Bloomberg Versus Koch

http://www.futureofcapitalism.com/2011/10/bloomberg-versus-koch

The November issue of Bloomberg Markets magazine unloads a much-anticipated and long-awaited attack on Koch Industries, under the headline, "The Secret Sins of Koch Industries." The Web site Kochfacts.com has a response from Koch Industries general counsel Mark Holden.

A few points that Mr. Holden omits from his response: The Bloomberg article says, "Koch Industries is obsessed with secrecy, to the point that it discloses only an approximation of its annual revenue -- $100 billion a year -- and says nothing about its profits." It's a private company. It doesn't have to disclose its revenue or its profits to anyone other than its owners or maybe the IRS. You'd think that Bloomberg, of all places, might comprehend this because Bloomberg itself is a private company that doesn't regularly publicly disclose its own profits, either.

The Bloomberg article attacks a foreign subsidiary of Koch Industries for doing business in Iran. The Bloomberg article goes into extensive detail about how President George W. Bush called Iran part of the "axis of evil," and reports, "Iran supports Iraqi militants and Taliban fighters as well as terrorist groups, including Hamas and Hezbollah, according to the U.S. State Department." But Bloomberg itself maintains a correspondent in Iran, Ladane Nasseri.

In other words, it's okay to not announce your annual profits and to operate in Iran if you are Bloomberg, but not if you are Koch. It's enough to make a person think that the real "sins" of Koch Industries aren't either a lack of disclosure or operations in Iran, but the libertarian political leanings of the Koch Industries owners. Those leanings, while gaining some popularity among voters, are anathema to a lot of journalists, which accounts for why all of a sudden various years-old regulatory skirmishes of Koch Industries are attracting front-page press attention.

One final point about the Bloomberg article. One of the things it faults Koch employees or a Koch subsidiary for is for paying officials of gvernment-owned companies:

In the Middle East, Koch-Glitsch paid what the termination letter describes as an exceptionally high commission of 23 percent to one of its sales agents.

"A portion of that money was intended to pay a customer's employee in order to secure the contract," Koch wrote.

The customer was an unnamed Egyptian company that was partially owned by the state. Koch-Glitsch made similar payments to win other contracts with public and private companies in Egypt and Saudi Arabia, Koch wrote in its letter to Mausen.

Koch-Glitsch gave envelopes stuffed with cash to a Moroccan company, Koch wrote in its letter. Koch-Glitsch also made an improper payment to secure a contract with a Moroccan government organization, Koch wrote. The company made similar payments to an unnamed Nigerian government agency to win contracts, Koch wrote.

The Bloomberg approach seems to be to fault Koch for making these payments and to conclude that Koch's libertarianism is somehow the cause of its transgressions or supposed transgressions, or as the article puts it, "how the Kochs' anti-regulation political ideology has influenced the way they conduct business." Bloomberg seems to suggest, without actually coming out and saying so, that these libertarians somehow believe they don't have to obey any laws. But libertarianism is not the same as anarchism. And, rather than the ideology influencing the business, the reverse could also be the case. In other words, these business experiences could have bolstered the Koch's small-government political ideology. No one has accused the Koch brothers themselves of knowing of these payments before they were made. But if they learned about the payments after the fact, wouldn't constantly being shaken down for payments by government employees make a businessman wish there were fewer government employees and wish there were fewer state-owned companies, so that business could be won on the basis of value delivered rather than government employees or cronies paid?

by Ira Stoll  |  Oct 3, 2011 at 6:37 am Related Topics:  Government ownership, Politics, Press, Regulation receive the latest by email: subscribe to the free futureofcapitalism.com mailing list