Free Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer Page B

attempt by Charles against Freddie to get his stock at a cheap price.” The magazine noted that Charles “vigorously denied” it. Years later, Frederick also briefly alluded to it, telling the biographer Daniel Schulman that“Charles’ ‘homosexual blackmail’ to get control of my shares did not succeed for the simple reason that I am not homosexual.” For reasons that remain disputed, Frederick’s inheritance was nonetheless handled differently than that of the other boys. He took more money up front, and was left out of a final distribution.
    In the midst of this filial rancor, in 1967, Fred Koch died of a heart attack. Charles, then thirty-two years old, became chairman and CEO of the family business, which the sons renamed Koch Industries, in honor of their father. At the time, the company’s principal business was refining oil, operating pipelines, and cattle ranching. Its annual revenues were estimated at $177 million, making it a substantial company but slight in comparison with the behemoth it would become.
    Fred Koch’s fears of confiscatory taxes turned out to be overblown. When he died, he was described as thewealthiest man in Kansas, and his will made his sons extraordinarily rich. Charles Koch has often lauded the virtuous habits it takes to succeed, publishing a book on the subject in 2007 called
The Science of Success
. He has been less forthcoming about his inheritance. His brother David, in contrast, has made less pretense of being self-made. He joked about his good fortune in a 2003 speech to alumni at Deerfield Academy, the Massachusetts prep school from which he graduated and where, after pledging $25 million, he was made the school’s sole “lifetime trustee.” He said, “You might ask: How does David Koch happen to have the wealth to be so generous? Well, let me tell you a story. It all started when I was a little boy. One day, my father gave me an apple. I soon sold it for five dollars and bought two apples and sold them for ten. Then I bought four apples and sold them for twenty. Well, this went on day after day, week after week, month after month, year after year, until my father died and left me three hundred million dollars!”
    Fred Koch also left his sons the building blocks with which they could construct one of the most lucrative corporate empires in the world. The crown jewel, according to one former Koch Industries insider, was the Pine Bend Refinery, then called the Great Northern Oil Company, in Rosemount, Minnesota, not far from Minneapolis. In 1959, Fred Koch bought a one-third interest in the concern.
    In 1969, two years after Charles Koch took the company’s helm,Koch Industries acquired the majority share in the refinery. Charles later described the purchase as “one of the most significant events in the evolution of our company.”
    Pine Bend was a gold mine because it was uniquely well situated geographically to buy inexpensive, heavy, “garbage” crude oil from Canada. After refining the cheap muck, the company could sell it at the same price as other gasoline. Because the heavy crude oil was so cheap, Pine Bend’s profit margin was superior to that of most other refineries. And because of a host of environmental regulations, it became increasingly difficult for rivals to build new refineries in the area to compete.
    By 2015, Pine Bend was processing some 350,000 barrels of Canadian crude a day, and according to David Sassoon of the Reuters-affiliated
InsideClimate News
, Koch Industries was the world’s largest exporter of oil out of Canada. In 2012, he wrote, “This single Koch refinery is now responsible for an estimated 25 percent of the 1.2 million barrels of oil the U.S. imports each day from Canada’s tar sands territories.” The Kochs’ good fortune, however, was the globe’s misfortune, because crude oil derived from Canada’s dirty tar sands requires far greater amounts of energy to produce and so is especially harmful to the environment.
    In 1970,