Charles Koch: We're not in politics to boost our bottom line

Fredreka Schouten | USA TODAY

Corrections and clarifications: An earlier version of this story misstated Charles and David Koch's ownership stake in Koch Industries.



WICHITA — Charles Koch and his industrial empire are mounting an aggressive new defense of his company and his political advocacy, with the billionaire insisting his work to help elect Republicans is rooted in his decades-long quest to "increase well-being in society."

"We are doing all of this to make more money?" Koch said of charges that his drive to limit government's power will increase his bottom line. "I mean, that is so ludicrous."

"I don't know how they can say that with a straight face," he said. "We oppose as many or more things that would benefit us than would hurt us," he said, ticking off potential losses at his Minnesota oil refinery if the Keystone XL pipeline he supports is constructed and his opposition to the Export-Import Bank, whose subsidies aiding U.S. companies he has decried as corporate welfare.

His comments came during an interview with USA TODAY in his office at Koch Industries, where he discussed a wide range of topics — from the nearly daily death threats against him to what he termed the "hysteria" in some quarters about global warming.

(For the record, Koch says this of climate change: "You can plausibly say that CO2 has contributed" to the planet's warming, but he sees "no evidence" to support "this theory that it's going to be catastrophic.")

The publicity-averse CEO is stepping into the spotlight as Koch Industries launched a new advertising campaign this week that shows the company's reach into into all corners of Americans' daily lives — from the Lycra in their workout clothes and the gas in their tanks. A new "We are Koch" website tells uplifting stories about employees and beneficiaries of Koch philanthropy.

The company also is advertising in professional sports arenas and earlier this year inked a multi-year sponsorship deal to promote Koch Industries during college basketball and football games at 15 universities. It's all part of a 10-year marketing campaign to introduce Koch to the American public in new ways, said Steve Lombardo, a veteran Washington marketing and crisis communications expert hired last year as the company's chief communications and marketing officer.

In October, Crown Publishing will release Koch's second book, Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies, detailing his management philosophy.

Koch (COKE) has gained notoriety for helping to create and financially support a sprawling network of think tanks, policy and political groups to advance his limited-government agenda. In the 2014 election alone, two affiliated groups — Americans for Prosperity and Freedom Partners — bombarded Senate Democratic candidates with more than $90 million in advertising in a successful effort to flip control of the chamber to the Republican Party. Much of the network runs through non-profit organizations that do not disclose their donors' identities.

In the run-up to last year's midterm elections, then-Senate majority leader Harry Reid, D-Nev., took the Senate floor more than three dozen times to lambaste the Koch brothers — Charles and his younger brother and company co-owner, David — as "un-American" and the leaders of a secret money "cult."

INCREASED PUBLICITY EFFORT

Koch said the company has stepped up its publicity efforts to help "defend ourselves from attacks and make our employees feel better about the company" and to make clear to customers and suppliers that "we're not this evil ogre trying to make your lives worse."

Malcolm Harris, a professor of finance at Friends University in Wichita, said Koch's political activity may be hurting his ability to retain and recruit talent to his ever-expanding business empire. In the last two years or so, Koch Industries has acquired all or parts of more than two dozen companies, including Molex, an Illinois-based firm that makes electronic components for products such as iPhones, that Koch purchased for $7.2 billion in late 2013.

"When you acquire companies, you acquire a lot of employees," Harris said. "You want them to become part of your team, and it may be hard if they are thinking, 'Oh gee. Aren't those the guys that eat babies in the morning?' "

Lombardo would not say how much the company is pumping into its latest round of advertising, which includes digital ads on news and information sites, but called it a "significant spend." The TV ads will air nationally on cable and broadcast networks on everything from the Sunday political talk shows to The Big Bang Theory.

Even as he defends his company, Koch shows no signs of backing down from the policy and political agenda that has made him the bogeyman of the left.

Earlier this year, the Kochs and their network of some 450 donors, who help underwrite everything from political ads to university research grants, committed to spending nearly $900 million in the two years ahead of the 2016 election. That's more than double the network's spending in the run-up to the 2012 elections and more than twice what the Republican National Committee invested in the elections that year.

Charles Koch said this week that only about a third of that will be spent on electoral politics. The political network he and his brother oversee also is considering wading into the Republican presidential primary for the first time and providing financial support to as many as five candidates who have a "positive message" and the ability to prevail in the 2016 general election. That move could drive the Republican field closer to the Kochs and their libertarian positions, which often sit at odds with GOP's business-friendly and socially conservative wings.

The Kochs move to shape the Republican nomination battle has set off alarms among campaign-finance watchdogs.

"This is called the 'Koch primary,' " Fred Wertheimer, president of the campaign watchdog group Democracy 21, said of the brothers' plans."Never mind those caucuses and primaries where millions of Americans choose their candidates. The Kochs will do it for all of us."

"It's more evidence of how our political system is turning into an oligarchy," he said.

MIDWESTERN ROOTS, GLOBAL REACH

Charles and David Koch each own 42% of Koch Industries, but Charles, 79, is the driving force behind the energy and manufacturing company, which employs more than 100,000 people around the globe. He's served as its chairman and CEO since 1967.

David Koch, who has the title of executive president, lives in New York where he is a leading patron of the arts and has donated heavily to cancer research. (Lincoln Center's New York State Theater, for instance, was renamed for him in 2008 to celebrate the $100 million he donated for its renovation. )

Charles Koch, however, has stayed put in the town where he grew up. His home sits inside the walled, park-like compound where he was raised, an eight-minute drive from the office. "Why move?" he said. "We've been very successful here."

His imprint is all over Wichita. The 10,500-seat sports arena at Wichita State University, for instance, bears his name, thanks to a $6 million contribution toward its renovation.

Koch's low-key persona belies his standing as the world's sixth-richest person — a slot he shares with his brother, David Koch, on the Forbes' rankings. He shows up at the office by 7:15 a.m. most days. He's happy to chat about his 90-minute daily workout — a routine that includes Pilates, strength training and climbing on the Stairmaster.

On a recent Tuesday at lunchtime, he was standing with other employees in the company cafeteria, Café Koch, getting his $4.99 meal of chili and beer-braised brisket boxed up to take back to his desk.

A MISSION TO LIMIT GOVERNMENT "COERCION"

He and his aides express dismay he's been so vilified by politicians and popular culture. The Kochs are the subject of two critical documentaries and are regularly lampooned by late-night comics.

Didn't he expect aggressive pushback when his network was spending heavily to dislodge Democrats from the Senate's majority?

"I didn't expect it to be as dishonest and as vicious as it was," said Koch, who called the flood of death threats against him and his family the "scariest" part of the last few years.

Koch Industries spokeswoman Melissa Cohlmia said he still gets hate mail and death threats almost daily, like the one that landed in a general corporate e-mail box Tuesday that started with "How about you start off by killing yourselves" and ended with "I hope you die slowly from prostate cancer."

The missive hit particularly close to home; both Koch brothers are prostate-cancer survivors.

To hear Koch tell it, he's a reluctant political warrior — drawn into elections as a last resort because the ideas he's been promoting for 50 years about curtailing the government's power haven't gotten enough traction.

(He doesn't consider himself a Republican, by the way, although he's registered as one because in deep-red "Kansas, that's the game.")

In his view, less government intervention means more opportunities for individuals to thrive. He sees government's primary role as "coercion" and says it should apply that force in limited circumstances, such as national defense, public safety, enforcing settlements and preventing the spread of communicable disease.

He maintains that the government's role in most everything else — from licensing cab drivers to regulating banks — ought to be up for debate. His voice rises to a near-shout when talking about criminal laws and the civil forfeiture of assets in criminal investigations

"If somebody smokes a joint, we're gonna go in and bust them? We're gonna raid houses in case somebody has a banned substance? Confiscate their houses?"

"My God," he said, "if people don't see that as an abuse of force, of too much government, then we're just not communicating."

His critics note that the Kochs' anti-regulation stance also advances their economic interests. Reducing the government's permitting powers or lobbying for reductions in federal and states gas taxes, as the Koch-affiliated Americans for Prosperity is doing around the country, helps the bottom line of a business such as theirs that is rooted in oil refining and manufacturing.

While the company touts its environmental record, Democrats highlight its run-ins with the government. In 2000, for instance, Koch Industries agreed to pay $30 million in penalties for leaking oil into waterways in six states. At the time, it was the biggest civil fine levied under the Clean Water Act. (Another $5 million went to environmental projects.)

"It's very difficult to disentangle their political beliefs from their business interests. It's all wrapped up into one," said Daniel Schulman, an editor with Mother Jones magazine and the author of the 2014 biography of Koch and his three siblings, Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty.

"That said, Charles Koch doesn't always advocate for his interests. They'll take the subsidies, and they have lobbied against those sorts of things," he said. "I absolutely think they are true believers."

In one of its most unusual alliances, Koch Industries has teamed up with the liberal think tank, Center for American Progress, and prominent Democrats, such as former Obama administration official Van Jones, to work on a broad overhaul of the criminal-justice system. Goals range from reducing the criminal laws on the books to helping restore the voting rights of those convicted of non-violent crimes.

"I was initially cautious, trying to figure out whether I would find a hidden agenda if I looked under a lot of rocks," Jones said in a recent interview with USA TODAY about his collaboration on the issue with Koch Industries' senior vice president and general counsel Mark Holden. "I take them at their word that their libertarian values have led them to this issue."

"I'm sure they'll get some positive PR from this," Jones added. "But you have to have a very strange view of PR to think that talking about getting felons out of prison is a genius public-relations move."

Holden, who said he had a "great conversation" last week at the White House with top Obama administration officials about criminal justice, said he hopes the new cooperation with Democrats might change the tone of the political discourse ahead of 2016. "We'd like to have a principled debate," about issues, he said.

The strategy of attacking the Kochs "doesn't seem to have worked because they lost the Senate," he said. "I'm hopeful they have decided on another strategy."

"But I'm not naive," Holden added. "This is a political world. We'll be ready."