Thanks to our excellent contacts, we got hold of a copy of the still unpublished November issue of "Bloomberg Markets" magazine, because the cover story sounds more than just promising:
In a bold and spectacular move, Bloomberg Markets Magazine wrote a story titled "The secret sins of Koch Industries" which does not only focus on several new revelations, but also provides a comprehensive overview about scandals of Koch Industries which happened during the last decades. The story also explicitly puts the well known political activities of the Koch Brothers in context with their highly questionable behaviour in business.
The story is a fine piece of investigative reporting and spans over 14 pages in the magazine, without the adverts. No less than 15 Bloomberg-journalists in several countries have worked on it. It is fascinating to see that such a major investigative piece about a highly political issue does appear in a business magazine and not in one of the more "traditional" political magazines or newspapers.
This is Pulitzer-Prize territory. This article is destined to make large waves, not just because of the particular revelations, but also because of the highly impressive and almost surprising depth of reporting. It is obvious that no expense was spared for this article. Next to Jane Mayer's ground breaking piece about the Koch Brothers in the New Yorker, this article by Bloomberg Markets Magazine undoubtedly represents another PR-disaster for the Koch Brothers, and could also have severe consequences.
Bloomberg Markets Magazine reveals in this article for example that:
- Koch Industries used the European offices of their subsidiary Koch-Glitsch to sell millions of dollars of petrochemical equipment to Iran in an apparent violation of the US-Iran trade embargo, as recently as 2007
- Internal documents of Koch Industries prove that the company took elaborate steps to ensure that their US-employees weren't involved in the sales to Iran
- While is not 100% certain at this point that Koch Industries did in fact violate US law, according to Bloomberg Markets Magazine, internal memos show for example that the details of the sales with Iran were meticulously checked by US lawyers of Koch Industries and coordinated with the lawyers in order to fully ensure that no visible involvement of US-citizens took place
- Koch Industries paid bribes in six countries from 2002 to 2008 to win business in Africa, India and the Middle East, comparable to similar behaviour of German technology giant Siemens (Siemens subsequently had to pay a $ 1.6 billion fine!)
- Koch Industries sacked a compliance officer in France in June 2009 who discovered the illegal bribes at Koch Industries subsidiary Koch-Glitsch
- These revelations were made possible through newly discovered documents from two labour court cases in France
- Bloomberg Markets reveals that former employees of Koch Industries harshly criticize the company for their internal practises and ethics
- The story also covers in great detail over several pages earlier violations of Koch Industries: The company in the past "rigged prices with competitors, lied to regulators and repeatedly run afoul of environmental regulations, resulting in five criminal convictions since 1999 in the U.S. and Canada"
These are just examples of the revelations. There is a lot more in the article - please buy the magazine and read the details yourself.
At the heart of the new revelations is the subsidiary Koch-Glitsch, which according to their website has their main offices in the USA, Italy and South Korea. The Bloomberg article mentions that their German office was closed in 2009. The offices in Germany and Italy were apparently at the heart of the new allegations regarding Iran. The new discoveries could easily develop into a massive scandal with unforeseeable consequences for Koch Industries.
Koch-Glitsch describe themselves like this:
Koch-Glitsch was formed in 1997 with the acquisition of selected assets of Glitsch, Inc. by Koch Engineering Company, Inc. It is the best of both Koch Engineering and Glitsch, Inc. with a continuing commitment to providing value-added products to our customers.
Koch-Glitsch is a Koch Chemical Technology Group, LLC company that serves the refining, chemical, and petrochemical industries. Koch-Glitsch offers one-stop shopping for many customers because of the related product lines of our affiliated companies. Diagnostic scans, combustion burners, modular mass transfer skids, and heat transfer products are just a few of the many products available from other companies within Koch Chemical Technology Group, LLC.
According to Bloomberg, the products of Koch Industries which were sold to Iran helped to build the largest methanol plant in the world. The German engineer George Bentu, who worked for Koch-Glitsch from 2001 to 2007 is quoted saying that the company used "every single chance to do business with Iran", and that his concerns were brushed aside when he first discovered documents about the deals with Iran: "Bentu says his boss told him not to worry, that the company's U.S. lawyers made sure the deals with Iran were legal", according to the magazine.
It is not difficult to find the details about the provisions of the US-Iran embargo. Due to the fact that Iran has been viewed for many years as a supporter of terrorism, sanctions were put in place in the mid-1990s. The website of the US-treasury explains all the details. The treasury even provides a leaflet with precise information about the details of the trade embargo. There it says:
"Trade and investment activities with Iran by U.S. persons,
wherever located, are prohibited"
It will probably surprise nobody that Koch Industries sees nothing wrong with the practices of Koch-Glitsch. A spokesperson of Koch Industries is quoted in the article with saying that "Koch-Glitsch had protocols in place that were consistent with applicable U.S. laws allowing such sales at the foreign subsidiary level."
However, I have great doubts that such arguments will be an effective defence. The documents prove, according to Bloomberg, that the sales with Iran were coordinated with the US lawyers, basically in order to ensure that the documentation is "clean." In my opinion, it appears that Koch Industries had an elaborate scheme in place to circumvent the embargo, and US citizens were involved in "supervising" the scheme. I also question whether Koch-Glitsch is a "foreign subsidiary", as the company also has three offices in the USA.
As it is mentioned in the article, German technology giant Siemens had to pay a fine of $ 1.6 billion for paying bribes in four countries. It now has been discovered through the new documents that Koch Industries paid bribes in six countries in order to win business, over the course of several years. It is also revealed in the story that Koch Industries was aware of the danger, having seen what happened to Siemens.
Salon today reported that the upcoming story already seemed to make the Koch Brothers very nervous:
Here’s a rule of thumb about public relations: When P.R. pros begin furiously spinning a story before it has even come out, there’s a pretty good chance the story is going to be damaging to the reputation of said P.R. pros’ bosses.
And that’s exactly what we’re seeing right now, as an anonymous person or persons in the orbit of the billionaire conservative donors Charles and David Koch try to discredit a forthcoming story in Bloomberg Markets magazine.
Based on the prebuttal items appearing this week in the Washington Examiner, the Daily Caller, and U.S. News and World Report, the Bloomberg story focuses on alleged malfeasance and/or fraud and/or bad behavior by the conglomerate Koch Industries.
One of those episodes apparently involves bribery by a Koch subsidiary in France, according to the piece by Washington Examiner editorial page editor Mark Tapscott. He reports that “Bloomberg reporters have been trolling among former Koch employees overseas in search of disaffected voices willing to talk,” but Tapscott suspects the story may be animated by bias against the Tea Party. And he notes that, “Koch USA officials say they were as surprised and angered as anybody else when they were first apprised of the bribery allegations, and moved as quickly as possible to get to the bottom of the situation and fix it.”
All three of the prebuttal stories cite an unnamed source who was interviewed for the Bloomberg story; it’s not clear if that same source spoke with all three publications. The Examiner describes the source as a former government official.
Well, fact is that story in Bloomberg Markets Magazine is based on solid reporting, with documented evidence and witnesses on the record. This will be a tough ride for the Koch Brothers. There is nothing to "discredit." The article is an effort of almost monumental proportions, carefully researched by no less than 15 journalists all over the globe, and very courageous at the same time. I believe that since Enron the business press hasn't delivered a similar slam dunk.
The summary by "Bloomberg Markets" is damning:
For six decades around the world, Koch Industries 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.
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The political activities of the Koch Brothers are also mentioned in the article, but this is not the main emphasis of the story by Bloomberg. However, the Koch Brothers won't like it one bit how Bloomberg "connects" their huge financial support for example of the Tea Party movement with their questionable business dealings.
I have been planning to write a longer post about the Koch Brothers for a while. Politicalgates already published a detailed post about the Koch-group "Americans for Prosperity" in February this year, written by our contributor Nomad.
Recently, I saw the full version of the excellent documentary "Astroturfwars - How corporate America fakes a grassroots revolution" by Australian filmmaker Taki Oldham. Despite the fact that I already knew quite a lot about the Tea Party movement and the corporate fake grassroots groups in general, I was still taken aback by the shocking revelations in this documentary, and asked myself how it is possible that in the USA such a solid piece of reporting has not been shown on mainstream TV. The documentary has been distributed over the internet, but I would be surprised if more than a few thousand people in total have watched it so far.
I later discovered that Taki Oldham afterwards created an updated, shorter version of the documentary, called "The Billionaires Tea Party." This version is about 55 minutes long, instead of the original 90 minutes, and it also includes some new and updated facts. I was happy to discover that the new version is available in full length on youtube. However, some excellent, additional clips from the original documentary "astroturfwars" are also available on youtube HERE. More clips on Taki Oldham's website HERE!
In addition, you also find a very informative clip about the Koch Brothers and Americans for Prosperity HERE.
Taki Oldham examines in detail the phenomenon of the "front groups" like "Americans for Prosperity", and discovers that these front groups are extensively used in the fight against government healthcare, climate change legislation and in supporting the Tea Party movement, and that Koch Industries are at the heart of many of these front groups.
During my research, I was surprised to discover that the concept of a front-group was first developed by the German propaganda genius and communist Willi Münzenberg in the 1920s, which prompted me to buy a biography of Willi Münzenberg, published by Harper Collins as well as a book in German language which he wrote himself, called "Propaganda as a weapon", in which he sharply analyses the methods of Nazi-propaganda. The methods of the Nazis were very different from Münzenberg's tactics, as he preferred covert operations in which the person of desire doesn't even know that he or she is being subjected to propaganda. Therefore Münzenberg developed with great skill the concept of the "front groups", a concept that proved to be so effective that it later was adapted for example by the tobacco industry, and then by the Koch Brothers. It is always nice to learn new and additional facts while originally researching a different topic. Münzenberg was most likely killed by Stalin's henchmen in 1940, a few years after Münzenberg, who in earlier years was a very good personal friend of Lenin, turned into an anti-Stalinist.
Münzenberg emphasised the need for a front group to completely hide the real "owners." This is a lesson which the Koch Brothers haven't learned, because despite all their attempts to act as secretly as possible, they are still far too transparent - which is fortunate.
They also took elaborate steps to ensure that the content of their "infamous" meetings with business leaders and journalists are kept secret. However, they failed miserably. The most recent revelations were several sensational recordings from inside the secret "Summer Seminar" in June 2011, which were published by Mother Jones (here and here) and the Brad Blog (here and here).
Today, I created a clip with some of the most important remarks by Charles Koch, in which he says that "we have Saddam Hussein", and that the next 18 months will be the "mother of all wars, for the life or death of this country."
However, I believe that he will now have some additional problems...
Good night, and good luck! :-)
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UPDATE:
One of our readers just sent me this advert for a speech by Koch Industries corporate communication director Melissa Cohlmia, which will take place on Thursday, October 20, from 9.30 am to 10.30 am at Wichita State University. The topic of the speech is more than appropriate: "The integrated marketing approach to crisis communication."
It just so happens that Melissa Cohlmia is the Koch Industries spokesperson who is quoted in the Bloomberg article several times, always with the same "Everything is fine - nothing to see here" statements. So her "marketing approach to crisis communication" is already quite obvious. Deny, refute, deflect. However, I have to say that her statements in the article are far from convincing, given the overwhelming documentation which is provided by "Bloomberg Markets" magazine.
I wonder if she has anything interesting to say, or if she will answer questions? Is somebody living close and has time to attend the speech?
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UPDATE 2:
I just looked into our statcounter, and I discovered that we have new visitors.
Charles & David, I am truly sorry that we ruined your Sunday. We all cherish our weekends, but unfortunately I couldn't wait any longer to publish the story.
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