Damning the Koch Bros.

Did the libertarian businessmen break American laws in Iran?

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The recent headline in Bloomberg Markets magazine was nothing if not sensational: “Koch Brothers Flout Law Getting Richer with Secret Iran Sales.” Those would be the billionaire Koch brothers, Charles and David Koch, whose support for libertarian, small-government causes and sponsorship of the Tea Party has turned them into bêtes noires for the Left and a foil for much of the mainstream media.

Bloomberg Markets’ article was almost precisely calculated to fuel left-wing contempt for the Koches, with its account of an alleged pattern of unethical and illegal business practices by Koch Industries Inc., the brothers’ Wichita, Kansas, based oil company. As depicted in the report, Koch Industries Inc. was the very personification of corporate greed and profit-first amorality, a notoriously secretive company that regularly disregarded U.S. laws and regulations in order to do business, including with America’s enemies like Iran.

The Left instantly seized on the sinister-sounding storyline. Left-wing blogs raged at the Koch brothers' supposed “Iranian treason” and insisted that all the causes supported by the Koch brothers, from groups like Americans for Prosperity to the Tea Party, were tainted by association with them. Not to be outdone, Mother Jones demanded that Rick Perry, who had received funding from the Koch brothers while running for Texas governor, return all donations and renounce any and all ties to the Koches. New York magazine chimed in that, as a result of Bloomberg’s report, the Koch brothers “seem to be resembling more and more the left's caricature of them” as evil right-wingers bent on doing the country ill. What more proof could be needed of the Koch brothers’ malevolence?

For all the hyper-partisan outrage it generated on the Left, however, there was significantly less to the Bloomberg Markets report than met the eye. As journalism, the hit-piece was shoddy at best. For example, to back up its claims about Koch Industries' disregard for American laws in dealing with Iran, the magazine relied primarily on two sources, both disgruntled former employees. One of the sources, Ludmila Egorova-Farines, had been fired by the company for failing to show up to work. And the sources contradicted each other. Thus, to support its claims about Koch's dealings in Iran, the magazine relied on the say-so of one George Bentu, who was identified as a sales engineer for a subsidiary of Koch Industries based in Germany. “Every single chance they had to do business with Iran or anyone, else, they did,” Bentu was quoted as saying. Nowhere mentioned in the report was that Bentu’s account was dismissed by Ergorova-Farines, the other main source for the story, while she was still with the company. After investigating Bentu’s concerns, she found that they were “contradictory” and had “insufficient or no substantiation.” Clearly, the magazine had not chosen the most credible sources on which to base its indictment of Koch Industries.

But the problem with the story exceeded its dubious sources. Bloomberg Markets reported that between 2001 and 2007, a French subsidiary of Koch sold petrochemical equipment to Iran. Yet the magazine declined to highlight a highly critical point: the deals were perfectly legal. Although U.S. law banned American multinational companies from doing business in Iran, these companies’ foreign subsidiaries were allowed to operate under certain conditions. That exception is the reason that 74 corporations have done business in Iran over the last decade, according to the New York Times.

Despite that loophole, Koch Industries in 2007 went beyond what was required by U.S. law and voluntarily stopped doing business with Iran in any form. By contrast, many companies, including corporate donors to Democrats, stayed in Iran after Koch Industries had left. General Electric, whose CEO Jeffrey Immelt is chairman of President Obama's Council on Jobs and Competitiveness, continued to do business in Iran until 2008. Another Democratic funder, the industrial conglomerate Honeywell International Inc., is still selling security technology to Iran. In that time, those companies gave generously to Democrats. The Weekly Standard’s Mark Hemmingway points out that between 2003 and 2010, the Democratic Senatorial Campaign Committee took at least $343,000 in donations from corporations doing business with Iran, including from Koch's political action committee. (That history did deter the DSCC from trying to make political hay of the Bloomberg Markets story by demanding that Republicans call on Koch Industries to cut ties with Iran, something the company had already done.) If Koch’s prior involvement in Iran tainted its political contributions, why was the same not true for the funds that flowed to left-wing coffers and causes from the likes of GE and Honeywell? Neither the Bloomberg Markets article nor the left-wing bloggers who trumpeted its findings paused to consider the question.

Instead, the magazine explored the absurd and offensive theory that Koch Industries’ willingness to do business with Iran stemmed from the libertarian politics of the Koch brothers. Although the connection was never concretely spelled out, the implication was that the brothers’ dislike for government regulations was behind their company’s willingness to break the law to do business in Iran. The charge was baseless on several counts. First and foremost, the company’s business in Iran, conducted through a subsidiary, was entirely legal. More to the point, there was not a shred of evidence connecting libertarian politics to Koch Industries' involvement in Iran. One could just as plausibly suggest that liberal politics drove Democratic donors to set up shop in Iran. Indeed, those companies arguably have more to answer for, since they continued to business in Iran after Koch Industries had left.

All those flaws help explain why, aside from ecstatic coverage by left-wing partisans, the Bloomberg Markets has gotten little traction since its publication last week. If one aim of the story was to discredit the Koch brothers and their company in the eyes of the Tea Party and conservatives generally, it has clearly failed. If anything, it has confirmed that while left-wing billionaires like George Soros – who has been convicted for insider trading in Europe – get a free pass in the media, conservatives will be demonized regardless of the facts. But then, they already knew that.