In May 2008, a unit of Koch Industries, one of the world’s largest privately held companies, sent Ludmila Egorova-Farines, its newly hired compliance officer and ethics manager, to investigate the management of a subsidiary in Arles in southern France. In less than a week, she discovered that the company had paid bribes to win contracts.
“I uncovered the practices within a few days,” Egorova-Farines says. “They were not hidden at all.”
She notified her supervisors in the United States. A week later, Wichita, Kan.-based Koch Industries dispatched an investigative team to look into her findings.
By that September, the researchers had found evidence of improper payments to secure contracts in six countries dating to 2002, authorized by the company’s Koch-Glitsch affiliate in France.
“Those activities constitute violations of criminal law,” Koch Industries wrote in a Dec. 8, 2008, letter giving details of its findings.
Egorova-Farines’s superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent, even after Koch’s investigators substantiated her findings. She sued Koch-Glitsch for wrongful termination.
Koch-Glitsch is part of a global empire run by billionaire brothers Charles and David Koch, who have taken a small oil company they inherited from their father, Fred, after his death in 1967 and built it into a chemical, textile and refining conglomerate spanning 50 countries.
Koch Industries discloses only an approximation of its revenue — $100 billion a year — and says nothing about its profit.
The most visible part of Koch Industries is its consumer brands, including Lycra fiber and Stainmaster carpet. Georgia-Pacific, which Koch owns, makes Dixie cups, Brawny paper towels and Quilted Northern bath tissue.
Charles, 75, and David, 71, each worth about $20 billion, are prominent financial backers of groups that believe that excessive regulation is sapping the competitiveness of American business. Charles and David have supported the tea party, a loosely organized group that aims to shrink the size of government.
These are long-standing tenets for the Kochs. In 1980, David Koch ran for vice president on the Libertarian ticket, pledging to abolish Social Security, the Federal Reserve System, welfare, minimum-wage laws and federal agencies — including the Energy Department, the FBI and the CIA.
What many people don’t know is how the Kochs’ anti-regulation ideology has influenced the way they conduct business.
A Bloomberg Markets investigation has found that Koch Industries — in addition to being involved in improper payments to win business in Africa, India and the Middle East — has sold millions of dollars of petrochemical equipment to Iran, a country the United States identifies as a sponsor of global terrorism.
Internal company documents show that the company made those sales through foreign subsidiaries, thwarting a U.S. trade ban. Koch Industries units have also rigged prices with competitors, lied to regulators and repeatedly run afoul of environmental regulations, resulting in five criminal convictions since 1999 in the United States and Canada.
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