Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (8 page)

Outside of academics, Charles’s primary passion was rugby. His legendary competitive streak truly flared on the rugby pitch, though he even played games of flag football with an unusual level
of intensity. “It was like he was playing the Super Bowl,” recalled an MIT graduate who refereed games Charles played in.

He attended graduate school at MIT directly after college, and completed a master’s degree in nuclear engineering in 1958. Charles had contemplated making a career in this fledgling industry, but he soon thought better of it. The federal government tightly regulated the nuclear sector. Working in the industry, he would be at the perpetual mercy of Washington bureaucrats. His budding libertarian sensibilities were repulsed by the notion. So he took a second master’s, this one in chemical engineering. By 1959, Charles was working as an engineer for the Boston-based consulting firm Arthur D. Little. He enjoyed living in Boston, and moreover, he loved his job. In Wichita he was Fred Koch’s son, but in New England, Charles had found a way to step out of his father’s shadow.

A year went by, then two. Back home in Wichita, Fred Koch grew restless. He wanted Charles home. He was in poor health. His blood pressure was sky high and he had a family history of heart problems. His mother had died of congestive heart failure. A heart attack had also claimed his older brother in the 1950s, after which Fred helped to pay the private school tuitions of his nieces and nephews and gave them a small bloc of stock in his company.

Fred had grown forgetful and gone was the great vigor and drive of his younger years. In a letter to his friend Robert Welch, intended to nudge the aging John Birch Society leader to consider stepping aside for the good of the movement, Fred confided that while he had always intended to “remain in business until I died,” his failing memory and waning energy had forced him to reconsider. “Regretfully, I came to the conclusion that the time had come for me to gradually withdraw from business and to turn it over to someone else,” Fred wrote. “I suppose what this all means is a gradual hardening of the arteries and a reduced supply of blood to the brain so the gray matter just doesn’t function like it should.”

There was never much doubt about Fred’s choice of successor. His artistic eldest son had no interest in the engineering field, or the family business. “MIT is not for you, Frederick. I think Harvard is for you,” Frederick recalled his father counseling him. Ever since his arrival in Cambridge in the early 1950s, he pursued a very different life and very different interests than his three younger brothers.

At Harvard, Frederick studied English literature and acted in theater productions. His fondest memories are of singing in the Glee Club. The Boston Symphony Orchestra’s conductor, Charles Munch, enlisted the Glee Club to perform as the chorus in a series of concerts featuring the symphonies of Berlioz. RCA Victor recorded the performances, enabling Frederick to proudly play an LP for his parents in which he sang in
Romeo and Juliet
and the
Damnation of Faust
. “I had a wonderful time there,” Frederick said of his Harvard years.

The eldest Koch brother left the faintest of impressions on his dorm mates in Harvard’s Adams House. They remember him as a thin, pale boy and recall that he was unfailingly polite and arrived at school with an enormous collection of opera LPs. Based on Fredericks’s affect, they guessed at his sexuality.

After graduation, Frederick attended Harvard Law School for a year, before abandoning the program to enlist in the U.S. Naval Reserve in the fall of 1956. His first duty station was in Millington, Tennessee. The young petty officer, first class, was attached to a technical training unit, then transferred to a logistical command, where he oversaw officer personnel records. This was “far more interesting work than what was required of me” in his prior post, he reported to Harvard classmates in an alumni update. In 1958, before his discharge from the Navy, Frederick served aboard the USS
Saratoga
in the Atlantic fleet.

After returning to civilian life, Frederick attended the Yale School of Drama, majoring in playwriting. For his master’s thesis,
he collaborated with Clark Gesner (later known for composing
You’re a Good Man, Charlie Brown
) on a musical theater adaptation of the 1941 book
No Bed for Bacon
. Set in the Elizabethan era, the comedic book was later cited for inspiring some of the plotlines in the Academy Award–winning film
Shakespeare in Love
.

Frederick, in these years, explored the gay lifestyle, at least from an academic perspective. In the late 1950s, he became a follower of the ONE Institute of Homophile Studies, an organization for gays and lesbians founded in 1956, and a subscriber to its quarterly journal. In a July 1959 letter to the organization, requesting a copy of a book it had published called
Homosexuals Today
, he also inquired whether the institute was “familiar with a booklet or pamphlet listing, by name and address, the gay bars and restaurants in various European cities?… If you are aware of the title and editorial address of this publication, I should appreciate receiving this information.”

A fellow Yale classmate, Bob Murray, remembered Frederick for his “prim campus haberdashery,” which usually included a coat and tie, and for the fact that he often kept to himself and was occasionally ridiculed because of his priggish appearance. “His mark,” Murray said, “seemed limited to his… aloofness, his marginal presence, his formal dress, his ‘aloneness.’ ” Frederick appeared to have few friends, nor much of a social life.

Murray recalled his surprise when, before Christmas recess in 1960 or 1961, Frederick threw a large party at his off-campus apartment, located across the street from New Haven’s Shubert Theater. When Murray and his wife arrived, students spilled into the hallway and down a stairway leading to the apartment. A refrigerator stocked with champagne was ajar and partygoers were handing bottle after bottle into the crowd.

“The host was not seen in the crowd and the crowd was simply helping itself, some stuffing several bottles into their coat pockets
and leaving the premises for a private party of their own,” Murray said. Murray and his wife finally located Frederick “in a far corner of his dark living room looking, we decided later, lost and baffled by being caught in a riot. We left after having acknowledged the host, feeling even more sorry than before for ‘the poor little rich boy.’ ”

Frederick moved from New Haven to New York City after completing his master’s program in 1961. He taught script writing for a semester at New York’s New School and apprenticed with theater producer Charles Hollerith Jr., but he mostly lived off a trust fund Fred Koch had established for his son the year Frederick graduated from Yale. “The arrangement,” Frederick recalled, “was that I would receive dividends on a quarterly basis and this would continue until the age of 45,” when he could access the principal. The Koch patriarch structured it in this way because he feared Frederick, left to his own devices, would blow through his trust fund on ill-advised theater productions. “My father was quite concerned about my having chosen a very risky profession,” Frederick said. “And he was particularly concerned about the temptation I might have to invest my own capital in plays that I would produce. And he wanted… me to have some assurance that I would have an income quite apart from the theater.”

Mary Koch lamented in a 1986 interview that her eldest son had an “inferiority complex” that prevented him from achieving more with his life. “Freddie never composed anything himself and his father was upset that he never earned a living. Fred felt Freddie just indulged his pleasures in art, music, and literature when he could have created something.”

Even though his immediate family lacked confidence in his ability to make a living in the arts, Frederick was popular among his parents’ circle of friends, with whom he seemed more at ease than his contemporaries. On periodic visits home to Wichita for holidays or other special occasions, he often joined his mother on
the weekly cocktail party circuit. (Fred was rarely if ever seen at these confabs.) “Freddie used to love to go to those cocktail parties and gatherings,” remembered one fellow partygoer. “He was very good at conversation and always interested in what other people were doing.” He added: “Other people outside the family from Wichita were very impressed with Freddie, by the things that he’d done and the good causes he’d supported. In Wichita, Freddie was the most liked of all the four brothers, in the sense that he often went to those cocktail parties. He socialized more with our parents’ generation.”

Charles resisted his father’s first few attempts to lure him home to Wichita. Finally, Fred gave his son an ultimatum: “He told me either you come back here and take over the company or I’m going to sell it,” Charles recalled. So Charles dutifully returned home in late 1961 to begin learning the ropes of his father’s company.

Fred had always seen great leadership potential in Charles. Even so, when Charles went to work for the family company, Fred didn’t want to build up his twenty-six-year-old son’s confidence too much. “I hope your first deal is a loser,” he told him, “otherwise you will think you’re a lot smarter than you are.”

Fred put Charles to work as the vice president of Koch Engineering, the company he had spun off when Winkler-Koch disbanded in the 1940s. The company, which composed only a small part of Fred’s business empire, was just scraping by. Most of its customers were overseas, and the fact that the company had no international manufacturing presence was part of the problem. One of Charles’s early assignments entailed surveying possible locations in Europe to site a manufacturing plant for the production of Koch FLEXITRAYs, used for separating (or “fractionating”) oil. After scouring Europe, the young executive settled on a site in Bergamo, Italy. Fred was convinced that this was the money-losing deal he had warned his son about. “I have tried to discourage him,” he told a
friend in a letter, “but he won’t listen to papa.” Fred’s aversion to Italy stemmed from his experience there in 1958, during national elections, when he witnessed “how strong the Communists were.”

“Personally,” he confided to the friend, “I think we are going to pour the money down the drain, but it’s his baby so I am going to let him go ahead.”

It turned out to be the first in a series of astute business moves by Charles, who, by 1965, had doubled Koch Engineering’s sales. Fred named Charles president of Koch Engineering in 1963 and made him a vice president of his main company, Rock Island Oil and Refining. Working closely with Fred’s right-hand man, Sterling Varner, an Oklahoma native who seemed to have a countrified expression for every occasion, Charles moved aggressively to expand the firm’s crude oil gathering business. They acquired pipelines and small trucking companies—undervalued and unwanted assets that Varner lovingly referred to as “the junk.”

Varner worked for L. B. Simmons when Fred bought his uncle’s Rock Island Oil pipeline and refinery assets in the 1940s. Varner came along as part of the deal. The son of an Oklahoma oil field worker, he had started out as a crude oil purchasing clerk, rising steadily through the ranks to become an indispensable executive. It was quite a reversal from Varner’s early days with Fred’s company, when he made $2,400 a year and had some reason to believe he was expendable. One summer early in Varner’s tenure, Fred asked him to oversee the drilling of water wells at Beaverhead Ranch. Summer came and went without the industrialist issuing Varner a new assignment, so finally, as Thanksgiving neared, he called his boss.

“Who?” Fred asked, when Varner announced who was calling. Fred had forgotten about him, though he would eventually recognize great promise in Varner and take him under his wing. It wasn’t just Varner’s knack for sussing out good deals, but his ability to connect with people. He was the kind of guy who put a hand
on your shoulder when he reached out to shake your hand. He could relate just as easily to an oil field roughneck as he could to a Wichita banker. He did both with a colloquial charm, peppering his speech with oil patch bon mots that fellow executives fondly referred to as “Sterlingisms.”

By the time Charles arrived on the scene, Varner, sixteen years his senior, knew every nook and cranny of Fred’s business empire. He became the young businessman’s tutor as Charles learned the ropes and, in later years, his most trusted advisor. Varner was the perfect foil for Charles, who like so many ambitious young men tended to overlook the human details. Charles’s mathematical mind adapted easily to the big picture and the bottom line, but he could be woefully inept at dealing with people. Varner, who did not come from a world of quarterly reviews and profit plans, understood there was more to success than merely business acumen. Charm was a crucial ingredient, and Varner had it in surplus. “He really taught me a lot about the importance of people… and being people-oriented,” Charles would later say. With Charles serving as the company’s brain and Varner as its soul, the pair became a formidable management team—and occasional partners in crime.

While Charles pushed for expansion, his father focused on conserving capital to pay his estate taxes. In one case, when Charles sought his father’s sign off to buy two North Dakota trucking companies, Fred approved the purchase of just one of them. When Fred left on a trip, Charles and Varner went ahead and bought both companies anyway. “When I informed him of this,” Charles recalled, “my father was initially furious, but eventually forgave us since both acquisitions ended up being highly profitable.” In 1966, Fred named Charles president of Rock Island Oil and Refining “so that, as he put it, if something happened to him, I would be in charge.”

During the mid-1960s, Fred had been in and out of the hospital
with heart trouble. He suffered a major heart attack in mid-1967 that left him hospitalized for two months. Not long after he was released, the industrialist cajoled his doctor for clearance to go hunting, which the physician finally granted.

That November, Fred accompanied his close friend R. C. “Mac” McCormick, owner of Wichita’s Broadview Hotel, on a hunting excursion to Utah. On November 17, Fred was in a duck blind near the Bear River, accompanied by a gun loader. He hadn’t shot well all day. When a solitary duck flew overhead, Fred tracked the bird with the muzzle of his shotgun. He aimed, then squeezed the trigger. The bird stopped in mid-flight and fell from the sky.