Koch Industries, Inc. is an American multinational corporation based in Wichita, Kansas, United
States, with subsidiaries involved in manufacturing, trading and investments. Koch also owns Invista,
Georgia-Pacific, Flint Hills Resources, Koch Pipeline, Koch Fertilizer, Koch Minerals and
Matador Cattle Company. Koch companies are involved in core industries such as the manufacturing,
refining and distribution of petroleum, chemicals, energy, fiber, intermediates and polymers,
minerals, fertilizers, pulp and paper, chemical technology equipment, ranching, finance, commodities
trading, as well as other ventures and investments. The firm employs 50,000 people in the United
States and another 20,000 in 59 other countries. In 2013, Forbes called it the second largest
privately held company in the United States, with an annual revenue of $115 billion, down
from the largest in 2006. If Koch Industries were a public company in 2013, it would have
ranked 17 in the Fortune 500. Fred C. Koch, after whom Koch Industries,
Inc. is named, co-founded the company in 1940 and developed an innovative crude oil refining
process. His sons, Charles Koch, chairman of the board and chief executive officer,
and David H. Koch, executive vice president, are principal owners of the company after
they bought out their brothers, Frederick and William "Bill" Koch, for $1.1 billion
in 1983. Charles and David H. Koch each own 42% of Koch Industries. Charles has stated
that the company would go public "over my dead body".
History Predecessor companies
In 1925, Fred C. Koch joined MIT classmate Lewis E. Winkler at an engineering firm in
Wichita, Kansas, which was renamed the Winkler-Koch Engineering Company. In 1927 they developed
a more efficient thermal cracking process for turning crude oil into gasoline. This
process threatened the competitive advantage of established oil companies, which sued for
patent infringement. Temporarily forced out of business in the United States, they turned
to other markets, including the Soviet Union, where Winkler-Koch built 15 cracking units
between 1929 and 1932. During this time, Koch came to despise communism and Joseph Stalin's
regime. In his 1960 book, A Business Man Looks at Communism, Koch wrote that he found the
USSR to be "a land of hunger, misery, and terror." According to Charles G. Koch, "Virtually
every engineer he worked with [there] was purged."
In 1940, Koch joined new partners to create a new firm, the Wood River Oil and Refining
Company, which is today known as Koch Industries. In 1946 the firm acquired the Rock Island
refinery and crude oil gathering system near Duncan, Oklahoma. Wood River was later renamed
the Rock Island Oil & Refining Company. Charles G. Koch joined Rock Island in 1961, having
started his career at the management consulting firm Arthur D. Little. He became president
in 1966 and chairman at age 32, upon his father's death the following year.
Koch Industries The company was renamed Koch Industries in
honor of Fred Koch, the year after his death. At that time, it was primarily an engineering
firm with part interest in the Pine Bend Refinery in Minnesota, a crude oil-gathering system
in Oklahoma, and some cattle ranches. In 1968, Charles approached Union Oil of California
about buying their interest in Great Northern Oil Company and its Pine Bend Refinery but
the discussions quickly stalled after Union asked for a large premium. In 1969, Union
Oil began trying to market their interest in Great Northern by telling potential buyers
that Koch's controlling interest could be thwarted by currying favor with another owner,
J. Howard Marshall II. When Marshall discovered this he threw his lot in with Koch, they together
acquired a majority interest in the company and ultimately bought Union's interest. Ownership
of Pine Bend refinery led to several new businesses and capabilities, including chemicals, fibers,
polymers, asphalt and other commodities such as petroleum coke and sulfur. These were followed
by global commodity trading, gas liquids processing, real estate, pulp and paper, risk management
and finance. In 1970, Charles was joined at the family
firm by his brother David H. Koch. Having started as a technical services manager, David
became president of Koch Engineering in 1979. Recent News
In April 2014, Koch Industries and the private equity arm of Goldman Sachs agreed to acquire
printing ink producer Flint Group for around $3 billion.
Subsidiaries Among Koch Industries' subsidiaries across
various industries are: Georgia-Pacific
Georgia-Pacific is a paper and pulp company that produces "Brawny" paper towels, "Angel
Soft" toilet paper, "Mardi Gras" napkins and towels, "Quilted Northern" toilet paper and
paper towels, "Dixie" paper plates, bowls, napkins and cups, "Sparkle" paper towels,
and "Vanity Fair" paper napkins, bowls, plates and tablecloths. The Atlanta-based company
has operations in 27 states. INVISTA
Acquired from DuPont, INVISTA is a polymer and fibers company that makes "Stainmaster"
carpet, and "Lycra" fiber, among other products. Koch Pipeline Company LP
Koch Pipeline Company LP, which owns and operates 4,000 miles of pipeline used to transport
oil, natural gas liquids and chemicals. Its pipelines are located across Wisconsin, Minnesota,
Texas, Missouri, Iowa, Oklahoma, Louisiana, and Alberta, Canada. The firm operates offices
in Wichita, Kansas, St. Paul, Minnesota and Corpus Christi, Texas.
In 1946 Wood River Oil Co. purchased Rock Island Oil and Refining Co. As a part of the
transaction, it acquired a crude-oil pipeline in Oklahoma. As a result of construction and
investments, Wood River acquired other pipelines in the U.S. and Canada. “In the ensuing
years,” according to Koch Pipeline's website, “the company bought, sold and built pipeline
systems transporting crude oil and refined products, as well as natural gas, natural
gas liquids and anhydrous ammonia.” Koch Pipeline and its affiliates currently maintain
a 4,000-mile network of pipelines. Flint Hills Resources LP
Flint Hills Resources LP, originally called Koch Petroleum Group, is a major refining
and chemicals company based in Wichita, Kansas. It sells products such as gasoline, diesel,
jet fuel, ethanol, polymers, intermediate chemicals, base oils and asphalt. It operates
oil refineries in six states. Flint Hills has chemical plants in Illinois, Texas and
Michigan. The firm is also a major manufacturer of asphalt used for paving and roofing applications.
It operates 13 asphalt terminals located in six states including Alaska, Wisconsin, Iowa,
Minnesota, Nebraska, and North Dakota. The firm manages the purchasing of domestic crude
oil from Texas and Colorado offices, has four ethanol plants across Iowa, operates three
refineries in Alaska, Texas, and Minnesota, and has a refinery terminal in Alaska. The
Minnesota refinery can process 320,000 barrels of crude a day, most of which comes from Alberta,
Canada, and handles one quarter of all Canadian oil sands crude entering the U.S. It also
operates fuel terminals in Wisconsin, Texas, and one each in Iowa and Minnesota.
In March 1999, Koch Petroleum Group acknowledged that it had negligently dumped hundreds of
thousands of gallons of aviation fuel into wetlands from its refinery in Rosemount, Minnesota,
and that it had illegally dumped a million gallons of high-ammonia wastewater onto the
ground and into the Mississippi River. Koch Petroleum paid a $6 million fine and $2 million
in remediation costs, and was ordered to serve three years of probation.
In April 2001, the company reached a $20 million settlement in exchange for admitting to covering
up environmental violations at its refinery in Corpus Christi, Texas.
In June 2003, the US Commerce Department fined Flint Hills Resources a $200,000 civil penalty.
The fine settled charges that the company exported crude petroleum from the US to Canada
without proper US government authorization. The Commerce Department’s Bureau of Industry
and Security said from July 1997 to March 1999, Koch Petroleum committed 40 violations
of Export Administration Regulations. In 2005, Koch's Flint Hills Resources refinery
was recognized by the Environmental Protection Agency's Clean Air Awards program for reducing
air emissions by 50 percent while expanding operations. The EPA has worked with Flint
Hills Resources to develop "strategies for curtailing so-called 'upset' emissions, in
what agency and company sources say could lead to guidance to minimize such emissions
from petroleum refineries and other industrial facilities." The EPA described the process
as a "model for other companies." In 2006, Flint Hills Resources was fined nearly
$16,000 by the EPA for 10 separate violations of the Clean Air Act at its Alaska oil refinery
facilities, and required to spend another $60,000 on safety equipment needed to help
prevent future violations. In May 2014, Flint Hills Resources announced
a definitive agreement to purchase PetroLogistics, a Houston-based manufacturer of chemical and
polymer grade propylene. Koch Fertilizer, LLC
Koch Fertilizer, LLC, which is one of the world’s largest makers of nitrogen fertilizers.
Koch Fertilizer owns or has interests in fertilizer plants the United States, Canada, Trinidad
and Tobago, Venezuela, and Italy, among others. Koch Fertilizer was formed in 1988 when the
Koch companies purchased the Gulf Central Pipeline and ammonia terminals connected to
the pipeline. The next year, the Koch Nitrogen Company was formed in order to market ammonia.
The next few years saw purchases of various ammonia facilities in Louisiana, Canada, and
elsewhere, and ammonia sales agreements with firms in Australia, the U.K., and other countries.
The year 2010 saw the founding of Koch Methanol, LLC, and Koch Agronomic Services, LLC. In
October 2010, a plant in Venezuela was nationalized by the government. In 2011, the firm acquired
the British fertilizer firm J&H Bunn Limited. Koch Agricultural Company
Koch Agricultural Company's Matador Cattle Company division operates three ranches totaling
425,000 acres located in Beaverhead, Montana, Matador, Texas and the Flint Hills of eastern
Kansas. There are more than 15,000 head of cattle raised on the ranches.
The Matador Land and Cattle Company was founded in 1882 by Scottish investors, whose acquisition
included 2.5 million acres in four Texas counties. In 1951, the company was sold to Lazard Frères
& Co., which in turn sold some of the Texas land to Fred C. Koch. In 1952 Koch formed
Matador Cattle Company, and later one of his companies purchased part of Matador Ranch,
which was brought together with other Koch ranches in Montana and Kansas. Today, according
to the ranch's website, it “is owned and operated by Matador Cattle Company, a division
of Koch Agriculture Company, which is an indirect, wholly-owned subsidiary of Koch Industries.”
Koch's Matador Ranch in Texas earned the Lone Star Land Steward award, an award sponsored
by Chevron, Toyota and the Texas and Southwestern Cattle Raisers Association for outstanding
natural resource management in 2010. Environmental and safety record
Bloomberg reports that from 1999 to 2003, Koch Industries was assessed "more than $400 million
in fines, penalties and judgments." Daniel Indiviglio, in a reaction piece appearing
in The Atlantic argues that the Bloomberg article is biased and misleading, asserting
that the Bloomberg team "only found eight instances of alleged misconduct by a giant
multinational over the span of 63 years". In 2000, for its 300 reported oil spills which
had taken place across six states, Koch paid the largest civil fine ever imposed on a company
under any federal environmental law for the illegal discharge of crude oil and petroleum
products. In a settlement with the U.S. Justice Department and the state of Texas, the company
agreed to pay a "$30 million civil penalty, improve its leak-prevention programs and spend
$5 million on environmental projects." In 1996, an 8-inch-diameter steel LPG pipeline
operated by Koch Pipeline Company ruptured near Lively, Texas and began leaking butane
gas. The vapor cloud ignited when two residents drove their pickup truck through the flammable
vapors to get to a neighbor's house to call 9-1-1 to report the leak. The two were killed
in the explosion, and approximately 25 families were later evacuated from the neighborhood
without injury. An investigation conducted by the NTSB found that the pipe section which
failed had not been shown to have excessive corrosion in a 1995 inspection. Regulations
at the time did not provide criteria for "adequate cathodic protection." Koch also stated that
the bacteria-induced corrosion acted quicker than had ever previously been recorded in
the industry. The explosion was the only event of its kind in the company’s history. In
1999, a Texas jury found that negligence had led to the rupture of the Koch pipeline and
awarded the victims' families $296 million - "the largest compensatory damages judgment
in a wrongful death case against a corporation in U.S. history".
In 2000, a federal grand jury returned a 97-count indictment against Koch Industries and its
individual employees for environmental crimes relating to excess emissions of 85 metric
tons of benzene, a known carcinogen. In 2001, Koch Industries was fined $20 million, of
which $10 million was a criminal fine and $10 million to clean up the environment.
Legal issues In 2008, Koch Industries discovered that the
French affiliate Koch-Glitsch had violated bribery laws allegedly securing contracts
in Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia after an investigation by
Ethics Compliance officer, Egorova-Farines. After Koch Industries' investigative team
looked into her findings, the four employees involved were terminated. A Bloomberg article
states that Egorova-Farines reported her findings immediately, and even after Koch’s investigators
substantiated the findings, her “superiors removed her from the inquiry in August 2008
and fired her in June 2009, calling her incompetent.” Koch Industries’ general counsel, Mark Holden,
gave a different account of the events to Jennifer Rubin of the Washington Post. Holden
stated that Egorova-Farines failed to promptly share the findings, choosing instead to give
the information to a manager at Koch-Glitsch who was later fired for bribery. Rubin writes
that, according to Holden, “Egorova-Farines was not fired but instead ran into performance
problems, left the company to go on leave and never returned.” Egorova-Farines sued
Koch-Glitsch for wrongful termination in France. Rubin writes that she lost and “was ordered
to pay costs for bringing a frivolous case.” In May 2011, cyber-pranksters anonymously
released a fake Koch Industries press release. Koch Industries filed suit claiming among
other things that the cyber-pranksters had infringed on Koch Industries' trademark. The
identity of cyberpranksters were revealed to be Youth for Climate Truth.
Political activity
Koch Industries has spent more than $50 million to lobby in Washington between 2006 and October
2011, according to the Center for Responsive Politics.
The company has opposed the regulation of financial derivatives and limits on greenhouse
gases. It sponsors free market foundations and causes.
According to the Center for Responsive Politics, many of Koch Industries' contributions have
gone toward achieving legislation on energy issues, defense appropriations and financial
regulatory reform. Koch Industries has been criticized by the environmentalist group Greenpeace
for the role they allege the company plays in affecting climate change policy in the
United States. Koch Industries replied saying the Greenpeace report "distorts the environmental
record of our companies." One policy proposal to control global warming
that Koch Industries has come out against is Low Carbon Fuel Standards, such as were
passed in 2007 in California. According to Koch Industries, "LCFS would cripple refiners
that rely on heavy crude feedstocks to provide the transportation fuels that keep America
moving." The Koch Industries website includes an opinion
piece from the Wall Street Journal by Charles Koch, one of the company's owners, "Why Koch
Industries is Speaking Out." The article states: "Because of our activism, we've been vilified
by various groups. Despite this criticism, we're determined to keep contributing and
standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges
[deficit spending by governments] seriously." The company also funds the political action
committee KochPAC. See also
Koch family Koch family foundations
Koch Brothers Exposed
References
External links Koch Industries
Koch Industries companies grouped at OpenCorporates U.S. lobbying and campaign contributions at
OpenSecrets.org Koch Industries U.S. political contributions
from Influence Explorer at the Sunlight Foundation Koch Industries Public Sector U.S. political
contributions from Influence Explorer at the Sunlight Foundation
SUMMARY OF KOCH INDUSTRIES' UNITED STATES PRESENCE at sec.gov