How Stalin Funded the Tea Party Movement
“I would rather live under a bridge than live under socialism”
—tea bagger slogan
Everyone knows that Tea Party revolutionaries fear and hate socialism
about as much as the Antichrist. Which is funny, because the Tea Party
movement’s dirty little secret is that it owes its existence to the
grandaddy of all Antichrists: the godless empire of the USSR.
What few realize is that the secretive oil billionaires of the Koch
family, the main supporters of the right-wing groups that orchestrated
the Tea Party movement, would not have the means to bankroll their
favorite causes had it not been for the pile of money the family made
working for the Bolsheviks in the late 1920s and early 1930s, building
refineries, training Communist engineers and laying down the foundation
of Soviet oil infrastructure.
The comrades were good to the Kochs. Today Koch Industries has grown
into the second-largest private company in America. With an annual
revenue of $100 billion, the company was just $6.3 billion shy of first
place in 2008. Ownership is kept strictly in the family, with the
company being split roughly between right-wing brothers Charles and
David Koch, who are worth about $20 billion apiece and are infamous as
the largest sponsors of right-wing causes. They bankroll scores of
free-market and libertarian think tanks, institutes and advocacy groups.
Reason magazine, Heritage Foundation and Cato Institute are just a few
of Koch-backed free-market operations. Greenpeace estimates that the
Koch family shelled out $25 million from 2005 to 2008 funding the
“climate denial machine,” which means they outspent Exxon Mobile three
I first learned about the Kochs in February 2009, when Mark Ames and I
were looking into the strange origins of the then-nascent Tea Party
movement. Our investigation led us again and again to a handful of right-wing organizations and think tanks directly tied to the Kochs.
We were the first to connect the dots and debunk the Tea Party
movement’s “grassroots” front, exposing it as billionaire-backed
astroturf campaign run by free-market advocacy groups FreedomWorks and
Americans For Prosperity, both of which are closely linked to the Koch
But the Tea Party movement—and Koch family’s obscene wealth—go back
more than half a century, all the way to grandpa Fredrick C. Koch, one
of the founding members of the far-rightwing John Birch Society which
was convinced that evil socialism was taking over America through
unions, colored people, Jews, homosexuals, the Kennedys and even Dwight
These days, the Kochs paint themselves as true-believer Libertarians
of the Austrian School. Charles Koch, the elder brother who runs the
family business in Wichita, Kansas, quotes the wisdom of
proto-libertarian “economist” Ludwig von Mises, but also sees himself as
a thinker in his own right. In 2007, Charles made his contribution to
the body of free-market thought with an economic theory he calls Market-Based Management® (trademark protected, of course), which he lays out in a book titled the Science of Success.
A Forbes reviewer seemed a bit disturbed by Charles’ overt socialist
leanings, writing that the “author professes an almost Marxist faith in
the ‘fixed laws’ that ‘govern human well-being.’”
David Koch is the highbrow brother who lives in New York. He ran as
the Libertarian party candidate for vice-president in 1980 and says that
his dream is to “minimize the role of government, to maximize the role
of private economy and to maximize personal freedoms.” Apparently
everyone’s a free-market enthusiast at Koch Industries, including their
spokeswoman, who recently wrote a letter to the New York Times stating
that “it’s a historical fact that economic freedom best fosters
innovation, environmental protection and improved quality of life in a
society.” It might be true somewhere for someone, but not for the
Kochs—they owe it all to socialism and totalitarianism.
Here is a better historical fact, one that the Kochs don’t like to
repeat in public: the family’s initial wealth was not created by the
harsh, creative forces of unfettered capitalism, but by the grace of the
centrally-planned economy of the Soviet Union. This deserves repeating:
The Koch family, America’s biggest pushers of the free-market Tea Party
revolution, would not be the billionaires they are today were it not
for the whim of one of Stalin’s comrades.
The story of how the Koch family amassed its socialist wealth starts
at the turn of the 20th century with the birth of Fredrick C. Koch.
Fred was born in a tiny town in north Texas town to a Dutch immigrant
and newspaper publisher. The historical record is not clear about the
family’s wealth, but it appears that great-granddaddy Koch was not
hurting for cash, because Fred Koch turned out to be a smart kid and was
able to study at MIT and graduate with chemical engineering degree. A
few years later, in 1925, Fred started up the Winkler-Koch Engineering
Company with a former classmate, quickly developing and patenting a
novel process to refine gasoline from crude oil that had a highe-yield
than anything on the market. It was shaping up to be an American success
story, where anything was possible with a bit of elbow grease and good
The sky was the limit—until the free market rained on Fred’s parade.
See, Fred was living through the Roaring Twenties, a time of big
business, heavy speculation and zero government regulation. Much like
today, cartels were free to form and free to fix—and so they did.
Sensing a threat to their royalty-revenue stream from Winkler-Koch’s
superior refining technology, the reigning oil cartel moved in to teach
the young Koch how the laissez-faire business model worked in the real
“[W]hen he tried to market his invention, the major oil companies
sued him for patent infringement. Koch eventually won the lawsuits
(after 15 years in court), but the controversy made it tough to attract
many US customers,” according to Hoover’s Company Records service. Just
like that, Winkler-Koch Engineering found itself squeezed out of the
American market. They had a superior product at a cheaper price, but no
one to sell it to.
Luckily, there was one market where opportunity beckoned—and innovation was rewarded: the Soviet Union.
Stalin’s first Five Year Plan was just kicking into action a
nation-wide industrialization effort, and the Soviet planners needed
smart, industrious college grads like Fred Koch. The Soviet Union was
desperately trying to increase its oil refining capacity, so oil
engineers were especially in high demand—and well paid, too.
“We are the world’s greatest market, and we are prepared to order a large amount of goods and pay for them,” Joseph Stalin told an American journalist in 1932.
Stalin wasn’t kidding. From 1926 to 1929, the Soviet oil industry
bought $20 million worth of equipment from America. And Koch was about
to get in on the action.
In 1929, after hosting a delegation of Soviet planners in Wichita,
Kansas, Winkler and Koch signed a $5 million contract to build 15
refineries in the Soviet Union. According to Oil of Russia, a Russian
oil industry trade magazine, the deal made Winkler–Koch into Comrade
Stalin’s Number One refinery builder. It provided equipment and oversaw construction:
The first Winkler–Koch plants were set up in Tuapse in
1930. The cracking unit operated commendably, and would in the future be
the type preferred by the heads of the Soviet Union’s petroleum
industry when purchasing new cracking equipment.
In 1931, two Winkler–Koch cracking units were launched in Baku,
another two in Batumi, and six at once in Grozny; the last had a
combined refining capacity of 900,000 tons per year. In 1932, a
Winkler–Koch unit commenced operations in Yaroslavl.
At the time, the Soviet Union’s oil industry was a total mess.
Equipment built by Western engineering firms was always breaking down or
didn’t work at all. Western engineers were constantly being accused of
espionage or sabotage, real or imagined, and booted out of the country.
Soviet workers suspected of colluding with the foreigners were simply
taken out back and shot. Winkler-Koch made sure they were running a
tight, effective operation. Unlike their Western competitors, Koch
pleased his Soviet clients by ensuring top quality and helping the cause
Koch lived up to the slogan: “Work hard enough for Comrade Stalin to thank you!”
The Soviet oil planners were delighted with Koch’s refineries, which
“operated commendably, and would in the future be the type preferred by
the heads of the Soviet Union’s petroleum industry when purchasing new
cracking equipment.” The Communists were so impressed they kept giving
Winkler-Koch business and regularly sent Soviet engineers to train in
Wichita. It was a sign of growing mutual trust.
By the time he got out in 1933, Koch earned $500,000,
which was a ton of money for a kid fresh out of college. This nut of
money served as the foundation for the family’s future wealth, which
Koch no doubt started acquiring at rock-bottom prices. After all, 1933
was one of the two worst years of the Great Depression—all assets were
priced to go at 90% off. In the end, the capitalist-hating socialists
ended up treating Koch fairly, way better than the monopolistic
thrashing he got from his native land. So you’d think he’d at least
something good to say about the Soviet Union when he got home?
Nope, not at all. He hated the Commies real bad. But for some reason
he kept it to himself until the late 1950s (possibly because he was
still doing work for the Soviet Union). Then, after coming back from a
trip to the Soviet Union in 1956, he flies off the handle. According to a
1956 AP article,
Fred Koch was among eleven prominent residents of Wichita, Kansas,
“left for Moscow by plane today in an effort to convince the Russian
people that Soviet propaganda about capitalists is untrue.” Sounds like
the perfect cover for a business trip.
It’s not clear what he was actually doing there. But whatever the
outcome—maybe he didn’t get the contract he was expecting or maybe he
got swindled out of some investment or maybe he plain ol’ hated the thaw
of post-Stalin Russia—Fred Koch came back a pissed-off anti-Communist
freak and joined up with the right-wing Bircher freak show. He bankrolled a John Birch Society chapter in Wichita and attempted to open a Bircher bookstore, which wasn’t too popular and had to close.
He warned of a massive Communist conspiracy to take control of
America, saying that the Reds were eroding American universities,
churches, political parties, the media and every branch of government.
“Maybe you don’t want to be controversial by getting mixed up in this
anti-communist battle,” Koch said in a speech to a Women’s Republican Club in
1961. “But you won’t be very controversial lying in a ditch with a
bullet in your brain.” Strong words for a strong Stalin Queen—must’ve
rocked the stockings off the Bircher groupies.
In 1961, Koch published a pamphlet called “A Businessman Looks At Communism,”
in which he recounted his travels with a “hardcore Communist” named
Jerome Livshitz. It was from him Fred Koch had first learned about the
commie conspiracy to take over America:
The government detailed a little man by the name of
Jerome Livshltz to go around to our various installations with me.
Livshitz had taken part in the revolution of 1905, and had spent twelve
years in the U.S.A. as a revolutionary, most of the time in jails….
In the months I traveled with him he gave me a liberal education in
Communist techniques and methods. He told me how the Communists were
going to infiltrate the U.S.A. in the schools, universities, armed
forces and to use his words, “Make you rotten to the core.” I believe
that due to his American experience he was one of the original
architects of the Communist plan of subversion of the U.S.A.
My associate and I pulled him from under an overturned car in Tiflis,
and he was amazed. “Why did you save my life?” he said. “We are
enemies. I would not have saved you. Perhaps when the turn there, I will
spare your lives.” He told me that if his own mother stood in the way
of the revolution he would strangle her with his bare hands. This is the
mark of a hard-core Communist. They will do anything—anything.
Fred Koch’s paranoia continued to spiral out of control until his
thumper quit in 1967. But by that time his son, Charles G. Koch, had
already taken over control of the family business. He appropriated his
father’s Communist paranoia and made it the basis for the family’s
free-market business philosophy.
“Once, my father ran a business in the ex-Soviet Union, and all
engineers who worked with my father were imprisoned by Stalin later. My
father, who had experienced this, became an anti-communist and thought
the value of economical freedom and prosperity was more important than
ever before,” Charles said during an interview with a Korean newspaper in 2008, leaving out the part how evil socialist cash is the foundation of the Koch family’s wealth.
Once he took over, it was clear that Charles had big plans for Koch
Industries. He was going to push the limits of corporate growth by
plowing 90% of the company’s profits back into till and diversifying to
the max. It worked. The company expanded at an unreal rate: its revenues
increased from $100 million in 1966 to $100 billion in 2008—that’s
Today, it operates thousands of miles of pipelines in the United
States, refines 800,000 barrels of crude oil daily, it buys and sells
the most asphalt in the nation, is among the top ten cattle producers,
and is among the 50 largest landowners. Koch Industries also plowed
hundreds of millions of dollars into right-wing organizations like
Institute for Humane Studies, the Cato Institute, the Mercatus Center at
George Mason University, the Bill of Rights Institute, the Reason
Foundation, Citizens for a Sound Economy and the Federalist Society—all
of them promoting the usual billionaire-friendly ideas of the free
market, deregulation and smaller government.
If that expansion looks too fast to be legit, that’s because it was.
William Koch, the third brother who had a falling-out with Charles
and David back in the ’80s over Charles’ sociopathic management style,
appeared on “60 Minutes” in November 2000
to tell the world that Koch Industries was a criminal enterprise: “It
was – was my family company. I was out of it,” he says. “But that’s what
appalled me so much… I did not want my family, my legacy, my father’s
legacy to be based upon organized crime.”
Charles Koch’s racket was very simple, explained William. With its
extensive oil pipe network, Koch Industries’ role as an oil middleman–it
buys crude from someone’s well and sells it to a refinery–makes it easy
to steal millions of dollars worth of oil by skimming just a little off
the top of each transaction, or what they call “cheating measurements”
in the oil trade. According to William, wells located on federal and
Native American lands were the prime targets of the Koch scam.
“What Koch was doing was taking all these measurements
and then falsifying them on the run sheets,” said Bill Koch. “If the
dipstick measured five feet 10 inches and one half inch, they would
write down five feet nine and one half inches.”
That may not sound like much, but Bill Koch said it added up. “Well,
that was the beauty of the scheme. Because if they’re buying oil from
50,000 different people, and they’re stealing two barrels from each
person. What does that add up to? One year, their data showed they stole
a million and a half barrels of oil.”
In 1999, William decided to take his brothers down. He sued Koch
Industries in civil court under the False Claims Act, which allows
whistleblowers to file suit on behalf of the federal government. William
Koch accused the company of stealing hundreds of millions of dollars in
oil from federal lands.
The band of brothers settled the case two years later, with Charles
agreeing to pay $25 million in penalties to the federal government to
have the suit dismissed. It turned out to be a great deal for Charles
and David, considering that in the 1980s their “adjustments” allowed Koch Industries to siphon off 300 million gallons of oil without paying. It was pure profit–free money–to the tune of $230 million.
At the trial, 50 former Koch gaugers testified against
the company, some in video depositions. They said employees even had a
term for cheating on the measurements.
“We in the company referred to it as the Koch Method because it was a
system for cheating the producer out of oil,” said one of the gaugers,
Ah, finally! We’ve stumbled upon the secret to the family’s success!
At the bottom of it all, the Koch Method that funds all the libertarians
is nothing but good old-fashioned plunder. Or, as Koch hero Ludwig von
Mises might say, “The Koch Method is just an unceasing sequence of
Yasha Levine is a mobile home inhabitin’ editor of The eXiled. He
is currently stationed in Victorville, CA. You can reach him at levine
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