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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).