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

by Daniel Schulman

  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 rap
id 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.

  “Fink is a mover,” said a libertarian activist who knew him well. “And sometimes you have to move people if you’re a mover.”

  Fink is Charles’s gatekeeper, one of few people within the Koch empire who unfailingly have his ear. He created lasting enmity among the many people—most of them ideological allies—he tangled with on his path to power. His detractors describe him in Rasputinesque terms: sharp-elbowed, ruthless, backstabbing. One of his critics is George Mason University economics professor Charles Rowley, who said he has “fought an increasingly lonely battle against Charles Koch’s growing influence over the Economics Department and the Mercatus Center at George Mason University since the late 1990s,” including efforts to meddle with hiring decisions at the school. Rowley called Fink “a third-rate political hack” and “a man who is very appropriately named.”

  Fink made enemies as he did battle on the Koch brothers’ behalf, but he also produced results. His three-decade partnership with Charles changed the face of American politics—and it changed the public image of Koch Industries from a little-known energy conglomerate into a quasi-political corporate entity.

  “Charles is a passionate free-market guy,” noted a former Koch executive. “Rich Fink is his soulmate on all of this. The arrival of Rich Fink changed a lot of stuff. They didn’t face the public sector threat. They weren’t involved in change-the-world stuff then.”

  In the early 1980s, Charles asked Fink to study a handful of libertarian outfits he supported with a view toward recalibrating his strategy to bring about a free-market revolution. The plan they hatched culminated some 30 years later in the creation of a powerful political fiefdom within the broader Republican firmament that threatened the GOP establishment itself. Their strategy helped lay the intellectual and organizational groundwork for the Tea Party and other Obama antagonists.

  Charles and Fink put into motion a Friedrich Hayek–inspired plan they called a “Structure of Social Change”—a three-tiered model in which the production, packaging, and marketing of ideas was akin to the manufacturing of Lycra. Their plan for bringing about a free-market epoch and Koch Industries’ business model—gathering raw materials and refining them into more valuable products consumers desire—were basically one and the same. As Fink once explained, in clinical fashion:

  When we apply this model to the realm of ideas and social change, at the higher stages we have the investment in the intellectual raw materials, that is, the exploration and production of abstract concepts and theories. In the public policy arena, these still come primarily (though not exclusively) from the research done by scholars at our universities.

  To facilitate the production of these raw materials, Charles pumped millions of dollars into hundreds of universities around the country. These contributions—which totaled nearly $31 million between 2007 and 2011 alone—have gone to endow professorships, underwrite free-market economics programs, and sponsor conferences and lecture series for libertarian thinkers. (Charles was not a passive investor: When his foundation provided $1.5 million to hire a pair of economics professors at Florida State University, his representatives insisted on a contract with the school giving them veto power over job candidates.)

  Step two of the process, Fink explained, entailed taking the intellectual output of these academic programs, ideas “often unintelligible to the layperson and seemingly unrelated to real-world problems,” and refining them into a “useable form.”

  In the middle stages, ideas are applied to a relevant context and molded into needed solutions for real-world problems. This is the work of the think tanks and policy institutions. Without these organizations, theory or abstract thought would have less value and less impact on our society.

  This was the domain of the Cato Institute, Mercatus, and the dozens of other free-market, antiregulatory policy shops that Charles, David, and their foundations have supported over the years. Organizations like these churned out reports, position papers, and op-eds arguing for the privatization of Social Security; fingering public employee unions for causing state budget crises; attempting to debunk climate science; and making the case for slashing the welfare system and Medicaid.

  Charles and Fink also concentrated on grooming an intellectual class of research scholars, journalists, and others to articulate these policies to the masses. One of the vehicles for this was the Institute for Humane Studies, the incubator of libertarian thought that economist Baldy Harper founded in the 1960s. The institute offers a range of educational opportunities for budding libertarian thinkers at the graduate and undergraduate level, holding summer seminars and awarding generous scholarships, grants, and fellowships to the next generation of Charles Kochs. Charles’s foundation provided another avenue for cultivating young ideological allies, offering an internship program that places students at an assortment of right-leaning public policy organizations.

  The third piece of the master plan was mobilizing citizen-activists—or at least creating the illusion of a grassroots groundswell. These activists would agitate for the same policies the academics had conceptualized and the think tanks had refined into talking points and policy prescriptions.

  Citizen activist or implementation groups are needed in the final stage to take the policy ideas from the think tanks and translate them into proposals that citizens can understand and act upon. These groups are also able to build diverse coalitions of individual citizens and special interest groups needed to press for the implementation of policy change.

  As David once explained, “What we needed was a sales force that participated in political campaigns or town hall meetings, in rallies, to communicate to the public at large much of the information that these think tanks were creating.”

  In 1985, Fink and the Koch brothers formed Citizens for a Sound Economy. The group was inspired in part by the tactics of the Left, especially those of crusading consumer advocate Ralph Nader, who commanded a formidable activist army. Citizens for a Sound Economy concentrated on doing, one former board member chuckled, “what Ralph Nader would do if he had any sense.” It was in essence the bizarro-world version of Nader’s Public Citizen. Where Nader fought to expand regulation, Citizens for a Sound Economy worked to eviscerate it. And where Nader battled corporate power, Citizens for a Sound Economy concentrated on harnessing it.

  The group, fueled by donations from the Koch brothers, their company, and a variety of corporate backers, quickly developed political cachet within the Beltway. The Reagan administration appointed Fink to its Commission on Privatization, and he won a spot on the Federal Reserve’s Consumer Advisory Council. Citizens for a Sound Economy’s friends on Capitol Hill grew to include influential Republican congressmen John Boehner of Ohio and Dick Armey of Texas, the House majority leader, and it attracted high-profile conservatives to its board, such as Reagan administration budget director James Miller III and C. Boyden Gray, George H. W. Bush’s White House counsel.

  Its core mission consisted of promoting lower taxes and less government, for which it solicited large contributions from corporations with a direct financial interest in promoting or thwarting particular agendas. The issues Citizens for a Sound Economy advocated for or against, while consistent with its overarching philosophy, often appeared heavily influenced by its benefactors. Microsoft donated $380,000—Citizens for a Sound Economy lobbied Congress to cut the Justice Department’s antitrust enforcement budget. Three sugar companies chipped in $700,000—the group mounted a campaign against an Army Corps of Engineers reclamation plan that would have encroached on cane-growing acreage in Florida’s Everglades. The phone company US West ponied up $1 million; Citizens for a Sound Economy unleashed a telecommunications deregulation initiative.

  One of the group’s biggest backers was the tobacco industry. Citizens for a Sound Economy repeatedly
aligned with tobacco makers to repel tax increases on cigarettes and eradicate the longstanding federal tobacco program, which limited the amount of tobacco that could be sold and imposed price controls.

  A consultant who worked with the group in the 1990s recalled once accompanying Citizens for a Sound Economy’s leaders on a fund-raising expedition to the New York City headquarters of Philip Morris. There, executives from both groups plotted an antitax campaign orchestrated to appear like a grassroots uprising. “The concept was to find other like-minded potential donors, who would sign on to this front group concept, whether it was at the local level, or the state level, or the national level,” the consultant explained. “In this particular case, what this discussion was about, was that CSE funding… would be co-mingled with Philip Morris funds, with the purpose of setting up these handful of front groups that would fight against excise taxes, or retail taxes.… It was a very straight, bottom-line corporate interest.” It was a corporate antitax effort packaged to appear as the will of the people.

  “I’d never seen anything like it in the American political system,” the consultant marveled, “and I thought I’d seen everything.”

  Not long after, Citizens for a Sound Economy and Philip Morris joined forces again to battle the Clinton administration’s health care reform initiative. In 1994, as Hillary Clinton launched a national bus tour to promote the effort, Citizens for a Sound Economy rented a bus of its own. It was broken down and dilapidated; the group towed it from town to town as it shadowed the First Lady’s route. When she arrived at a tour stop, waiting for her was Citizens for a Sound Economy’s decrepit bus, “THIS IS CLINTON CARE” spray-painted on its side.

  Citizens for a Sound Economy’s activists came to the health care fight riding high from one of their most successful legislative coups: shooting down the Clinton administration’s proposed BTU tax. Clinton unveiled the measure during his first State of the Union address as part of a five-year deficit-cutting budget plan. He proposed taxing fuels based on their heat content, giving a leg up to sustainable energy sources such as wind and solar power.