Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (28 page)

Richard Fink, Charles’s top advisor, enforces ideological consistency across the spectrum of Koch business units, and he frequently intercedes to prevent them from inadvertently transgressing Charles’s free-market creed. Such was the case when one Koch business unit, which had developed an environmentally sensitive incinerator, sought permission to work with government regulators to strengthen environmental rules. This might have improved the company’s competitive position, but it went against Charles’s overarching philosophy. Fink spiked the idea.

Charles’s goals have always been larger than building a business. He created a free-market society in miniature at Koch Industries, but his decades-long effort, and David’s, to catalyze social change on a broader scale has proven far more difficult. The brothers are “driven by their feeling that the way they run their company is the way the country should be run,” the former Koch manager said. As the Obama era dawned, the brothers felt America desperately needed a Koch-style turnaround.

In late January 2009, as Richard Fink strode into Koch Industries’ imposing dark-glass-and-granite headquarters on the outskirts of Wichita, the nation’s economy was in free fall. The stock market had cratered. Credit markets had seized. There was talk of bank nationalization, another Great Depression.

The Bush administration had responded by throwing open the national vault: It rescued failing banks and financial firms with a $700 billion bailout and doled out $17.4 billion to save America’s ailing automakers. Additional billions would soon be on the way to Detroit. The incoming Obama administration, just a few days in office, was meanwhile pressing forward with plans for another massive outlay of federal cash via a stimulus package of close to a trillion dollars.

There was nothing free about this market, in which U.S. taxpayers kept foundering businesses on life support and the government injected the economy with money the country didn’t have to spend. General Motors had in effect been nationalized. It was Keynesian economics on steroids. The Austrians were spinning in their graves.

In the 1930s, under similar economic conditions, FDR had ushered in the New Deal, reshaping the scope of government in ways that conservatives had been fighting to roll back ever since. Under the new administration, Fink believed, there was no telling
how large the bureaucracy might balloon, how expansive and entrenched government programs might grow, how much economic freedom might be robbed from the private sector in a federal power grab. There was a Democratic House. A Democratic Senate. A Democratic president. To Fink and his bosses, Charles and David Koch, this augured a trifecta of doom. The last time a Democrat had sat in the White House, the company had weathered one of the rockiest periods in its history, as environmental regulators and Justice Department lawyers mercilessly besieged Koch Industries.

Fink had been considering retirement, hoping to play more golf and spend time unwinding at his vacation home in Delaware’s Bethany Beach. The silver-haired strategist had spent more than thirty years in the ideological trenches. He oversaw Charles’s multifarious philanthropic, political, and public policy endeavors, as well as the whole of Koch Industries’ public sector group, which encompassed its lobbying, communications, and legal divisions.

Now the country, as far as Fink could see it, had reached a crossroads. It faced not just an economic crisis but an ideological one. He and the Kochs had spent decades trying to turn the tide, fighting their own kind of culture war to remake America into their free-market, small-government ideal, a place of unfettered capitalism where the market’s “invisible hand” would always guide society in the right direction. The progressive administration of Barack Obama threatened to roll back much of what they had achieved. Fink was a veteran of many political street fights, and he had at least one more left in him. Retirement could wait.

That day in Wichita, Fink huddled with Charles and David to discuss the political climate and plot their next moves. Just a few days earlier, Obama had taken the oath of office, placing his hand on the same velvet-bound Bible that Abraham Lincoln had used in 1861. Already the Kochs and their top political advisor were looking ahead to Obama’s defeat.

Though Charles and David had supported George W. Bush—and a host of Koch employees had joined his administration—they were no big fans of his presidency. Bush had led the country into two costly wars, assailed civil liberties in the name of national security, expanded the size of government, and run up the federal deficit. If that was compassionate conservatism, they preferred the original, tough-love variety. But from their perspective, at least Bush’s policies had fostered a more hospitable regulatory environment.

Obama was a different story. He talked of overhauling health care, tackling global warming, reforming the financial system. Charles considered him a “dedicated egalitarian” who had “internalized some Marxist models.” David, the more bombastic of the pair, declared him “the most radical president we’ve ever had as a nation,” a leader steeped in the “hard core economic socialist” politics of his Kenyan father.

The Obama administration, Fink told the brothers, was poised to push the country over the precipice. Labor unions, social programs, regulation, tax hikes—nearly everything the administration stood for, they stood against. The brothers had two choices, Fink said. They could keep their heads down and watch the country slide into oblivion, or they could come out swinging. Fink counseled jihad.

“If we are going to do this, we should do it right or not at all,” Fink told the brothers. “But if we don’t do it right or if we don’t do it at all, we will be insignificant and we will just waste a lot of time, and I would rather play golf.”

The risks were clear. Fink and others at Koch Industries feared political retribution of the kind they believed the Clinton administration had targeted them with. Back then, the Koch brothers, through an advocacy group called Citizens for a Sound Economy, had fought health care reform and other key pieces of Clinton’s agenda. After years of prosecutorial scrutiny, the Clinton administration’s parting shot, a little more than a month before the 2000
election, was a 97-count felony indictment against Koch Industries and four of its employees. It accused the company of releasing at least 91 metric tons of the cancer-causing pollutant benzene from its Corpus Christi oil refinery, which it alleged Koch officials had tried to conceal. The case fell apart, and the company ultimately pleaded guilty to a single charge of “covering up environmental violations” and paid a $20 million fine (the equivalent of a parking ticket for a company that earned in excess of $30 billion in revenues that year).

But this finale to the traumatic Clinton years was still fresh on the brothers’ minds. When a still-embittered David had once visited the Clinton presidential library in Little Rock, where he was visiting his in-laws over the Christmas holiday, he had sarcastically asked a docent where he could find Monica Lewinsky’s famous blue dress. Informed this presidential artifact was not part of its collection, he half-jokingly accused the library of whitewashing history.

The Justice Department wasn’t the only arrow in a president’s quiver. The White House had other, subtler means at its disposal. Koch and its subsidiaries sought thousands of federal permits annually—what if the Obama administration made some of them especially difficult to obtain?

By taking on the Obama administration, Charles and David would also jeopardize their privacy. Despite the scale of their wealth and the scope of their political activity over the years, they and their company were not household names. In the past, they had often tried whenever possible to keep Koch Industries out of the public eye. “In their minds, the bigger you get the more public scrutiny you invite,” explained an ex–Koch executive. The same rule applied, only doubly so, in the rough-and-tumble world of politics. Though David did enjoy the accolades that came with his medical and cultural philanthropy, Charles was so publicity averse that he had to be cajoled into lending his name to the basketball
arena at Wichita State University that he underwrote. He was fond of the expression—one his father also used—that “it’s the whale who surfaces to spout off that gets harpooned.”

Fink warned the brothers that they would be placing not just their company but their legacy on the line. “If we do it right,” Fink cautioned, “then it is going to get very, very ugly.”

Richard Fink’s rise within Koch Industries provides a road map to the brothers’ decades-long ascendance from libertarian outsiders to influential conservative powerbrokers. It connects the dots on the brothers’ journey from backers of the ideologically driven libertarian movement to reputed kingpins of the hell-raising Tea Party juggernaut.

Considering how poorly their first meeting had gone, Fink still finds it hard to believe that Charles chose to work with him. In 1978, Fink was a twenty-seven-year-old doctoral student at New York University, which at the time had the country’s lone graduate program focused on Austrian economics. Fink had done his undergrad work at Rutgers University, not far from his hometown of Maplewood, New Jersey. There, he’d come under the tutelage of several libertarian economists. As he worked toward his Ph.D., Fink taught part-time at Rutgers, and he began investigating the possibility of founding a dedicated Austrian economics program there. The idea horrified faculty members schooled in traditional economics, but Rutgers’s dean and the chairman of the economics department told Fink they would not stand in his way if he could scare up the necessary capital on his own.

Charles, then developing a reputation as the moneybags bankrolling the libertarian movement, was on Fink’s shortlist of possible funders. The young economist phoned his Wichita office obsessively until one day the businessman’s mild Midwestern twang came on the line. Charles, always scouting for new talent, invited Fink to Wichita to make his pitch in person.

Fink was thrilled, but what would he wear to his big meeting? He purchased what he considered a snazzy suit—his first—for the occasion. It was made of black polyester and accented with white piping. Underneath, he wore a checkered shirt and a bright blue tie. With his long hair and unruly beard, Fink looked like he was trying out for the Bee Gees, not auditioning for a man who could make or break his future with the stroke of a pen.

When they met, Charles flipped impassively through Fink’s proposal. He said little, but seemed unimpressed. Fink returned home to New Jersey assuming Charles wasn’t interested. But not long after the meeting, he came through with $150,000 to fund Fink’s program.

Thinking back years later on the impression he must have made, Fink once commented to Charles that he was surprised the businessman had even given him a single dollar. “If a guy came up to me with a black polyester suit, white piping, dressed like that with a beard and hair down to his shoulders, I don’t think I would probably meet with him let alone give him the equivalent of about $500,000 in inflation-adjusted dollars.”

“Why,” he asked, “did you do that?”

“I like polyester,” Charles deadpanned. “It’s petroleum based.”

Something had impressed Charles about Fink—and it wasn’t the suit. He wasn’t one of the flaky libertarian activists Charles normally encountered, who had grand notions but little follow-through. “There are a lot of people who have ideas but they don’t know how to get it done,” Charles later reflected. “Rich always had a sense for how to get something done and make it effective.”

Starting with Charles’s seed funding, Fink’s Austrian program—its initial goal to provide a handful of undergraduate economics students with an alternative to the predominant Keynesian model—bloomed into one of the nation’s preeminent centers of free-market scholarship and advocacy. In 1980, Fink moved the
program, along with four of the five students who had enrolled in it, from Rutgers to the campus of George Mason University, then a little-known, state-run school in the Virginia suburbs outside of Washington. At the time, the university had a small cadre of Austrian economists on staff, who had urged Fink to relocate there after hearing that he was shopping around for a new home for his program. At George Mason, he folded the program into a broader research outfit that was at first called the Center for Market Processes and later renamed the Mercatus Center, after the Latin word for “markets.”

As the center grew in stature, and as George Mason itself became a magnet for students interested in Austrian economics, Charles poured millions into Mercatus and other programs at the university. The center became home to such eminent free-market economists as Nobel Prize winner Vernon Smith and Tyler Cowen, an author and
New York Times
contributor who was one of the students who had moved with Fink from Rutgers to George Mason in 1980. Slowly, Mercatus grew into an influential and feisty bastion of deregulatory policy. A testament to its clout: Mercatus recommended 14 of the 23 federal rules targeted on the incoming Bush administration’s regulatory “hit list.”

By then Fink (who, with Charles, remains a Mercatus board member) had ascended through a series of positions within the Koch brothers’ ideological and corporate empire. “He is almost like a fireman in the sense that he is often called upon by the Kochs to address issues that pop up that need attention,” said James Miller III, the White House budget director during the Reagan administration, who has served on the boards of Koch-funded organizations since the late 1980s. “So he is frequently involved with some of the nonprofits when issues come up.” More than just a fixer, Miller noted, Fink is also a “grand strategist in the sense of seeing how the pieces fit together, seeing how opportunities for affecting outcomes are emerging.”

Fink’s strategic vision dazzled Charles. “He had a game plan and a master plan for how they were going to get from point A to point B, which was influencing national politics,” said a political operative who worked with Fink in the 1990s. Based on his plan for lifting their free-market worldview out of the intellectual ghetto, Fink very quickly worked his way into the CEO’s inner circle. “Richie got Charles’ ear big time and convinced Charles that he, Richie, was the strategist that he needed,” said Richard Wilcke, who ran the Council for a Competitive Economy, a short-lived organization Charles founded in the late 1970s that focused on pressuring the business community to forsake subsidies and other government handouts. “[Fink] convinced [Charles] that he was really the guy who understood the strategy and what needed to be done. And Charles bought it. He was enamored with Fink.”

At the time Fink came on the scene, the Cato Institute’s Ed Crane was Charles’s chief political advisor. But a falling-out between the CEO and the sometimes-acerbic think-tank president provided an opening for Fink to claim the mantle of ideological consigliere. Fink’s rapid rise also displaced George Pearson, who since 1969 had overseen Charles’s libertarian philanthropy and who had grown so close to the Koch family that he even received a $10,000 bequest in Mary Koch’s will.