Dark Money

by Jane Mayer

  According to Coppin, who read many of Fred Koch’s private letters, in 1946, when Freddie was thirteen, his father confided to a family friend that there was a child-rearing crisis at home with which he needed help. Freddie had undergone some kind of emotional turmoil while being forced to labor at the family ranch that summer. The family friend recommended a consultation with Portia Hamilton, a clinical psychologist in New York who specialized in child development, with whom Fred began to correspond. Hamilton met with the family and wrote up an evaluation. The psychologist recommended that the boys be separated and that Mary Koch, who was already busy with social life and travel, further distance herself from them in order to make them more “manly.” Psychological theories during that period attributed homosexuality to “over mothering.”

  As a result, Freddie was sent to Hackley, a prep school in Tarrytown, New York, where he could follow his cultural interests, attending the opera in Manhattan and acting in school productions. Later, he came to feel that Hackley rescued him.

  In order to keep him from picking on his brothers, the Kochs sent Charles away to school as well, in his case, at the age of eleven. The school they chose for him was the Southern Arizona School for Boys, renowned for its strictness. His mother made clear that it was done for his younger brother Billy’s sake, which only heightened resentments between the boys.

  “I pleaded with them not to send me away,” Charles told Fortune in 1997. Charles did poorly at the boarding school, but instead of yielding to his pleas to come home, the Kochs sent him to an even more rigid boarding school, the Fountain Valley School in Colorado. “I hated all that,” Charles recalled. At one point, his parents finally “took pity” on him, he said, and let him attend public high school in Wichita, which he loved, but “I got into trouble,” he recalled, so they packed him off to the Culver Military Academy in Indiana, which also emphasized discipline. There, Charles did better academically but repeatedly got into trouble. Eventually, Culver expelled him for drinking on a train (although he was eventually readmitted, enabling him to earn his diploma). “I have a little bit of a rebel, and free spirit in me,” Charles later acknowledged. As punishment, Charles’s father banished him to live with his relatives in Texas. “Father put the fear of God in him,” David later recalled. “He said, ‘If you don’t make it, you’ll be worthless. You’ve disappointed me.’ Father was a severe taskmaster.”

  In his confidential report for Bill Koch, Coppin wrote, “Charles spent little of the next fifteen years at home, only coming there for an occasional holiday.” After he was exiled by the family, “the first thing Charles did when he came home on vacation was to beat up” his younger brother Bill.

  Young Bill grew alarmingly depressed. He was socially withdrawn and preoccupied with his sense of inferiority to his twin, David, and his older brother Charles. Soon the twins too were sent to boarding school. Bill, interestingly, chose to follow Charles’s footsteps to Culver Military Academy, while David chose the eastern prep school Deerfield Academy. “There was a lot of strife between the boys. Charles was in constant rebellion against authority. It was a miserable childhood,” Coppin said in an interview.

  Yet later, as a parent, Charles partially repeated the pattern. When his own son, Chase, then thirteen, played a halfhearted tennis match, Charles had an employee pick him up and deliver him to a baking, reeking feedlot on one of the family ranches where he was forced to work seven days a week, twelve hours a day. Charles proudly recounted the story with a grin, telling The Wichita Eagle, “I think he thought he’d have a job here in Wichita and could go out with his friends at night.” Chase became an exceptionally good tennis player but later had another, more serious problem. While driving as a high school student in Wichita, he ran a red light and fatally injured a twelve-year-old boy. He pleaded guilty to a misdemeanor charge of vehicular manslaughter and was sentenced to eighteen months of probation and a hundred hours of community service and was required to pay for the boy’s funeral. After college, Chase, like his father, joined the family company.

  Meanwhile, in an online blog, Charles’s other child, Elizabeth, a Princeton graduate, described her own efforts to prove herself to her father. Of a visit home, she wrote, “As soon as we arrived I felt an overwhelming urge to prostrate myself on the floor and eat dirt in order to illustrate how grateful I am for everything they’ve done for me, that I’m not the spoiled monster they warned me I’d become if I wasn’t careful.” She described “chasing” her father around the house, trying to impress him with her interest in economics, and “staring down that dark well of nothing you do will ever be good enough you privileged waste of flesh.”

  A generation before, stern admonitions against becoming spoiled had emanated from Fred Koch to his offspring as well. Even as he laid plans to leave huge inheritances to his sons, he wrote a prophetic letter to them in 1936. In it, he warned,

  When you are 21, you will receive what now seems like a large sum of money. It will be yours to do what you will. It may be a blessing or a curse. You can use it as a valuable tool for accomplishment or you can squander it foolishly. If you choose to let this money destroy your initiative and independence, then it will be a curse to you and my action in giving it to you will have been a mistake. I should regret very much to have you miss the glorious feeling of accomplishment and I know you are not going to let me down. Remember that often adversity is a blessing in disguise and certainly the greatest character builder. Be kind and generous to one another and to your mother.

  Charles Koch keeps a framed copy of this letter in his office, but as Fortune observed, given the brothers’ future protracted legal fights against each other, “Never did such good advice fall on such deaf ears.”

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  David Koch recalled that his father tried to indoctrinate the boys politically, too. “He was constantly speaking to us children about what was wrong with government,” he told Brian Doherty, an editor of the Koch-funded libertarian magazine Reason and the author of Radicals for Capitalism, a 2007 history of the libertarian movement with which the Kochs cooperated. “It’s something I grew up with—a fundamental point of view that big government was bad, and imposition of government controls on our lives and economic fortunes was not good.”

  Fred Koch’s political views were apparently shaped by his traumatic exposure to the Soviet Union. Over time, Stalin brutally purged several of Koch’s Soviet acquaintances, giving him a firsthand glimpse into the murderous nature of the Communist regime. Koch was also apparently shaken by a steely government minder assigned to him while he worked in the Soviet Union, who threatened that the Communists would soon conquer the United States. Koch was deeply affected by the experience and later, after his business deals were completed, said he regretted his collaboration. He kept photographs in the company headquarters in Wichita aimed at documenting how the refineries he had built had later been destroyed. “As the Soviets became a stronger military power, Fred felt a certain amount of guilt at having helped build them up. I think it bothered him a lot,” suggests Gus diZerega, a Wichita acquaintance of the family’s.

  In 1958, Fred Koch became one of eleven original members of the John Birch Society, the archconservative group best known for spreading far-fetched conspiracy theories about secret Communist plots to subvert America. He attended the founding meeting held by the candy manufacturer Robert Welch in Indianapolis. The organization drew like-minded businessmen from all over the country, including Harry Bradley, the chairman of the Allen-Bradley company in Milwaukee, who later financed the right-wing Bradley Foundation. Members considered many prominent Americans, including President Dwight D. Eisenhower, Communist agents. (The conservative historian Russell Kirk, part of an effort to purge the lunatic fringe from the movement, famously retorted, “Ike isn’t a Communist; he’s a golfer.”)

  In a 1960 self-published broadside, A Business Man Looks at Communism, Koch claimed that “the Communists have infiltrated both the Democrat [sic] and Republican Parties.” Pro
testant churches, public schools, universities, labor unions, the armed services, the State Department, the World Bank, the United Nations, and modern art, in his view, were all Communist tools. He wrote admiringly of Benito Mussolini’s suppression of Communists in Italy and disparagingly of the American civil rights movement. The Birchers agitated to impeach Chief Justice Earl Warren after the Supreme Court voted to desegregate the public schools in the case Brown v. Board of Education, which had originated in Topeka, in the Kochs’ home state of Kansas. “The colored man looms large in the Communist plan to take over America,” Fred Koch claimed in his pamphlet. Welfare in his view was a secret plot to attract rural blacks to cities, where he predicted that they would foment “a vicious race war.” In a 1963 speech, Koch claimed that Communists would “infiltrate the highest offices of government in the U.S. until the President is a Communist, unknown to the rest of us.”

  Blazing a trail that would later be followed by his sons, Koch tapped his fortune to subsidize his political activism. He underwrote the distribution of what he claimed were over two and a half million copies of his book, as well as a speaking tour. According to the Associated Press, during one speech in 1961 he told the members of a Kansas Women’s Republican club that if they were afraid of becoming too “controversial” by joining his fight against Communism, they should remember that “you won’t be very controversial lying in a ditch with a bullet in your brain.” Such rants brought Koch to the attention of the FBI, which filed a report describing his rhetoric as “utterly absurd.”

  The John Birch Society’s views were primitive, but its marketing was quite sophisticated. Welch, the candy manufacturer who founded the group, urged organizers to implement a modern sales plan, advertising heavily and pushing pamphlets door-to-door. The movement flourished in Wichita, where Fred Koch frequently attended local John Birch Society meetings and was a generous benefactor.

  Ironically, the organization modeled itself on the Communist Party. Stealth and subterfuge were endemic. Membership was kept secret. Fighting “dirty” was justified internally, as necessary to combat the imputed treacherousness of the enemy. Welch “explicitly sought to use the same methods” he attributed to the Communists, “manipulation, deceit, and even dishonesty,” recalled diZerega, who attended Birch Society meetings in Wichita in his youth. One ploy the group used, he said, was to set up phony front groups “pretending to be other than what they were.” An alphabet soup of secretly connected organizations sprang up, with acronyms like TRAIN (To Restore American Independence Now) and TACT (Truth About Civil Turmoil). Another tactic was to wrap the group’s radical vision in mundane and unthreatening slogans that sound familiar today, such as “less government, more responsibility.” One of Welch’s favorite tropes, decrying “collectivism,” would cause some head-scratching more than fifty years later when it was echoed by Charles Koch in a 2014 diatribe in The Wall Street Journal denouncing his Democratic critics as “collectivists.”

  Welch was “a very intelligent, sharp man, quite an intellectual,” Fred Koch’s wife, Mary, later told her hometown newspaper The Wichita Eagle. The family’s admiration for the John Birch Society, however, proved somewhat embarrassing on November 22, 1963, when President John F. Kennedy was assassinated. As Lee Fang recounts in his book, The Machine: A Field Guide to the Resurgent Right, when President Kennedy arrived in Dallas that morning, he was confronted by a hate-stoked, full-page newspaper ad paid for by several Texas members of the John Birch Society, accusing him of treasonously promoting “the spirit of Moscow.” At the time, Kennedy had moved from trying to ignore the Birchers to realizing he needed to confront their increasingly pernicious fearmongering, which he denounced as “crusades of suspicion” and “extremism.”

  In a hasty turnabout, soon after the assassination Fred Koch took out full-page ads in The New York Times and The Washington Post mourning JFK. The ads advanced the conspiracy theory that JFK’s assassin, Lee Harvey Oswald, had acted as part of a Communist plot. The Communists wouldn’t “rest on this success,” the ads warned. In the corner was a tear-out order form, directing the public to sign up for John Birch Society mailings. In response, the columnist Drew Pearson slammed Koch’s “gimmick” and exposed him as a hypocrite for having profited himself from Soviet Communism by building up the U.S.S.R.’s oil industry.

  Fred Koch continued to be active in extremist politics. He provided substantial support for Barry Goldwater’s right-wing bid for the Republican nomination in 1964. Goldwater, too, opposed the Civil Rights Act and the Supreme Court’s landmark desegregation decision, Brown v. Board of Education. Instead of winning, the Far Right helped ensure the Republican Party’s humiliating defeat by Lyndon Johnson that year. In 1968, Fred Koch went further right still. Before the emergence of George Wallace, he called for the Birch Society member Ezra Taft Benson to run for the presidency with the South Carolina senator Strom Thurmond on a platform calling for racial segregation and the abolition of all income taxes.

  David and Charles absorbed their father’s conservative politics and joined the John Birch Society too, but they did not share all of his views. According to diZerega, who befriended Charles in the mid-1960s after meeting him while browsing in a John Birch Society bookstore in Wichita, Charles didn’t accept all of the group’s conspiracy theories. He recalls that Charles, who was several years older, steered him away from the Communist conspiracy books and toward the collection of antigovernment economic writers whose work he found especially exciting. “This is the good stuff,” he recalls Charles telling him. The founder of the John Birch Society, Welch, was a board member of the Foundation for Economic Education, which spread a version of laissez-faire economics so extreme “it bordered on anarchism,” as Rick Perlstein writes in his history of Goldwater’s ascent, Before the Storm. Unlike his father’s conspiracies, these were the theories that captivated Charles.

  The postcollege years were a restless period in Charles’s life. In 1961, when he was twenty-six, his father, whose health was failing, persuaded him despite his doubts to return to Wichita to help run the family business. After graduating with a bachelor of science in engineering and master’s degrees in nuclear and chemical engineering from MIT, where his father was on the board of trustees, Charles had been enjoying his freedom working in Boston as a business consultant. Convinced that his father would sell the company otherwise, Charles reluctantly returned to Wichita to help but found himself intellectually hungry back in his hometown. In his telling, he was almost feverishly bent on finding some overarching system of political theory to bridge his father’s emotional anti-Communism with his own more analytical approach to the world. He also wanted to merge his thinking about business and his interests in engineering and mathematics. “I spent the next two years almost like a hermit, surrounded by books,” he told The Wall Street Journal in 1997. Visitors to his apartment recall him littering almost every surface with abstruse economic and political texts. He later explained that having learned that “there are certain laws that govern the natural world,” he was trying to discover “if the same isn’t true for the societal world.”

  Contributing to Charles’s intellectual ferment at this time were his father’s dinner table diatribes against taxation. Fred saw taxes in America darkly, as incipient socialism. Early on, the Internal Revenue Service had sued his company for underpayment of taxes, requiring a large additional payment as well as penalties and legal fees. He remained vehemently opposed to estate taxes, and told Charles that he feared the U.S. government would tax him so heavily it might force him to sell the family business, diminishing his sons’ inheritances. To minimize future taxes, Fred Koch took advantage of elaborate estate planning. Among other strategies, he set up a “charitable lead trust” that enabled him to pass on his estate to his sons without inheritance taxes, so long as the sons donated the accruing interest on the principle to charity for twenty years. To maximize their self-interest, in other words, the Koch boys were compelled to be charitable. Tax avoidance w
as thus the original impetus for the Koch brothers’ extraordinary philanthropy. As David Koch later explained, “So for 20 years, I had to give away all that income, and I sort of got into it.”

  Fred Koch’s estate plan treated each son equally, but according to Coppin, to ensure that his offspring would continue to obey him, he arranged to pass his fortune on to them in two stages, with the second half passing on only after his death. The first distribution gave all four boys equal ownership of Koch Engineering, the smaller of his two companies. The later distribution thus hung over his sons’ heads, subject to their father’s whim.

  Charles’s embrace of the John Birch Society, according to Coppin, was in part designed to please the old man. According to diZerega, whom Charles invited to participate in an informal discussion group at the Koch mansion during this period, “It was pretty clear that Charles thought some of the Birch Society was bullshit.” He recalls that “Charles was bright as hell.” And in fact, in 1968, the year after his father died, Charles resigned from the organization over its support for the Vietnam War, which he opposed.

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  A related fringe group, though, became seminal to Charles Koch’s political evolution during this period, the Freedom School, which was led by a radical thinker with a checkered past named Robert LeFevre. LeFevre opened the Freedom School in Colorado Springs in 1957 and from the start there were close ties to the John Birch Society. In 1964, Robert Love, a major figure in the Wichita branch of the John Birch Society, introduced Charles to the school, which offered one- and two-week immersion courses in “the philosophy of freedom and free enterprise.” Robert Welch, the John Birch Society’s founder, also visited. But LeFevre’s preoccupations were slightly different. He was almost as adamantly opposed to America’s government as he was to Communism.