n a scorching summer Sunday in July, David H. Koch, the billionaire philanthropist, political activist, and chemical engineer, hosted a small party with his wife Julia at their oceanfront home on the east end of Long Island, N.Y.

 

The gathering attracted a group of well-heeled Republicans willing to forgo the beaches and boutiques of fashionable Southampton for a couple of hours and instead pony up $50,000 apiece for the privilege of rubbing shoulders with Mitt Romney.

The fundraiser also attracted a boisterous crowd that Koch (pronounced Coke) definitely hadn't invited — 100 or so people who had been bused in for free from New York City, 100 miles away, by Occupy Wall Street, MoveOn.org, and other groups that support liberal causes.

As the donors arrived, the protesters, many dressed only in beachwear and flip-flops, unfurled banners in the gentle breeze, proclaiming “Koch Kills” and “Shame on You.” A small plane, rented by MoveOn, flew overhead trailing a banner reading “Romney Has A Koch Problem.”

Romney had been the guest of honor at two other fundraisers at private homes in the exclusive community that were to net him an estimated $3 million, all in that same day. But it was the event at the Kochs' idyllic retreat that drew the protesters and grabbed the headlines in the next day's newspapers.

For a man who jealously guards his privacy, it was a yet another illustration of how the 72-year-old Koch, co-founder of the powerful conservative political advocacy group Americans for Prosperity has become a lighting rod this political year and a target of Democratic political attacks, notably one from President Barack Obama, who called Koch and his older brother Charles “secretive oil billionaires” in an Austin, Texas, speech.

the right candidate Koch supports Mitt Romney, here speaking at
an Americans for Prosperity event in Troy, Mich.

They “don't have to say who exactly the Americans for Prosperity are,” Obama charged. “You don't know if it's a foreign-controlled corporation. You don't know if it's a big oil company, or a big bank. You don't know if it's an insurance company that wants to see some of the provisions in health reform repealed because it's good for their bottom line, even if it's not good for the American people.” Obama campaign manager Jim Messina went further: “Those are the same Koch brothers whose business model is to make millions by jacking up prices at the pump, and who bankrolled tea party extremism, and committed $200 million to try to destroy President Obama before Election Day.”

or his part, the publicity-shy Koch tells Newsmax in a rare interview: “We've had nothing to do with the tea party movement. I think that is a spontaneous uprising by conservative Americans who were concerned with the financial condition of our government. It's just a groundswell of people who are terrified about what the government is doing.”

The critics remain undaunted, however. An Aug. 10, 2010, New Yorker magazine article by Jane Mayer titled “Covert Operations,” claimed David Koch spawned the tea party movement and is pushing for the “eradication of the federal government in almost all its forms.”

Alongside the piece was a photo of him cloaked in shadows making him look like the Italian dictator Benito Mussolini.

Even Hollywood has gotten into the Koch-bashing act. Comedian Will Ferrell's summer box-office hit The Campaign featured fictional Motch brothers, two tycoons who try to rig a congressional election to benefit their business interests.

And on MSNBC, a Democratic strategist went so far as to suggest that Koch was partially responsible for the killing by a neighborhood watch patrolman of Florida teen Trayvon Martin because one of Koch's companies was supposedly part of a business group that supported the state's controversial Stand Your Ground laws. A Koch industries spokesperson said the company had never been involved with the issue at any level and that Koch himself had never expressed an opinion on it.

At the center of all this sturm und drang is Koch and Americans for Prosperity, founded in 2004 by David Koch, his brother Charles, and former House leader Dick Armey, which fights for lower taxes and limited government. Armey plays no role now.

early days Clockwise: David Koch, MIT basketball captain;
David, Charles, and father Fred; mother Mary and David at
Deerfield graduation; David, MIT graduation.

The nonprofit group, which opposed Obamacare and was credited with helping Republicans win back control of the House of Representatives in 2010, says its mission is to educate and mobilize citizens as advocates in the public-policy process.

Its website says “it has more than 2 million activists in all 50 states.” The organization gets 90 percent of its money from member contributions.

While Americans for Prosperity addresses national concerns like Obamacare, it has been especially effective in addressing state and local policy issues. The group will organize activists to show up at county commission or school board meetings to counter liberal advocates.

 “We've had nothing to do with the tea party movement . . . It's just a groundswell of people who are terrified about what the government is doing.” — David Koch

In this election year, Americans for Prosperity, which has raised an estimated $150 million, has unleashed a barrage of television ads and a high-tech voter mobilization drive in key battleground states. For David Koch, all this amounts to a battle for the future of the country. And he's not about to back down.

The fourth richest man in America, according to Forbes, believes that the country that allowed him to become so prosperous is threatened by a drift to the left and by insurmountable debt. Koch tells me he entered the political fray out of passionate concern that the country is following the disastrous path of Europe and particularly Greece, imperiling the futures of his children and the country's children.

“We are very concerned about the future of our country and the catastrophic consequences of the federal government incurring these massive deficits year after year with no significant steps being taken to correct these deficits,” he says. “Almost everybody I know who has any kind of financial savvy or experience is terrified by the consequences of never-ending massive deficits, which are being paid for generally by the Federal Reserve purchasing Treasury bonds.”

Koch says that inflation could be on the horizon. “The Federal Reserve is creating money to buy these Treasury bonds, and if that policy continues for too long, we're going to start to see inflation,” he says. “And the inflation will move up rather steadily, and then it will increase in its intensity, and we can have runaway inflation at some point in time.” That will drive up the interest rate on the national debt from about 3 percent per year to perhaps 6 percent or 9 percent. “That's absolutely unsustainable,” he says.

itting on a beige couch in his office on New York's Madison Avenue, you would never guess Koch is the left's favorite boogey man. At 6 feet, 5 inches tall, the executive vice president of Koch Industries, one of the world's largest privately held companies, looks like the chemical engineering major he once was at the Massachusetts Institute of Technology.

Clipped to his white shirt pocket is a pen and a mechanical pencil. On his right ring finger he wears his MIT 1962 class ring displaying a beaver. “Beavers build dams and so do engineers,” he explains with a raucous laugh. With a personal net worth estimated by Forbes at $31 billion, only Bill Gates, Warren Buffett, and Larry Ellison are richer than Koch. But those other billionaires are liberals and portrayed in the press as benign benefactors.

Koch, on the other hand, is a free-market conservative who is depicted as a cross between Bernie Madoff and Hannibal Lecter.

A fellow libertarian even came up with a term for his empire, “Kochtopus,” meaning his tentacles reach everywhere. In Koch's office, there is no sign of this lurking evil. No heads of wild game shot in the jungle hanging on the wall — just photos of him with his family. There is a plastic model of his artificial knee joints — his knees began to give out when he was captain of his MIT basketball team. Also in his office, there is a skull model of an early hominid called Paranthropus boisei, presented to him by the Smithsonian. On a coffee table is a Steuben glass replica of a dinosaur, a gift from the American Museum of Natural History in New York.

According to the Chronicle of Philanthropy, Koch is now the leading patron of the arts in the country. He has given more than $1 billion to cancer research, museums, and other charitable causes. The latest is a $65 million contribution to refurbish the front plaza and install modern fountains at the Metropolitan Museum of Art in New York City.

Koch's path to success doesn't quite fit the left's stereotype of a rich conservative who inherited all his wealth. To be sure, Koch's father, Fred, son of a Dutch immigrant, co-founded what became Koch Industries, Inc. He developed an innovative crude oil refining process, and the company built refineries.

on the stump From left: Koch as running mate, Libertarian
presidential candidate Ed Clark, and Clark's wife Alicia in 1980.

Fred Koch made sure David would not grow up thinking the world owed him a living. While he belonged to the Wichita Country Club across the street from his home, he forbade David from swimming at the pool there without his permission.

Fred sent his son to Deerfield Academy in Massachusetts, but during the summer, David drove tractors and bulldozers, operated hay bailers, and fixed farm equipment on the family ranch. One summer, he dug ditches in 110-degree heat for a pipeline in the oil fields of southwestern Oklahoma.

“If I wanted to buy some candy, I had to beg Father for 25 cents to buy a candy bar,” Koch tells Newsmax. “He wanted us to appreciate what that money meant. We had to earn it.” Upon his death in 1967, Fred handed over the company to his four sons. But only David Koch and his brother Charles, the chairman and CEO of Koch Industries, elected to continue with the business.

Since they took over, it has grown 2,000 times larger. It has more than $110 billion in annual revenue. Based in Wichita, Kan., the company employs 50,000 people in the United States and 10,000 in 59 other countries.

Besides transporting and processing oil and natural gas, Koch Industries today produces chemicals, asphalt, fertilizers, paper products, and such consumer products as Stainmaster carpets and Dixie brand paper cups and plates. In addition to being executive vice president of Koch Industries, David Koch serves as CEO of its wholly owned subsidiary, Koch Chemical Technology Group.

uring the 1980 presidential election, Koch ran for vice president on the Libertarian Party ticket. While he still considers himself a libertarian on social issues, he says he is a conservative on fiscal matters and sees the Republican Party as the best way to restore fiscal sanity to the country. Contrary to popular impression, the conservative movement is not monolithic. If you asked 10 conservatives their views on 10 issues, chances are each one would give different answers to some of them. Koch has broken with what most conservatives believe on two key issues: gay marriage, which he supports, and possible tax increases to reduce the deficit under certain conditions. “My wife and I have relatives who are gay, and we have a large number of friends who are gay, and so I don't see how, if two women love each other or two men love each other, why they should not be allowed to marry,” Koch says. “Who is being hurt by that? I'm very much in favor of individual liberty, and two gay people getting married is kind of an open expression of individual freedom.”

Koch can be hard to pigeonhole. On the tax issue, he and his brother Charles have opposed on principle measures like government ethanol subsidies that would benefit their own company.

Rethinking the
Water We Drink

Almost every week, David Koch flies to Boston and spends two days at Koch Membrane Systems Inc. in Wilmington, Mass., part of the Koch subsidiary he heads. Since college days, Koch has been interested in turning ocean water or wastewater into clean, drinkable water, the business of Koch Membrane.

Koch Membrane was founded as a company called ABCOR in the 1960s by a professor and some students from MIT. Koch Industries invested early on, and by 1985 the company had purchased it and changed the name.

Koch came up with the idea of building a water treatment system that uses a few large filter cartridges instead of many smaller units. That results in a smaller footprint, fewer connections, and lower maintenance costs.

“Both waste water and desalinization are things which, long term, have extremely strong fundamentals,” says Christopher Gasson, publisher of Global Water Intelligence magazine in London. “What they're [Koch Membrane] offering is something that is very much keyed into the challenges that nations are facing.”

koch membrane systems

“People often ask me why the executive vice president and major shareholder of a $115 billion corporation spends two days a week with a $100 million subsidiary,” Koch says. “They wonder why I'm not on a beach somewhere. Well, I find this technology to be extremely challenging and intellectually stimulating, and the opportunities in this field are tremendous.” ■

“Koch Industries owns several ethanol plants, and they directly benefited from the subsidies that ended this year,” says Phil Kerpen, a former vice president of Americans for Prosperity Foundation. “And yet not only did they not have any concerns, but they encouraged us when we said we were working to stop the subsidies, because they knew it was a bad policy.” In contrast to his image in the media, “ David Koch really tended to trust us, and he tends not to get involved in any kind of micromanagement,” Kerpen says. “I've interacted with him in the context of board meetings and other events. He's always been a thoughtful participant in the discussions, not some sort of larger-than-life figure giving orders. Nothing like the media portrayal as some kind of villain.”

eyond a photo of himself with George H.W. Bush, Koch's office gives no sign of his political interests. But as a privately held company, Koch Industries is not afraid to stake out political positions, and he more than demonstrates that.

Charles Koch

A fan of Mitt Romney, Koch makes it clear he is a Republican who votes Republican. While President Obama is a “charming guy” who is very articulate, “what bothers me about him is that he seems to be anti-business,” Koch says. “As you know, business provides 3 out of every 4 jobs in our economy, and gosh, does he attack business just relentlessly.”

The attacks have had a psychological effect. “The president's remarks are a major contributor toward extraordinarily low business confidence in the economy,” Koch says. In addition, “Obama is proposing massive increases in taxes, which will be very harmful to business investing heavily in new facilities and expanding their business capabilities and being able to hire additional people,” Koch says.

In Koch's view, the federal government is full of bloat and rife with “featherbedding.” He believes federal spending must be cut dramatically in the next three or four years. Ideally, it would be cut to a point where the government spends 19 percent to 20 percent of the gross national product, as opposed to the current 25 percent, balancing the budget.

Koch favors lowering taxes to stimulate the economy. “Broad-based tax increases make no sense; they would only slow an economy in tremendous need of growth,” he says. But if a tax increase becomes necessary to win support of Democrats, Koch would link any increase directly to spending cuts that would be at least five times greater than any tax increase.

Conservatives like Grover Norquist, president of Americans for Tax Reform, which opposes any tax increases on the grounds the government will just spend the money, admire Koch despite the fact that he may stray from conservative orthodoxy. “I have known David Koch since he ran for vice president on the Libertarian ticket in 1980,” Norquist says. “He is a principled businessman filled with courage and determination. We could use a few more like that.” ■