Koch Brothers Exploit Current IRS ‘Scandal’ for Personal Gain

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David and Charles Koch have taken their hypocrisy and self-serving interests to a new level by having the Senior VP and General Counsel for Koch Industries, Mark Holden, insinuate that the Kochs are victims of the Obama administration.

Holden, speaking to The Wichita Eagle May 24, accused President Obama of deliberately trying to politically intimidate the Kochs since 2010. His flimsy story implied that comments President Obama and a senior White House advisor made in 2010 mean that the White House was behind the so-called IRS “scandal” in recent news.

Let’s contrast Holden’s claims with actual facts, as well as ponder what the Koch Brothers could possibly be trying to cover up. 

Kochs Claim ‘Disturbing’ Pattern of Government Intimidation

Holden admitted to The Wichita Eagle that he had no evidence that the White House was involved in targeting the Kochs for IRS tax scrutiny, and he failed to say how the Kochs had been targeted, if at all. However, Holden pointed to a 2010 comment by a former Obama advisor to suggest a connection between Obama’s White House and the IRS scrutiny of right-wing political groups.

Former advisor Austan Goolsbee had said at a 2010 briefing:

“We have a series of entities that do not pay corporate income tax. Some of which are really giant firms, you know Koch Industries is a multibillion dollar business. So that creates a narrower base because we’ve literally got something like 50 percent of the business income in the U.S. is going to businesses that don’t pay any corporate income tax.”

Ironically, the Kochs are attempting to hinge a White House-IRS conspiracy on a comment that was true. Koch Industries is organized as a (Subchapter) S corporation, which passes all income to its owners’ 1040s and pays no corporate level tax, according to Forbes. It’s a questionable tactic as S corporations are typically an instrument of small businesses, allowing owners to avoid paying taxes twice on relatively low amounts of revenue – once at the corporate level and again as the owner’s income.

Far from being a small business, Koch Industries is the second-largest private company in the United States. David and Charles Koch have done well for themselves by avoiding paying corporate income tax; each brother is worth $34 billion, making them both the fourth richest person in the U.S. and the sixth richest in the world, according to 2013 Forbes data.

Obama Villainizes Kochs to Raise Money, Says Koch Industries

Koch representative Mark Holden also told The Wichita Eagle that Obama has singled out the Kochs in order to scare liberal supporters into donating more to his campaign. Holden was referring to 2010 comments Obama made about the Koch-funded group Americans for Prosperity (AFP):

“Right now all around this country there are groups with harmless-sounding names like Americans for Prosperity, who are running millions of dollars of ads against Democratic candidates all across the country. And they don't have to say who exactly the Americans for Prosperity are. You don’t know if it’s a foreign-controlled corporation. You don’t know if it’s a big oil company, or a big bank.”

Again, Obama’s comments are not false. In fact, his remarks hint at why the increased IRS scrutiny of Tea-Party related groups was likely well-founded. The IRS requires that 501(c)(3)’s refrain from “activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate.”

Obviously, AFP is involved in partisan politics. The organization reported $36.4 million in outside spending on the 2012 election, with virtually all of that money going to support Republicans or oppose Democrats.

AFP skirts IRS non-profit rules by organizing itself into two divisions: a 501(c)(3) foundation (for which David Koch serves as chairman) that shares funds with a 501(c)(4) political arm. Unlike 501(c)(3)’s, 501(c)(4) organizations are allowed to participate in political campaigns and elections, as long as political activities are not the group’s primary purpose, a requirement that neither division of the AFP group seems to meet.

The AFP money is just the tip of the iceberg of the Koch’s brothers’ political spending. As individuals, the Kochs pledged $60 million to unseat Obama in the 2012 election, while Koch Industries has paid out $19.2 million in almost exclusively Republican political contributions since 1990, and spent another $76.8 million in political lobbying since 1998, according to OpenSecrets.org.

What Exactly Do the Kochs Have to Hide?

A discussion of the Kochs would not be complete without explaining why they are the villains of this story, not the victims they are attempting to emulate. This list of Koch environmental- and public health-related wrongdoing is just a primer, and is certainly not all-inclusive:

  • The Koch brothers are the biggest funders of climate change denial, having spent $67 million since 1997 trying to refute scientific facts and oppose environmental controls aimed at preserving public health. This Greenpeace report that figure is based on says the Kochs even outspent ExxonMobil in an attempt to preserve their own interests in the dirty energy industry.
  • Koch Industries was sued by the Department of Justice in the 1990s for causing more than 300 oil spills and releasing 3 million gallons of oil into lakes and rivers. While the potential penalty was $214 million, Koch Industries paid only $35 million to settle the suit, according to The New Yorker.
  • In 1999, a jury found Koch Industries guilty of negligence and malice in the deaths of two Texas teenagers in an explosion resulting from a leaky underground butane pipeline, for which the company paid an undisclosed settlement.
  • Also in the 1990s, the Justice Department accused Koch Industries of 97 counts related to its cover up of the discharge of 91 tons of the carcinogen benzene from its Corpus Christi refinery. In an all-too-familiar conclusion, the Kochs ended up paying only $21 million of a potential $350 million fine. The company also pleaded guilty to one criminal charge of covering up environmental violations, including the falsification of documents.

What do you think: Are the Kochs the innocent victims of intimidation by the Obama administration – or are they motivated by a desire to hide their own continued manipulation and wrongdoing?

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Select sources: Wichita Eagle, OpenSecrets.org, Greenpeace, The New Yorker