Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right (19 page)

Worried about his health, Green said that he nonetheless filed a complaint with OSHA. Koch Industries subsequently fired him, he said, for “making false statements.”

In his statement, Green added that he later learned that Special Agent Moorman worked not for the FBI but “for Koch Security in Wichita Kansas.” At the time, Larry M. Moorman was an investigator in Koch Industries’ legal department. Moorman later became the director of corporate security for Koch Industries.

According to the private investigator, Richard “Jim” Elroy,
soil samples were later taken from one of the locations that Green identified as having been polluted with mercury by Koch Industries and sent to an independent laboratory for testing. The soil samples, according to Elroy’s report, were so highly contaminated with mercury that the lab refused to send them back through the U.S. mail and demanded payment for specialized disposal of hazmat substances. But by then, Green had lost his job. “
Green was just a nice, working-class black guy from Louisiana, trying the best he could to make a living,” said Elroy, who took Green’s statement while working on behalf of Bill Koch in his litigation against his brothers Charles and David at the time. “Koch just runs over these people and then discards them as trash,” Elroy said. Asked about Green’s allegations, neither Moorman nor the spokesman for Koch Industries responded.

But as allegations concerning pollution mounted nationally, federal prosecutors began to piece together an enormous case against the company for violating the Clean Water Act. In 1995, the Justice Department sued Koch for lying about leaking millions of gallons of oil from its pipelines and storage facilities in six different states. Federal investigators documented over three hundred oil spills during the previous five years, including one 100,000-gallon crude oil spill that left a twelve-mile-long slick in the bay off Corpus Christi, not far from where the Koch refinery was located.

Angela O’Connell, the lead federal prosecutor in the case against Koch Industries, later described it as unlike any other oil company she had ever dealt with, noting that over her twenty-five-year career at the Justice Department she dealt with most of them. “
They’re always operating outside of the system,” she told Daniel Schulman, who provides a vivid account of the company’s serial lawbreaking in
Sons of Wichita
. Leaks and spills, she noted, are endemic in the oil business, but she maintained that while other companies would sit down with regulators and admit their failings, Koch Industries “
repeatedly lied…to avoid penalties.”

As O’Connell compiled the massive multistate case against Koch Industries, she developed an uneasy sense that she was being spied on. She thought her trash was being searched, and her phone bugged, but she could never prove it. She was rattled badly enough by the situation that from that point on she monitored everything she said and did, to make sure it couldn’t be used against her.

Documents show that beginning in 1983 Koch Industries hired a former employee of the U.S. Secret Service, David Nicastro, to assist its security operations. By 1994, Nicastro had his own small investigative firm in Texas, Secure Source, and “
for the next four or five years,” he confirmed, “I worked on different projects” for the Kochs, including the litigation between the brothers.
In court papers, he described his role as conducting “numerous investigations” for Koch Industries and what he called its “entities.” Joining Nicastro was Charles Dickey, a former FBI agent.

In looking back many years later, O’Connell said she regarded the Kochs as “dangerous” and still felt uncomfortable talking about them. Dropping her voice, as if they might be listening, she recalled, “They tried to attack my reputation.” She recounted that as she was working on the case against the company, it obtained a meeting with the head of the Environmental Protection Agency at the time, Carol Browner, at which company representatives accused O’Connell of acting overzealously, in an unsuccessful effort to have her removed from the case. “
They lie about everything, and they get away with it because they’re a private company,” she says. “They obstructed every step of discovery. It was always, ‘I didn’t do it,’ ‘It’s not our oil,’ ‘It’s not our pipes.’ You can’t believe anything they say. They definitely don’t play the game the way other companies do,” she says.

On January 13, 2000, O’Connell’s division at the Justice Department prevailed. Koch Industries agreed to pay a $30 million fine, which was the biggest in history at that point, for violations of the Clean Water Act. The EPA issued a press release accusing Koch Industries of “egregious violations” and trumpeting that the huge fine proved that “those who try to profit from polluting our environment will pay the price.” But O’Connell, who retired from the Justice Department in 2004, was still haunted by the damage from the oil leaks a decade later. “The thing is, oil sinks to the bottom and poisons the fish. If people eat it, they get really, really sick,” she said. “People die.”

W
hile a few legal violations could be understood as misfortunate accidents, Koch Industries’ pattern of pollution was striking not just for its egregiousness but also for its willfulness. As the company was settling the oil spill case that O’Connell brought, its Pine Bend Refinery in Rosemount, Minnesota, pleaded guilty to still more violations of the Clean Water Act. The refinery paid an $8 million fine for dumping a million gallons of ammonia-contaminated wastewater onto the ground, along with negligently spilling some 600,000 gallons of fuel into a protected natural wetland and the nearby Mississippi River. Earlier the refinery had already paid a $6.9 million fine to the Minnesota Pollution Control Agency to settle charges stemming from the same violations. In this pollution case, like that in Corpus Christi, government authorities accused Koch of trying to cover up its offenses, in this instance by surreptitiously dumping extra pollutants on weekends and late at night in order to evade monitoring, and later falsifying the records. A former employee, Thomas Holton, who had worked at the Pine Bend Refinery, told the Minnesota
Star Tribune
, “
There were times when…yeah, we lied. We did do that. And I won’t cover that up.”

These misdeeds paled, however, in comparison with what befell two teenagers in the rural town of Lively, Texas, some fifty miles southeast of Dallas, on August 24, 1996. That afternoon, Danielle Smalley, a newly minted high school graduate, was at home in the family trailer, packing her things for college. A friend, Jason Stone, was over, to talk about the farewell party they were planning for her that night. Smalley’s father, Danny, a mechanic, was home too, watching sports on television. A faint but increasingly nauseating gassy smell was the only sign that something was amiss. After they could find no source, Danielle and Jason decided to drive to a neighbor’s house to report a possible gas leak. The family had no phone of their own. Borrowing Danny Smalley’s truck, they set out, but the truck stalled a few hundred yards away. When Danielle, who was at the wheel, tried to restart it, the ignition lit an invisible cloud of butane gas that was leaking from a corroded, underground Koch pipeline that ran not far from the house, setting off a monstrous blast. A towering fireball utterly consumed the truck. Danielle and Jason burned to death.

Koch Industries offered Danny Smalley, Danielle’s father, money to drop the wrongful death lawsuit he subsequently brought against the company. Like Doreen Carlson, however, the surviving family member wanted more than cash.

The pretrial maneuvering was fierce, with Koch Industries reportedly hiring a fleet of top-flight lawyers and a private investigator to tail Smalley. Smalley’s lead lawyer, Ted Lyon, meanwhile, suspected his law office was being bugged. He hired a security firm to inspect, which discovered that tiny transmitters had been planted in his office. “
I’m not saying the Kochs did it,” the lawyer later said. “I just thought it was very interesting that it happened during the period we were litigating the case.”

As the two sides prepared for trial, a chilling picture of corporate negligence emerged.
An investigation by the National Transportation Safety Board found that Koch Pipeline Company, the unit in charge, knew that the pipeline was corroded and had neither made all of the necessary repairs nor told the forty or so families living near the explosion site how to handle an emergency. An expert witness for the Smalleys described the pipeline as “
Swiss cheese.” The explosion, according to the witness, Edward Ziegler, a certified oil industry safety expert, resulted from “a total failure of a company to follow the regulations, keep their pipeline safe and operate it as the regulations require.”

For three years, the company had in fact stopped using the old pipeline in favor of a newer one. But the company decided to revive the older pipeline when it realized it could make an additional $7 million annually by patching it and using it to carry liquid butane. Bill Caffey, an executive vice president at Koch Industries, admitted in a deposition, “
Koch Industries is definitely responsible for the death of Danielle Smalley,” but he stressed that he had believed that the pipeline was safe when he authorized its use. He praised Charles Koch as admirably focused on complying with safety and other regulations but acknowledged there were financial pressures. “We were to work on reducing wasteful spending,” he explained. A former employee, Kenoth Whitstine, testified in a deposition that when he brought concerns to his boss at the company about another corroding pipeline, which he feared could cause a fatal accident if ruptured, he was told that it would be cheaper to pay off damages from a lawsuit than make the repairs.

Finally getting the chance he had waited for, Danny Smalley took the stand as the last witness in the trial and delivered an enraged soliloquy denouncing the Kochs as caring only about money. As he later told
60 Minutes
,
“They said, ‘We’re sorry, Mr. Smalley, that your child lost her life and Jason lost his life.’ Sorry doesn’t get it. They’re not sorry. The only thing they looked at was the bottom dollar. How much money would they lose if they shut the pipeline down. They didn’t care, all they wanted was the money.”

If the Kochs’ cavalier safety practices were a gamble, they lost when the jury rendered its verdict. On October 21, 1999, it found Koch Industries guilty not just of negligence but of malice, too, because it had known about the extreme hazard its decaying pipeline had posed. In his suit, Danny Smalley had asked for $100 million in damages from the company, a staggering sum. The jury, however, imposed a fine almost three times larger, demanding Koch Industries pay him $296 million. At the time, it was the largest wrongful death award on record.

A
s they reeled from the verdict, the brothers also faced a growing political crisis. The U.S. Senate had opened an investigation into allegations that the company stole tens of millions of dollars’ worth of oil from wells on Native Americans’ tribal land. After a yearlong investigation in 1989, it released a scathing report accusing Koch Oil of “a widespread and sophisticated scheme to steal crude oil from Indians and others through fraudulent mis-measuring.”

The Senate investigation had penetrated Koch Industries’ well-guarded secrecy, compelling Charles Koch to be deposed at the company headquarters in Wichita. One committee official recalled him as “
quietly enraged” by the government intrusion. Under oath, Charles admitted that the company had improperly taken approximately $31 million worth of crude oil over a three-year period from Indian lands but argued that it had been accidental. He told investigators that oil measurement is “a very uncertain art.” The committee, however, produced evidence showing that none of the other companies buying oil from Indian land at the time had substantial problems with measurements.
In fact, the other companies, most of which were far better known, had secretly turned Koch in, because they regarded it as cheating.

The Senate investigation was marked by what was becoming a familiar pattern: those challenging the Kochs began to feel that someone was trying to watch and possibly intimidate them. Richard “Jim” Elroy, who later became a private eye himself, was at the time an FBI agent detailed to the Senate investigation.
His specialty had been investigating corruption in Oklahoma, and he had handled a number of tough cases, including some involving organized crime. But he soon faced a situation that he said he had never before encountered even when investigating the Mafia: he became certain that he was being followed.

One day, Elroy stopped his car, jumped out, and confronted the driver who had been tailing him, dragging him out of his car at gunpoint, flashing his FBI identification, and warning him, “Tell your boss the next time he tries this, you’ll be in a body bag.” Elroy recounted that the driver explained, “I’m a private investigator who works with Koch Industries.” The company’s legal affairs head reportedly denied hiring private investigators to spy on Elroy. But other Senate investigators had unsettling experiences as well.
According to the Senate report, another investigator discovered that a Koch employee tried to get dirt on him from his former wife.

The committee’s chief counsel,
Kenneth Ballen, who had previously worked as a prosecutor against organized crime in New Jersey, believed that one of his assistants was paid to get dirt on him. Luckily, Ballen said, there wasn’t any. “
It wasn’t like politics; it was like investigating organized crime,” Ballen recalled. Charles Koch, he maintains, “is a scary guy to take on. Most people back off, rather than tangling with them,” Ballen observed. “These people have amassed an amazing amount of unaccountable power.”

Another young lawyer working on the Senate investigation, Wick Sollers, who later became a managing partner at the blue-chip law firm King & Spalding, also found the experience disturbing. Sollers was an assistant U.S. attorney in Baltimore when the Senate committee recruited him. “The company was unhappy with the investigation,” he noted. “They sent various people to try to stop us—emissaries, lawyers—as well as a senator to try to stop the investigation.” The senator in question was the Oklahoma Republican
Don Nickles, a social and fiscal conservative who received many campaign contributions from Koch Industries over the years and whose lobbying firm was later hired by the company.