Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (5 page)

Based on their father’s experience, Charles and David, who initiated their share of lawsuits over the years, nevertheless came to view litigation as a last resort, a necessary evil. According to Charles, Fred’s advice to his sons, after prevailing over Universal, was, “Never sue. The lawyers get a third, the government gets a
third, and you get your business destroyed.” Bill Koch took away a different lesson: He would grow up to see litigation as a weapon of righteous retribution. In their father’s stand, the brothers saw a man of iron will and concrete principle who wouldn’t be cowed or coerced, who wouldn’t back down in the face of a just fight. Each of the brothers, in his own way, internalized these values. As they grew up, the brothers recognized these same traits at work in their father’s crusade against the spread of communism.

The last place Fred Koch expected to be on his thirtieth birthday was deep in the Russian Caucasus in the company of a diminutive and joyless Bolshevik. But the toll that the Universal Oil Products battle took on Winkler-Koch’s revenues had pushed Fred and his partner out of the United States and into the welcoming embrace of Josef Stalin’s Soviet Union.

In the late 1920s, the newly formed U.S.S.R. dispatched scientists and engineers to the United States to search for cracking technology that could aid Stalin’s plans for rapid industrialization. Just a few decades earlier, Czarist Russia had led the world in petroleum production. The empire’s rich oil fields in the Caucasus, along the Caspian and Black Seas, made the Russians such a formidable force that Rockefeller’s Standard Oil had scrambled to establish a network of overseas subsidiaries in a battle for market share.

The biggest blow to the Russian oil sector was self-inflicted. Over the course of three days in August 1905, on the heels of the first Russian Revolution, oil workers in the Absheron Peninsula of Azerbaijan rioted. They burned more than 1,400 oil derricks, sabotaged well shafts, and mangled drilling equipment. Oil production plummeted. For at least the next decade, Russia’s oil industry limped forward as the U.S. oil sector took off. Then came World War I, and a wave of uprisings in 1917 that ushered in a Bolshevik government, which gradually consolidated the oil industry under state control.

Revolution and war had decimated the region’s economy, and the Soviet Union’s new communist leaders placed a premium on revitalizing the oil industry to turn around the U.S.S.R.’s economic prospects. The Soviets looked to the West for technology and technical expertise. Sometimes in exchange for oil concessions or royalties, American and European companies began to supply modern drilling equipment. And Western oil field workers and engineers poured into the region to professionalize the Soviet Union’s drilling operations and oversee the construction of pipelines.

But even as the Soviets revamped oil production sites, modern refining technology remained elusive. The country’s leaders desperately wanted to transition to thermal cracking, but the major American companies, the leaders in this field, were reluctant to provide this technology, especially to a regime with which the United States had severed diplomatic relations.

Many American companies did business with the Soviet Union during this era, but the subject of trade relations between the countries was controversial and a matter of considerable national debate. During a speech in 1931, Representative Hamilton Fish III, a New York Republican and the grandson of Ulysses Grant’s secretary of state, summed up the opposition to aiding the Soviets for his congressional colleagues on the Ways and Means Committee. “It is plain to the mind of anyone living in a capitalistic country, that what is contemplated is a plan for a great world revolution,” he said. “… That 5-year plan aims at just one thing—the economic ruin of every nation in the world that has not the Soviet form of government, and they contemplate eventually the establishment of the Soviet government in this country and everywhere else.”

Fred Koch and his partner didn’t have the luxury to worry about Soviet plans for world domination. They needed work, and Koch’s summons to Russia began innocently enough. Visiting the United States in the late 1920s, Alexander Sakhanov, research
director of the Soviet oil concern Grozneft, discovered Winkler-Koch. The company did not possess the best or most advanced cracking technology, Sakhanov wrote home in an April 1929 letter, but “its merit consists in extreme simplicity and, as a consequence, cheapness.”

The year of Sakhanov’s visit, Winkler-Koch signed contracts with Amtorg, the Soviet Union’s U.S.-based trade representative, to design and construct fifteen oil cracking stills in the U.S.S.R. at refineries located in Baku, the capital of Azerbaijan; the Chechen capital of Grozny; the Russian Black Sea port town of Tuapse; Yaroslavl, located 160 miles northeast of Moscow; and other locations. The deal, worth nearly $5 million, also called for the engineers to consult on the construction of dozens more cracking units.

The Soviets were demanding customers. They requested detailed technical data and specifications, and their deal with Winkler-Koch also required the company to use its contacts to place thirty Soviet engineers at American manufacturing plants and refineries, where they could study their operations during six-month internships. This would later allow the U.S.S.R. to replicate Winkler-Koch’s cracking stills using its own engineers.

On August 27, 1930, when Fred arrived in Moscow to check on the progress of his engineers, the Soviet government assigned a minder to keep tabs on him during his month-and-a-half-long journey to the refineries in Grozny, Tuapse, Batumi, and other cities where the installation of Winkler-Koch cracking units was under way.

Jerome Livschitz, who had spent twelve years living in the United States before returning to Russia to take part in the 1917 revolution, inspired fear wherever he went. Along with a near-constant sneer, the little man, with graying hair and a pinched face, wore an ill-fitting suit. What small pleasure Livschitz derived out of life seemed to come from goading Fred about the plans of
the communists to infiltrate every aspect of American society. The schools, the churches, the unions, the military, the government—all were communist targets. Just you wait and see, Livschitz taunted, “we will make you rotten to the core.”

One day, as they convoyed through the Georgian capital of Tblisi, the car carrying Livschitz flipped. Fred and another American engineer rushed to free him from the wreck. Dazed from the crash, the Bolshevik seemed surprised the Americans had come to his aid. “Why did you save my life?” he asked. “We are enemies. I would not have saved yours.” He paused and reflected, momentarily feeling in a charitable mood. “Perhaps when the revolution comes to the U.S.A., and I return there, I will spare your lives.”

Fred had traveled widely, but he had never seen conditions like the ones he witnessed in the Soviet Union. A deep gloom pervaded the country, and an undercurrent of trepidation pulsed through the populace. He “found it a land of hunger, misery, and terror.” Citizens were allotted a monthly ration of food that was barely enough to subsist on. The government provided coupons redeemable for bland and ill-made clothes, and issued citizens a half-bar of soap each month for washing. Communist informants lurked everywhere. A trip to Siberia—if not a bullet in the head—awaited anyone suspected of disloyalty.

During his travels, Fred befriended a Russian family who had lived in the United States before returning to their homeland following the Bolshevik revolution. Their English-speaking children worked as translators for Winkler-Koch’s American engineers. One of them, a daughter named Mary, begged Fred to carry a letter out of the country for her, in order to sneak it past the Soviet censors who monitored the mail. He agreed, but later couldn’t help himself from peeking at the contents: “We are here just like slaves,” Mary had written to a friend. “We cannot do anything we want but we do what they tell us to do.… I cannot write it to you on paper how terrible it is here.”

In late October 1930, as Fred began his journey home following a round of meetings with Soviet officials in Moscow, Livschitz saw him off at the train station. The communist’s parting words chilled him: “I’ll see you in the United States sooner than you think.” Etched into his mind, this troubling memory visited Fred often in the years ahead, as slowly but surely he saw the plot of communist subversion unfold—just as Livschitz promised it would. To the end of his days, he was deeply haunted by what he’d seen in the Soviet Union and conflicted by the role he and his company had played in empowering the U.S.S.R.

“I was naïve enough to think in that far away day that I could help the Russian people by what I was doing,” he wrote in a 1964 letter to the editor that ran in
The Washington Post
. “What I saw in Russia convinced me of the utterly evil nature of communism.… What I saw there convinced me that communism was the most evil force the world has ever seen and I must do everything in my power to fight it, which I have done since that time.”

On the morning of December 8, 1958, as a light snow fell in Indianapolis, Fred Koch strode up the walkway to the sprawling brick Tudor home at 3650 Washington Boulevard. Stepping out of the chill and shedding his coat, Fred was greeted by Marguerite Dice, the widow who had volunteered to host the meeting that would mark the birth of the John Birch Society.

Fred found a seat in Dice’s spacious living room, where plush chairs and davenports had been arrayed in a semicircle. There with him were ten others, including T. Coleman Andrews, former commissioner of the Internal Revenue Service, who had resigned his post in 1955, coming out as a vocal foe of the income tax; Col. Laurence Bunker, a former aide to General Douglas MacArthur; Wisconsin industrialist William Grede; W. B. McMillan, president of the Hussman Refrigerator Company; and University of Illinois classics professor Revilo Oliver, later a hero of white supremacists for his racist and anti-Semitic jeremiads.

Robert Welch had convened the meeting. He was a former candy company executive who in the mid-1950s had quit his job to devote himself full-time to fighting communism. How could he continue peddling Sugar Babies and Junior Mints when America—the world—was in crisis?

Welch was a child prodigy who had entered college at the age of twelve. He had dabbled in politics, launching a 1950 bid for lieutenant governor in Massachusetts on a platform of repelling the creep of socialism into state and federal government. He lost the race, but his dystopic vision of a subverted, subjugated America gained traction. To disseminate his ideas, Welch founded a magazine,
One Man’s Opinion
(later renamed
American Opinion
). And that was the problem: Welch was just one man. If he hoped to defeat the existential threat of communism, he would need an army.

Fred Koch, whose fervent anticommunism had brought him to Welch’s notice, seemed like an ideal general. Since returning from the Soviet Union in 1930, he had watched his four sons grow up in a world where the words of his old Bolshevik minder seemed to be coming true. Fred now saw evidence of communist infiltration everywhere. Jerome Livschitz’s taunt—
we will make you rotten to the core
—echoed in his ears. His time among the Soviets, and his firsthand experiences witnessing a society fully under the boot heel of government, was regular table talk for the Koch boys.

“He was constantly speaking to us children about what was wrong with government and government policy,” David has said. “It’s something I grew up with—a fundamental point of view that big government was bad, and imposition of government controls on our lives and economic fortunes was not good.”

Fred’s experiences in the Soviet Union, which in turn drove his interest in politics and economics, especially influenced Charles. “That sparked the evolution of Charles’s political views,” said Tony Woodlief, a former Koch Industries management consultant who knows Charles well. “You can blame it on Standard Oil.”

The more Fred traveled the world, the more horrified he became at the growing influence of socialism and communism—to the point where, on the cusp of World War II, he even saw something laudable in the rise of fascism. “Although nobody agrees with me,
I am of the opinion that the only sound countries in the world are Germany, Italy, and Japan, simply because they are all working and working hard,” he reported in an October 1938 letter to his mentor Charles de Ganahl, after an extensive trip that included stops in imperial Japan and (“violently socialistic”) New Zealand.

At the end of World War II, Fred believed that the next great clash would be fought between the forces of capitalism and collectivism, but to his frustration, few people seemed to recognize the peril. He saw it as his duty to raise the alarm. “I think these times are far more serious even than Civil War days,” he confided to a friend and retired military officer. “That war was merely to decide whether we were going to be one nation or two, whereas the fight that is going on now in this country is going to decide whether we are going to be free men or slaves.” (This was a bizarre comment to make, since the Civil War was fought, in large part, to eradicate slavery.)

As he became increasingly outspoken about the menace of communism, Fred returned to Moscow in 1956 (his first visit in twenty-six years), joining a delegation of ten prominent Wichita businessmen on a “friendship tour” to refute Soviet propaganda about the evils of capitalism. “We have been painted as oppressive masters of the laboring people,” one of Fred’s companions said at the time. “We are nothing of the sort. Although we are wealthy in terms of worldly goods, we are humanitarians in every respect.”
The quixotic trip only reinforced the immutability of the ideological battle under way.

When Welch summoned Fred to Indianapolis, he did not tell the industrialist the reason for the meeting. He merely said that the topic was of the gravest importance.

“The meeting will be completely ‘off the record’—you will simply be in Indianapolis, or just in the Midwest, on business,” Welch wrote to the small circle of prominent men he had picked to attend the conclave. “And since there is no way I can tell you of the ideas which I hope to see thoroughly discussed there, without writing volumes, you will have to take for granted that I would not ask such busy men to give up two whole days in this way unless I thought it would be worthwhile.”

When all his guests took their seats, Welch made his entrance toting a thick stack of note cards. Tall, with thinning gray hair and pursed lips, Welch looked a bit like Mr. Magoo. He shook hands with the men and, knowing there was much ground to cover, took his place rigidly behind a podium that he had borrowed from a nearby church.

“Before tomorrow is over,” Welch said, “I hope to have all of you feeling that you are taking part, here and now, in the beginning of a movement of historical importance.” Speaking for hours on end in his customary monotone, interrupted only by small breaks for food, Welch outlined the dizzying breadth of the communist conspiracy, reaching back to the Roman and Greek empires—civilizations that “did perish of the cancer of collectivism”—to illustrate the tragic fate that could be awaiting the West.

“This octopus is so large,” Welch said, “that its tentacles now reach into all of the legislative halls, all of the union labor meetings, a majority of the religious gatherings, and most of the schools of the whole world. It has a central nervous system which can make its tentacles in the labor unions of Bolivia, in the farmers’
co-operatives of Saskatchewan, in the caucuses of the Social Democrats of West Germany, and in the class rooms of Yale Law School, all retract or reach forward simultaneously. It can make all of these creeping tentacles turn either right or left, or a given percentage turn right while the others turn left, at the same time, in accordance with the intentions of a central brain in Moscow or Ust-Kamenogorsk. The human race has never before faced any such monster of power which was determined to enslave it.”

To others, this might have sounded like pure lunacy. But Fred knew better. Of the men who had assembled in Indianapolis, he perhaps had the most direct experience with communism. He had seen the beast up close.

The communists had either executed or banished to Siberia many of the Soviet engineers Fred worked with in the early 1930s. Even the loyal Bolshevik Jerome Livschitz had faced a firing squad in 1936 for allegedly plotting with Stalin’s nemesis, Leon Trotsky.

Fred suspected Stalin’s assassins had struck even closer to home. In 1930, Winkler-Koch trained a Russian engineer by the name of Hachatouroff, who while en route back to the Soviet Union, received word that his life was in danger. He returned to Wichita, where Fred gave him a job. But a few months later, Hachatouroff was found dead after falling from a hotel window. The authorities ruled his death a suicide. When Charles was old enough to hear the gruesome tale, Fred told him about Hachatouroff and about the brutality of the Soviet regime, where a man’s life was not his own and where almost any transgression was punishable with death. Fred said that he didn’t buy the official explanation of the Russian engineer’s demise. He believed the KGB had murdered him. “He was always convinced that they pushed him out,” Charles remembered.

Only as dusk fell on that first day in Indianapolis did Welch unveil his vision. Defeating this many-tentacled monster, Welch
explained, required its own multipronged approach: the establishment of Christian Science–like reading rooms and bookstores, to educate people on “the true history of events and developments of the past two decades”; the organizing of front groups (“little fronts, big fronts, temporary fronts, permanent fronts, all kinds of fronts”); and support for conservative news outlets—Welch’s
American Opinion
, but also William F. Buckley’s
National Review
(then a mere three years old), the
Dan Smoot Report
, and
Human Events
.

Additionally, Welch’s movement would make prodigious use of the “letter-writing weapon,” causing a “continuous overwhelming flood” of correspondence to descend on everyone from Washington lawmakers and executive agency heads to newspaper editors, TV sponsors, and educators. Welch intended to place their weight onto “the political scales in this country as fast and as far” as possible.

It wasn’t until the following day that Welch gave a name to his movement: the John Birch Society. For those unfamiliar with Birch, Welch handed out packets containing copies of the 1954 biography he had written of the young Baptist preacher and Army captain, who was shot dead by Chinese communists in August 1945, a week-and-a-half after V-J Day. Welch considered Birch the first martyr of the Cold War. “It is my fervent hope that the John Birch Society will last for hundreds of years and exert an increasing influence for the temporal good and spiritual ennoblement of mankind throughout those centuries,” Welch told the men seated in front of him.

Over the course of the two-day retreat, Welch succeeded in stirring the patriotic instincts of his guests, who had needed little convincing that the nation was on a destructive path. Before Welch even concluded his presentation, Hussman Refrigerator Company’s W. B. McMillan scratched out a check for $1,000: “Here, Bob, we’re in business.” Fred Koch enthusiastically signed on, too,
later joining the John Birch Society’s National Council, along with most of the other attendees.

After Indianapolis, Fred threw himself more vigorously than ever into the fight against communism. He besieged lawmakers with letters demanding they address the peril facing the nation, writing to one congressman that “inaction means in a very few years Red Chinese and Red Russian soldiers will be marching in our streets. In that event the dead will be the lucky ones.” And in 1960, Fred self-published a short tract called
A Business Man Looks at Communism
, which warned of an impending communist takeover. The pamphlet was an outgrowth of a talk on communism he’d given to Wichita Rotarians, and which he was subsequently asked to reprise on local radio station KFH. So many listeners called in asking for copies that Fred decided to expand on his remarks in a 39-page booklet.

He produced a forceful, though deeply paranoid polemic intended to jar Americans from their apathy: “It is not the Communists who are destroying America,” he wrote. “America is being destroyed by citizens who will not listen, are not informed, and will not think.”

One likely path to a communist coup, he wrote, was the “infiltration of high offices of government and political parties until the President of the U.S. is a Communist.… Even the Vice Presidency would do, as it could be easily arranged for the President to commit suicide.”

Fred saw the specter of communism lurking behind everything from American foreign aid (“the U.S.A. is following Stalin’s spending prescription”) to tax-free nonprofits (“using the astronomical sums of money in their control to bring on socialism”), and from college campuses (“one of the breeding grounds of recruits for the Communist Party”) to churches (“ministers don’t become Communists but Communists become ministers”).

Even modernist painters were part of the conspiracy: “The idea is to make our civilization seem degraded, ugly, and hopeless.” According to Bill Koch, Fred found Pablo Picasso particularly loathsome. “My father hated Picasso because he was a communist.”

The American civil rights movement also figured into the plot. “The colored man looms large in the Communist plan to take over America,” Fred wrote, noting that he’d been told that the Communist Party had influenced the welfare laws in major American cities “to make it attractive for rural Southern Negroes and Puerto Ricans to come to those cities.” Later, when the communists wanted to seize control of urban centers, they “will use the colored people by getting a vicious race war started.”

Fred reserved special scorn for labor unions, which endeavored to “have the worker do as little as possible for the money he receives,” he wrote. “This practice alone can destroy our country.” And he alleged that the “Communist-infiltrated union” whose members controlled the wire traffic in and out of the Pentagon had “probably” handed over America’s secrets to the communists.

Fred initially printed 12,500 copies of his pamphlet, which he distributed to every weekly newspaper in the country, along with other interested parties. Demand was so great that by late 1961, it had entered its ninth printing. At least 2.6 million copies of
A Business Man Looks at Communism
would ultimately go into circulation.

Readers of Fred’s anticommunist call to arms included FBI agents, who received numerous inquiries about the Wichita businessman. Worried Americans deluged FBI director J. Edgar Hoover with letters asking if Fred’s claims about the depth of the communist infiltration were valid—and in some cases wondering if his pamphlet was part of a subversive plot of its own.