Thread: In suit, Koch brothers seek bigger control over D.C. think tank

In suit, Koch brothers seek bigger control over D.C. think tank




(Chip Somodevilla/GETTY IMAGES) - WASHINGTON, DC - Americans for Prosperity Foundation Chairman David H. Koch (C) waves at the Defending the American Dream Summit in Washington on Nov. 4.



By T.W. Farnam and Dan Eggen, Published: March 1

The billionaire Koch brothers, whose outsized political spending has become an issue in the 2012 elections, are attempting to take control of a prominent Washington think tank in a move that would expand their influence in conservative politics, according to court records and interviews.

Charles and David Koch, owners of a Wichita-based conglomerate that ranks as one of the largest private corporations in the world, filed a lawsuit this week in Kansas seeking an option to increase their 50 percent control of the Cato Institute.


Cato President Ed Crane blasted the lawsuit Thursday as an attempted “hostile takeover” of a venerable Washington institution that he co-founded with Charles Koch in the 1970s.

“Mr. Koch’s actions in Kansas court yesterday represent an effort by him to transform Cato from an independent, nonpartisan research organization into a political entity that might better support his partisan agenda,” Crane said in a statement. He vowed to fight the move “vehemently.”

Charles Koch said in a statement that he and his brother were only seeking to uphold the terms of the shareholder agreement that governs Cato and were not “acting in a partisan manner.”

“We support Cato and its work,” he said. “We want to ensure that Cato stays true to its fundamental principles of individual liberty, free markets, and peace into the future, and that it not be subject to the personal preferences of individual officers or directors.”

With a $39 million budget last year, Cato is one of the largest think tanks in Washington, espousing a libertarian ideology of limited government and free-market economics.

The conflict comes at the same time the Koch brothers are under attack from Democrats, including President Obama’s reelection campaign, which has pointedly accused the duo of seeking to “destroy” Obama through donations to conservative front groups.

The Koch brothers, with an estimated personal wealth of $25 billion each, have long been prominent donors to conservative causes.

Cato was most recently divided between four shareholders: the two Koch brothers, Crane and former Cato chairman William Niskanen.

The lawsuit centers on the fate of the shares owned by Niskanen, who died in October. The Koch brothers contend that they have the option to buy Niskanen’s shares, but no offer has been made to them, according to the lawsuit. The shares now belong to Niskanen’s widow, Kathryn Washburn.

Washburn, who is named as a target of the suit along with Cato and Crane, referred questions to Cato.

Cato’s board chairman, Bob Levy, said in an interview that the Koch brothers, who have the power to appoint half of the board, have been choosing “Koch operatives” for members, with an eye to push Cato toward support of the Republican Party.

“None of the new directors, with the exception of one, has a reputation as a libertarian,” Levy said. “There are a lot of murky areas between actively supporting candidates and what Cato does now, which is working on issues.”

Cato scholars often differ with Republicans, holding an noninterventionist foreign policy, for example, and more liberal positions on immigration, same-sex marriage and several other social issues.

Charles Koch was the largest financial backer of Cato in its formative years. More recently, however, the brothers have cut back on their giving to the organization, donating nothing last year, according to Cato officials. The Koches have given millions of dollars to a new libertarian center at George Mason University.

A Cato spokeswoman last year said that Charles Koch and Crane had a “falling-out” in 1991.

The Koches are at the center of a public feud that erupted this week with the Obama campaign, which has criticized the brothers for their ties to Americans for Prosperity, a conservative nonprofit group that does not have to report its donors and has aired millions of dollars worth of advertising attacking the president’s policies.

Last week, Obama campaign manager Jim Messina sent out a fundraising letter characterizing the group as a front for the Koch brothers’ energy interests and accusing Koch Industries of seeking to inflate gas prices and “destroy” Obama before Election Day.

Americans for Prosperity President Tim Phillips said his group would resist any disclosure of donors, in part because of fears of retribution from the Obama administration.

“They always try to have a bogeyman, a villain,” Phillips said. “This administration has shown it will attempt to intimidate private citizens.”

Staff writer Allen McDuffee and staff researcher Lucy Shackelford contributed to this report.


In suit, Koch brothers seek bigger control over D.C. think tank - The Washington Post

Cato Institute Is Caught in a Rift Over Its Direction
By ERIC LICHTBLAU
Published: March 6, 2012



WASHINGTON — From its perch in a spacious brand-new headquarters blocks from the White House, the Cato Institute has built on its reputation as a venerable libertarian research center unafraid to cross party lines.
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Mike Burley/Topeka Capital-Journal, via Associated Press

Charles Koch, a Cato Institute founder, has been challenged by Cato officials, who say that his Republican activism has threatened the group's reputation for independent research.
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Times Topics: Cato Institute | Charles Koch


Now, however, a rift with one of its founding members — the billionaire conservative Charles Koch — is threatening the institute’s identity and independence, its leaders say, and is exposing fault lines over Mr. Koch’s aggressive and well-financed brand of Republican politics.

The rift has its roots, Cato officials said, in a long-simmering feud over efforts by Mr. Koch and his brother David Koch to install their own people on the institute’s 16-member board and to establish a more direct pipeline between Cato and the family’s Republican political outlets, including groups that Democrats complain have mounted a multimillion-dollar assault on President Obama. Tensions reached a new level with a lawsuit filed last week by the Kochs against Cato over its governing structure.

“We can’t be perceived as a mouthpiece of special interests,” Robert A. Levy, chairman of Cato’s board, said in an interview. “The Cato Institute as we know it would be destroyed.”

At a tense meeting in November at Dulles Airport outside Washington, David Koch and two family emissaries laid out what they described as the “intellectual ammunition” they envisioned that Cato could provide by supplying its brand-name research and scholars to Koch-financed political advocacy groups, according to Mr. Levy.

The one Koch-financed group mentioned by name at the meeting was Americans for Prosperity, which played a major role in the Republicans’ 2010 takeover of the House and is now preparing for the November election. Structured as a nonprofit, the group does not have to disclose its donors. It has backed Tea Party groups, organized rallies and paid for negative advertisements, drawing criticism from campaign finance watchdogs and Democrats over the flow of secret money to political causes.

Charles Koch, chief executive of Koch Industries, a chemical and refining company in Kansas, said he had no intention of taking over the institute. “We support Cato and its work,” Mr. Koch said in a statement. “We are not acting in a partisan manner, we seek no ‘takeover,’ and this is not a hostile action.”

But Mr. Levy said he balked at tightening ties between Cato and the Kochs’ advocacy groups, expressing concern that the brothers might try to select Cato’s research topics and the timing of its studies. Any perception of political influence could compromise Cato’s nonprofit status and stain its credibility, he said in an interview.

Over the years, Cato has successfully injected libertarian views into Washington policy and political debates, and given them mainstream respectability.

While leaders at Cato said the dispute has been years in the making, it broke into the open last week after the Koch brothers brought a lawsuit in federal court in Kansas against the institute.

The lawsuit, first reported on the Web site of the Washington Post, seeks to establish control of the four-person “shareholder group” that governs Cato. Charles and David Koch hold two of the four “shareholder” seats, but the lawsuit seeks to establish control of a third seat, vacated by the death of another founder.

The dispute goes deeper than mere seats on a board, Cato administrators argued.

“This is an effort by the Kochs to turn the Cato Institute into some sort of auxiliary for the G.O.P.,” said Edward H. Crane, who is president of Cato and co-founded it with Charles Koch. “What he is doing now is detrimental to Cato, it’s detrimental to Koch Industries, it’s detrimental to the libertarian movement.”

Tensions between such research organizations and the donors who finance them are nothing new in Washington. But the public nature of the spat and the big names involved — Cato is one of the country’s most widely cited research organizations, while the Koch brothers are perhaps the biggest benefactors of the conservative movement — has caused considerable buzz in Washington and on the Internet.

While its focus on libertarianism and individual liberties has often aligned the Cato Institute with conservatives on issues like gun rights and financial regulation, it has also staked out a number of positions closely tied to liberals. It generally supports same-sex marriage and guest immigrant-worker programs, for instance, while opposing the Patriot Act’s sweeping counterterrorism powers, aggressive use of American military intervention, and the criminalization of drugs.

Mr. Levy, the board chairman, said the dispute was already chipping away at the center’s reputation for independence as it seeks to raise money. Unlike many nonprofit research institutions, Cato does not have an endowment but continually raises money for its operations, with a budget last year of about $23 million. It is now in the midst of a major capital drive.

“We already have major contributors who will say we are not contributing another dollar until we are sure that the Kochs are not calling the shots,” Mr. Levy said. “It is a fund-raising nightmare.”

Cato Institute Is Caught in a Rift Over Its Direction
Published: March 6, 2012


(Page 2 of 2)

Part of the dispute is rooted in personal acrimony. Mr. Crane, the Cato president, was once close to Charles Koch, sharing libertarian beliefs and traveling with him to China and the Soviet Union as they joined to form Cato in the mid-1970s, officials said. But the two had a falling out, and the Kochs tried to have Mr. Crane removed as president some years ago, the officials said.
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Exacerbating tensions was an article in 2010 in The New Yorker magazine, in which an unnamed Cato Institute official was quoted comparing Charles Koch and his “market-based management” philosophies to an “emperor” with no clothes. The quote was said to infuriate Mr. Koch.

Charles and David Koch have rarely attended Cato board meetings in recent years, and Cato officials have rarely been invited to the family’s regular galas for influential conservatives. As the relationship with the institute has deteriorated, their donations have declined as well.

Since Cato was formed, the Kochs have donated about $30 million, officials said, but the bulk came in its first decade; by last year, the Kochs gave no money at all.

But the brothers still wield significant influence over Cato’s governance because of its unusual structure, which created four “shareholder” seats, each with shares of capital stock bought for a dollar each. The Kochs have used their shareholder positions to name seven employees and associates to the 16-member board.

The shareholder arrangement has raised questions among some nonprofit tax experts, who said a sale of the shares was legally problematic and possibly in conflict with Internal Revenue Service regulations. But Wes Edwards, a lawyer representing Koch Companies Public Sector, defended the structure as legally permissible under Kansas law.

Through their foundations, the Kochs finance dozens of organizations in the worlds of academia, medicine, the environment and other areas.

Critics assert that the Kochs have used their financial clout to steer the research at groups they support. Greenpeace, for instance, has labeled one Koch-supported research institute, the Mercatus Center at George Mason University, as a “front” for climate change deniers — an assertion that the center dismisses.

Some recipients of the Kochs’ largess say they have never felt political pressure.

Charles Koch serves on the board of the Mercatus Center and is chairman of the board of another institute at George Mason, the Institute for Humane Studies. But he has never tried to steer research toward his political activities, said Gary Leff, chief financial officer for both groups.

“He’s a longtime and generous supporter of ours, but we’re not involved as a political organization,” Mr. Leff said.

Shellagh McNeill contributed research.

This article has been revised to reflect the following correction:

Correction: March 7, 2012

An article on Tuesday about a fight for control of the Cato Institute, a libertarian policy center, misidentified the news organization that first reported the filing of a lawsuit in the matter last week. It was first mentioned on the Web site of The Washington Post, not on Politico.


http://www.nytimes.com/2012/03/06/us...20Emails&scp=2