What Are the Latest
Revelations About Koch Industries?
by Lois Beckett I ProPublica
Bloomberg has published an in-depth investigation into business
practices at Koch Industries, run by politically
influential brothers Charles and David Koch. The story lays out what it
suggests is a decades-long pattern of illegal and unethical behavior at Koch.
story and Koch's
official response are long and full of complicated details, and it's not
easy to untangle it all. Here's our guide to what seem to be the newest, most
subsidiaries in Europe got contracts through bribes in at least six countries.
In 2008, in the wake of a $1.6
billion settlement by the German engineering giant Siemens for bribing
officials around the world, Koch conducted an internal investigation of its own
payment practices. The company found that its France-based affiliate,
Koch-Glitsch, had paid illegal bribes to secure contracts in India, Africa and
the Middle East, including bribes to government officials, a practice banned by
Corrupt Practices Act. In response, Koch fired several employees and sales
agents, including the business director of Koch-Glitsch France.
Disputed: Was Koch's
According to Bloomberg's analysis of French court documents,
Koch failed to hold higher-level officials accountable for the bribery
payments. Koch said Koch-Glitsch's president for Europe and Asia "had no
knowledge" of the misconduct. Koch also ended up firing the ethics manager
who first conducted its investigation, and French labor courts upheld the
firing as fair.
corporations make bribes — and pay fines for breaking the law.
Many large companies have been investigated for bribery of
foreign officials, including Hewlett-Packard and Motorola.
The U.S. has recently stepped
up its enforcement of the Foreign Corrupt Practices Act, including a preliminary
investigation this year into whether News
Corp. may have violated the act. A recent survey of business executives
found that only
30 percent were "very confident" that their existing policies
would prevent bribery.
European subsidiary sold petrochemical equipment to Iran, which seems to be
While American companies have been banned from trading with
Iran since 1995, Koch's European subsidiary, Koch-Glitsch, sold equipment to a
unit of Iran's National Petrochemical Company for nearly a decade. The
equipment helped construct an ethanol processing plant. Koch's legal counsel
told The Washington Post that the sales
totaled roughly 15 million Euros over nine or 10 years, and that the
equipment sold had "no military, weapons, or nuclear application
As Bloomberg notes, while the sales to Iran may be
controversial, they appeared to be legal since no U.S. citizens or U.S.-based
divisions of the company were involved. Instead, Koch did the business at arms
length through Koch-Glitsch offices in Germany and Italy.
Disputed: Was it
wrong for a Koch subsidiary to do business with Iran?
Bloomberg described internal documents demonstrating that
Koch took a rigorous approach to following the letter of the law, but suggested
more investigation might be appropriate. Koch's general counsel told The Washington Post that the
company voluntarily ended all sales to Iran in 2005 or 2006. (Bloomberg
reported records of sales to Iran until 2007.)
Koch dismissed comments by what it called a "disgruntled
former employee" who told Bloomberg she felt the company's dealings
with Iran had betrayed its stated
core principal of integrity.
Context: Koch is one
of many corporations that have done business with Iran.
Many other American companies, including
Halliburton and GE, have done business with Iran through subsidiaries, and
as The Washington Post's Jennifer
Rubin pointed out, a
few were still doing so after Koch ended its ties to Iran.
As well as these new criticisms of Koch's corporate
behavior, the Bloomberg article and Koch's response revisited several previously reported scandals, including millions of dollars
in settlements the company paid after it failed
to pay for $31 million worth of crude oil it took from Indian land, made false
statements to cover up illegal emissions of the toxic chemical benzene at a
Texas plant, and accepted responsibility for the deaths of two Texas teenagers
who died in an explosion caused by a
leak in a gas pipeline with a well-documented history of corrosion.
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