Fraud, False Claims, Bribery, Price-Fixing and Other Corrupt Practices: In 1974 Koch was one of four oil companies accused by the Federal Energy Administration of overcharging customers by some $58 million. In 1980 Koch Industries was fined $50,000 by a federal court for manipulating a Bureau of Land Management lottery of oil and gas leases. That same year, the Carter Administration’s Council on Wage and Price Stability chastised Koch for refusing to cooperate with a price survey designed to assist a program to combat inflation (AP, March 7, 1980). As part of his feud with his brothers, William Koch hired private investigators to document claims that Koch Industries had engaged in fraud while purchasing oil from Indian reservations. A Senate committee looked into the matter and in 1989 found some validity to the charges. It submitted its findings to the Department of Justice, but a grand jury declined to issue indictments. In 1999 a federal jury, acting in a whistleblower case that had been initiated by William Koch, found that Koch Industries had underreported the amount of oil it obtained from federal and Indian leases. In 2001 the company agreed to pay $25 million to settle the case. In 2002 KoSa, a Luxembourg-based producer of synthetic fibers controlled by Koch, pleaded guilty to U.S. Justice Department charges of participating in a price-fixing cartel involving polyester staple and paid a $28.5 million criminal fine. In 2006 Koch paid a fine of $75,000 and signed a consent decree with the Federal Communications to resolve charges that the company’s applications for private radio licenses failed to mention that it had been convicted of felonies on three occasions in federal and state courts. The consent decree did not provide details of the cases, but they presumably involved the environmental violations below. In November 2011 the magazine Bloomberg Markets published a lengthy article entitled “The Secret Sins of Koch Industries” that made some explosive accusations against the company: “For six decades around the world, Koch Industries has blazed a path to riches—in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.” The environmental cases had been previously reported and are summarized below. What Bloomberg revealed for the first time were the allegations involving bribery and dealing with Iran. The article reported that the company’s subsidiary Koch-Glitsch paid bribes to secure contracts in six countries (Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia) and that it violated U.S. sanctions by doing business with Iran, including the sale of materials that helped the country build the world’s largest plant to convert natural gas to methanol used in plastics, paints and chemicals. Environmental and Safety Record In 1994 an ammonia leak at a pipeline-to-barge fertilizer facility near St. Louis owned by a Koch subsidiary killed one worker and sent another to the hospital (Journal of Commerce, February 23, 1994). The Coast Guard ordered the operation to be shut down for several weeks while conditions were examined. In 1995 the U.S Justice Department, the Environmental Protection Agency and the United Stated Coast Guard filed a civil suit against Koch Industries and several of its affiliates for unlawfully discharging millions of gallons of oil into the waters of six states. In one of the largest Clean Water Act cased ever brought up to that time, the agencies accused Koch of being responsible for more than 300 separate spills in Alabama, Kansas, Louisiana, Missouri, Oklahoma and Texas. The largest incident occurred in Nueces Bay and Corpus Christi Bay in 1994 along the eastern coast of Texas. In 1997 Tosco Corporation (now part of ConocoPhillips) sued Koch in a dispute over costs related to the clean-up of toxic waste at an oil refinery in Duncan, Oklahoma that used to be owned and operated by Koch. In 1998 a federal judge ordered Koch to contribute to those costs, and that ruling was upheld by an appeals court in 2000. The companies later settled the matter out of court. In 1998 Koch agreed to pay $6.9 million to settle charges brought by state environmental regulators relating to large oil spills at the company’s Rosemount refinery in Minnesota. The following year it agreed to plead guilty to related federal criminal charges and pay $8 million in fines. Also in 1998, the National Transportation Safety Board found that the failure of a Koch subsidiary to protect a liquid butane pipeline from corrosion was responsible for a 1996 rupture that released a butane vapor. When a pickup truck drove into the vapor it ignited an explosion that killed the driver and a passenger. In a wrongful death lawsuit a Texas jury awarded the father of one of the victims $296 million in damages. In 2000 the U.S. Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle the 1995 charges relating to more than 300 oil spills plus additional charges filed in 1997. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen. Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities. In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi. The Bloomberg Markets article cited above reported that a former Koch employee said she was told to falsify data in a report to the state on the emissions. The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area. In 2010 the EPA stripped Texas of its jurisdiction over the air-quality permits held by the Corpus Christi refinery. In 2002 Koch Petroleum Group, the Koch Industries entity involved in most of these environment problems, was renamed Flint Hills Resources. With the purchase of Georgia-Pacific, Koch acquired a company with its own environmental and safety problems, some of which remained unresolved. For example, in 1984 a G-P plant in Columbus, Ohio had spilled 2,000 pounds of phenol and formaldehyde that reached a nearby community. Residents complained of health problems from that incident and from a huge industrial waste pond that the company continued to maintain at the plant. In 2006 the U.S. Occupational Safety and Health Administration cited Georgia-Pacific for safety violations linked to the death of a worker in an accident at a Georgia paper mill and proposed a fine of $63,000. In 2009 the U.S. Justice Department and the EPA announced that G-P would spend $13 million to perform clean-up activities at a Michigan Superfund site where it previously had a paper mill. In 2010 G-P was one of ten companies sued by the Justice Department over PCB contamination of the Fox River in Wisconsin. Unlike the other defendants, G-P had already settled with DOJ by agreeing to a $7 million penalty and to pay for the costs of a portion of the clean-up. One of the other defendants, Appleton Papers, called the settlement a “sweetheart deal.” In 2009 Invista agreed to pay a $1.7 million civil penalty after disclosing more than 680 violations of various environmental regulations at its plants in seven states that it said dated back to when those facilities were operated by DuPont. More recently, Koch Industries has been caught up in the controversy over the Keystone XL pipeline. In 2011 Inside Climate News reported that Koch already responsible for 25 percent of the tar sands oil being imported from Canada into the United States and stood to benefit greatly from the new pipeline. Koch denied its involvement, but Inside Climate News found documents filed with Canada’s Energy Board contradicting that statement. An August 2012 report by the Political Economy Research Institute at the University of Massachusetts-Amherst identified Koch as being among the top five corporate air polluters in the United States. A November 2012 article in the Texas Observer reported on the high level of illnesses among people living near the Corpus Christi refinery owned by Koch subsidiary Flint Hills Resources. Subsidies The Kochs’ free-market ideology has not prevented their companies from taking economic development subsidies from state and local governments. In 2013 it was reported that Koch Industries was the largest investor in the Big River Steel project in Arkansas that was slated to receive some $139 million in state and local financial assistance. Do we really want these guys owning our government?
Posted on: Wed, 01 Oct 2014 02:37:56 +0000
Trending Topics
Recently Viewed Topics
© 2015