’t shy away from pushing legislation directly, as most think tanks did. Originally named Analysis and Research Association, the political influence operation grew to become the only outside organization allowed to caucus with members of Congress. The same year that The Heritage Foundation opened its doors in 1973, Weyrich created the American Legislative Exchange Council or ALEC, with the purpose of mounting legislative battles at the state level around the country. Most of ALEC’s funding came from Richard Mellon Scaife’s foundation, but would eventually count on much Koch money, too.

Paul Weyrich a conservative think tank chairman testifies before the Senate Armed Serviced Committee on Capitol Hill during the confirmation hearing of Defense Secretary-designate John Tower in Washington. Weyrich, who coined the phrase “moral majority” and helped turn social conservatives into a powerful force in the Republican Party, died Thursday, Dec. 18, 2008. He was 66. (AP Photo, File)

Koch became a key supporter of ALEC’s national push to deregulate the energy markets, putting his men on the task forces put together by the organization. ALEC’s “model bills” were introduced to many states with barely any modifications and greatly helped Koch Industries partake of the massive fraud that the new energy markets afforded companies like theirs. Pushing the changes along with Koch on ALEC’s task forces were representatives of Enron, which ended up taking the brunt of the press coverage when the chickens came home to roost.

Koch had been trading in the commodities market for years prior. In 1983, when NYMEX introduced oil futures contracts, Koch was well-positioned to take advantage of the seismic change this represented for the way oil was traded on the open market. Ron Howell, the man who years later carried out the fake audit of the Osage leases on Koch’s behalf, was then the head of the company’s oil trading division.

He would retire just two years later in 1985, but not before observing how things were about change. “It was the first time that there was a […] visible market signal for the price of oil”, he told Kochland author, Christopher Leonard. Until then, the price of oil was set over the phone between traders themselves; privately and far away from anyone not intimately involved in the industry. These were also real trades, in that the seller had to deliver the oil to the buyer. Koch had the advantage over independent traders because they already owned the oil and could execute delivery themselves. Oil contract futures, on the other hand, opened the door to the entire financial sector.

The NYMEX price of oil wasn’t the real price of oil. It was a bet on what the price of oil would be at some point in the future and Koch had built an intelligence-gathering operation on its own private trading floor that rivaled anything found in Langley, Virginia. Koch used data gleaned from every other division in their company; they utilized any data they could pry from competitors; they scoured news stories for information and even had a stable of the best meteorologists in the business to get a jump on weather patterns to predict consumption trends.

Charles Koch would bring all of it under one roof as Koch Supply & Trading after George W. Bush broke up the natural gas companies in 2001, spurring the fossil fuel giant to assume the management of the nation’s natural gas infrastructure. The potential profits promised by the new structure separating gas sellers from distributors and consumers were made even more attractive by the invention of yet another financial instrument: derivatives.

Unlike oil futures, which – while deferred – still required delivery of the asset, derivatives were pure bets based on the underlying value of the asset but without actual delivery of the asset at any stage of the transaction. Clinton’s Commodity Futures Modernization Act of 2000 would keep derivatives away from any regulation, setting the stage for the collapse of the financial system just eight years later. In the meantime, the derivatives market exploded and Koch was in perfect position to take full advantage.

Hoarding the Light

The whole Y2K “panic” would become the subject of much ridicule after the absurd warnings of a computer glitch apocalypse failed to materialize. But, behind the scenes, the new millennium was teeming with multi-millionaires and billionaires across corporate America frothing at the mouth about what many of them knew was coming.

Coupled with the recently deregulated energy markets and new financial instruments around oil and gas, the Kochs and the Enrons of the world could see what regular people couldn’t possibly imagine. These “titans of industry” had the inside track on the country’s consumption patterns. They knew people were buying more computers, gadgets and devices as the roll out of the Internet reached critical mass and that, as a result energy consumption was about to skyrocket.

One trader at Koch Supply & Trading spotted the trend early on in 2000. Brendan O’Neil started buying natural gas options as soon as an unusual cold snap made gas prices spike in the Spring of that year. O’Neil, like his peers, knew that major gas shortages were on the horizon. By December, the price of natural gas stood at $10.48, up from $2.88 in March. He alone would make Koch $70 million on the gas trades. His team, only one of many at the Houston offices, delivered $400 million to Koch’s coffers. Koch Gateway, the pipeline division, which actually delivered the gas to the buyers made only $15.3 million that year.

Enron Corporation headquarters in Houston, Texas

The artificial run up in gas prices caused rolling blackouts, store and factory closures, even car accidents from failing traffic lights around the country. But, it was clear to Koch where the biggest source of profits lay. So it was only logical that they would pour more money and effort into creating other speculative markets for the assets they already owned.

The obvious target was electricity. Paul Weyrich’s ALEC would take on the work of selling legislators around the country on the idea of an electricity market throughout the 1990’s and it would eventually take hold in several states, but none more disastrously than in California where a liberal Democrat state senator passed the bill that created the California Power Exchange (CPE).

The “megawatt-hour” was born. Equivalent to one hour of electricity needed to power 330 homes, it was the basic unit to be bought and sold on the exchanges and the national market value was calculated to be about $215 billon dollars. The CPE was set up in a way to allow the price of electricity to float with market conditions, but capped the amount Utilities could charge the end-consumer. To protect consumers from being left without power in the event no electricity was being bought on the exchange, an emergency authority called the California Independent System Operator (ISO) was created, whose sole purpose was to buy any shortfall in electricity the market left.

It was this peculiar agency that would be the target of Koch, Enron and other energy companies to inflate their profits at the expense of the Utilities through a fraudulent scheme known as “parking”. The fraud consisted of keeping megawatt-hours off of the CPE by making fictional sales to an out-of-state Utility and then turning around and selling the same megawatt-hours to ISO at a much higher price. The more power prices rose, the greater the temptation to manipulate the market in this way.

California’s Utility companies were driven to the verge of bankruptcy with losses of $10 billion and when the scandal finally broke in early 2001, governor Gary Davis worked out a bailout plan to save them. It took many more months before the underlying market “dysfunction” was addressed. Koch and friends continued to gouge their clients until the Federal Energy Regulatory Commission (FERC) finally stepped in. Koch quietly settled the charges brought against them for a cool $4.1 million.

Leviathan

The 21st century would find Koch Industries ready to indulge its voracious appetite. Just as it helped to create the economic conditions that would ultimately destroy the Farmland co-op and facilitate the purchase of its fertilizer plants, the success of its stealth political operation in tandem with other American oligarchs would free them up to act in their own interests while convincing others it was in theirs, as well.

FDR’s New Deal was truly a vestige. Workers’ rights were widely perceived as an evil of defunct communist systems of government and, thanks to the Supreme Court’s Citizens United ruling, the 0.01% could finally use their wealth openly to finance their preferred presidential candidates without the embarrassing need to actually run themselves, as Charles’ little brother David had done in 1980.

The internet and the rise of computerized, data-driven management systems would also give Koch the tools needed to finally dispense with the pretense of MBM or other such frills when it came to keeping employees in line. The engineer in charge of the most powerful private company in America could finally trade in all those messy, self-moving parts for real-time numbers.

GO TO PART FOUR: U.S. OF KOCH >>

Part Two of Multi-part series | go to part one >> or go to long read >>

The Bidders

The oil leases on the Osage territory began to be issued in 1912, drawing oil magnates from around the world to bid fortunes under the so-called “Million-dollar Elm”, where an auctioneer sold off the rights to extract from the wells. The tribe’s sudden stroke of luck didn’t come with the usual benefits associated with the accumulation of massive wealth familiar to most Americans. Much of it was kept behind a wall of racist paternalism expressed through government-appointed guardianships, that assigned White men to oversee the expenses of the tribal members and the power to cut them off at their discretion.

It was the sort of draconian government overreach that Koch and the various organizations he funded to promote the idea of limited government might uphold as examples of the dangers he was fighting to avert. But, that would have been empty rhetoric like most of the arguments put forth by many of his political front groups like Americans for Prosperity or Citizens for a Sound Economy. The endgame for Koch and his clique of preposterously wealthy (mostly) men was a government stripped of all responsibility beyond the responsibility to protect their property.

Among the bidders gathered under the tree in Pawhuska, Oklahoma in the 1920’s was a representative of the Gulf Oil company, owned by the Mellon clan, one of the original robber baron families and pioneers of the use of philanthropy as both a means of tax-avoidance and anti-government messaging. One of the heirs to the Gulf Oil, Mellon banking fortune would become one of the country’s biggest backers of radical right wing ideology and a strategically important partner to Charles Koch’s own efforts.

The Silverspoon Radical

Richard Mellon Scaife never gave any interviews or public speeches, but he exerted incalculable influence over America’s public affairs through the multiple foundations he and his family set up.

Inheriting an obscene amount of money at the age of 26 is probably not the easiest thing to deal with for even the most level-headed youngster. But, by all accounts, Richard Scaife was leading the kind of dissolute life most of us expect the scion of inter-generational wealth would. Kicked out of the Deerfield Academy prep school at 14 for drinking, his reputation for alcohol-induced benders would follow him to Yale University, which would also expel him for it.

Richard Mellon Scaife

After his father died in 1958, Scaife assumed the role of financial manager for the fortune passed on to his mother, Sarah. She would create several trusts, continuing the family tradition of using non-profits as tax shelters. Eventually, Richard would consolidate all of the foundations under the umbrella of the Scaife Family Charitable Trusts, which would be used to disburse hundreds of millions of dollars to radical right organizations, politicians and causes.

The most important of these may well have been the Institute for Contemporary Studies (ICS), based out of California. This Scaife-funded think tank initiated a slew of projects meant to influence policy. One of these sought to learn what was being taught in pre-collegiate economics classes and propose more free market-friendly curricula. Another put future president Ronald Reagan in front of every high school student in the state’s eleven hundred school districts via PBS.

Reagan’s deep ties to the ICS can be traced to the presence of Edwin Meese III on the foundation’s board. Meese, who would later serve as Reagan’s Attorney General and, arguably, his most trusted advisor, was among the invitees to Jim Buchanan’s 1973 unveiling of the Virginia academic’s “Third Century Project” outlining the way in which corporate America would transform the nation’s courts. Just a week earlier, Buchanan had presented his plan to another room-full of sympathetic business men. “Conspiratorial secrecy”, he warned them, “is at all times essential”.

The institute would soon count multinational corporations such as Exxon, IBM, Chase Manhattan Bank, Shell and Texaco among its ranks, making it one of the most influential think tanks in the nation.

Rise of the Oligarchs

In 1973, the brand new Environmental Protection Agency took aim at the Olin Corporation, which had started nearly a century earlier as a mine explosives and small arms company. Government contracts during World War I and II would greatly buttress its bottom line and the family-owned concern would go on to form a huge conglomerate producing everything from Winchester rifles to rocket fuel.

Its chemical division had a large rap sheet of environmental pollution and found itself being sued by the Environmental Defense Fund, the National Wildlife Federation and the Audubon Society for releasing DDT-laced effluents into a wildlife preserve. Three years before the EPA came down on the company, they were charged with dumping mercury into the Niagara River and were later found to have falsified records showing it had dumped 66,000 tons of toxic waste into a Niagara Falls landfill.

The Olin Corporation’s criminal negligence and outright disregard for human or environmental health spanned decades. But, as public outcry around these issues began to grow and regulations were put in place John M. Olin – who was not even running the company by then – created the Olin Foundation to, in his words, “see free enterprise re-established in this country. Business and the public must be awakened to the creeping stranglehold that socialism has gained here since World War II.”

Founder of the Olin Foundation, John M. Olin

Olin, along with many other members oligarch class, were galvanized by the infamous Powell memo calling for American business owners to mount a “counterrevolution” against what they saw as an existential threat. Powell, a former director of the Phillip Morris tobacco company, laid out the game plan in his 5,000-word manifesto, which identified the judiciary system as a central focus of their attack strategy. Nixon would appoint Powell to the Supreme Court just two years later.

The Olin Foundation immediately began funding projects focusing on the radical transformation of the American justice system. Among the first the Olin Foundation funded was a program run by an obscure law professor at the University of Miami, Henry G. Manne. Manne was his bringing corporate-oriented and cost-benefit analysis approach to regulation in his Law and Economics Center in the then marginally known campus in Coral Gables, Florida.

Charles Koch, in particular, would find Manne’s ideas very appealing as they dovetailed so perfectly with his own master plan.

Koch’s Law Manne

Charles Koch was following in the tradition of his covenant ideology forbearers. He saw his project to transform American politics akin to the Protestant Reformation, casting himself in the role of Martin Luther declaring that like the rebellious cleric, he stood firm against the established order. “I can do no other”, Koch boasted in a 1999 speech.

By that time, the project had made great, if largely unnoticed, strides. Henry G. Mane was Dean of Koch’s pseudo-academic operation at George Mason University. Over the previous two decades, Manne had been so successful with his Law and Economics program funded to the tune of millions of dollars by the likes of the Olin Foundation, Charles Koch and U.S. Steel, that by the middle of George H. W. Bush’s only term in office, 2 out of every 5 sitting federal judges had participated in Manne’s training sessions, applying free market economics to legal decision-making.

The “Henry Manne Camp”, which counts current Democratic presidential candidate and reportedly reformed liberal Elizabeth Warren among its alumni, doled out rich honorariums to legal scholars to write papers with his particular twist on legal questions that would be published in legal journals, spreading the meme throughout the profession. More than 600 institutions would end up sending their best legal minds to attend Manne’s intensive two-week courses; typically held in posh tropical locales such as Key West. Some institutions, like the University of Virginia’s law school, adopted Manne’s approach in its entirety.

Henry G. Manne, the libertarian legal scholar | Photo Credit: Benjamin Myers/Reuters

Koch and Manne identified what they considered the biggest threat to “economic freedom”. Together they determined that the environmental movement constituted the most clear and present danger to their designs as it sought to “control” corporate interests through “governmental regulation of business”. Government-backed health care also represented a danger since it “impaired the normal workings of labor markets”.

Tax policy, public education and feminism also sent shivers down their spines. The first because of the “inevitable egalitarian instincts” exhibited by “modern” democracies; education had to be curtailed because of the “community values” they considered to be “inimical to a free society”; and finally, feminism was too socialistic for their taste.

Bill Clinton’s re-election motivated Koch to take things up a notch and neutralize these threats, bringing the Nobel prize-winning James Buchanan directly into his operation. After years of funding Buchanan’s work through his various foundations, Charles Koch put up $10 million dollars to set up the James Buchanan Center at George Mason University. The new department would be an amalgam of Buchanan’s Center for Public Choice that the laureate had run at Virginia Tech and Koch’s long-time political hatchet man, Robert Fink’s Center for the Study of Market Processes.

The board of visitors would include William Kristol and Dick Armey, while Edwin Meese III sat as the board’s rector. Buchanan would ultimately be pushed out after getting wind of the illegal nature of the Center’s work. Ostensibly a philanthropic endeavor, registered as a 501 3(c) non-profit legally barred from engaging in politics, the Buchanan Center at GMU was being used as a political lobbying operation led by Koch operatives.

Koch Industries was growing at a frenetic pace, swallowing competitors and violating so many laws in the process, that attacking the system prosecuting them under these laws and imposing multi-million dollar fines on them made perfect business sense.

The Altar of Doom

In due course, the political discourse around the country would begin to reflect the radical, ant-government viewpoints espoused by the foundations and initiatives sponsored by the Kochs and partners like the DeVos family of the Amway fortune, the Coors brewing empire and many others.

Charles Koch issued his battle cry in 1978. “Our movement” he intoned, “must destroy the prevalent statist paradigm”. In the space of two decades his revolution had managed to seep into the national consciousness and its insane tenets would begin to spew from the mouths of his minion politicians. Thom Tillis, a U.S. Senator from North Carolina who owed his post to the Koch machine, wanted to do away with laws compelling restaurants to make employees wash their hands since, he claimed, “the market” would “take care of that”. The press was not immune, either. An editorial board member of the Wall Street Journal took a Koch-infused line against the need for public health officials, expressing her opinion that testing for lead levels in the blood of children was nothing more than an excuse to justify their jobs.

If we were to really look for justifications, we could simply take a closer look at the egregious practices Koch Industries has been employing in their pursuit of profit and unfettered growth. The lawsuit brought against them in 1995 by the EPA for spilling over 12 million gallons of oil across six states as a result of faulty pipelines is only one of many incentives this enormous corporation has to subvert the law and, the tremendous wealth at their disposal has allowed Charles Koch to go beyond mere court battles to burning the U.S. code itself upon the altar of free markets.

Go To Part Three >> KOCH BUST

Part One of Multi-part series or go to long read >>

Total Control

Koch Industries’ interlocking web of companies, foundations and front groups touch everything from the plastic cups you put out at parties, the gasoline you pump into your car, the votes you cast at the ballot box and even the wages your employer is willing to pay you. In short, this privately held enterprise, owned by two brothers, exerts arguably more influence over your life than the government they and their network of like-minded billionaires have been trying to undermine for over forty years.

Through theft, deception and secrecy the Koch’s have built a capitalist juggernaut and infiltrated the institutions of democracy in order to propagate its plutocratic designs upon the country; availing itself of a fringe political ideology rooted in the antebellum South, they have wrought environmental devastation, eviscerated the middle class and have managed to shift the political discourse in America to favor their self-serving, radical free-market policies.

Despite appeals to notions of liberty and so-called “sound economics”, at the core of the Koch business philosophy is little more than a justification for rapacious greed and a pathological inability to share. Those of us downstream from their unimaginable wealth are left to deal with the consequences of their massive, unchecked and wounded egos. But, it is only by dispensing with the pseudo-academic, quasi-legal arguments crafted by the purveyors of Koch’s proto-fascist gestalt, that we can begin to see the contours of their totalitarian dream.

Spiking the Water

In April 2014, the city of Flint, Michigan switched its water supply from Lake Huron to the contaminated Flint River. By June people were dying from a Legionnaires-associated disease caused by bacteria found in the water supply. The crisis became a national scandal as more people got sick even as municipal leaders claimed the water was safe to drink.

Five years later, Flint is still reeling. A fact recognized by the city’s new Mayor, Karen Weaver, who swept into office on a wave of anger and resentment. “It’s a community that’s still dealing with the trauma and the aftermath”, she told the New York Times “of having been poisoned at the hands of the government.”

But, the government was actually the first victim of this tragedy. Hidden in the depths of the rancid waters that killed twelve people and sickened nearly a hundred more, none other than the Kochtopus and its vast political influence machine thrashed about.

In the state of Michigan, it exerted considerable influence in the governor’s office through the Koch-funded and Koch-staffed think tank, Mackinac Center, which had been pushing for legislation that would place any community facing a “financial emergency” under direct state control and, in turn, hand over extraordinary powers to emergency managers. Among the powers accorded to these unelected bureaucrats was selling off local resources to private companies, outsourcing services and changing municipal suppliers at will.

True to the words of one state governor, who stated unequivocally, “When the Mackinac Center speaks, we listen”, their legislative recommendation made it into law and many cities were placed under this regime. More than half of the state’s black voters would come to be governed by such managers. The one assigned to oversee Flint made the fateful decision to switch the city’s water supply to “save money”.

Mind of the Kochtopus

The vital role Koch played in the Flint water crisis received little, if any, media attention because, as in this case, most of their machinations are carefully concealed behind front-groups, innocuous-sounding foundations and ostensibly noble causes.

Koch
AP Photo/David Zalubowski – Charles Koch and son Chase – June 29, 2019

Charles Koch began building this network, dubbed “Kochtopus” for its monstrous reach and multiple tentacles, almost as soon as he took the reins of Koch Industries in the 1970’s. His first mentor was a man by the name of F. A. “Baldy” Harper, author of a “free market primer” called “Why Wages Rise” in which he derides unions, public schooling and any kind of labor protection laws. A founding member of the Mont Pelerin Society along with Koch’s other idols F.A. Hayek and Edwin Von Mises, Baldy Harper would go on to found the Institute for Humane Studies with Koch’s generous and permanent funding.

The Mont Pelerin Society, in fact, would be the fountainhead for many beneficiaries of Koch money. Formed in 1947, the Society was the result of an historic gathering in Switzerland of free-market intellectuals led by their “guru”, F. A. Hayek, prophet of the rich propertied classes in a time when the rising power of unions and growing regulatory framework threatened to undercut their position. The infamous Chicago School of economics and its most polarizing figure, Milton Friedman, was a direct outgrowth of this post-war egghead club.

Friedman, however, was not radical enough for Koch and considered his approach to economics too technical to fulfill the more fundamental, philosophical and transformative changes Charles Koch wanted to bring about in America, turning his attention to other branches of the Mont Pelerin tree.

He found what he was looking for in another University of Chicago grad, who studied under yet another Mont Pelerin founder.

The Dictator’s Messiah

James M. Buchanan was more concerned with the political and social aspects of economic theory than with pesky numbers or statistics.

In 1956, he submitted a private proposal to the president of the University of Virginia for the creation of a department for Libertarian and conservative studies, misleadingly called the Thomas Jefferson Center for Political Economy and Social Philosophy. Buchanan was motivated to create his department by the watershed Supreme Court decision of Brown v.The Board of Education two years earlier, which put an end to racial segregation in the public school system.

The entrenched Southern White elites that ruled Virginia, led by one of the most powerful Senators in U.S. history, Harry F. Byrd, took the court’s decision as an affront and resisted desegregation with all the means at their disposal. Buchanan’s Center at UVA aimed to subvert what he and the Virginian ruling class perceived as federal incursion into states’ rights – a more palatable framing for their real problem: democracy.

The pull of history and strong resistance from Virginia’s White middle class doomed Buchanan’s project. The inevitable demise of the Byrd organization and the turnover of the university’s leadership eventually forced Buchanan to find refuge in a regular faculty position at UCLA, then a hub of radical right wing thought.

Buchanan’s ideas were popular enough in the tight knit circles he moved in, but they had yet to reach the broader audience he needed in order to generate the momentum required for them to actually affect policy. He began to acquire more widespread recognition after the publication of “Academia in Anarchy”, which put forward ‘solutions’ to expressions of social consciousness among the country’s student body. Along with his co-author, Nicos Devletoglou, he would propose remaking colleges and universities as “industries in which individuals sought to maximize their personal advantages and minimize their costs”. The idea was to eliminate dissent by turning higher education into a business and eliminating the humanities from the curriculum.

James Buchanan at George Mason in 1986 | Photo Credit – Sue Klemens

The book propelled Buchanan into the international spotlight and he would soon be heading back to Virginia to form a new department. Located in the less prestigious Virginia Polytechnic Institute, better known today as Virginia Tech, his Center for Public Choice was where he would first meet Charles Koch and become a regular recipient of the billionaire’s generosity.

Soon enough, Buchanan would have a chance to prove just how useful his anti-democratic vision of government could be to a select group of private interests and the Chilean Minister of Finance, Sergio de Castro, who hosted the American academic for a week of exclusive seminars in Augusto Pinochet’s military dictatorship. The main purpose of the five formal lectures he delivered during his 1980 visit was to explore how his “public choice” theory of economics could inform their new constitution.

Buchanan was credited – though not publicly – with providing the legislative tools the dictator needed to cement the governance structure he was running on behalf of the propertied classes. De Castro’s “modernizations” included such Buchanan staples as school vouchers, evisceration of the public university system, health care privatization and the creation of super majorities in the legislative chambers to make any future changes virtually impossible.

Six years later, James Buchanan would be awarded a Nobel Prize in economics and as his star rose, Charles Koch would single him out to lead his most important – and illegal – political operation on the banks of the Potomac. His name would serve to legitimize Koch’s project at George Mason University; very much the crown jewel of Koch’s by then well-established, multi-pronged political operation.

All About the Business

The engineering degree Charles Koch earned at MIT in 1957 served to sharpen a mind already predisposed to distillation. After his initial resistance, Fred Koch’s second-born settled in his role of heir-apparent and began to break down the parts of the corporation he would eventually rename after his father, selecting the best pieces and putting them back together for a more efficient performance.

He would tinker with it over and over again, reacting to changing markets, governmentally-imposed limitations and the ever-alluring siren call of more profits. Along the way, he would pick up the intellectual tidbits and political and economic theories that best suited his approach, cobbling together a personal business philosophy enshrined in what many a Koch employee would come to learn as Market-Based Management or MBM, for short.

An education in MBM, which some former employees described as a “cult”, was compulsory at the company and embracing its principles was a non-negotiable condition of employment. Ostensibly designed to attract and train free-market thinkers who thrived on the entrepreneurial spirit, Market-Based Management was a collection of tenets devised to produce clones of Charles Koch himself.

As Koch Industries expanded and devoured other gigantic corporations like Farmland and Georgia Pacific, it became harder to sell this glorified employee manual to the swelling number of people on its payroll. But, Koch’s ego and ambition grew along with the company assets. He began pouring more and more money into Libertarian causes and think tanks, as the need to keep the government at bay increased. He would invest in politicians and academics, like Buchanan, who could help him shape the public narrative and deflect negative attention from decidedly unfree market practices, such as the theft of resources from Native lands.

Measure Once, Take Twice

The rocky terrain in northeastern Oklahoma was thought to be of no particular value when the U.S. government relocated the Native American Osage tribe there from their original abode in what had become the state of Kansas. Only a decade earlier, George Bissell and Edwin L. Drake had successfully drilled for oil in Pennsylvania, kick-starting the age of fossil fuel extraction in the United States. The initially worthless land now part of the Osage Reservation soon revealed its rich deposits of crude. Oil leases were issued to the tribe, which oilmen all over the country would henceforth have to rent to gain access to the black gold.

The Osage would reap huge profits from the oil on their land, making them the wealthiest Native tribe in the country – indeed, the richest people per capita in the world. Decades later, Osage tribe members were driving around in expensive cars, wearing furs and exhibiting other signs of conspicuous consumption made possible by the ever-increasing dividends resulting from the oil gushing from the ground.

FILE PHOTO – Osage Nation delegation meets with U.S. President Calvin Coolidge

The story of the Osage takes a tragic but not so unexpected turn, as they began to be targeted in a criminal conspiracy to assassinate them and take over the fortune beneath their feet. The tribe would survive the ordeal with the help of nascent FBI and its fledgling director, J. Edgar Hoover who eventually cracked the multiple-murder case.

During the 1980’s, the Osage and the FBI would have to deal with a far more cunning and dangerous enemy in Koch Industries.

Koch President, Bill Hanna, sent out a company-wide memo instructing employees to “shred”, “burn” or otherwise destroy by “some equally effective method” any records that could benefit competitors. He did so in the midst of a U.S. Senate investigation into allegations of deliberate oil mismeasurement. The final report found Koch culpable of systematic oil theft.

For years, Koch had defrauded crude suppliers through manipulation of industry-standard oil gauging methods. They developed their own step-by-step procedure and drilled it into their oil gaugers with MBM-infused intensity with the understanding that their job depended almost exclusively on proper adherence to it. Gaugers were encouraged to always fudge the numbers they kept when siphoning crude from their suppliers’ tanks and loading it onto Koch’s barges. The practice was known as “cutting the top” and “bumping the bottom”, which simply meant that they took more than what they paid for.

This technique put millions of barrels of free oil into Koch’s refineries over the years. Among their victims were the Osage in Oklahoma, who they identified as the ideal target for a public relations campaign Koch mounted to undermine the Senate’s findings and stave off a criminal inquiry.

Understanding that the Osage had limited accounting expertise, Koch sent a former company trader, Ron Howell, to perform an ‘audit’ of the oil lease receipts against their own to prove that claims of oil theft were baseless. Howell came back with the incredible assertion that not only had Koch not stolen any oil, but in fact, had overpaid. In March, 1990, the Osage Nation News ran a story in which Osage chiefs cleared Koch of wrongdoing, based on the fraudulent audit results. Their statements were carried by the Daily Oklahoman soon after and Senator Bob Dole, beneficiary of almost a quarter of a million dollars from Koch throughout his career, submitted the article into the Senate record.

The criminal case never materialized. The FBI’s investigation was abruptly dropped by incoming U.S. Attorney, Timothy Leonard, a man with no relevant experience who was appointed by Oklahoma Senator and close Koch ally, Don Nickles.

Elbow Room

By 2016, Koch Industries would have grown into a fossil fuel behemoth with an annual revenue “larger than Facebook, Goldman Sachs and U.S. Steel combined”. Its insidious and calculated moves in local and state-level politics, academia and the law changed the political landscape of America. Their network would be instrumental in financing and amplifying the Tea Party zealotry. It would bring anti-union, anti-worker’s rights politicians like Scott Walker into the national spotlight. The radical right-wing rantings of Glenn Beck were written by the Koch-funded FreedomWorks, a tax-exempt group founded by former Republican House majority leader, Dick Armey. Beck would collect as much as $1 million dollars annually from the organization to spew his brand of free-market lunacy.

The Heritage Foundation, Cato Institute, The Reason Foundation, The Tax Foundation, The Club for Growth and Americans for Prosperity are just a partial list of the vast, multi-tiered operation initiated and maintained by the Kochs and their billionaire friends to shift the focus of political and economic discourse away from the majority and centering it around the interests of the 0.01 percent. The wealthy oligarch class coalesced around Charles Koch’s leadership to stage a coup on the rest of the country, couching their inhuman greed in populist rhetoric meant to seduce the masses of people they are intent on exploiting.

Along the way, Koch Industries’ shameful record of ecological destruction, subversion of democracy and death would soon be revealed as their true legacy.

Go To Part Two >> KOCH JUSTICE

Snakes in the Grass

Jeanne Humphreys’ beautiful home at 210 Harbor Drive, Key Biscayne, Florida had a snake problem, but a recent trip to Jamaica had given her some food for thought. She learned that farmers on the island had introduced the mongoose into the local fauna to fight a snake infestation during the 1870’s. Curly Humphreys’ wife found herself thinking about the snake-killing carnivores one night at the Fontainebleau Hotel in Miami Beach and innocently broached the subject with her husband’s associate and friend, Johnny Rosselli.

“What do you know about the word mongoose?” She asked Rosselli.

Shocked by the question, the gangster balked. “Are you crazy?”, Rosselli inquired before nearly spilling the beans on the CIA’s top-secret plot to kill Fidel Castro, in which he and Jeanne’s husband, were deeply involved.

“This Castro stuff is OK’d by the G [U.S. government]. We’re not supposed to talk about it”, Rosselli protested. “I can’t believe believe Curly would talk about such a thing.”

Jeanne Humphreys had no idea what Johnny was talking about and, wondered aloud what Castro had to do with the snakes in her front yard. Realizing his mistake, Rosselli asked Jeanne to keep it to herself. “Look, I just fucked up.” He said. “Please don’t tell Curly.”

The plot was the brainchild of then Vice President, Richard Nixon, who was angling for the presidency and calculated that a coup in Havana would get him there. After the scheme was hatched at a National Security Council meeting in the Spring of 1960, Nixon encouraged his military aide, General Robert Cushman, to meet with exiled Cuban militants and put a group together for its execution. Originally called Operation Pluto, the plan’s name was later changed to Operation Mongoose and it called for the invasion of Cuba and the assassination of Fidel Castro along with his top retinue of revolutionaries.

“I had been the strongest and most persistent for setting up and supporting such a program”, wrote Nixon, years later. But, the ragtag collection of exiles didn’t inspire the greatest confidence in the planners, and the decision was made to enlist the help of Johnny Rosselli, Curly Humphreys and a handful of other mobsters from the Chicago Outfit.

PHOTO – Mugshot of a young Filippo Sacco, a.k.a Johnny Rosselli

The Genius

Murray “Curly” Humphreys was the brains of the Chicago mob, otherwise known as The Outfit. His intellectual abilities would help them outmaneuver many a legal problem. But, one particular maneuver was such a stroke of genius, it would be enshrined in the most celebrated film in American history – The Godfather.

“I refuse to answer on the grounds that it might incriminate me.”, was the phrase crafted by the brilliant, former jewel thief to repel the onslaught of questions by U.S. Senators during the United States Senate Special Committee to Investigate Crime in Interstate Commerce, known as the Kefauver Committee. Over and over, Outfit members called to testify simply repeated the mantra, to the immense frustration of the dais.

The Committee called eight hundred witnesses in fifteen cities across the country during an eleven-month-long investigation, that resulted in more than 11,500 pages of testimony and must-watch TV. First broadcast in New Orleans, the hearing’s popularity soon drew in the big markets of New York and Los Angeles, among others. The record ratings attained during the 1950 World Series a year earlier were shattered, attracting between 20 and 30 million viewers. Committee Chairman Estes Kefauver became a household name and, at one point, the front-runner for the 1952 Democratic presidential nomination.

Nevertheless, none of the nineteen legislative recommendations issued by the committee’s report were ever implemented, and Kefauver himself, was found to be an avid gambler who was constantly broke as a result. Jewish mob boss, Meyer Lansky, confronted the hypocritical Senator. “What’s so bad about gambling?, asked the infamous New York Commission boss, “You like it yourself. I know you’ve gambled a lot.” Kefauver admitted as much, but revealed his true bigoted motivations in his repsonse: “That’s right, but I don’t want you people to control it.”

Forty-six “contempt of Congress” citations were issued during the hearings over the mobsters’ repeated use of Humphreys’ legal device. Only three were upheld by the courts. An incredible victory for the man who invented ‘Taking the fifth’, immortalized in Francis Ford Coppola’s seminal film.

Al Pacino in a still from the film, ‘The Godfather,’ directed by Francis Coppola, 1972. (Photo by Paramount Pictures/Courtesy of Getty Images)

The Godfather movie, itself, was a tribute the mob – which controlled most of Hollywood then – made to itself. Paramount producer Bob Evans had the rights to Mario Puzo’s novel and was unceremoniously turned down by MGM president, Jim Aubrey, when he tried to accommodate Coppola’s choice for the role of Michael Corleone – an unknown actor with an “unbreakable” contract with the competing studio, named Al Pacino. Undeterred, Evans sought help from Tinsel Town’s notorious fixer, Sidney Korshak.

“He never heard of the schmuck, either.”, recounted Korshak to Evans about how he dealt with the reluctant Aubrey. “I asked him if he wanted to finish building his hotel.”, said Korshak. The thinly veiled threat was enough for MGM to release Pacino from his contract and allow him to play the part, which would establish him in as one of the biggest names in the business.

A Fucking Hoofer

The Outfit’s incursion into the entertainment industry had begun after the end of Prohibition forced them to find other rackets to grow and launder their fortunes. The movie business, with its massive budgets and licensing opportunities, was the perfect vehicle. But, before film, the mob had taken over the music industry and bankrolled many of its brightest stars. Frank Sinatra was, perhaps, the brightest of them all.

The mob not only made Frank Sinatra, but also saved his career when it was foundering in the early 1950’s. Despite his marriage to Hollywood A-lister, Ava Gardner, Frank’s bid to jump-start his career again by getting a part in Harry Cohn’s upcoming movie, “From Here to Eternity”, was falling flat with the producer, who wanted a real actor for the part. “You’re nothing but a fucking hoofer”, Cohn told the desperate crooner, who immediately appealed to his mob buddies for a helping hand.

In a scenario similar to the one, that would play out years later between Korshak and MGM’s Aubrey, Johnny Rosselli came to Frank’s rescue and made Cohn an offer he couldn’t refuse. The movie won a total of eight Oscars, with Sinatra taking home the award for Best Supporting Actor and a new professional lifeline.

Meanwhile, things were picking up over in Havana, Cuba; the very place where Sinatra’s career had been launched. Santo Trafficante, Jr. was making a killing in the revamped casino business in Havana, in league with dictator Batista, who made Trafficante’s partner, Lansky, “adviser on gambling reform”.

PHOTO – Mugshot of young Frank Sinatra

The Commission boss soon opened a casino inside the iconic National Hotel, designed by Igor Plevitski, who also designed The Biltmore in Coral Gables. Six years earlier, a historic meeting between the biggest mafia bosses took place at the legendary hotel. Yet another pivotal moment also dramatized in The Godfather, when the heads of all the families gathered at the National to discuss something that was left out of the classic film – their participation in a highly classified, CIA-sponsored operation. Just before the mob summit, Frank Sinatra landed in Havana with two million dollars in a suitcase for the CIA’s point-man, Lucky Luciano.

Charles “Lucky” Luciano was recruited by CIA-precursor, OSS in 1942 to ostensibly safeguard New York harbor from acts of sabotage by the enemy axis. After being convicted to 30 years in federal prison for running a prostitution ring, Luciano was approached by undercover OSS agents , the precursor organization of the CIA, and offered a deal, that would mark the beginning of a far-reaching partnership between the U.S. government and the Sicilian and Italian-American mafia.

An argument can be made, that the CIA was created for the sole purpose of managing this partnership, which involved the creation of secret militias financed by world-wide heroin trafficking, called Operation Gladio.The meeting at the National Hotel in Havana was made to convince the Gambinos, Genoveses, Accardos and other top mafia families to get into the narcotics game, many of whom considered a dishonorable endeavor, and help Uncle Sam “fight communism”. The money Sinatra delivered to Luciano in Havana was part of a down payment he intended to distribute among the guests.

PHOTO – Hotel Nacional de Cuba view towards the Malecón in Havana, Cuba

The Wrong Cuban

Cubans were becoming part of America’s collective consciousness, thanks in large measure to the “I Love Lucy” show, which featured the bongo-playing Ricky Ricardo, Lucile Ball’s real-life husband and the sitcom’s producer, Desi Arnaz.

Arnaz is credited with inventing the multiple-camera sitcom method, which made his production house, Desilu Studios, one of Hollywood’s most successful, at the time. In 1959, Arnaz had another hit on his hands. The Untouchables, a show about fabled law-enforcer, Elliot Ness and his mobster-chasing adventures, ran for four years on ABC and became one of television’s classic shows. But, the Italian-American community did not take well to the portrayal of their culture on the series and it drew special ire from the real crime bosses, who went after the producer.

Desi’s childhood friend had been none other than Sonny Capone, the only son of the legendary mob boss, Al Capone. It was Sonny who first complained to Arnaz about the problem he had stirred up, but Arnaz insisted he was the best person to make such a show because of his own personal connection to the subject matter. From there, the issue only escalated and Sam Giancana, nominal head of the Chicago Outfit, sent Frank Sinatra to talk some sense into the Cuban.

The conversation between Arnaz and Sinatra ended with the singer storming out and pulling all of his productions from of Desilu Studios. Outraged, Giancana dispatched two of his henchmen to remove Desi Arnaz from this earth. Al Capone’s widow, Mae, stepped in to call off the hit and Ricky Ricardo was spared.

American actress Lucille Ball (1911 – 1989) (as Lucy Ricardo) and her husband, Cuban actor Desi Arnaz (1917 – 1986) (as Ricky Ricardo) talk in an episode of ‘I Love Lucy,’ Los Angeles, California, September 21, 1954. (Photo by CBS Photo Archive/Getty Images)

As it turns out, the mob had been worried about the wrong Cuban. Fidel Castro was about to turn the mob’s Havana dreams into a nightmare as his revolutionary forces ousted Batista and his entrenched elite. With Eisenhower riding out the last year of his Presidency and more worried about how his legacy would be affected by starting a conflict 90 miles from the U.S. mainland, Castro caught a break.

Nevertheless, the calculation regarding Castro seems to have changed among the real policy-making circles of America, and Castro’s sudden take-over of the island was seen as more of a boon than a detriment to U.S. designs for the rest of Latin America.

Cuba, after all, had no value besides that of a playground for the rich. In terms of natural resources, for instance, it was hardly worth the trouble to invest any kind of man-power to the goal of regime-change, even if such efforts were comprised of disposable mobsters and Cuban exiles. On the other hand, having a communist boogie man they could wave around as a warning to those in the continent who dared to dream of self-determination was much more valuable.

The Snake Pit

After the fiasco in the Caribbean, the upper echelons of the mafia saw the writing on the wall and made the necessary adjustments. Trafficante, Jr. cut a deal with the new island boss and gave Castro a piece of the bolita proceeds, a street-level gambling racket up and down the U.S. east coast. In contrast, Johnny Rosselli would go down with the ship.

Rosselli, like many of his Italian-immigrant brethren, dreamed of becoming full-blooded Americans. For him and his ilk, legitimizing their fortunes and joining the ranks of the “upperworld”, or the realm of sanctioned wealth creation, was also part of that aspiration.

He considered himself a patriot and his sincere commitment to anything the “G-men” would ask of him bore this out more than once. As far as Rosselli was concerned, he had reached the dream. Narrowly escaping fire from Cuban forces and twice having to jump out of speed boats during failed CIA-missions in the Caribbean, Rosselli had the war stories to prove it.

The era of the “Goombahs”, however, was coming to a close. The new RICO laws were successfully used to dissolve the crime family model in the United States. Rudy Giuliani, future Mayor of New York and Italian-American son, was the first and most prolific prosecutor of the mafia under the Racketeer Influenced and Corrupt Organizations Act, passed in 1970.

In 1976, Filippo Sacco’s decomposing body – Johnny Rosselli’s real name – was found in a 55-gallon steel drum floating near Miami, Florida after he had been called to testify before the Church Committee for a second time about who had killed Kennedy. As it turned out, Johnny Rosselli had a snake problem of his own and would have been better served by following his friend Curly’s advice all those years ago and taken “the fifth”.

The real scope and implications of what Rosselli was lending himself to, through his participation in the anti-Castro plot and other deep state operations probably escaped him and other members of the Outfit who were a part of them. Ultimately, they were pawns in a covert war that continues to this day, under different guises and with different players.

Role Reversal

If you would have carried out a poll in early November of 1963 about who was most likely to be assassinated that month between the President of the United States and Fidel Castro, the final tally would have likely tilted toward the latter. The fact that the bearded, cigar-smoking revolutionary remained in power for another five decades should tell us something.

The Cuban exile community blames Kennedy for the failure of the Bay of Pigs. But, it is clear that a decision had been made by more powerful, invisible players to keep Castro in power. The same ones who made the decision to remove Kennedy, and his entire mob-connected family, from it.

PHOTO – Fidel Castro surrounded by showgirls in Havana, Cuba

The scramble for power between the time of JFK’s assassination and Nixon’s resignation almost a decade later, was real. America’s post-war superpower status was seriously threatened by the Arab oil embargo. The Vietnam war and other internal strife had frayed the social fabric of the country.

Concurrently, Operation Gladio was unraveling in Europe and the usefulness of the CIA’s partnership with the mafia was becoming a liability. Luciano’s Sicilian networks and their affiliation with CIA-sponsored right-wing terrorists were being exposed by Italian law enforcement and attracting unwanted international attention. The whole house of cards was starting to come down and it would have, had it not been for the operation’s success in Afghanistan, where the Soviet military was exhausting itself fighting Gladio-financed Mujahidin led by one Osama Bin Laden.

Despite teetering on the brink of collapse, “anti-communism” was still fungible currency in American political theater, which could be traded for lowering protectionist barriers and other obstacles to U.S. interests at home and abroad. Fidel Castro, as a gatekeeper for an economic embargo that destroyed the lives of the Cuban people – not to mention a clear and present “nuclear threat” to the region, represented a valuable hegemonic tool for these same interests.

Sleep with the Fishes

The mob developed Hollywood’s proof of concept and built the industry’s SOPs. Today, the CIA and the Military Industrial Complex exerts direct control and oversees the messaging of almost every theater release; especially in the superhero/comic movie genre, which is little more than war propaganda.

The Cuban Missile Crisis and Ricky Ricardo are two sides of a false dialectic. Nuclear annihilation or Merengue; starvation or dinner with Ethel and Fred. The ‘TV-fication’ of America allowed simple yes/no narratives to be delivered right to the viewers’ prefrontal cortex.

Today, the ‘Internetification’ of America is bypassing even this step in the flow of perception and taking it straight to the limbic system, where discernment is an afterthought and the need for a narrative is eliminated altogether.

Much of the research for this article comes from Gus Russo’s fantastic account of the Chicago mob scene in his book The Outfit – The Role of Chicago’s Underworld in the Shaping of Modern America

The End is Near

Italian authorities were on the trail of Roberto Calvi and the Banco Ambrosiano’s irregular activities, oblivious to the incredible chasm of corruption, blood and terrorism that lay open just behind him. Founded in 1896, the bank had cultivated a pristine reputation as a model of integrity and independent governance, thanks to its policy of restricting the total amount of stock any single entity could own in the institution to 5%. Calvi had created a web of shell companies with myriad subsidiaries to get around these limitations, and by such means attained 16% control of the bank on behalf of the Vatican.

When the scandal broke all over the Italian press, the Pope himself was implicated in a conspiracy so large and dark, that even the most audacious spy novelists would balk at the premise. A wide-ranging Masonic fraternity called P2, comprising hundreds of powerful government figures and mobsters, was exposed as a central mover in the multi-billion-dollar scandal. Even high-ranking Vatican officials were part of the fraternity – a violation of Church tenets.

Banco Ambrosiano’s long-established good name had been tarnished beyond recovery, but the Milan-based institution’s role barely scratched the surface of a far bigger and much more sinister reality emanating from the deep recesses of post-World War II America; a burgeoning superpower intent on asserting itself on the rest of the world, bleeding from the shores of the Mediterranean all the way to Latin America.

Gladio

Dubbed “God’s Banker”, Calvi was in charge of laundering billions of dollars generated through world-wide heroin trade networks established years earlier by the CIA and its precursor agency, the OSS. Allen Dulles, future Director of the CIA, and his spy mentor “Wild” Bill Donovan, devised a plan at the conclusion of World War II to prevent – as claimed – a Soviet invasion of Europe. The concept revolved around recruiting Nazi officers and other extreme right wing elements to form so-called “stay-behind” units throughout the old continent, stationed clandestinely in several countries ready to act on a moment’s notice. They called the operation “Gladio”, and though the awaited red invasion never materialized, the services of the covert militias, who stashed CIA-provided armaments in thousands of secret locations, were requisitioned on multiple occasions as the need to quash left-leaning movements arose.

FILE PHOTO – Roberto Calvi, “God’s Banker”

Calvi’s boss, Michele Sindona, had been the first to establish and manage the laundering networks for the IOR (Instituto per le Opere di Religione), the Vatican’s invisible bank, through which all drug trade, arms sales and miscellaneous illegal profits were funneled. His vast connections to the Sicilian mafia made him the perfect go-between in the early days, but Calvi’s more sophisticated knowledge and financial creativity offered Gladio the necessary expertise to scale their ever-increasing thirst for dirty money. Calvi’s stealth takeover of Banco Ambrosiano was a salient example. Sought out for its solid reputation, he would go on to open several international branches of the bank to facilitate the movement of Gladio-destined funds around the world. Among the places Calvi incorporated these brass-plate shells were Luxembourg, Nassau in the Bahamas and Managua, Nicaragua.

The Heart of Liberation

Anastasio Somoza Debayle ruled the small Central American nation of Nicaragua the way any scion of a foreign-backed, generational ruling family would. Protected by Washington from the start, Somoza had little to threaten his fiefdom. As long as his benefactors in Langley, Virginia and the U.S. State Department gave their tacit approval, there was no manner of corruption or repression he wouldn’t avail himself of to remain in power.

Agrarian movements and peasant revolts were ubiquitous in the entire region. Nicaragua was no exception. The Sandinistas had always been a thorn on the side of Somoza, but had little chance of mounting a successful revolution as long as American interests remained steadfast behind the dictator. But, the rise of left-leaning groups and political factions were a predictable consequence of the oppressive presence of U.S.-sponsored, right-wing dictatorships not only in Nicaragua, but all over Latin America. Most concerning for the Gladio intelligence clique, however, was the emergence of a grassroots religious movement, led by local Catholic bishops and clergymen called Liberation Theology.

To the immense consternation of a Vatican leadership, which was fully invested in the suppression of leftist ideologies and the imposition of conservative, right-wing governments in Italy and all over Europe, Liberation Theology began to draw a great number of advocates within dioceses all over Latin America. The concern was, of course, shared by their partners in the CIA who aided the Vatican in the subsequent persecution of priests, nuns and other members of the clergy who supported the movement through the already established, transnational spy network known as Operation Condor, centrally relayed through Southcom headquarters in Panama.

A woman trying desperately to prevent detention of a young man by police during anti-government rally in Buenos Aires during the Argentinian Dirty War, when thousands of people were killed or disappeared at the hands of the military. (Credit: Horacio Villalobos/Corbis/Getty Images)

Spurred on by his superiors at the top of Gladio’s hierarchy, Roberto Calvi created a web of corporate fronts in different countries to facilitate the flow of black funds from the IOR to Latin American dictators, in order to round up, incarcerate and kill tens of thousands of dissidents. Argentina’s “dirty war” was only one of the operations of state terrorism financed by the Vatican/CIA nexus, which slaughtered, kidnaped and tortured over 30,000 people. Among Argentine dictator Videla’s informers was one Fr. Jorge Mario Bergoglio, then the Provincial General of the Jesuits, better known today as Pope Francis I.

By the Skin of their Teeth

Years later, when the noose was tightening around Calvi as Italian judge Carlo Palermo uncovered more and more of the astonishing truth, Gladio’s financial wiz wrote a letter threatening to expose the Vatican’s deep ties to the murderous state repression unleashed by the coterie of military dictators halfway around the world, revealing that he had been tasked with creating:

an effective politico-religious penetration into secular society by securing control over banking institutions. The enormous importance of what I just said induced me to incur debts in foreign currency in order to buy Banco Ambrosiano shares in sufficient quantity to guarantee IOR control over the institution… On more than one occasion, I believed that my life was at risk as I rushed from one Latin American country to another, seeking to oppose the ferment of anticlerical ideologies. I did my upmost in every sense even to the point of concerning myself with the supply of warships and other war material…

The gauntlet was about to come down. Ambrosiano’s collapse was opening leads Italian law enforcement might think twice about before following them. Carmine “Mino” Pecorelli, the Journalist who first published the P2 member list, was promptly murdered. Judge Palermo was nearly killed when a car bomb exploded just as he was arriving at the office he opened in Sicily to continue his probe, and the head of Italy’s Military Intelligence, Guiseppe Santovito – whom Palermo had arrested and was scheduled to be interrogated by Italian investigators – was killed in his holding cell. The real culprits behind Italy’s “days of lead” were being exposed as right-wing Gladio saboteurs and not communists, as was propagated by those same Gladio networks. The CIA saw the writing on the wall and started leaving its partners in the lurch. Michele Sindona was indicted in New York and convicted after a convoluted attempt at a staged kidnapping, which ended up exposing even more P2 members and widening the net for Italian prosecutors, who would eventually try and convict over 72 members of the Sicilian mafia in connection to Gladio.

As the 70’s rolled around, several other factors began to interfere with the smooth execution of the operation. The OPEC nations’ boycott following the Arab-Israeli war reverberated across the world economy and directly impacted Gladio’s cash sources, which stretched across different currency baskets.

President Jimmy Carter’s policies would also interfere with the international scheme. Carter ended support for the Somoza regime and opened the door for the Sandinista revolution, which ultimately drove the U.S.-backed dictator out of power.

Nevertheless, Gladio had managed an enormous victory as the USSR found itself hopelessly embroiled in Afghanistan, where the CIA had successfully created cells of radical Islamic militants to wage Jihad against the Russian-backed government of Afghanistan, going as far as recruiting African American Muslims through proxy organizations in the U.S. to go fight in the Gladio-created holy war.

However, the Sandinista takeover of Nicaragua and imminent collapse of the Italian Gladio networks, thrust the American deep state into damage control mode. George H.W. Bush, who along with Henry Kissinger, represented the top of the Gladio pyramid, mobilized their political machinery to take the White House. The infamous “October Surprise” was engineered through Gladio’s Turkish networks, which delivered weapon caches to the Iranian government in exchange for delaying the hostages’ release and putting the Reagan/Bush ticket in office.

Just months into the new administration, the first of two failed Gladio assassination attempts occurred when Bush family friend, Hinckley Jr. shot Ronald Reagan. Pope John Paul II, who had incurred the network’s ire by holding secret talks with the Soviets, was slated to be removed later that Fall.

Power By Any Other Name

Roberto Calvi’s body would be discovered dangling over the Thames river in London. Bricks would be found in his trousers – a Masonic signature. The Pope would miraculously survive the bullets shot at him by multiple Turkish assassins, belonging to the Grey Wolves Gladio unit and the capture of Ali Agca nearly derailed the planned cover story to blame communists for the attempted murder. Ronald Reagan survived, as well, but he was mentally weakened enough from the trauma, that Bush could operate just as well from the Vice Presidential office.

Soon after the former spokesperson for General Electric recovered from his bullet wounds, he officially declared narcotics a matter of U.S. National Security and the “War on Drugs” was launched in earnest. A few years later, the Berlin Wall came down and George H.W. Bush assumed power directly, moving Gladio into the second phase of operation in a post-Soviet world.

The War on Drugs is yet another manifestation of the original Gladio operation, designed to maintain American hegemony in Latin America, as well as subvert any attempt at self-determination by countries in the region.

Framing it as a battle between Capitalism and Communism allows factions to align themselves on either side of an ideological debate, that is in itself, false. On final analysis, this is all just a gambit of power. The ultimate goal is to consolidate resources and energy in the fewest hands. The right-left paradigm is a Hegelian dialectic, and who ever participates in it – no matter which side they fall in – simply furthers the final objective.

Much of the research for this article comes from Paul L. Williams’ seminal work, “Operation Gladio – The Unholy Alliance Between the Vatican, the CIA and the Mafia

Borderline was born from an article in Proceso magazine, one of Mexico’s top publications for investigative journalism, about the incredible conditions inside the CERESO de Piedras Negras where the Zetas cartel had been running operations since the early 2000’s. The piece was based on a report by the Colegio de Mexico, and was also included as a downloadable pdf. More tan intrigued, I immediately printed the 70+ page pdf document. Only a fraction of what I read in there actually made it into part one of Borderline, and if you can read Spanish I recommend reading it in its entirety.

At first, I considered making the series about the Zeta-controlled prison exclusively. There was certainly more than enough material to justify it, but given the current political climate in the United States I was afraid that producing a portrait of such a place without the larger context would prove counterproductive,

As soon as I began my research, I came upon Ginger Thompson’s fantastic investigation for Pro Publica about a bungled DEA operation, that resulted in the death or disappearance of more than 300 people in the region of northern Coahuila as the Zetas exacted revenge after the American law enforcement agency “carelessly” revealed the cartel bosses’ private cell phone numbers to Mexican authorities. As it turned out, it was Thompson’s article which spurred the subsequent investigation by Colegio de Mexico scholars into the prison, where many of the killers unleashed on the hapless residents of Piedras Negras and surrounding areas by the Zetas came from.

I quickly realized that I had the perfect story from which to launch a broader examination about the war on drugs. Here was this horrific incident taking place less than 5 miles from the border between Mexico and the United States after more than four decades of a relentless “drug war”.  How was this possible? More than forty years engaged in a battle against narcotics and not only are the most violent cartels to date doing business steps from the U.S. border, but the illicit drug market in America has ballooned to an all-time high, raking in $150 billion dollars a year?

Clearly, something else is going on. The truth about America’s war on drugs is out there and has been for quite a while, but mainstream sources of information rarely take on these stories and in most cases work to suppress them. The case of Gary Webb is among the most salient, though not the only one. The facts themselves are the best proof that the so-called war on drugs is a cover for hegemonic foreign policy directives originating in Washington.

In Borderline, I try to lay out some of the facts and provide a broad historical perspective for those who may otherwise not know the full story and find themselves being manipulated by dishonest political discourse. It is not an exhaustive presentation, by any means, but I have tried to cover a large enough swath of events – spanning centuries – to give those who seek a better understanding a solid foundation for further research.

The series starts and ends with the story that is closest to us, both in time and space. But, in between, the root causes of the humanitarian crisis currently expressing itself at the U.S.-Mexico border are finally given the context that is missing from other accounts about the war on drugs and the fictionalized dramas, like Narcos, which have found so much recent success.

The full series is freely available online on the Deep City Chronicles Vimeo channel.

Trailer

Netflix

Netflix is about to release the third installment in its wildly successful series “Narcos”, which began with the fantastic portrayal of Colombian drug kingpin Pablo Escobar by Wagner Moura, in a well-conceived, albeit, fictional narrative centering around the exploits of the Medellin cartel and the hapless DEA agents in pursuit of its infamous leader.

Blown Cover

The new season moves on chronologically and northward, to the mid 80’s in Mexico and the first case of a murdered agent of the DEA. Enrique “Kiki” Camarena was an anti-narcotics officer with the Drug Enforcement Administration working in Mexico under cover as a journalist. In the Winter of 1985, months before a devastating earthquake that would take thousands of lives in Mexico City, a member of the Guadalajara Group, got careless with the plans to kidnap him after his identity had been leaked to the criminal organization by an anonymous source in the American consulate located in the capital of Jalisco.

Camarena
File Photo: Enrique “Kiki” Camarena was tortured to death in Mexico by Rafael Caro Quintero in 1985.

Rafael Caro Quintero had been just another uneducated thug on the payroll of the drug trafficking group, but had risen quickly in the ranks as a result of his ambition and innovative marijuana cultivation methods. At that time, the organization was headed by Amado Carrillo Fuentes, a.k.a. El Señor de Los Cielos, who would later put together a fleet of aircraft to transport narcotics across the border. Quintero ran part of Carrillo Fuentes’ operation with fellow gang deputy, Ernesto Fonseca Carrillo or Don Neto. Together, they decided to teach the annoying DEA agent a lesson and scare him off.

The Look-Away

Camarena was abducted and hidden in one of the organization’s main properties in the city of Guadalajara. Business was booming. The covert Iran-Contra operation was in full swing, and American deep state actors had scaled the Mexican drug trafficking business considerably. Tons of Colombian cocaine were being smuggled into the United States via the Sinaloan desert, where U.S. military personnel swapped the weapons cargo they had flown in, destined for Nicaraguan Contras, with cocaine brought up from South America on its way to the streets of South Central Los Angeles and other points in the growing crack and coke market. It was not surprising then, that Caro Quintero felt he could get away with torturing a DEA agent to death.

Nevertheless, when Fonseca Carrillo, heard what Quintero had done, he was terrified. He personally went to see the agent’s mangled corpse while it was still in the safe house and went off on Quintero. What his partner didn’t understand was that the boss was not THE boss. There were higher-ups in the Mexican military and the federal government who would not be happy with this turn of events. Quintero’s rouge actions could jeopardize their positions. Indeed, Don Neto was soon convicted of the agent’s murder and is languishing in a Mexican prison to this day. As for Caro Quintero, he too was arrested and sent to prison, though released just a few years ago. The Guadalajara Group, however, would continue to thrive under new figureheads groomed by the real bosses behind the scenes and rebrand itself as the Sinaloa Cartel.

That’s Entertainment

The first two seasons of Narcos didn’t go very far down the rabbit hole of the deep state’s active involvement in the drug trade. At best, there were only some very subtle insinuations. But, nobody expects that to change as the series progresses. After all, there are “higher-ups” in nearly every industry and people, in general, like their heroes and villains to be clearly defined. Diego Luna is set to play the Lord of the Skies in the upcoming Netflix epic. If the Mexican actor is able to approach Moura’s gravitas from the first two seasons, then the show will be well worth the $9-dollar subscription price tag. But, don’t assume you’re going to get the real story about the drug war.

If you’re looking to be both informed and entertained, I would urge you to consider watching my series “Borderline – The Unhinged Truth About the Drug War”, currently half-way through its full release. Part I and Part II are out now, no subscription necessary.

Borderline – The Unhinged Truth About the Drug War

Is the war on drugs a failed policy or a vital tool of American hegemony?

Part I


A massacre in the northern Mexican state of Coahuila was unleashed by the most violent cartel in the country, the Zetas. As many as 300 people were murdered or kidnapped in 2011 by the mercenary drug army, but if it hadn’t been for the DEA, such a terrible tragedy might have never happened. Part one takes you on the ground of the deadliest war of our time, and sets the stage for the real story about the so-called war on drugs.

Part II


Part II takes a step back into history and looks at the roots of drug trafficking in America as well as the rise to power of the architect of the modern day “war on drugs”, George H.W. Bush, and the so-far unexamined, engineered crisis imposed on a rising Mexican economy three decades ago, which plunged it into the violence-ridden country it is today.

Part III


Part III begins with the collapse of the Somoza regime in Nicaragua and the creation of the world’s biggest illicit drug market in the United States via Iran-Contra by elements of America’s deep state. The policies and strategies employed by the military-industrial complex are then revealed in detail, as the political discourse of “national security” was continually used by both the Department of Defense and large U.S. multinational firms to impose hegemonic designs on Latin America and the world, with pharma giant Pfizer leading the way on the corporate front, and U.S. Southern Command (Southcom) assuming the lead role on the military front.

NXIVM

What do you get when you mix a former child-genius who grew into an adult with a pathological god complex, two sister heirs of a multi-million-dollar fortune with daddy issues, and an endless supply of emotionally unstable, aspiring actresses? The answer, apparently, is a sex-cultish pyramid scheme called NXIVM, masquerading as a self-empowerment program, which engages in child trafficking, blackmail, branding, and rape.

Keith Raniere, the 57-year old founder and mastermind of the organization pronounced NEX-i-um, was arrested by Mexican authorities in late March at an estate in Puerto Vallarta, Jalisco, and deported to Texas, where he was arraigned on charges brought against him by federal prosecutors in Brooklyn, NY.

Raniere, who had been in and out of the public (and law enforcement) eye for almost two decades, had so far avoided too much attention, despite a 2003 Forbes Magazine cover story, that painted him and his organization in a most unflattering light. The secretive self-help “guru” had continued to dispense his unusual brand of personal empowerment techniques to thousands of paying customers through his so-called ESP (Executive Success Program) seminars, imparted internationally by several franchise-like partnerships with some very influential people around the world.

Kryptonite

His relative anonymity came to a screeching halt as a result of his arrest in Mexico, followed by the detention of one of his co-conspirators (as defined in the FBI’s filing), Allison Mack. Widely known to the younger generation as “Chloe” of the hit Television show, Smallville, Mack’s arrest sent shockwaves through the Internet, which has latched on to the story, ever since. Curiously, her sycophantic character in the teen melodrama somewhat mirrors her current ‘real-life’ drama, which revolved around a not-so-subtle worship of the show’s hero, an adolescent Superman. Even more odd is the apparently factual claim that fellow star, Kristin Kreuk, who played the treacherous “Lana Lang” character on the same series, was the one who brought Mack into Raniere’s group after taking one of the organization’s “intensives” – a multi-day empowerment course. According to Barbara Bouchey, former member and NXIVM bookkeeper, Mack created a program within the organization called The Source, which targeted actors to bring into Raniere’s lair.

Much of the press has focused on the shocking details of the physical and psychological abuse endured by the group’s inner circle sorority members, who have been subjected to sleep deprivation and sexual coercion, and the brutal heat stamping of their skin with a cauterizing pen during a 30-minute, video-taped ritual imposed on selected female members by other female members, upon induction to DOS, an acronym for the Latin “Dominus Obsequious Sororium”, which loosely translates to Master Over the Slave Women. Allison Mack is said to have functioned at the highest level of the sorority, and is alleged to have benefitted financially from her participation, receiving compensation for bringing women into the Raniere-created group.

As disturbing as the involvement of a well-known actress may be, that might just be the tip of the iceberg. In an interview with WNYT, Bouchey remarked that, “as the story unfolds, the branding and the women’s group is what’s getting everybody’s attention, however, I think there’s so much more underneath…” As we delve further into the NXIVM story, her warning becomes unassailable.

The Higher Ups

NXIVM’s tentacles extend all over the world. But, when the Eastern District of New York launched a full-on investigation into NXIVM and Keith Raniere, the self-styled messiah fled south of the border, where some of his most important friends could put him up for a while.

The man who led NXIVM’s operations in Mexico was Emiliano Salinas Occelli, son of none-other than Carlos Salinas de Gortari, former President and one of the most powerful, if reviled figures in the country. Despite the fact that Gortari had to flee to Ireland and then Fidel’s Cuba in the wake of his calamitous presidency (1988-1994), marked by the massive heist known as FOBAPROA, he is once again living in Mexico, but is careful (and powerful enough) to remain out of the spotlight. Gortari is a known psychopath, who murdered a maid in his house when he was a young boy. Much of the wealth he stole, and which he continues to generate through various financial interests, is hidden behind one of Forbes’ so-called “richest men in the world”, Carlos Slim, who is simply a frontman for the illicit Salinas family fortune, and other Mexican one-percenters who wish to remain anonymous.

Police in Mexico do not operate independently, and do not initiate investigations – that job is left to the judicial branch, who, in turn work at the behest of whichever political clique happens to be running the country. Mexican cops are low-paid grunts who spend their time extorting the population for their own survival, and only execute arrests like Raniere’s in Puerto Vallarta when they are directed by someone higher up on the food chain. The go-ahead to apprehend the American might have come from Salinas himself, as the heat had started to build on his son, and began to pose a problem for Salinas’ future political ambitions. Initially, the scion of the notorious ex-President was forced to distance himself publicly from the allegations against DOS, citing the same excuse given by Raniere himself, who asserted that the “sorority” of women who had branded each other with a mysterious symbol, combining both his own initials and those of Allison Mack, was in no way connected with the NXIVM organization.

Raniere’s other Mexican partner, Alejandro Betancourt Ledesma – who managed the Mexican NXIVM operation with Salinas Occelli, had previously availed himself of his lawyer’s services to send threatening letters to the guru’s detractors and legal challengers in America, and even managed to procure a worthless, but perhaps frightening “cease and desist” order from a Mexican federal agent, which was sent to at least twenty of Raniere’s enemies in the U.S.

Rosa Laura Junco, daughter of the publisher of one of the country’s largest newspapers, Reforma, is allegedly a member of DOS, and has also been branded, according to sources. In addition, Raniere is also partner in another company with Emiliano Salinas Occelli, along with Alejandra González Anaya – sister of Mexico’s Secretary of the Treasury, called Ánima (Spirit), which has received several Mexican government contracts over the years, including the Pan-American Games of 2011, which took place in Guadalajara.

Since Raniere’s arrest, Emiliano Salinas has divested himself completely from any interests in NXIVM, though none of the statements issued by him or his communication vehicles give a specific reason for the break.

The Luthers

Edgar Bronfman Jr. royally pissed off his father, original heir to the Seagram’s wine and spirits empire, when he married Sherry Brewer, a beautiful black woman. “Are you telling me that I couldn’t be president of Seagram if I married Sherry?”, asked a defiant Edgar Jr. “No.”, was Sr.’s matter-of-fact answer. But, marriage in the Bronfman clan was never a ‘till death do us part’ kind of thing, and in good time, Edgar Jr. would assume the reins of the company, and Sherry would make way for Jr.’s second wife, the New York educated Venezuelan daughter of the Chairman of Petroleos de Venezuela. Bronfman Sr., himself, had recently remarried for the third time, to Rita Webb, aka, Georgina, who would bear his last two children, Sara and Clare Bronfman. Edgar Jr.’s mother, Ann Loeb, heiress of the Kuhn, Loeb & Company banking dynasty, had divorced his father just two years prior; a union that produced five offspring altogether.

The Bronfmans are in the pantheon of 20th Century royalty. Samuel Bronfman, the patriarch who’d started it all, had been President of the World Jewish Congress. Seagram’s growth, a basic spirits company founded by the “gruff Russian Jew”, was made possible by the more than two billion dollars in stock dividends from stock in DuPont owned by the company. By the time Edgar Jr. joined the company in 1982, Seagram would be a six-billion-dollar multinational behemoth, that owned such noteworthy assets like Chivas Regal, Crown Royal and Absolut Vodka, among many others.

But the young Bronfman Jr. had a strong creative streak, and was first attracted to a career in film production; an itch he scratched before taking a position in the family business with a couple of movie ventures. He never fully relinquished his love for show business, and in 1993, Edgar Jr. persuaded the Seagram board to purchase 4.9 percent of Time Warner, just under the 5 percent threshold that would require public disclosure. Eventually, Seagram would acquire 15 percent of the massive media company, setting off rumors of a hostile takeover, which never materialized.

In 1995, Bronfman Jr. approached DuPont to propose a deal where the chemical giant would buy back Seagram’s stock for $9 billion; a move that drew heavy criticism on Bronfman Jr., who proceeded with the deal nevertheless, and used to money to make further inroads into the content and media business, buying a controlling interest in MCA, which included assets such as Universal Pictures. Five years later, Bronfman Jr. sold controlling interest of Seagram’s entertainment division to the Vivendi corporation, and its beverage division to Pernod-Ricard. In 2002, Seagram’s assets – in excess of 250 by then – were auctioned off by the French company. Seagram was no more. Charles Bronfman, Edgar Jr.’s uncle, called the events leading up to Seagram’s demise “a disaster… It is a family tragedy.”

Sugar Tits

It was around this time, as the once mighty wine and spirits colossus was crumbling to the ground that Edgar Jr.’s young half-sisters, Sara and Clare Bronfman, were making the acquaintance of the eccentric genius guru in upstate New York. At just 25 years of age, Sara would take the first leap, undergoing one of the NXIVM’s “intensives” in the fall of 2002. The course, a combination of hypnosis and NLP (Neuro Linguistic Programming) was ostensibly designed for self-improvement and personal empowerment. The younger Clare, was less enthusiastic about the course, but relented under her sister’s prodding and took one herself soon thereafter.

Edgar Bronfman Sr. had a strained relationship with Clare and Sara, whose mother he had divorced when they were just 4 and 7, respectively. Much of their lives had been spent traveling between England and Kenya, where their mother and Richard Leakey, a renowned Paleontologist, carried on an affair. The old man was eager to rekindle a relationship with his youngest daughters, and in the early part of 2003 took one of Raniere’s courses himself. Bronfman Sr. turned out to be so impressed, that he arranged for private therapy sessions with NXIVM’s second-in-command, Nancy Salzman, who was flown in his helicopter from the group’s compound in New York to his estate in Virginia. This went on for months, until, it is said, Clare revealed to her father, that Raniere had borrowed $2 million dollars from her.

Bronfman Sr. was reportedly livid, and cut ties with NXIVM immediately. In October of that year, Forbes would publish the hit piece on Keith Raniere, entitled “Cult of Personality”. The article would reveal all sorts of previously unknown information about the man, including his sketchy business past with Consumers’ Buyline, a marketing concern, which had been shut down by regulators in 1993 over claims it was a pyramid scheme. The Forbes piece also went into some detail about NXIVM’s odd practices and Raniere’s obsession with the works of Ayn Rand. Bronfman Sr. himself was quoted in the article, calling the group “a cult”. For Sara and Clare, this was nothing short of betrayal by their father, who saw their progress at NXIVM as a personal achievement.

Raniere, perhaps intuiting how to benefit from this rift, suggested that the Bronfman girls become clients of Barbara Bouchey’s asset management firm. Bouchey, who was then part of NXIVM’s board of directors, and one of Raniere’s girlfriends, is today one of Raniere’s biggest detractors. At the time, Bouchey didn’t grasp the conflict of interest, as she signed check after check, drawing funds from the Bronfman girls’ accounts to finance Raniere’s ambitions.

Between the years of 2004 and 2010, according to legal filings and public records, $150 million was withdrawn from the Bronfman’s trust and bank accounts. Among the expenses were $30 million in real estate investments, $11 million for a private jet, and over $65 million to cover Raniere’s trading losses through First Principles, a company registered under Nancy Salzman’s name. At one point, in need of more money, the Bronfman girls sought to access a trust reserved until Bronfman Sr.’s passing, by changing the trustees, who oversaw it.

Bronfman Sr. began to consider the possibility of having his daughters declared legally incompetent, to stem the financial bloodletting, but was dissuaded by the idea of stigmatizing the family name with such a recourse.

Raniere put Sara and Clare on the NXIVM board, with Sara given the title of “Minister of Humanities”, which put her in charge of organizing all events. She arranged a V.I.P. session with Richard Branson on his private island in the Caribbean, and continued to climb the NXIVM ladder. Clare, meanwhile, was also becoming closer to the organization practically abandoning her equestrian dreams – she was a trained jumper, and in 2004 she was running for the U.S. Olympic trials – but, on Raniere’s advice, decided to sell most of her horses, and a $7 million-dollar training center to continue financing Raniere’s projects.

In 2009, the Bronfman sisters organized what seemed like the biggest success of their lives, when they managed to book the Dalai Lama to speak in Albany, New York. The event’s announcement caused an uproar in the local press, which decried the holy man’s association with the “cult-like” group. Two potential venues, including Raniere’s alma mater, refused to host the event, and after a slew of emails sent to the Dalai Lama himself, complaining about said association, he cancelled his appearance.

Alas, the reincarnated spiritual master is a practical man, and after Sara Bronfman flew to India to plead with him (and the Dalai Lama Trust was registered in New York State), the visit was back on. Sara and Clare beamed when he called them “friends” only a few feet away from him on the stage at the Palace Theater in Albany in May.

Black Rainbows

The newborn appeared out of nowhere in 2007. Gaelen, as they call him, arrived in upstate New York with then NXIVM member Kristin Keefe. The boy’s provenance was as mysterious as that of little Clark Kent when the farmer couple found the kid of steel in the middle of their wheat field. Keefe claimed the baby’s grandfather had simply handed him over to her after his mother had died a few weeks earlier in Ann Arbor, Michigan.

Barbara Bouchey, who was then still Raniere’s confidante, said that she overheard the child “would be raised utilizing Keith’s methodology, and the child would be exposed to certain kinds of music, certain kinds of physical exercise and language.”

Gaelen would be the first test-case for Raniere’s so-called “Rainbow Cultural Garden”, a controversial program developed with Dr. Brandon Porter, a New York doctor, who was being investigated in December of 2017 for traumatic experiments on women, which allegedly consisted in making the female subjects watch videos of rape and murder.

Keefe, and the boy escaped NXIVM with the help of the New York State Police in 2014.

In a lawsuit involving former NXIVM attorney Joseph O’Hara and the Bronfmans, Ethical Foundation, a non-profit O’Hara says was being used to illegally hide funds for for-profit activities, was turned over to the group with $230,000 in funds. O’Hara complained to Andrew Cuomo’s office, but didn’t hear back. The funds have since been directed to a new foundation called Ethical Science Foundation, led by Clare Bronfman, which claims to do brain research by the aforementioned Dr. Porter.

Rainbow Cultural Garden LLC, which is affiliated with another company called Ethical Principles, Inc., has 11 branches around the world. Described as an “early child-development program which, through careful, progressive exposure to multiple languages, cultures, representational systems, and aesthetics, seeks to inspire and capture the miraculous, creative, learning lives of children.”

Late in 2017, Rainbow Cultural Garden U.K., which listed Sara Bronfman as CEO on its website, before it was taken down, was placed under “review” by a watchdog group. Just yesterday, the Miami New Times reported that Rainbow Cultural Garden Miami, was ordered closed by state authorities. The school, located close to Miami’s posh Design District was inaugurated by Raquel Perera in 2015. Perera is the wife of Spanish pop star, Alejandro Sanz. She claimed to “direct” the school, and credited Raniere with creating the school’s curriculum in an interview with Spanish-language television station, Univision, that same year. Their son, Dylan, is supposedly a student.

According to Frank Parlato Jr., who has been exposing NXIVM for years on his blog (FrankReport.com), the schools are “an attempt to train children to become sociopaths who can never bond with their parents”.

Struck Stars

The parade of celebrities who have passed through NXIVM, and the methods used in their courses and seminars, bears more than a passing resemblance to another cult-like organization: Scientology.

Linda Evans, Richard Branson, Allison Mack, Kristen Kreuk, and Sheila Johnson, founder of BET, are just a few of the well-known people, that we know have had close dealings with this nefarious group.

Keith Raniere, who makes his followers call him “Vanguard”; a man has expressed a megalomaniacal desire to start his own country – going as far as collecting names of people with Native American heritage, in hopes having enough of them to claim sovereignty for a future land purchase; whose former girlfriend and former NXIVM member, Toni Natalie, has been warning others and counseling ex-members for almost twenty years; and, finally, has been known to authorities for at least as long, is finally facing justice.

Raniere may be an evil genius, but whoever has been protecting him all these years must be the devil himself.

SOURCES:

https://www.nytimes.com/2018/04/20/nyregion/allison-mack-smallville-sex-trafficking.html
https://www.nytimes.com/2017/12/21/nyregion/nxivm-women-branded-federal-investigation.html
https://frankreport.com/2018/03/05/nxivm-is-a-company-not-a-sect-emiliano-salinas/
https://frankreport.com/2017/10/12/betancourts-new-super-lawyer-threatens-expians-with-arrest-in-mexico-if-they-dont-shut-up-about-dos/
https://www.proceso.com.mx/527546/cae-el-fundador-de-la-secta-nxivm-vinculada-en-mexico-con-un-hijo-de-salinas-de-gortari
https://www.theguardian.com/us-news/2018/mar/26/nxivm-cult-co-founder-keith-raniere-arrested-charged-sex-trafficking-texas
https://elpais.com/internacional/2018/04/13/mexico/1523579870_424276.html
https://www.huffingtonpost.com.mx/2018/04/13/emiliano-salinas-deja-esp-vinculada-a-la-secta-nxivm_a_23410478/
https://aristeguinoticias.com/2603/mexico/empresa-de-emiliano-salinas-defiende-inocencia-del-lider-de-nxivm/
https://aristeguinoticias.com/2212/mexico/fbi-ya-investiga-a-nxivm-en-estados-unidos-nyt/
http://wnyt.com/news/nxivm-keith-raniere-sex-trafficking-charge-fbi-halfmoon-women-branded-group-toni-natalie-barbara-bouchey/4844678/
https://www.cnn.com/2018/04/20/entertainment/allison-mack-arrested/index.html
https://nypost.com/2011/01/31/guru-blow-off-taxes/
http://www.oxygen.com/crime-time/frank-parlato-keith-raniere-sex-cult-NXIVM
https://www.usatoday.com/story/news/nation-now/2018/03/27/nxivm-leader-keith-raniere-arrested-charged/462685002/
https://www.cbsnews.com/news/nxivm-leader-keith-raniere-charged-sex-trafficking/
https://www.timesunion.com/news/article/NXIVM-co-founder-Keith-Raniere-charged-in-federal-12782354.php
https://www.thesun.co.uk/news/4925050/posh-brit-school-founded-by-american-cult-leader-under-review-by-watchdog/
https://www.timesunion.com/local/article/Secret-mission-A-child-589818.php
https://www.timesunion.com/local/article/Secrets-of-NXIVM-2880885.php
http://www.chicagotribune.com/news/nationworld/ct-sex-trafficking-female-slaves-20180326-story.html
http://www.miaminewtimes.com/news/alejandro-sanzs-wifes-miami-school-closed-by-state-tied-to-nxivm-sex-cult-founder-10295903
https://www.vanityfair.com/culture/2010/11/bronfman-201011

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