A new article at Bloomberg Markets details the "secret sins" of Koch Industries, the enormous global chemical, textile, and refining empire run by billionaire brothers Charles and David Koch, who are among the chief financial patrons of the Tea Party movement. The "bombshell" exposé, which was completed by 15 reporters in seven countries, documents legally suspect petrochemical-equipment sales to Iran and bribery of officials in six other countries, along with a host of legal travails dating back decades. Will these "secret sins" damage the deep-pocketed conservative-libertarian political patrons? Here's what you should know:
What are Koch Industries' alleged "sins"?
In a nutshell, write Bloomberg reporters Asjylyn Loder and David Evans, Koch Industries has spent six decades reaping enormous profits worldwide "in part by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety, and ignoring environmental regulations." The article specifically alleges that Koch stole 1.95 million barrels of oil from U.S. lands and Native American families by purposefully undercounting the oil it extracted, caused the death of two Texas teenagers through negligence on a gas pipeline, used subsidiaries to sidestep a U.S. ban on trading with Iran, and bribed officials in six countries to secure lucrative contracts.
Where was this alleged bribery?
In May 2008, Koch compliance and ethics officer Ludmila Egorova-Farines found evidence of foreign bribes at a French office of European affiliate Koch-Glitsch. A subsequent Koch investigation uncovered illicit payments to secure deals in Algeria, Egypt, India, Morocco, Nigeria, and Saudi Arabia.
And what about Iran?
Between 2003 and 2007, Koch used its Koch-Glitsch arm to sell equipment to build and expand Iran's giant state-owned methanol plant, according to internal documents and former employee George Bentu. U.S. citizens have been barred from doing business with Iran since 1995. "Every single chance they had to do business with Iran, or anyone else, they did," says Bentu, a German citizen.
Are either of those prosecutable crimes?
The alleged foreign bribes appear to run afoul of the 1977 Foreign Corrupt Practices Act, and Koch's outlining of the bribes in a termination letter to the employee it blames for them, Leon Mausen, "sounds like a smoking gun," says Duke Law School professor Sara Sun Beale. The letter, made public in Mausen's French wrongful-termination lawsuit, "really should get the Justice Department's attention. When you have a smoking gun, you launch an investigation." Koch says its sales to Iran were legal at the time, since U.S. citizens took no part.
What does Koch say about the exposé?
The article includes extensive rebuttal from Koch spokeswoman Melissa Cohlmia, who argues that Koch has learned from any mistakes, and paid for any legal missteps. In a separate statement, Koch general counsel Mark Holden says, "Bloomberg's substandard reporting contains major inaccuracies," thanks largely to its reliance on some "unreliable" and "disgruntled" former employees. The bribery was the work of one rogue manager, he adds, and "years ago" Koch "prohibited all trading with Iran, a policy that is stricter than U.S. law."
Will the exposé draw any blood?
What's most damaging about the incredibly thorough article is that it's in Bloomberg, hardly a bastion of "patchouli-burning, Birkenstock-wearing hippies," says David Dayen at Firedoglake. As for the substance, "you'd need only add some story about Charles or David Koch personally tying down a damsel in distress to train tracks to come up with a more damning portrait." Nonsense, says Jennifer Rubin at The Washington Post. If this cherry-picked collection of cold cases is all that months of politically motivated digging can uncover, "Koch may be better run than most American conglomerates." Well, you've got to ask, says Noreen Malone at New York. How will conservatives and Tea Partiers feel about a big patron supporting "a member of the axis of evil"?
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