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Koch Brothers Sue Cato in Ownership Dispute

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Fancy building, disputed

In a move that could have significant impact on institutional libertarianism, Cato Institute founder Charles Koch and his brother David (the latter of whom sits on the boards of both Cato and the Reason Foundation, which publishes this website), are suing Cato, Cato President Ed Crane, and the widow of recently deceased former Cato chairman William Niskanen in a dispute over Niskanen's ownership shares in the $39 million libertarian think tank. Here's how the Washington Post, which broke the story, characterized events:

Charles and David Koch, owners of a Wichita-based conglomerate that ranks as one of the largest private corporations in the world, filed a lawsuit this week in Kansas seeking an option to increase their 50 percent control of the Cato Institute.

Cato President Ed Crane blasted the lawsuit Thursday as an attempted "hostile takeover" of a venerable Washington institution that he co-founded with Charles Koch in the 1970s.

"Mr. Koch's actions in Kansas court yesterday represent an effort by him to transform Cato from an independent, nonpartisan research organization into a political entity that might better support his partisan agenda," Crane said in a statement. He vowed to fight the move "vehemently."

The New Yorker's pic of Ed Crane

Charles Koch said in a statement that he and his brother were only seeking to uphold the terms of the shareholder agreement that governs Cato and were not "acting in a partisan manner."

"We support Cato and its work," he said. "We want to ensure that Cato stays true to its fundamental principles of individual liberty, free markets, and peace into the future, and that it not be subject to the personal preferences of individual officers or directors." […]

Cato was most recently divided between four shareholders: the two Koch brothers, Crane and former Cato chairman William Niskanen.

The lawsuit centers on the fate of the shares owned by Niskanen, who died in October. The Koch brothers contend that they have the option to buy Niskanen's shares, but no offer has been made to them, according to the lawsuit. The shares now belong to Niskanen's widow, Kathryn Washburn. […]

Charles Koch was the largest financial backer of Cato in its formative years. More recently, however, the brothers have cut back on their giving to the organization, donating nothing last year, according to Cato officials. The Koch[s] have given millions of dollars to a new libertarian center at George Mason University.

A Cato spokeswoman last year said that Charles Koch and Crane had a "falling-out" in 1991.

More information, including more quotes from both sides, at the link. Here also are PDF links to the lawsuit, and to Cato's bylaws.

The New Yorker's pic of David Koch

The New Yorker's Jane Mayer, author of a controversial and influential hit piece on the Kochs two years ago, provides background, some of it culled from Reason Senior Editor Brian Doherty's foundational history of the libertarian movement:

Cato was co-founded by Edward Crane and Charles Koch, in the nineteen-seventies, with Koch's money; the lawsuit notes that the original corporate name was the Charles Koch Foundation, Inc. […]

Brian Doherty, in his 2007 history of the libertarian movement, "Radicals for Capitalism," writes, "As for what happened between Cato's Ed Crane and his longtime biggest supporter, Crane himself insists 'I don't know what happened. I'll go to my grave not understanding what happened.'"

Doherty also interviewed Charles Koch, whom he portrays as being rather blithe about the breakup: "For his part, Charles Koch decided at a certain point that 'my involvement [with Cato] was counterproductive. I have strong ideas, I want to see things go in certain direction [sic], and Crane has strong ideas. I concluded, why argue with Ed? Rather than try to modify his strategy, just go do my own thing and wish him well. I had to get out to let them reach their potential, and I think it worked out to their benefit.'"

More analysis and commentary from David Weigel, Jonathan H. Adler, and Skip Oliva (whose Twitter feed has been full of related content).

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

148 responses to “Koch Brothers Sue Cato in Ownership Dispute

    1. …is fun to watch.

      But don’t let them fool you; they all are still Market Fundamentalists, who demand a strict adherence to specific religio-economic doctrines, usually as a reaction against TEH LIBURULZ.

      Praise Teh Holy Spirit and Teh Invisible Hand.

      1. Economists instead were assigned the task to dispense priestly blessings that would allow business to operate independent of damaging political manipulation. They accomplished this task by means of their message of “laissez faire religion, based on a conception of a society composed of competing individuals”…Admittedly, as the economic “symbolism got farther and farther from reality, it required more and more ceremony to keep it up.”
        ? Robert H. Nelson, REACHING FOR HEAVEN ON EARTH

        Economic efficiency has been the greatest source of social legitimacy in the United States for the past century, and economists have been the priesthood defending this core social value of our era.
        ? Robert H. Nelson, ECONOMICS AS RELIGION

        source: http://www.dieoff.org

        1. Bold Fontz Are Kool

      2. I wish Cato or the Kochs were market fundamentalists, it’s just the bland fighting the beige now.

        1. Wooly Beige. Wasn’t that L. Neil Smith’s stand-in character for Harry Brown in The American Zone?
          Jesus. Reading that mess was a couple hours of my life wasted.
          And now I’ve wasted more seconds commenting on it.
          I’ve done it again!
          And again!
          Somebody stop meeeeeeeeee!

  1. KOCHTOPUS

    Where is Lew Rockwell in all this?

      1. Typical Raimondo, associate anyone he doesn’t like with Stalin or Hitler.

        1. Typical everyone

        2. fucking stupid.

    1. Kochtopus vs. Crane. I think I saw this on Animal Planet. Or here.

      1. Please. The “Craniacs” versus the “Kochtopus”.

        Only one man can bring this all back together: David Bergland.

    2. If you can get Ed Crane and a Koch brother (really, one is all you need) on the Reason Cruise, I’ll sign up.

    3. Where is Lew Rockwell in all this?

      Read, and behold. It’s going to get interesting:

      http://www.underpenaltyofcatap…..ch-vs-cato

      The agreement … proves that Murray was an original shareholder.

      What is most significant, is that according to David, Murray never signed his certificate over to Cato or Koch. Since the current Koch brothers lawsuit is all about turning a certificate over, the Koch brothers obviously understand that the turning over of a certificate is important.

      Since Murray didn’t sign his and he left his entire estate to his wife and his wife left Lew Rockwell as the executor upon her death, in a logic endorsed by the Koch brothers (via the lawsuit), Lew has a strong argument that because the Rothbard certificate has not been endorsed over to Cato, Lew represents those certificates in the goings on at Cato.

      1. Awesome for the shit show yeah maybe, but not so awesome for Cato.

    4. Going to entertaining if it turns out Lew Rockwell is now a major shareholder, thanks to the revelling lawsuit.

  2. There is nothing more fun than watching billionaires fight over a nickel
    -this one is going to be fun

    1. Watching John and the other puppets accuse every troll of being you is kinda funny. In a sad way.

      1. The sad part is John doesn’t know why he’s doing it; he’s a parasite living symbiotically on another organism

    2. http://zengersmag.blogspot.com…..ic-in.html

      “She saw them take out 100 barrels of oil on the Osage reservation and mark down 70 barrels. They’d take 40 barrels and mark down 30. I followed the trucks to the central loading dock, and the man said, ‘I want more overage.’ In the old days we called that ‘thievery.’ Today we call it ‘job creation.’ The guy standing on the deck was named Charles Koch” ? one of the notorious Koch brothers who are among the principal corporate villains cited by the Occupy movement ? “and when he was asked why, since he’s already a billionaire and he’s taking $3 from Stanlee Ann Mattingly ? Koch said, ‘I want what’s coming to me, and that’s all of it.'”

  3. What’s libertarian about forcing someone to sell you something? On what basis does the widow not get to just hold the shares?

    1. On the basis of a previously agreed-upon contract.

      1. …to market fundamentalists.

        1. But not marriage contracts or newsletters I sign.

          “I disavow.”

          “Things happen.”

          1. Market fundamentalists don’t think contracts can be broken? That’s news to me.

    2. What’s libertarian about forcing someone to sell you something?

      So you’re saying there was force or fraud involved in the signing of the contract?

    3. Seer|3.2.12 @ 2:22PM|#
      … On what basis does the widow not get to just hold the shares?

      Uh, this is a standard legal clause in the formation of a joint-general partership company; the issue falls under the concept of Right of First Refusal.

      The example here is 3 people agree to run a business; if one dies, the remaining partners have the right to allocate the former owners shares in a pre-agreed upon manner in order to maintain business continuity, and ensure that those who *own* the firm have the greatest interest in its success. Say the dead guy’s kids/family were screaming liberals; is their 30% ownership of a libertarian think-tank in the interests of the firm? The beneficiaries are certainly entitled to the *value* of the inherited ownership stake (its $ value) – but not its independent transferrance to *anyone*, sans input from the other business-partners.

  4. That is a fancy building, for fancy-pants individuals, no doubt.

    Us regular-pantsed proles have to make due in our Soviet-style concrete apartment blocks.

    1. What about the pantsless, Jim? What happens to them?

      1. They are issued Utilikilts and Vibram Fivefingers.

        1. Hey! I resemble that remark!

        2. Thankfully the Dallas Irish Festival is this weekend, so all day tomorrow I get to embarass my wife wearing my kilt, with no underwear, and “accidentally” flipping it up every time I sit down.

          Sadly though it is a traditional kilt, not a utilikilt.

          1. I have given some thought to taking up competing in highland games, and at least half of that was based on my desire to wear a kilt in public.

            1. Wear one anyway. Fuck it, what are people gonna do, Warty? Think you’re more of a freak than they do already?

              Honestly, in my experience, you get more questions about the Fivefingers than you do the kilt.

              1. The questions are fucking constant. It’s highly annoying.

                1. Yeash, the first couple of times, I didn’t mind. The next 600, it started to wear on me.

                  1. I prefer my Merrels to the Vibrams at this point, because no one stops me to ask about them.

                2. So is caber tossing involved?

                  1. Yes.

                    Wait, you’re using that as a euphemism for something sexual, right, Ska? The answer is still yes.

                    1. I’m telling you, I understand why women wear skirts now. That thing is soooo comfortable, esp. in the Texas summer. Easy to just take a shitpiss while you’re walking, too. Just falls right out onto the ground, no fuss no muss.

          2. irish kilts?

            1. I was going to write the same, but if you’ve ever seen any version of the Emerald Society in a parade, they wear kilts and play bagpipes, too.

              1. a modern innovation only

                1. I’m doing to to rub my Scottish pride in their snooty poverty-stricken Irish faces.

                2. Kilts are also a relatively modern innovation.

          3. I went to a black-tie New Year’s party years ago with an ex-girlfriend and a few other couples, and one of the guys was wearing a formal kilt. Too awesome. I thought about getting one, but it’s just crazy expensive.

            1. Aren’t they like $700 and up? I do like the idea of having one, though. It would give me an extra reason to grow a beard down to my navel, I think.

              1. I looked, and you can get a good one for around $1,000. The big cost, I believe, is the kilt itself.

                I own a tux, and I’ve thought about getting a tartan waistcoat. I already have “Pro Libertate” cufflinks.

            2. Yeah, traditional formal full on kilts are crazy expensive. I think on the order of $3k? But there are many lower priced alternatives. I get most of mine at various RenFests.

              1. I got my at our renfaire, but felt like a chump when I saw websites offering them for much less.

                For a few hundred more I can even get one made (online) from my specific clan tartan.

                1. That’s what makes it so expensive for me. There are national tartans, and that whole clan tartan business is largely fictional. At least in the sense that it goes back before the 19th century (Scots were waaay in vogue in England then).

                  1. Well sure it was mostly invented within the last two hundred years, but it’s still something a lot of people in the Scottish heritage movement do.

                    I get a discount with some retailers as a dues-paying memeber of my clan association (I also get a shitty quarterly newsletter and some schwag like stickers and membership card, etc.)

                    1. I have some clan stuff from my family, so I can’t throw large stones or telephone poles.

  5. BTW, thanks for reading my blog, honey 😉

  6. Come on. How many times do we have to go over this? The purges come after you take power.

  7. Interesting news; unlike these babies fighting over blocks:
    France to require Breathalyzer kits

    It gives whole new meaning to BYOB

  8. I have to give Cato higher marks than Reason on capitalism these days. Cato invited Soros to speak at its Hayek celebration. Great capitalists like Soros need to be heard.

    (Cue the rightwing nutcases who think Soros is a “commie” despite his continuous fight against statism in Eastern Europe).

    1. OOoohh! Shrike spoof!

      1. No, I think that’s just shrike.

  9. Meetings at the club of secret billionaires who rule the world are going to be awkward!

    1. Like that meetings at the Masonic Temple aren’t already awkward ENOUGH!? LOL!

  10. I’d ask why we can’t all just get along, but I’ve been reading Hit & Run comments for long enough to know that’s not going to happen.

    1. That made me laugh and blow snot out my nose.

      Well done!

  11. Internecine conflicts are the best conflicts.

    1. -1 point for not using extirpation somewhere in that sentence.

      1. Internecine conflicts resulting in the extirpation of hegemonic dualities are the best conflicts.

        1. TWO BILLIONAIRES ENTER ONE BILLIONAIRE LEAVES

          1. As long as all the money is ok.

          2. Just to be clear, Ed Crane isn’t a billionaire, right? Jokes aside, it seems like that’s suggested a couple of times in these here comments.

            1. Did you see the picture up there? It screams monocle.

              1. Strictly honorary. I’m not sure he’s even “rich”, except in the Obama sense (i.e., people with money who aren’t mutual).

            2. How dare you question me!

              1. Dude, they’re going to execute the billionaires (other than a few of the more proletarian bent–yeah, I know) first. Let’s not get Ed added to the list.

                1. Cambodia redux, everyone with a monocle gets shot.

            3. Wait… aren’t WE ALL billionaires? I assumed… i mean, *you’re* not?? I thought it was like… a rule for joining??… god, I’m so embarassed. The rest of the Illuminati are going to so laugh at me…

              1. Silly person. Mere billions are for common folk.

              2. “Wait… aren’t WE ALL billionaires?”

                Not for another three years when a case of Old Style will cost $100,000.

                1. Are you claiming to have 10,000 cases of Old Style set aside?

                  1. Used to, now it’s down to about three.

                    1. Someday, I hope I can say, “We are ALL billionaires now.”

        2. The Jungian thing?

          1. The well-hungian thing, if ya know what I’m sayin’…

          2. No. Piss off.

            1. All I ask is that you obey my orders like you would the word of God.

              1. Like I told you before, that should be a management book title.

                1. When I was in cooking school the chef had a sign in his office window that read:

                  Rule #1: The boss is always right.

                  Rule #2: When the boss is wrong, refer to Rule #1.

              2. Oops.

                Woah woah woah Warty, you DON’T want people to obey you like it was the word of God, you at least want to do better than THAT.

  12. Nice alt-text.

  13. I guess it’s true what they say. Ask and you shall receive.

  14. If he gets Cato next he’ll be after Green Hornet.

    1. No, no – they already got OJ, so now they’re trying to get Cato.

    2. Please. Wrong Cato.

      This is the right Cato: “You fool! You raving Oriental idiot! There is a time and a place for everything, Cato! And this is it!” [Clouseau goes to attack Cato, but misses and destroys the restaurant’s kitchen.]

      1. +1 Nonexistent upvote.

  15. …..SO 24 hours ago….

    http://www.washingtonpost.com/….._blog.html

    (I believe that’s the same one Matt linked to – too lazy to check – CAUSE I ALREADY READ THIS YESTERDAY)

  16. …whom sits on the boards of both Cato and the Reason Foundation…

    Here’s hoping Drew Carey outlasts David Koch, even though I once voted for Davy for Vice President. True story.
    Come to think of it, I also once voted for Wayne Allyn Root for Vice President. Jesus. What the fuck is wrong with me?

    1. No what the fuck is wrong with me?

    2. No what the fuck is wrong with me?

  17. Great capitalists like Soros need to be heard.

    Yup.

    1. …no one ever listens to him.

  18. So the Koch brothers are trying to toss a widow out into the street, eh? This won’t go over well on the MSNBC tonight.

    1. If she was depending on living off of a non-profit organization, she deserves it.

      1. ballers gotta roll like that. Voluntary says voluntary, bitch.

    2. If you mean pay her millions for a corporation that is designed never to make money by “tossing her into the streets” then yeah that is what the Kochs are doing.

  19. Jesus. What the fuck is wrong with me?

    You’re obviously not afraid of failure.

    1. You’re obviously not afraid of failure.

      Let’s see:

      David Koch
      Andrew Marrou
      Nancy Lord
      Jo Jorgensen
      Art Olivier
      Richard Campagna
      Wayne Allyn Root

      I have no idea what you’re talking about.

      1. Oh, wait. How the fuck could I have forgotten Jim Lewis?

        1. Really — how many others of you can say they’ve cast a vote for all of these greats?

          1. I fake voted for Gus Hall when we had a fake election in school when I was 9 (1980).

      2. At least Jo was a hottie.

  20. Cato is non-partisan? Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha.

    1. Honest question: To which party do you think they belong?

      1. Holy cow, has he read nothing published by Cato? If they’re helping the Republicans, it’s in the same way the Nazis helped the Russians in the summer of ’41.

        1. That’s why I ask, Pro L, ’cause I honestly don’t know what he’s getting at.

          1. Trolling, silly. Sheesh.

            1. Apparently I don’t understand trolling, then.
              “Puzzling” troll is puzzling?

              1. His rhetorical question, followed by the excessive derision, was obviously meant to elicit a response. That’s how I understand trolling, anyway. Ask John. He’s the expert around here at getting trolled.

                1. excessive derision

                  ??
                  Apparently I also don’t understand “excessive derision.”
                  Oh, well.

                  1. Oh, wait. You’re saying the troll showed “excessive derision” simply to get any kind of response at all.
                    Huh. Weird.

      2. Like all the other libertarians, they’re owned lock stock and barrel by the conservatives.

    2. Non-partisan is a designation handed out by the IRS. Most non-partisan groups have clearly laid out ideologies.

      1. To be sure, Cato is no shill. Some think tanks are, more or less. Probably most.

  21. So Michael Caine is David Koch? Is that a picture from Inception?

  22. “We support Cato and its work,” he said. “We want to ensure that Cato stays true to its fundamental principles of individual liberty, free markets, and peace into the future, and that it not be subject to the personal preferences of individual officers or directors.”

    Like hiring those leftwing twits Wilkinson and Sanchez!

    1. You’ve never actually read anything Sanchez has written have you?

  23. BFD.
    I’m getting married!

    1. And…pathetic troll is pathetic.
      Yep, I really don’t get trolling these days.

      1. You’re supposed to ignore it. Answering it only makes it stronger.

        1. So our trolls are looking for and satisfied by any kind of answer at all?
          Really, what would be the purpose, then? Are our trolls nihilists?
          That’s just scary.

  24. This all reminds me of a party I went to at Ed Crane’s house. Everyone was in the backyard having a good time and when I went in to go to the bathroom I found Ed on the couch watching a rerun of Friends. Dude just doesn’t give a fuck about anyone.

  25. It is kind of weird for the Koch Bros. to have such a hands-off policy on Cato for so many years and then suddenly go all litigation-y about it. I haven’t seen any real explanation for that. Presumably, they could have exerted influence or bought out one of the other partners in the past if they had wanted.

    1. No it’s not weird. It’s your owners telling you that you can’t have it both ways any more. You can’t both take their $$$ and pretend to be “free”. I’m surprised the Koch’s have been this nice to you up until now.

  26. Sounds like a plan to me dude.

    http://www.Went-Anon.tk

  27. So, how much is the widow holding out for?

  28. Without commenting on who should win one way or the other, why do they even want to waste a lot of money litigating this? It’s not like posession of her shares will assure them a bigger slice of that phat Cato dividend payment next quarter…

  29. Personally I think this makes the Kochs look very bad, particularly Charles. How many weeks ago was it that Bill Niskanen was buried? I believe it was about 12 weeks and they are in court suing his widow. That is classless and crass.

    Cato has a good reputation of producing quality policy material. Koch has a reputation of being a power-hungry man with few real principles, mostly interested in protecting just his own personal interests.

    As a libertarian who previously defended them from unfair attacks, I’m now cheering the attackers on. This is despicable. This is just a power play that will end up discrediting a great libertarian organization in order to satisfy the ego of Charles Koch.

    1. Well, probably they assumed they would have this option, and the widow assumed she would get the ownership. I’m sure they tried to talk it out before it got to this stage.

  30. This sounds like a job for Rollerball.

  31. Haha. You political hacks expose yourselves once again by omitting him.

    http://www.economicpolicyjourn…..-cato.html

  32. No mention of Rothbard?

  33. This Email from Jerry Taylor post at The Volakh Conspiracy provides detail into the happenings at CATO of late:

    Koch v. Cato ? A View from Cato

  34. “Cato was co-founded by Edward Crane and Charles Koch, in the nineteen-seventies, with Koch’s money; the lawsuit notes that the original corporate name was the Charles Koch Foundation, Inc.”

    You overlooked Murray Rothbard, who named it the Cato Institute and owned shares as well, until they where taken from him.

    Kind of overlooked that, huh?

  35. All of a sudden, Big Daddy Koch is tired of your shit and wants you to cut the crap and pay the piper. HOW DOES IT FEEL TOADIES?! Not so nice when the big bully treats you exactly like any other cheap hooker now is it?

  36. Wow. Something tells me this takeover will be the gift that keeps on giving.

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