Friday, May 09, 2014

Where Does The Anti-Democracy Koch Smear Machine Get Its Money?


Most of their wealth comes from oil and gas

This morning, you may have read that just one of the arms of Koch brothers' political Dark Money assault against democracy, a shady proto-fascist outfit called Americans for Prosperity, plans to spend a minimum of $125 million on the midterm elections. "The projected budget for Americans for Prosperity would be unprecedented for a private political group in a midterm, and would likely rival even the spending of the Republican and Democratic parties’ congressional campaign arms," writes Ken Vogel for Politico. Americans for Prosperity has already spent $35 million this cycle smearing the very conservative Democrats who have been most likely to actually back-- whether through fear or conviction-- the Koch/GOP agenda: Kay Hagan (NC), Mark Pryor (AR), Mark Begich (AK) and Mary Landrieu (LA). In Landrieu's case, the Koch smear campaign is already yielding results, her negatives rising dramatically from 28% to 58% since the Koch's gave the go-ahead for the attacks to begin. 59% of Louisiana voters now say they would rather have a new senator.
The plans-- combined with those of other groups in the sprawling political operation affiliated with the billionaire industrialists Charles and David Koch-- more closely resemble the traditional functions of a national political party than a network of private nonprofit groups.

The goal of the network is a long-term movement to expand the political playing field for conservatives-- both into new states and into non-traditional demographics including millennial, Hispanic and low-income voters.

AFP’s $125-million projected 2014 budget alone would also exceed the total 2012 fundraising hauls of the Democratic Congressional Campaign Committee, National Republican Congressional Committee, Democratic Senatorial Campaign Committee or the National Republican Senatorial Committee.

As the Koch network prepares to gather its operatives and donors next month for an annual summer fundraising seminar, it’s implementing a series of adjustments based on lessons learned from 2012. In the run-up to that election, the network spent more than $400 million only to watch President Barack Obama win reelection and his Democratic allies retain the Senate.

Some megadonors wondered what their cash bought, and privately suggested they might look to spend their money elsewhere. The Koch operation undertook a forensic analysis of what went wrong designed partly to prove to donors that it could be trusted with their political donations going forward.

AFP identified “three key areas where the Left outperformed our efforts in the field,” according to the memo, which conceded they were “tough and painful lessons-- but it’s important to remember that AFP is run like a business”:

“Our data system was insufficient” and failed to quickly process information fed into it by thousands of canvassers and phone bankers contacting voters, causing “delays in updates, leading to some data inaccuracies during a critical phase of our organizing efforts.”

“We were outmanned” by the left generally and Obama’s campaign, specifically, which, the memo notes “had 770 field staff on the ground” in Florida alone. By contrast, the memo notes that AFP and “other network partners” had about only 300 total field staff nationwide.

“The Left had a superior messaging strategy and implementation that effectively identified their demographic targets, determined which issues resonated best with which groups, and delivered specific messages over TV, radio and online ads for those audiences.”

…Echoing Charles Koch’s opposition to the minimum wage, it asserts that free market, low-regulation policies “create the greatest levels of prosperity and opportunity for all Americans, especially for society’s poorest and most vulnerable.” Yet, the memo says, “we consistently see that Americans in general are concerned that free-market policy-- and its advocates-- benefit the rich and powerful more than the most vulnerable of society. …We must correct this misconception.”

The major contributors to the Koch network groups tend to skew much whiter and older than the population the groups are trying to reach. And while the emcee of the Koch donor seminars, Kevin Gentry, in April emailed a group of fundraisers for allied organizations that “we want our donors to be younger,” he added that “just doesn’t track with reality. So if we try to ‘force’ our donors to become younger-- i.e., focusing our donor acquisition more at youth cohorts, we will likely have less efficient and less economically profitable fundraising.”
Referencing the thorough research of Bloomberg reporter David de Jong, we find that two of the Koch brothers-- dangerous anti-democracy extremists David and Charles-- are, collectively, worth over $100 billion. The richest person in the world is Bill Gates ($79.5 billion) followed by Carlos Slim ($67.1 billion) and Warren Buffett ($64.5 billion). But not all the Dark Money for the anti-democarcy enterprise comes from the two anti-American brothers. They've carefully developed a whole network of wealthy, old white people who are obsessed with racism, greed, paranoia and anti-social manias. Some give immense sums and some give modestly. De Jong came across one of these hidden billionaires, the 4th richest woman in America-- the 5th richest woman in the world-- whose very controversial inheritance gave her a 15% interest in Koch Industries. 70 year old Elaine Tettemer Marshall of Dallas has managed to avoid the spotlight that billionaire status usually brings. Her stake in the Wichita, Kansas-based industrial conglomerate, which generates annual sales of $110 billion, is worth more than $12.7 billion. The only richer women, like her, did nothing to build or earn immense fortunes, just inherited them-- a couple of Waltons and the Mars candy heiress, Jacqueline Mars. Marshall gained control of the Koch stake following the death of her husband, E. Pierce Marshall in 2006, although the contested battle over the will-- with her "mother-in-law," Anna Nicole Smith a Playboy Bunny, stripper and hooker-- went all the way to the Supreme Court.
[Elaine] Marshall’s ability to stay out of the limelight stands in contrast to her father-in-law, J. Howard Marshall, who had been a Koch shareholder for more than two decades and created a spectacle with his 1994 marriage to Smith, then a 26-year-old Playboy model, whom he wed at age 89. Since then, the Marshall fortune has been in a near-constant state of turmoil.

In April 1995, four months before Howard Marshall’s death, Smith sued his son, Pierce, in Harris County, Texas, probate court, accusing him of interfering with his father’s ability to provide her spousal support. The lawsuit was the first in a stream of legal cases that led to a 16-year battle between Smith and Pierce Marshall, the end of which neither would live to see. Marshall succumbed to an infection in 2006 at age 67; Smith died of a drug overdose at age 39 in a Florida hotel in 2007.

…The partnership between the Koch and Marshall families began in 1959, when Koch Industries founder Fred C. Koch acquired a 35 percent stake in Great Northern Oil Co., a Minnesota-based refinery co-founded by Howard Marshall, for about $5 million in cash. A decade later, Koch’s second-oldest son, Charles, offered to swap the rest of Marshall’s stake in Great Northern for Koch Industries shares.

“He took stock rather than cash-- and held on to it,” said Robert L. Bradley Jr., editor of Howard Marshall’s autobiography, Done in Oil, in an e-mail. “The stock appreciated into something very, very large.”

In 1974, at the wedding reception of his oldest son, J. Howard Marshall III, the elder Marshall gave each of his two sons 4 percent of Koch Industries voting stock, telling them, “Boys, these are the Crown Jewels, take care of them,” according to documents filed by the U.S. District Court for California’s Central District in Santa Ana in 2002.

Those jewels played a crucial role in an attempted boardroom coup six years later, when two of Charles Koch’s brothers tried to oust him as CEO. With some cousins and several allies, Bill Koch and Frederick Koch controlled about 48 percent of the votes, and turned to Howard Marshall’s sons to gain the majority needed to displace Charles. Howard III sided with the dissident brothers; his younger brother, Pierce, rejected their plea.

His loyalty tied to Charles Koch, Howard Marshall thwarted the coup by buying back his oldest son’s voting stock for $8 million. According to court documents, Marshall subsequently disinherited Howard III, considering the $8 million payment “an early inheritance.”

Howard III contested his father’s will in Harris County probate court in 1995. Pierce Marshall, who was left in charge of his father’s estate following his death, countersued, claiming his older brother committed fraud when he sold his Koch Industries voting stock back to their father at an inflated price.

The court sided with the estate. According to the verdict, rendered in 2001, Howard III had engaged in fraud by stating a claim to his father’s inheritance, and was ordered to pay about $11 million to various Marshall family trusts. Howard Marshall III and his wife, Ilene, filed for bankruptcy in Los Angeles in 2002.

While dueling with his brother, Pierce Marshall was also fending off charges from Anna Nicole Smith, who filed for bankruptcy in 1996. During the bankruptcy proceedings, the former stripper-- her given name was Vickie Lynn Hogan-- claimed her late husband had intended to set up a trust in her benefit. The trust was to have contained a sum equal to half of the increased value of Marshall’s assets during their marriage. Pierce Marshall, Smith claimed, illegally interfered with the trust’s creation.

In 2000, the U.S. bankruptcy court for California’s Central District in Los Angeles awarded Smith about $475 million in damages, determining that Pierce Marshall had “deprived her of her expectancy of a substantial inter vivos gift from her deceased husband J. Howard.”

…Smith never got a dollar. The Harris County probate court, where she had filed her first lawsuit against Pierce Marshall, ruled in 2001 that she had no valid claim to the estate… After the first Supreme Court decision in 2006, Pierce Marshall transferred his Koch stake, held by a company called Trof Inc., into a Grantor Retained Annuity Trust (GRAT) named Staurolite. Marshall owned all of Trof, according to the 2002 District Court ruling. Trof held 14.6 percent of Koch Industries, according to a 2001 application to the Federal Communications Commission, which was submitted by a company in which a Koch subsidiary held an interest.

Pierce Marshall was listed as Staurolite’s grantor and Elaine as the trustee, according to the trust agreement. Pierce also created his will at that time, leaving the majority of his estate to Elaine and appointing her as executrix. In his will, Pierce Marshall directed that, upon his death, all of his interest in the Staurolite GRAT be transferred to the EPM Marital Income Trust, of which Elaine Marshall is the trustee. He died six weeks after signing his will.

In a brief submitted to the Supreme Court in March 2009, Howard K. Stern, the executor of the Anna Nicole Smith estate, accused the late Pierce Marshall of moving the family’s most valuable asset-- Koch Industries stock-- outside of his estate. Elaine Marshall responded in a court declaration that the creation of the will and GRAT was the result of “18 months of planning, reparation and drafting,” and “not caused by the Supreme Court’s decision” that granted jurisdiction to the District Court in 2006 over Smith’s claim.

“The whole advantage of a GRAT is passing appreciated property to your family members without a gift tax,” said Robert Willens, an independent tax adviser based in New York. “You can say with a straight face, if you’re called on to disclose your assets, that you no longer own the stock that you’ve put into the trust. All you have is this amorphous annuity interest.”

Elaine Marshall didn’t list the GRAT as part of his estate, according to an inventory of Pierce Marshall’s estate assets, submitted to the Supreme Court in 2009. The estate’s most valuable asset listed in the inventory was Telomere LLC, which represented more than $115 million of the estate’s reported $125 million value.

Marshall is one of nine Koch Industries board members. She donated $5,000 to the company’s political action committee in December 2011, according to the Center for Responsive Politics. She is credited with the family’s Koch stake because of her control over the EPM Marital Income Trust.
The tangled webs and hidden trusts and shady organizations layered on each other makes it impossible to know for sure where the flow of Dark Money in the Koch world is coming from and where exactly it goes. All we found on Elaine's political giving, aside from the $5,000 to the Koch PAC were a few vanilla contributions to Bush and Dole.

Bloomberg's report last month on the 2 Koch brothers net worth topping $100 billion, emphasized some of the shady political maneuverings the two are employing in their twisted, relentless war against working families in this country. The misnamed "Freedom Partners" is one of their many attack machines, which is running vicious smear campaigns aimed at polluting the political debate in Colorado and Iowa with attacks against Democrats for backing expansion of health insurance.
“The Koch brothers are pouring millions into this,” Chris Harris, a campaign spokesman for Senator Udall, said in an e-mail yesterday. “They’re only fighting for their own interests, not Coloradans’. Mark Udall has a long record of fighting for the middle class and stops at nothing to protect Colorado’s special way of life.”

…Jeff Giertz, a spokesman for Braley’s campaign, said the Kochs and the GOP candidates they support stand behind policies that would hurt Iowa’s economy.

“Bruce Braley fights for Iowa’s working families because that’s where he comes from, and he’ll keep fighting for Iowa in the U.S. Senate,” Giertz said in an e-mail yesterday.

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