Koch Industries Responds to New Yorker Claims

Thursday, 26 Aug 2010 07:00 PM

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Koch Industries has issued a response to a New Yorker magazine article highly critical of the Wichita, Kan.-based conglomerate and its owners, brothers David and Charles Koch.

Among other things, the new article, entitled “Covert Operations: The Billionaire Brothers Who are Waging a War Against Obama,” by Jane Mayer, suggests that Koch has been funding the tea party movement secretly through the Americans for Prosperity Foundation, which David Koch founded in 2004. David is Koch Industries' executive vice president who, along with brother Charles, owns more than 80 percent of the firm.

The New Yorker cites largely unnamed sources to make its claim that the Koch brothers have been donating to and organizing the tea party movement.

Americans for Prosperity “has worked closely with the tea party since the movement’s inception,” the New Yorker claims, adding that “by giving money to ‘educate,’ fund, and organize tea party protesters, they have helped turn their private agenda into a mass movement.”

And she quotes an unnamed Republican consultant who said of the tea party movement: “The Koch brothers gave the money that founded it.”

The only problem with this conspiracy theory is that the Koches and their foundations have been donating to many pro-free market organizations and think tanks long before Obama came into the White House. And dozens of groups are part of the tea party movement, many of whom have not received a dime in Koch funding.

Koch Industries is the second-largest privately held company in the United States, with interests in a range of industries including petroleum refining, minerals, fertilizers, forest and consumer products and chemical technology. Its subsidiaries include the Georgia-Pacific pulp and paper company.

In its response to the article, Koch issued a statement rebutting the New Yorker piece point by point and blaming the magazine’s approach for the company’s refusal to make David or Charles Koch available.

“We submitted extensive facts and background information to the magazine,” the statement reads. “Given that all we provided did not change the publication’s negative, unbalanced tone and agenda, we declined their requests to speak to Koch executives.”

Here is the full Koch Industries statement, titled “Koch Facts”:

For more than 40 years, Koch companies, the Koch family and their foundations have been publicly devoted to making the world a better place. Unfortunately, both political parties in recent years have advocated government policies and spending that threaten the economic foundations of our families, company and country. In the face of this threat, our increased efforts to advance market-based policy solutions, which history shows drive a society’s productivity, innovation and enhanced quality of life, have attracted negative attention from some who do not support economic freedom.
This site offers an accessible and reliable source of information about our market-based point of view and our responsible operations.

Response to 8/23/10 The New Yorker article

We submitted extensive facts and background information to the magazine. Given that all we provided did not change the publication’s negative, unbalanced tone and agenda, we declined their requests to speak to Koch executives. The story dredges up issues resolved long ago and mischaracterizes our business philosophy and principles, our practices and performance record, and the education efforts and policies we support. Accurate information on many of the issues from this and other recent media and Internet discussion items is below:

Operate safe, clean facilities across Koch companies

We implement EH&S management systems and strive for superior performance and environmental protection. Many of these efforts are about achieving excellent compliance records and minimizing incidents, but there are also considerable results, including 180 environmental and safety awards, that go beyond compliance.
Koch’s refining company, Flint Hills Resources, processes a barrel of crude oil with 60 percent fewer air emissions than the industry average. Flint Hills facilities strive to operate efficiently and in an environmentally responsible manner. Since 1997, the company has reduced its average per-barrel criteria air emissions by 71 percent.
Flint Hills Resources is a recognized leader in reducing flaring at its refineries, reducing flare time by 90 percent since 1997. The company earned a Clean Air award from the EPA.
In Sigurd, Utah, Georgia-Pacific employees developed an innovative solution to reclaim land more efficiently. This process saved more than $41,000 and left the landscape in good condition. The results earned GP an Innovation in Reclamation Award from the State of Utah, awarded on Earth Day 2010.

Serve our communities and those in need

From disaster relief to supporting, via cash donations and employee sweat equity, Habitat for Humanity projects to entrepreneurship education programs for inner city youth, Koch companies support numerous programs aimed at improving the lives of people in their communities.
Donations around the world have helped advance learning and education, improve the quality of life, and support human services and at-risk youth.

Climate change

Long before climate change was a key policy issue, Koch companies and Koch foundations worked to advance economic freedom and market-based policy solutions to societal challenges. A free society and the scientific method require an open, honest airing of all sides, not demonizing and silencing those with whom you disagree. We've strived to encourage an intellectually honest debate on the scientific basis for claims of harm from greenhouse gases. Because it's crucial to understand whether proposed initiatives to reduce greenhouse gases will achieve desired environmental goals and what effects they would likely have on the global economy, we have tried to help highlight the facts of the potential effectiveness and costs of policies proposed.

Greenpeace

The Greenpeace report mischaracterizes Koch companies’ efforts and distorts the environmental record of our companies. Koch companies have long supported science-based inquiry and dialogue about climate change and proposed responses to it. Koch companies have put tremendous effort into discovering and adopting innovative practices that reduce energy use and emissions in the manufacture and distribution of our products.
In addition, Greenpeace's unsubstantiated and inaccurate assertion - that all funds given by Koch Industries and Koch foundations to a broad group of organizations from 2005 through 2008 were focused on climate issues - breaks down immediately upon examination. As the organizations involved have affirmed, they focus on numerous public policy issues and the funding in question supported many projects outside the scope of energy or environmental matters.

Environmental record

While history is an important consideration when assessing anyone’s track record, we continue to see long-settled issues discussed with no context to accurately reflect our current operations. Publicly available data reveals that Koch companies have managed environmental risk well over many years, and earned accolades for those achievements. From wetlands restoration and award-winning habitat preservation projects that apply to the company's ranches as well as refineries to river conservation, they have led and participated in many efforts that have enhanced the environment in their communities and within their fence lines.

2001 Corpus Christi settlement

When Koch entities and employees were charged with 97 counts in 2000, the central issue was not benzene releases. The charges addressed measurement practices and control equipment on pipes and tanks handling waste streams prior to treatment within the refinery. A Clinton-appointed federal judge oversaw the case and, as facts about the case were revealed, it was the Clinton Department of Justice attorneys who dropped the number of counts by nearly 90 percent before the 2001 inauguration of President Bush. These same prosecutors saw the case's continued disintegration -- once their evidence and witnesses were able to be challenged before the judge -- and agreed to a settlement in April 2001 that included dismissing all counts against Koch Industries and the individuals. Koch Petroleum Group pled to just one, non-pollution-related count. That count – alleging a false statement regarding reported information in 1995 – was the original issue the company self-reported to authorities when discovered. The company paid a fine and completed probation.

1996 Pipeline accident

The August, 1996 pipeline accident in Texas was a tragedy. Koch accepted responsibility immediately for the incident, which is the only event of its kind in the company’s history. The thorough review conducted of this pipeline the year before the accident did not uncover any issues that posed a foreseeable threat to public safety. The bacteria-induced corrosion that caused the accident acted more quickly to damage this pipeline than had ever been documented by any industry expert. Koch’s cooperative efforts to identify the source and cause of this problem so that this knowledge could be shared throughout industry were praised by the National Transportation Safety Board, which did a two-year investigation into this incident. Koch Pipeline Company, L.P. has taken lessons learned from this incident and modified its procedures to help avoid any repeat of an accident like this.

Minnesota

Koch Petroleum Group took full responsibility for mistakes and pled guilty to two negligence misdemeanors relating to problems at its Rosemount refinery in 1996 and 1997. These charges involve delays in the cleanup of a tank leak, part of which later appeared in a wetland adjacent to the Mississippi River, and the manner in which refinery waste water was discharged. Koch agreed to pay $6.9 million in 1998 to settle related issues under a stipulated agreement with the Minnesota Pollution Control Agency.

Pipeline settlement

More than 10 years ago, Koch paid $35 million to settle pipeline releases. It's important to note, however, that the reason it was the largest fine to date (it's been eclipsed many times over by now in cases involving other companies) was that it marked the first time the government had bundled multiple incidents – stretching out over nearly 10 years in six states over multiple pipeline systems – into a single enforcement action. Since that time, Koch-operated pipelines have earned numerous state- and federal-level honors for industry-leading records for safe operations.

Oklahoma oil measurement

A U.S. District Judge approved a settlement to end an oil measurement case initiated against Koch Oil as a qui tam action in 1989.

Americans for Prosperity/Citizens for a Sound Economy

Among the hundreds of organizations that have received support from Koch companies and/or the Koch foundations are Americans for Prosperity and Americans for Prosperity Foundation. In 1984, Dr. Richard Fink, Charles and David Koch and Jay Humphries co-founded the Americans for Prosperity Foundation, then known as Citizens for a Sound Economy Foundation. Over time the participants in CSE and the CSE Foundation developed different visions. In 2004, CSE became FreedomWorks and the CSE Foundation was renamed Americans for Prosperity Foundation. AFP Foundation created a 501(c)(4) organization, AFP. AFP and AFP Foundation have grown to more than 1.2 million members in all 50 states, with 30 state chapters and affiliates and more than 65,000 donors. David Koch is chairman of the board for AFP Foundation, which has a citizen-education mission.
AFP and AFP Foundation are legally separate organizations with two separate governing boards. AFP Foundation, which is a 501(c)(3) organization, focuses on citizen education about economic policy and a return of the federal government to its Constitutional limits. AFP, a 501(c)(4) entity, focuses on citizen advocacy. Koch foundations provide no funding to AFP.

John Birch Society and opposition to communism

Fred Koch, who died in 1967, was a supporter, not a founder, of the John Birch Society in the 1950s. His anti-communist sentiment stemmed from time he spent in the Soviet Union between 1929 and 1932 when his engineering company designed and built oil cracking units to be erected in refineries in the U.S.S.R. Fred found the Soviet Union to be "a land of hunger, misery and terror." Virtually all the Soviet engineers he worked with were purged by Stalin, who exterminated tens of millions of his own people. This experience, combined with what his Communist associates told him of their methods and plans for world revolution, caused Fred Koch to become a staunch anti-communist.

Formaldehyde

We believe any/all regulations should be based on sound science. Georgia-Pacific meets standards currently set for formaldehyde in a variety of applications and has provided comments on formaldehyde’s classification as part of the established regulatory development process in the United States. The debate over EPA's recent review of formaldehyde is not simply an industry concern. Several federal agencies have submitted formal comments urging caution and questioning some of the data and information on which EPA's decision was based.
There are numerous indications that the science EPA has employed may not be the best and to make any final decisions prior to the current comprehensive scientific review of formaldehyde by the National Academy of Sciences would be inappropriate.

Government-run healthcare

Innovation drives our country – and in the healthcare field it brings us better treatments, improved procedures and cures for life-threatening diseases. Government takeover of healthcare may stymie innovation, affect medical research negatively and reduce the reimbursements our leading research institutions receive.


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