Inside the Koch Brothers’ Toxic Empire
Together, Charles and David Koch control one of the world’s largest fortunes, which they are using to buy up our political system. But what they don’t want you to know is how they made all that moneyBy TIM DICKINSON
The enormity of the Koch fortune is no mystery. Brothers Charles and David are each worth more than $40 billion. The electoral influence of the Koch brothers is similarly well-chronicled. The Kochs are our homegrown oligarchs; they’ve cornered the market on Republican politics and are nakedly attempting to buy Congress and the White House. Their political network helped finance the Tea Party and powers today’s GOP. Koch-affiliated organizations raised some $400 million during the 2012 election, and aim to spend another $290 million to elect Republicans in this year’s midterms. So far in this cycle, Koch-backed entities have bought 44,000 political ads to boost Republican efforts to take back the Senate.
What is less clear is where all that money comes from. Koch Industries is headquartered in a squat, smoked-glass building that rises above the prairie on the outskirts of Wichita, Kansas. The building, like the brothers’ fiercely private firm, is literally and figuratively a black box. Koch touts only one top-line financial figure: $115 billion in annual revenue, as estimated by Forbes. By that metric, it is larger than IBM, Honda or Hewlett-Packard and is America’s second-largest private company after agribusiness colossus Cargill. The company’s stock response to inquiries from reporters: “We are privately held and don’t disclose this information.”
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But Koch Industries is not entirely opaque. The company’s troubled legal history – including a trail of congressional investigations, Department of Justice consent decrees, civil lawsuits and felony convictions – augmented by internal company documents, leaked State Department cables, Freedom of Information disclosures and company whistle-blowers, combine to cast an unwelcome spotlight on the toxic empire whose profits finance the modern GOP.
Under the nearly five-decade reign of CEO Charles Koch, the company has paid out record civil and criminal environmental penalties. And in 1999, a jury handed down to Koch’s pipeline company what was then the largest wrongful-death judgment of its type in U.S. history, resulting from the explosion of a defective pipeline that incinerated a pair of Texas teenagers.
The volume of Koch Industries’ toxic output is staggering. According to the University of Massachusetts Amherst’s Political Economy Research Institute, only three companies rank among the top 30 polluters of America’s air, water and climate: ExxonMobil, American Electric Power and Koch Industries. Thanks in part to its 2005 purchase of paper-mill giant Georgia-Pacific, Koch Industries dumps more pollutants into the nation’s waterways than General Electric and International Paper combined. The company ranks 13th in the nation for toxic air pollution. Koch’s climate pollution, meanwhile, outpaces oil giants including Valero, Chevron and Shell. Across its businesses, Koch generates 24 million metric tons of greenhouse gases a year.
For Koch, this license to pollute amounts to a perverse, hidden subsidy. The cost is borne by communities in cities like Port Arthur, Texas, where a Koch-owned facility produces as much as 2 billion pounds of petrochemicals every year. In March, Koch signed a consent decree with the Department of Justice requiring it to spend more than $40 million to bring this plant into compliance with the Clean Air Act.
The toxic history of Koch Industries is not limited to physical pollution. It also extends to the company’s business practices, which have been the target of numerous federal investigations, resulting in several indictments and convictions, as well as a whole host of fines and penalties.
And in one of the great ironies of the Obama years, the president’s financial-regulatory reform seems to benefit Koch Industries. The company is expanding its high-flying trading empire precisely as Wall Street banks – facing tough new restrictions, which Koch has largely escaped – are backing away from commodities speculation.
It is often said that the Koch brothers are in the oil business. That’s true as far as it goes – but Koch Industries is not a major oil producer. Instead, the company has woven itself into every nook of the vast industrial web that transforms raw fossil fuels into usable goods. Koch-owned businesses trade, transport, refine and process fossil fuels, moving them across the world and up the value chain until they become things we forgot began with hydrocarbons: fertilizers, Lycra, the innards of our smartphones.
The company controls at least four oil refineries, six ethanol plants, a natural-gas-fired power plant and 4,000 miles of pipeline. Until recently, Koch refined roughly five percent of the oil burned in America (that percentage is down after it shuttered its 85,000-barrel-per-day refinery in North Pole, Alaska, owing, in part, to the discovery that a toxic solvent had leaked from the facility, fouling the town’s groundwater). From the fossil fuels it refines, Koch also produces billions of pounds of petrochemicals, which, in turn, become the feedstock for other Koch businesses. In a journey across Koch Industries, what enters as a barrel of West Texas Intermediate can exit as a Stainmaster carpet.
Koch’s hunger for growth is insatiable: Since 1960, the company brags, the value of Koch Industries has grown 4,200-fold, outpacing the Standard & Poor’s index by nearly 30 times. On average, Koch projects to double its revenue every six years. Koch is now a key player in the fracking boom that’s vaulting the United States past Saudi Arabia as the world’s top oil producer, even as it’s endangering America’s groundwater. In 2012, a Koch subsidiary opened a pipeline capable of carrying 250,000 barrels a day of fracked crude from South Texas to Corpus Christi, where the company owns a refinery complex, and it has announced plans to further expand its Texas pipeline operations. In a recent acquisition, Koch bought Frac-Chem, a top provider of hydraulic fracturing chemicals to drillers. Thanks to the Bush administration’s anti-regulatory agenda – which Koch Industries helped craft – Frac-Chem’s chemical cocktails, injected deep under the nation’s aquifers, are almost entirely exempt from the Safe Drinking Water Act.
Koch is also long on the richest – but also the dirtiest and most carbon-polluting – oil deposits in North America: the tar sands of Alberta. The company’s Pine Bend refinery, near St. Paul, Minnesota, processes nearly a quarter of the Canadian bitumen exported to the United States – which, in turn, has created for Koch Industries a lucrative sideline in petcoke exports. Denser, dirtier and cheaper than coal, petcoke is the dregs of tar-sands refining. U.S. coal plants are largely forbidden from burning petcoke, but it can be profitably shipped to countries with lax pollution laws like Mexico and China. One of the firm’s subsidiaries, Koch Carbon, is expanding its Chicago terminal operations to receive up to 11 million tons of petcoke for global export. In June, the EPA noted the facility had violated the Clean Air Act with petcoke particulates that endanger the health of South Side residents. “We dispute that the two elevated readings” behind the EPA notice of violation “are violations of anything,” Koch’s top lawyer, Mark Holden, told Rolling Stone, insisting that Koch Carbon is a good neighbor.
Over the past dozen years, the company has quietly acquired leases for 1.1 million acres of Alberta oil fields, an area larger than Rhode Island. By some estimates, Koch’s direct holdings nearly double ExxonMobil’s and nearly triple Shell’s. In May, Koch Oil Sands Operating LLC of Calgary, Alberta, sought permits to embark on a multi-billiondollar tar-sands-extraction operation. This one site is projected to produce 22 million barrels a year – more than a full day’s supply of U.S. oil.
Charles Koch, the 78-year-old CEO and chairman of the board of Koch Industries, is inarguably a business savant. He presents himself as a man of moral clarity and high integrity. “The role of business is to produce products and services in a way that makes people’s lives better,” he said recently. “It cannot do so if it is injuring people and harming the environment in the process.”
The Koch family’s lucrative blend of pollution, speculation, law-bending and self-righteousness stretches back to the early 20th century, when Charles’ father first entered the oil business. Fred C. Koch was born in 1900 in Quanah, Texas – a sunbaked patch of prairie across the Red River from Oklahoma. Fred was the second son of Hotze “Harry” Koch, a Dutch immigrant who – as recalled in Koch literature – ran “a modest newspaper business” amid the dusty poverty of Quanah. In the family legend, Fred Koch emerged from the nothing of the Texas range to found an empire. But like many stories the company likes to tell about itself, this piece of Kochlore takes liberties with the truth. Fred was not a simple country boy, and his father was not just a small-town publisher. Harry Koch was also a local railroad baron who used his newspaper to promote the Quanah, Acme & Pacific railways. A director and founding shareholder of the company, Harry sought to build a rail line across Texas to El Paso. He hoped to turn Quanah into “the most important railroad center in northwest Texas and a metropolitan city of first rank.” He may not have fulfilled those ambitions, but Harry did build up what one friend called “a handsome pile of dinero.”
Harry was not just the financial springboard for the Koch dynasty, he was also its wellspring of far-right politics. Harry editorialized against fiat money, demanded hangings for “habitual criminals” and blasted Social Security as inviting sloth. At the depths of the Depression, he demanded that elected officials in Washington should stop trying to fix the economy: “Business,” he wrote, “has always found a way to overcome various recessions.”
In the company’s telling, young Fred was an innovator whose inventions helped revolutionize the oil industry. But there is much more to this story. In its early days, refining oil was a dirty and wasteful practice. But around 1920, Universal Oil Products introduced a clean and hugely profitable way to “crack” heavy crude, breaking it down under heat and heavy pressure to boost gasoline yields. In 1925, Fred, who earned a degree in chemical engineering from MIT, partnered with a former Universal engineer named Lewis Winkler and designed a near carbon copy of the Universal cracking apparatus – making only tiny, unpatentable tweaks. Relying on family connections, Fred soon landed his first client – an Oklahoma refinery owned by his maternal uncle L.B. Simmons. In a flash, Winkler-Koch Engineering Co. had contracts to install its knockoff cracking equipment all over the heartland, undercutting Universal by charging a one-time fee rather than ongoing royalties.
It was a boom business. That is, until Universal sued in 1929, accusing WinklerKoch of stealing its intellectual property. With his domestic business tied up in court, Fred started looking for partners abroad and was soon doing business in the Soviet Union, where leader Joseph Stalin had just launched his first Five Year Plan. Stalin sought to fund his country’s industrialization by selling oil into the lucrative European export market. But the Soviet Union’s reserves were notoriously hard to refine. The USSR needed cracking technology, and the Oil Directorate of the Supreme Council of the National Economy took a shining to Winkler-Koch – primarily because Koch’s oil-industry competitors were reluctant to do business with totalitarian Communists.
Between 1929 and 1931, Winkler-Koch built 15 cracking units for the Soviets. Although Stalin’s evil was no secret, it wasn’t until Fred visited the Soviet Union, that these dealings seemed to affect his conscience. “I went to the USSR in 1930 and found it a land of hunger, misery and terror,” he would later write. Even so, he agreed to give the Soviets the engineering know-how they would need to keep building more.
Back home, Fred was busy building a life of baronial splendor. He met his wife, Mary, the Wellesley-educated daughter of a Kansas City surgeon, on a polo field and soon bought 160 acres across from the Wichita Country Club, where they built a Tudorstyle mansion. As chronicled in Sons of Wichita, Daniel Schulman’s investigation of the Koch dynasty, the compound was quickly bursting with princes: Frederick arrived in 1933, followed by Charles in 1935 and twins David and Bill in 1940. Fred Koch lorded over his domain. “My mother was afraid of my father,” said Bill, as were the four boys, especially first-born Frederick, an artistic kid with a talent for the theater. “Father wanted to make all his boys into men, and Freddie couldn’t relate to that regime,” Charles recalled. Frederick got shipped East to boarding school and was all but disappeared from Wichita.
With Frederick gone, Charles forged a deep alliance with David, the more athletic and assertive of the young twins. “I was closer with David because he was better at everything,” Charles has said.
Fred Koch’s legal battle with Universal would drag on for nearly a quarter-century. In 1934, a lower court ruled that Winkler-Koch had infringed on Universal’s technology. But that judgment would be vacated, after it came out in 1943 that Universal had bought off one of the judges handling the appeal. A year later, the Supreme Court decided that Fred’s cracker, by virtue of small technical differences, did not violate the Universal patent. Fred countersued on antitrust grounds, arguing that Universal had wielded patents anti-competitively. He’d win a $1.5 million settlement in 1952.
Around that time, Fred had built a domestic oil empire under a new company eventually called Rock Island Oil & Refining, transporting crude from wellheads to refineries by truck or by pipe. In those later years, Fred also became a major benefactor and board member of the John Birch Society, the rabidly anti-communist organization founded in 1958 by candy magnate and virulent racist Robert Welch. Bircher publications warned that the Red endgame was the creation of the “Negro Soviet Republic” in the Deep South. In his own writing, Fred described integration as a Red plot to “enslave both the white and black man.”
Like his father, Charles Koch attended MIT. After he graduated in 1959 with two master’s degrees in engineering, his father issued an ultimatum: Come back to Wichita or I’ll sell the business. “Papa laid it on the line,” recalled David. So Charles returned home, immersing himself in his father’s world – not simply joining the John Birch Society, but also opening a Bircher bookstore. The Birchers had high hopes for young Charles. As Koch family friend Robert Love wrote in a letter to Welch: “Charles Koch can, if he desires, finance a large operation, however, he must continually be brought along.”
But Charles was already falling under the sway of a charismatic radio personality named Robert LeFevre, founder of the Freedom School, a whites-only libertarian boot camp in the foothills above Colorado Springs, Colorado. LeFevre preached a form of anarchic capitalism in which the individual should be freed from almost all government power. Charles soon had to make a choice. While the Birchers supported the Vietnam War, his new guru was a pacifist who equated militarism with out-of-control state power. LeFevre’s stark influence on Koch’s thinking is crystallized in a manifesto Charles wrote for the Libertarian Review in the 1970s, recently unearthed by Schulman, titled “The Business Community: Resisting Regulation.” Charles lays out principles that gird today’s Tea Party movement. Referring to regulation as “totalitarian,” the 41-year-old Charles claimed business leaders had been “hoodwinked” by the notion that regulation is “in the public interest.” He advocated the “barest possible obedience” to regulation and implored, “Do not cooperate voluntarily, instead, resist whenever and to whatever extent you legally can in the name of justice.”
After his father died in 1967, Charles, now in command of the family business, renamed it Koch Industries. It had grown into one of the 10 largest privately owned firms in the country, buying and selling some 80 million barrels of oil a year and operating 3,000 miles of pipeline. A black-diamond skier and white-water kayaker, Charles ran the business with an adrenaline junkie’s aggressiveness. The company would build pipelines to promising oil fields without a contract from the producers and park tanker trucks beside wildcatters’ wells, waiting for the first drops of crude to flow. “Our willingness to move quickly, absorb more risk,” Charles would write, “enabled us to become the leading crude-oilgathering company.”
Charles also reconnected with one of his father’s earliest insights: There’s big money in dirty oil. In the late 1950s, Fred Koch had bought a minority stake in a Minnesota refinery that processed heavy Canadian crude. “We could run the lousiest crude in the world,” said his business partner J. Howard Marshall II – the future Mr. Anna Nicole Smith. Sensing an opportunity for huge profits, Charles struck a deal to convert Marshall’s ownership stake in the refinery into stock in Koch Industries. Suddenly the majority owner, the company soon bought the rest of the refinery outright.
Almost from the beginning, Koch Industries’ risk-taking crossed over into recklessness. The OPEC oil embargo hit the company hard. Koch had made a deal giving the company the right to buy a large share of Qatar’s export crude. At the time, Koch owned five supertankers and had chartered many others. When the embargo hit, Koch had upward of half a billion dollars in exposure to tankers and couldn’t deliver OPEC oil to the U.S. market, creating what Charles has called “large losses.” Soon, Koch Industries was caught overcharging American customers. The Ford administration in the summer of 1974 compelled Koch to pay out more than $20 million in rebates and future price reductions.
Koch Industries’ manipulations were about to get more audacious. In the late 1970s, the federal government parceled out exploration tracts, using a lottery in which anyone could score a 10-year lease at just $1 an acre – a game of chance that gave wildcat prospectors the same shot as the biggest players. Koch didn’t like these odds, so it enlisted scores of frontmen to bid on its behalf. In the event they won the lottery, they would turn over their leases to the company. In 1980, Koch Industries pleaded guilty to five felonies in federal court, including conspiracy to commit fraud.
With Republicans and Democrats united in regulating the oil business, Charles had begun throwing his wealth behind the upstart Libertarian Party, seeking to transform it into a viable third party. Over the years, he would spend millions propping up a league of affiliated think tanks and front groups – a network of Libertarians that became known as the “Kochtopus.”
Charles even convinced David to stand as the Libertarian Party’s vice-presidential candidate in 1980 – a clever maneuver that allowed David to lavish unlimited money on his own ticket. The Koch-funded 1980 platform was nakedly in the brothers’ self-interest – slashing federal regulatory agencies, offering a 50 percent tax break to top earners, ending the “cruel and unfair” estate tax and abolishing a $16 billion “windfall profits” tax on the oil industry. The words of Libertarian presidential candidate Ed Clark’s convention speech in Los Angeles ring across the decades: “We’re sick of taxes,” he declared. “We’re ready to have a very big tea party.” In a very real sense, the modern Republican Party was on the ballot that year – and it was running against Ronald Reagan.
Charles’ management style and infatuation with far-right politics were endangering his grip on the company. Bill believed his brothers’ political spending was bad for business. “Pretty soon, we would get the reputation that the company and the Kochs were crazy,” he said.
In late 1980, with Frederick’s backing, Bill launched an unsuccessful battle for control of Koch Industries, aiming to take the company public. Three years later, Charles and David bought out their brothers for $1.1 billion. But the speed with which Koch Industries paid off the buyout debt left Bill convinced, but never quite able to prove, he’d been defrauded. He would spend the next 18 years suing his brothers, calling them “the biggest crooks in the oil industry.”
Bill also shared these concerns with the federal government. Thanks in part to his efforts, in 1989 a Senate committee investigating Koch business with Native Americans would describe Koch Oil tactics as “grand larceny.” In the late 1980s, Koch was the largest purchaser of oil from American tribes. Senate investigators suspected the company was making off with more crude from tribal oil fields than it measured and paid for. They set up a sting, sending an FBI agent to coordinate stakeouts of eight remote leases. Six of them were Koch operations, and the agents reported “oil theft” at all of them.
One of Koch’s gaugers would refer to this as “volume enhancement.” But in sworn testimony before a Texas jury, Phillip Dubose, a former Koch pipeline manager, offered a more succinct definition: “stealing.” The Senate committee concluded that over the course of three years Koch “pilfered” $31 million in Native oil; in 1988, the value of that stolen oil accounted for nearly a quarter of the company’s crude-oil profits. “I don’t know how the company could have figures like that,” the FBI agent testified, “and not have top management know that theft was going on.” In his own testimony, Charles offered that taking oil readings “is a very uncertain art” and that his employees “aren’t rocket scientists.” Koch’s top lawyer would later paint the company as a victim of Senate “McCarthyism.”
By this time, the Kochs had soured on the Libertarian Party, concluding that control of a small party would never give them the muscle they sought in the nation’s capital. Now they would spend millions in efforts to influence – and ultimately take over – the GOP. The work began close to home; the Kochs had become dedicated patrons of Sen. Bob Dole of Kansas, who ran interference for Koch Industries in Washington. On the Senate floor in March 1990, Dole gloatingly cautioned against a “rush to judgment” against Koch, citing “very real concerns about some of the evidence on which the special committee was basing its findings.” A grand jury investigated the claims but disbanded in 1992, without issuing indictments.
Arizona Sen. Dennis DeConcini was “surprised and disappointed” at the decision to drop the case. “Our investigation was some of the finest work the Senate has ever done,” he said. “There was an overwhelming case against Koch.” But Koch did not avoid all punishment. Under the False Claims Act, which allows private citizens to file lawsuits on behalf of the government, Bill sued the company, accusing it of defrauding the feds of royalty income on its “volumeenhanced” purchases of Native oil. A jury concluded Koch had submitted more than 24,000 false claims, exposing Koch to some $214 million in penalties. Koch later settled, paying $25 million.
Selfinterest continued to define Koch Industries’ adventures in public policy. In the early 1990s, in a high-profile initiative of the first-term Clinton White House, the administration was pushing for a levy on the heat content of fuels. Known as the BTU tax, it was the earliest attempt by the federal government to recoup damages from climate polluters. But Koch Industries could not stand losing its most valuable subsidy: the public policy that allowed it to treat the atmosphere as an open sewer. Richard Fink, head of Koch Company’s Public Sector and the longtime mastermind of the Koch brothers’ political empire, confessed to The Wichita Eagle in 1994 that Koch could not compete if it actually had to pay for the damage it did to the environment: “Our belief is that the tax, over time, may have destroyed our business.”
To fight this threat, the Kochs funded a “grassroots” uprising – one that foreshadowed the emergence, decades later, of the Tea Party. The effort was run through Citizens for a Sound Economy, to which the brothers had spent a decade giving nearly $8 million to create what David Koch called “a sales force” to communicate the brothers’ political agenda through town hall meetings and anti-tax rallies designed to look like spontaneous demonstrations. In 1994, David Koch bragged that CSE’s campaign “played a key role in defeating the administration’s plans for a huge and cumbersome BTU tax.”
Despite the company’s increasingly sophisticated political and public-relations operations, Charles’ philosophy of regulatory resistance was about to bite Koch Industries – in the form of record civil and criminal financial penalties imposed by the Environmental Protection Agency.
Koch entered the 1990s on a pipeline-buying spree. By 1994, its network measured 37,000 miles. According to sworn testimony from former Koch employees, the company operated its pipelines with almost complete disregard for maintenance. As Koch employees understood it, this was in keeping with their CEO’s trademarked business philosophy, MarketBased Management.
For Charles, MBM – first communicated to employees in 1991 – was an attempt to distill the business practices that had grown Koch into one of the largest oil businesses in the world. To incentivize workers, Koch gives employees bonuses that correlate to the value they create for the company. “Salary is viewed only as an advance on compensation for value,” Koch wrote, “and compensation has an unlimited upside.”
To prevent the stagnation that can often bog down big enterprises, Koch was also determined to incentivize risk-taking. Under MBM, Koch Industries books opportunity costs – “profits foregone from a missed opportunity” – as though they were actual losses on the balance sheet. Koch employees who play it safe, in other words, can’t strike it rich.
On paper, MBM sounds innovative and exciting. But in Koch’s hyperaggressive corporate culture, it contributed to a series of environmental disasters. Applying MBM to pipeline maintenance, Koch employees calculated that the opportunity cost of shutting down equipment to ensure its safety was greater than the profit potential of pushing aging pipe to its limits.
The fact that preventive pipeline maintenance is required by law didn’t always seem to register. Dubose, a 26-year Koch veteran who oversaw pipeline areas in Louisiana, would testify about the company’s lax attitude toward maintenance. “It was a question of money. It would take away from our profit margin.” The testimony of another pipeline manager would echo that of Dubose: “Basically, the philosophy was ‘If it ain’t broke, don’t work on it.'”
When small spills occurred, Dubose testified, the company would cover them up. He recalled incidents in which the company would use the churn of a tugboat’s engine to break up waterborne spills and “just kind of wash that thing on down, down the river.” On land, Dubose said, “They might pump it [the leaked oil] off into a drum, then take a shovel and just turn the earth over.” When larger spills were reported to authorities, the volume of the discharges was habitually low-balled, according to Dubose.
Managers pressured employees to falsify pipeline-maintenance records filed with federal authorities; in a sworn affidavit, pipeline worker Bobby Conner recalled arguments with his manager over Conner’s refusal to file false reports: “He would always respond with anger,” Conner said, “and tell me that I did not know how to be a Koch employee.” Conner was fired and later settled a wrongful-termination suit with Koch Gateway Pipeline. Dubose testified that Charles was not in the dark about the company’s operations. “He was in complete control,” Dubose said. “He was the one that was line-driving this Market-Based Management at meetings.”
Before the worst spill from this time, Koch employees had raised concerns about the integrity of a 1940s-era pipeline in South Texas. But the company not only kept the line in service, it increased the pressure to move more volume. When a valve snapped shut in 1994, the brittle pipeline exploded. More than 90,000 gallons of crude spewed into Gum Hollow Creek, fouling surrounding marshlands and both Nueces and Corpus Christi bays with a 12-mile oil slick.
By 1995, the EPA had seen enough. It sued Koch for gross violations of the Clean Water Act. From 1988 through 1996, the company’s pipelines spilled 11.6 million gallons of crude and petroleum products. Internal Koch records showed that its pipelines were in such poor condition that it would require $98 million in repairs to bring them up to industry standard.
Ultimately, state and federal agencies forced Koch to pay a $30 million civil penalty – then the largest in the history of U.S. environmental law – for 312 spills across six states. Carol Browner, the former EPA administrator, said of Koch, “They simply did not believe the law applied to them.” This was not just partisan rancor. Texas Attorney General John Cornyn, the future Republican senator, had joined the EPA in bringing suit against Koch. “This settlement and penalty warn polluters that they cannot treat oil spills simply as the cost of doing business,” Cornyn said. (The Kochs seem to have no hard feelings toward their one-time tormentor; a lobbyist for Koch was the number-two bundler for Cornyn’s primary campaign this year.)
Koch wasn’t just cutting corners on its pipelines. It was also violating federal environmental law in other corners of the empire. Through much of the 1990s at its Pine Bend refinery in Minnesota, Koch spilled up to 600,000 gallons of jet fuel into wetlands near the Mississippi River. Indeed, the company was treating the Mississippi as a sewer, illegally dumping ammonia-laced wastewater into the river – even increasing its discharges on weekends when it knew it wasn’t being monitored. Koch Petroleum Group eventually pleaded guilty to “negligent discharge of a harmful quantity of oil” and “negligent violation of the Clean Water Act,” was ordered to pay a $6 million fine and $2 million in remediation costs, and received three years’ probation. This facility had already been declared a Superfund site in 1984.
In 2000, Koch was hit with a 97-count indictment over claims it violated the Clean Air Act by venting massive quantities of benzene at a refinery in Corpus Christi – and then attempted to cover it up. According to the indictment, Koch filed documents with Texas regulators indicating releases of just 0.61 metric tons of benzene for 1995 – one-tenth of what was allowed under the law. But the government alleged that Koch had been informed its true emissions that year measured 91 metric tons, or 15 times the legal limit.
By the time the case came to trial, however, George W. Bush was in office and the indictment had been significantly pared down – Koch faced charges on only seven counts. The Justice Department settled in what many perceived to be a sweetheart deal, and Koch pleaded guilty to a single felony count for covering up the fact that it had disconnected a key pollution-control device and did not measure the resulting benzene emissions – receiving five years’ probation. Despite skirting stiffer criminal prosecution, Koch was handed $20 million in fines and reparations – another historic judgment.
On the day before Danielle Smalley was to leave for college, she and her friend Jason Stone were hanging out in her family’s mobile home. Seventeen years old, with long chestnut hair, Danielle began to feel nauseated. “Dad,” she said, “we smell gas.” It was 3:45 in the afternoon on August 24th, 1996, near Lively, Texas, some 50 miles southeast of Dallas. The Smalleys were too poor to own a telephone. So the teens jumped into her dad’s 1964 Chevy pickup to alert the authorities. As they drove away, the truck stalled where the driveway crossed a dry creek bed. Danielle cranked the ignition, and a fireball engulfed the truck. “You see two children burned to death in front of you – you never forget that,” Danielle’s father, Danny, would later tell reporters.
Unknown to the Smalleys, a decrepit Koch pipeline carrying liquid butane – literally, lighter fluid – ran through their subdivision. It had ruptured, filling the creek bed with vapor, and the spark from the pickup’s ignition had set off a bomb. Federal investigators documented both “severe corrosion” and “mechanical damage” in the pipeline. A National Transportation Safety Board report would cite the “failure of Koch Pipeline Company LP to adequately protect its pipeline from corrosion.”
Installed in the early Eighties, the pipeline had been out of commission for three years. When Koch decided to start it up again in 1995, a water-pressure test had blown the pipe open. An inspection of just a few dozen miles of pipe near the Smalley home found 538 corrosion defects. The industry’s term of art for a pipeline in this condition is Swiss cheese, according to the testimony of an expert witness – “essentially the pipeline is gone.”
Koch repaired only 80 of the defects – enough to allow the pipeline to withstand another pressure check – and began running explosive fluid down the line at high pressure in January 1996. A month later, employees discovered that a key anticorrosion system had malfunctioned, but it was never fixed. Charles Koch had made it clear to managers that they were expected to slash costs and boost profits. In a sternly worded memo that April, Charles had ordered his top managers to cut expenditures by 10 percent “through the elimination of waste (I’m sure there is much more waste than that)” in order to increase pre-tax earnings by $550 million a year.
The Smalley trial underscored something Bill Koch had said about the way his brothers ran the company: “Koch Industries has a philosophy that profits are above everything else.” A former Koch manager, Kenoth Whitstine, testified to incidents in which Koch Industries placed profits over public safety. As one supervisor had told him, regulatory fines “usually didn’t amount to much” and, besides, the company had “a stable full of lawyers in Wichita that handled those situations.” When Whitstine told another manager he was concerned that unsafe pipelines could cause a deadly accident, this manager said that it was more profitable for the company to risk litigation than to repair faulty equipment. The company could “pay off a lawsuit from an incident and still be money ahead,” he said, describing the principles of MBM to a T.
At trial, Danny Smalley asked for a judgment large enough to make the billionaires feel pain: “Let Koch take their child out there and put their children on the pipeline, open it up and let one of them die,” he told the jury. “And then tell me what that’s worth.” The jury was emphatic, awarding Smalley $296 million – then the largest wrongful-death judgment in American legal history. He later settled with Koch for an undisclosed sum and now runs a pipeline-safety foundation in his daughter’s name. He declined to comment for this story. “It upsets him too much,” says an associate.
The official Koch line is that scandals that caused the company millions in fines, judgments and penalties prompted a change in Charles’ attitude of regulatory resistance. In his 2007 book, The Science of Success, he begrudgingly acknowledges his company’s recklessness. “While business was becoming increasingly regulated,” he reflects, “we kept thinking and acting as if we lived in a pure market economy. The reality was far different.”
Charles has since committed Koch Industries to obeying federal regulations. “Even when faced with laws we think are counterproductive,” he writes, “we must first comply.” Underscoring just how out of bounds Koch had ventured in its corporate culture, Charles admits that “it required a monumental undertaking to integrate compliance into every aspect of the company.” In 2000, Koch Petroleum Group entered into an agreement with the EPA and the Justice Department to spend $80 million at three refineries to bring them into compliance with the Clean Air Act. After hitting Koch with a $4.5 million penalty, the EPA granted the company a “clean slate” for certain past violations.
Then George W. Bush entered the White House in 2001, his campaign fattened with Koch money. Charles Koch may decry cronyism as “nothing more than welfare for the rich and powerful,” but he put his company to work, hand in glove, with the Bush White House. Correspondence, contacts and visits among Koch Industries representatives and the Bush White House generated nearly 20,000 pages of records, according to a Rolling Stone FOIA request of the George W. Bush Presidential Library. In 2007, the administration installed a fiercely anti-regulatory academic, Susan Dudley, who hailed from the Koch-funded Mercatus Center at George Mason University, as its top regulatory official.
Today, Koch points to awards it has won for safety and environmental excellence. “Koch companies have a strong record of compliance,” Holden, Koch’s top lawyer, tells Rolling Stone. “In the distant past, when we failed to meet these standards, we took steps to ensure that we were building a culture of 10,000 percent compliance, with 100 percent of our employees complying 100 percent.” To reduce its liability, Koch has also unwound its pipeline business, from 37,000 miles in the late 1990s to about 4,000 miles. Of the much smaller operation, he adds, “Koch’s pipeline practice and operations today are the best in the industry.”
But even as compliance began to improve among its industrial operations, the company aggressively expanded its trading activities into the Wild West frontier of risky financial instruments. In 2000, the Commodity Futures Modernization Act had exempted many of these products from regulation, and Koch Industries was among the key players shaping that law. Koch joined up with Enron, BP, Mobil and J. Aron – a division of Goldman Sachs then run by Lloyd Blankfein – in a collaboration called the Energy Group. This corporate alliance fought to prohibit the federal government from policing oil and gas derivatives. “The importance of derivatives for the Energy Group companies . . . cannot be overestimated,” the group’s lawyer wrote to the Commodity Futures Trading Commission in 1998. “The success of this business can be completely undermined by . . . a costly regulatory regime that has no place in the energy industry.”
Koch had long specialized in “over-the-counter” or OTC trades – private, unregulated contracts not disclosed on any centralized exchange. In its own letter to the CFTC, Koch identified itself as “a major participant in the OTC derivatives market,” adding that the company not only offered “risk-management tools for its customers” but also traded “for its own account.” Making the case for what would be known as the Enron Loophole, Koch argued that any big firm’s desire to “maintain a good reputation” would prevent “widespread abuses in the OTC derivatives market,” a darkly hilarious claim, given what would become not only of Enron, but also Bear Stearns, Lehman Brothers and AIG.
The Enron Loophole became law in December 2000 – pushed along by Texas Sen. Phil Gramm, giving the Energy Group exactly what it wanted. “It completely exempted energy futures from regulation,” says Michael Greenberger, a former director of trading and markets at the CFTC. “It wasn’t a matter of regulators not enforcing manipulation or excessive speculation limits – this market wasn’t covered at all. By law.”
Before its spectacular collapse, Enron would use this loophole in 2001 to help engineer an energy crisis in California, artificially constraining the supply of natural gas and power generation, causing price spikes and rolling blackouts. This blatant and criminal market manipulation has become part of the legend of Enron. But Koch was caught up in the debacle. The CFTC would charge that a partnership between Koch and the utility Entergy had, at the height of the California crisis, reported fake natural-gas trades to reporting firms and also “knowingly reported false prices and/or volumes” on real trades.
One of 10 companies punished for such schemes, Entergy-Koch avoided prosecution by paying a $3 million fine as part of a 2004 settlement with the CFTC, in which it did not admit guilt to the commission’s charges but is barred from maintaining its innocence.
Trading, which had long been peripheral to the company’s core businesses, soon took center stage. In 2002, the company launched a subsidiary, Koch Supply & Trading. KS&T got off to a rocky start. “A series of bad trades,” writes a Koch insider, “boiled over in early 2004 when a large ‘sure bet’ crude-oil trade went south, resulting in a quick, multimillion loss.” But Koch traders quickly adjusted to the reality that energy markets were no longer ruled just by supply and demand – but by rich speculators trying to game the market. Revamping its strategy, Koch Industries soon began bragging of record profits. From 2003 to 2012, KS&T trading volumes exploded – up 450 percent. By 2009, KS&T ranked among the world’s top-five oil traders, and by 2011, the company billed itself as “one of the leading quantitative traders” – though Holden now says it’s no longer in this business.
Since Koch Industries aggressively expanded into high finance, the net worth of each brother has also exploded – from roughly $4 billion in 2002 to more than $40 billion today. In that period, the company embarked on a corporate buying spree that has taken it well beyond petroleum. In 2005, Koch purchased Georgia Pacific for $21 billion, giving the company a familiar, expansive grip on the industrial web that transforms Southern pine into consumer goods – from plywood sold at Home Depot to brand-name products like Dixie Cups and Angel Soft toilet paper. In 2013, Koch leapt into high technology with the $7 billion acquisition of Molex, a manufacturer of more than 100,000 electronics components and a top supplier to smartphone makers, including Apple.
Koch Supply & Trading makes money both from physical trades that move oil and commodities across oceans as well as in “paper” trades involving nothing more than high-stakes bets and cash. In paper trading, Koch’s products extend far beyond simple oil futures. Koch pioneered, for sale to hedge funds, “volatility swaps,” in which the actual price of crude is irrelevant and what matters is only the “magnitude of daily fluctuations in prices.” Steve Mawer, until recently the president of KS&T, described parts of his trading operation as “black-box stuff.”
Like a casino that bets at its own craps table, Koch engages in “proprietary trading” – speculating for the company’s own bottom line. “We’re like a hedge fund and a dealer at the same time,” bragged Ilia Bouchouev, head of Koch’s derivatives trading in 2004. “We can both make markets and speculate.” The company’s many tentacles in the physical oil business give Koch rich insight into market conditions and disruptions that can inform its speculative bets. When oil prices spiked to record heights in 2008, Koch was a major player in the speculative markets, according to documents leaked by Vermont Sen. Bernie Sanders, with trading volumes rivaling Wall Street giants like Citibank. Koch rode a trader-driven frenzy – detached from actual supply and demand – that drove prices above $147 a barrel in July 2008, battering a global economy about to enter a free fall.
Only Koch knows how much money Koch reaped during this price spike. But, as a proxy, consider the $20 million Koch and its subsidiaries spent lobbying Congress in 2008 – before then, its biggest annual lobbying expense had been $5 million – seeking to derail a raft of consumer-protection bills, including the Federal Price Gouging Prevention Act, the Stop Excessive Energy Speculation Act of 2008, the Prevent Unfair Manipulation of Prices Act of 2008 and the Close the Enron Loophole Act.
In comments to the Federal Trade Commission, Koch lobbyists defended the company’s right to rack up fantastic profits at the expense of American consumers. “A mere attempt to maximize profits cannot constitute market manipulation,” they wrote, adding baldly, “Excessive profits in the face of shortages are desirable.”
When the global economy crashed in 2008, so did oil prices. By December, crude was trading more than $100 lower per barrel than it had just months earlier – around $30. At the same time, oil traders anticipated that prices would eventually rebound. Futures contracts for delivery of oil in December 2009 were trading at nearly $55 per barrel. When future delivery is more valuable than present inventory, the market is said to be “in contango.” Koch exploited the contango market to the hilt. The company leased nine supertankers and filled them with cut-rate crude and parked them quietly offshore in the Gulf of Mexico, banking virtually risk-free profits by selling contracts for future delivery.
All in, Koch took about 20 million barrels of oil off the market, putting itself in a position to bet on price disruptions the company itself was creating. Thanks to these kinds of trading efforts, Koch could boast in a 2009 review that “the performance of Koch Supply & Trading actually grew stronger last year as the global economy worsened.” The cost for those risk-free profits was paid by consumers at the pump. Estimates pegged the cost of the contango trade by Koch and others at up to 40 cents a gallon.
Artificially constraining oil supplies is not the only source of dark, unregulated profit for Koch Industries. In the years after George W. Bush branded Iran a member of the “Axis of Evil,” the Koch brothers profited from trade with the state sponsor of terror and reckless would-be nuclear power. For decades, U.S. companies have been forbidden from doing business with the Ayatollahs, but Koch Industries exploited a loophole in 1996 sanctions that made it possible for foreign subsidiaries of U.S. companies to do some business in Iran.
In the ensuing years, according to Bloomberg Markets, the German and Italian arms of Koch-Glitsch, a Koch subsidiary that makes equipment for oil fields and refineries, won lucrative contracts to supply Iran’s Zagros plant, the largest methanol plant in the world. And thanks in part to Koch, methanol is now one of Iran’s leading non-oil exports. “Every single chance they had to do business with Iran, or anyone else, they did,” said Koch whistle-blower George Bentu. Having signed on to work for a company that lists “integrity” as its top value, Bentu added, “You feel totally betrayed. Everything Koch stood for was a lie.”
Koch reportedly kept trading with Tehran until 2007 – after the regime was exposed for supplying IEDs to Iraqi insurgents killing U.S. troops. According to lawyer Holden, Koch has since “decided that none of its subsidiaries would engage in trade involving Iran, even where such trade is permissible under U.S. law.”
These days, Koch’s most disquieting foreign dealings are in Canada, where the company has massive investments in dirty tar sands. The company’s 1.1 million acres of leases in northern Alberta contain reserves of economically recoverable oil numbering in the billions of barrels. With these massive leaseholdings, Koch is poised to continue profiting from Canadian crude whether or not the Keystone XL pipeline gains approval, says Andrew Leach, an energy and environmental economist at the business school of the University of Alberta.
Counterintuitively, approval of Keystone XL could actually harm one of Koch’s most profitable businesses – its Pine Bend refinery in Minnesota. Because tar-sands crude presently has no easy outlet to the global market, there’s a glut of Canadian oil in the midcontinent, and Koch’s refinery is a beneficiary of this oversupply; the resulting discount can exceed $20 a barrel compared to conventional crude. If it is ever built, the Keystone XL pipeline will provide a link to Gulf Coast refineries – and thus the global export market, which would erase much of that discount and eat into company profit margins.
Leach says Koch Industries’ tar-sands leaseholdings have them hedged against the potential approval of Keystone XL. The pipeline would increase the value of Canadian tar-sands deposits overnight. Koch could then profit handsomely by flipping its leases to more established producers. “Optimizing asset value through trading,” Koch literature says of these and other holdings, is a “key” company strategy.
The one truly bad outcome for Koch would be if Keystone XL were to be defeated, as many environmentalists believe it must be. “If the signal that sends is that no new pipelines will be built across the U.S. border for carrying oil-sands product,” Leach says, “that’s going to have an impact not just on Koch leases, but on everybody’s asset value in oil sands.” Ironically, what’s best for Koch’s tar-sands interests is what the Obama administration is currently delivering: “They’re actually ahead if Keystone XL gets delayed a while but hangs around as something that still might happen,” Leach says.
The Dodd-Frank bill was supposed to put an end to economy-endangering speculation in the $700 trillion global derivatives market. But Koch has managed to defend – and even expand – its turf, trading in largely unregulated derivatives, once dubbed “financial weapons of mass destruction” by billionaire Warren Buffett.
In theory, the Enron Loophole is no longer open – the government now has the power to police manipulation in the market for energy derivatives. But the Obama administration has not yet been able to come up with new rules that actually do so. In 2011, the CFTC mandated “position limits” on derivative trades of oil and other commodities. These would have blocked any single speculator from owning futures contracts representing more than a quarter of the physical market – reducing the danger of manipulation. As part of the International Swaps and Derivatives Association, which also reps many Wall Street giants including Goldman Sachs and JPMorgan Chase, Koch fought these new restrictions. ISDA sued to block the position limits – and won in court in September 2012. Two years later, CFTC is still spinning its wheels on a replacement. Industry traders like Koch are, Greenberger says, “essentially able to operate as though the Enron Loophole were still in effect.”
Koch is also reaping the benefits from Dodd-Frank’s impacts on Wall Street. The so-called Volcker Rule, implemented at the end of last year, bans investment banks from “proprietary trading” – investing on their own behalf in securities and derivatives. As a result, many Wall Street banks are unloading their commodities-trading units. But Volcker does not apply to nonbank traders like Koch. They’re now able to pick up clients who might previously have traded with JPMorgan. In its marketing materials for its trading operations, Koch boasts to potential clients that it can provide “physical and financial market liquidity at times when others pull back.” Koch also likely benefits from loopholes that exempt the company from posting collateral for derivatives trades and allow it to continue trading swaps without posting the transactions to a transparent electronic exchange. Though competitors like BP and Cargill have registered with the CFTC as swaps dealers – subjecting their trades to tightened regulation – Koch conspicuously has not. “Koch is compliant with all CFTC regulations, including those relating to swaps dealers,” says Holden, the Koch lawyer.
That a massive company with such a troubling record as Koch Industries remains unfettered by financial regulation should strike fear in the heart of anyone with a stake in the health of the American economy. Though Koch has cultivated a reputation as an economically conservative company, it has long flirted with danger. And that it has not suffered a catastrophic loss in the past 15 years would seem to be as much about luck as about skillful management.
The Kochs have brushed up against some of the major debacles of the crisis years. In 2007, as the economy began to teeter, Koch was gearing up to plunge into the market for credit default swaps, even creating an affiliate, Koch Financial Products, for that express purpose. KFP secured a AAA rating from Moody’s and reportedly sought to buy up toxic assets at the center of the financial crisis at up to 50-times leverage. Ultimately, Koch Industries survived the experiment without losing its shirt.
More recently, Koch was exposed to the fiasco at MF Global, the disgraced brokerage firm run by former New Jersey Gov. Jon Corzine that improperly dipped into customer accounts to finance reckless bets on European debt. Koch, one of MF Global’s top clients, reportedly told trading partners it was switching accounts about a month before the brokerage declared bankruptcy – then the eighth-largest in U.S. history. Koch says the decision to pull its funds from MF Global was made more than a year before. While MF’s small-fry clients had to pick at the carcass of Corzine’s company to recoup their assets, Koch was already swimming free and clear.
Because it’s private, no one outside of Koch Industries knows how much risk Koch is taking – or whether it could conceivably create systemic risk, a concern raised in 2013 by the head of the Futures Industry Association. But this much is for certain: Because of the loopholes in financial-regulatory reform, the next company to put the American economy at risk may not be a Wall Street bank but a trading giant like Koch. In 2012, Gary Gensler, then CFTC chair, railed against the very loopholes Koch appears to be exploiting, raising the specter of AIG. “[AIG] had this massive risk built up in its derivatives just because it called itself an insurance company rather than a bank,” Gensler said. When Congress adopted Dodd-Frank, Gensler added, it never intended to exempt financial heavy hitters just because “somebody calls themselves an insurance
In “the science of success,” Charles Koch highlights the problems created when property owners “don’t benefit from all the value they create and don’t bear the full cost from whatever value they destroy.” He is particularly concerned about the “tragedy of the commons,” in which shared resources are abused because there’s no individual accountability. “The biggest problems in society,” he writes, “have occurred in those areas thought to be best controlled in common: the atmosphere, bodies of water, air. . . .”
But in the real world, Koch Industries has used its political might to beat back the very market-based mechanisms – including a cap-and-trade market for carbon pollution – needed to create the ownership rights for pollution that Charles says would improve the functioning of capitalism.
In fact, it appears the very essence of the Koch business model is to exploit breakdowns in the free market. Koch has profited precisely by dumping billions of pounds of pollutants into our waters and skies – essentially for free. It racks up enormous profits from speculative trades lacking economic value that drive up costs for consumers and create risks for our economy.
The Koch brothers get richer as the costs of what Koch destroys are foisted on the rest of us – in the form of ill health, foul water and a climate crisis that threatens life as we know it on this planet. Now nearing 80 – owning a large chunk of the Alberta tar sands and using his billions to transform the modern Republican Party into a protection racket for Koch Industries’ profits – Charles Koch is not about to see the light. Nor does the CEO of one of America’s most toxic firms have any notion of slowing down. He has made it clear that he has no retirement plans: “I’m going to ride my bicycle till I fall off.”
Mike Pompeo, the Secretary of Trump
How he became a heartland evangelical—and the President’s most loyal soldier.
By Susan B. GlasserAugust 19, 2019
Born in derision and remade in flattery, the relationship between Trump and Pompeo has proved surprisingly durable.Illustration by Paul Rogers
In the winter of 2016, Donald Trump was roaring through the primaries, and Mike Pompeo was determined to stop him. Pompeo, a little-known congressman from Wichita, helped persuade Marco Rubio to make a late stand in Kansas. Like many Republicans in Congress, Pompeo believed that Rubio had the national-security knowledge and the judgment to be President, and Trump did not. Urged on by Pompeo, Rubio’s team pulled money out of other states to gamble on winning the Kansas caucus. It was one of the few remaining contests in which Rubio still hoped to beat Trump, who, he said, was a “con artist” about to “take over the Republican Party.”
On March 5th, Trump and Senator Ted Cruz, of Texas, arrived in Wichita for the caucus. Rubio left his closing argument to Pompeo, who told the crowd at the Century II arena, “I’m going to speak to you from the heart about what I believe is the best path forward for America.” An Army veteran who finished first in his class at West Point, Pompeo cited Trump’s boast that if he ordered a soldier to commit a war crime the soldier would “go do it.” As the audience booed, Pompeo warned that Trump—like Barack Obama—would be “an authoritarian President who ignored our Constitution.” American soldiers “don’t swear an allegiance to President Trump or any other President,” Pompeo declared. “They take an oath to defend our Constitution, as Kansans, as conservatives, as Republicans, as Americans. Marco Rubio will never demean our soldiers by saying that he will order them to do things that are inconsistent with our Constitution.” Listening backstage, Trump demanded to know the identity of the congressman trashing him. A few minutes later, Pompeo concluded, “It’s time to turn down the lights on the circus.”
Pompeo’s stinging rebuke of Trump got barely a mention in the local press, and Rubio finished third in Kansas. “We got smoked,” a former top Rubio campaign aide told me. Days later, Rubio’s campaign was over. In May, Trump secured the delegates needed for the nomination, and Pompeo reluctantly joined the rest of Kansas’s congressional delegation in endorsing him. Still, Pompeo had told the Topeka Capital-Journal, in April, that Trump was “not a conservative believer,” and, a few weeks later, he said, on CNN, “A lot of his policies don’t comport with my vision for how I represent Kansas.”
At that point, Pompeo had never met Trump. Like many Republicans who called Trump a “kook,” a “cancer,” and a threat to democracy before ultimately supporting him, Pompeo disagreed with much of Trump’s platform. He took issue in particular with Trump’s “America First” skepticism about the United States’ role in the world. Pompeo was a conservative internationalist who had been shaped by his Cold War-era military service, and he remained a believer in American power as the guarantor of global stability. Yet, after Trump won the Presidency, Pompeo sought a post in his Administration and did not hesitate to serve as his C.I.A. director. In 2018, after Trump fired Secretary of State Rex Tillerson, by tweet, Pompeo happily replaced him as America’s top diplomat.
Pompeo, an evangelical Christian who keeps an open Bible on his desk, now says it’s possible that God raised up Trump as a modern Queen Esther, the Biblical figure who convinced the King of Persia to spare the Jewish people. He defines his own job as serving the President, whatever the President asks of him. “A Secretary of State has to know what the President wants,” he said, at a recent appearance in Washington. “To the extent you get out of synch with that leader, then you’re just out shooting the breeze.” No matter what Trump has said or done, Pompeo has stood by him. As a former senior White House official told me, “There will never be any daylight publicly between him and Trump.” The former official said that, in private, too, Pompeo is “among the most sycophantic and obsequious people around Trump.” Even more bluntly, a former American ambassador told me, “He’s like a heat-seeking missile for Trump’s ass.”
Pompeo’s transformation reflects the larger story of how the Republican Party went from disdaining Trump to embracing him with barely a murmur of dissent. This account of how Pompeo became the last survivor of the President’s original national-security team and his most influential adviser on international affairs is based on dozens of interviews in recent months with current and former Administration officials, U.S. and foreign diplomats, and friends and colleagues of Pompeo’s; the Secretary did not answer repeated requests for comment.
Thirty-one months into the Administration, the relationship between Trump and Pompeo, born in derision and remade in flattery, has proved to be surprisingly durable. Trump often gushes about Pompeo, even as he has berated his hawkish national-security adviser, John Bolton, for taking similar positions. “I argue with everyone,” Trump told a reporter. “Except Pompeo.”
Fifty-five, burly, and barrel-chested, Pompeo lives with his second wife, Susan, and their golden retriever, Sherman, in a rented house on the grounds of a military base across the street from the State Department. A film buff and an AC/DC fan, he seems modest and approachable in settings where he’s comfortable. When challenged, especially about the President, he gets testy and red in the face. He favors baggy gray suits and close-cropped gray hair. Trump, who often talks about whether someone “looks the part,” has made a point of calling out Pompeo’s unglamorous presence. At a recent appearance in South Korea, he summoned Pompeo to the stage with his daughter Ivanka, referring to them as “beauty and the beast.”
Pompeo’s background bears little resemblance to that of recent Secretaries of State, all of whom came to the job after long careers in public life and with extensive international experience. Pompeo, in contrast, has had a “meteoric rise,” as his friend Steve Scalise, the House Republican Whip, told me. A little more than a decade ago, he was unknown not only in Washington but also in his adopted home state, where he had just lost his first campaign, placing third in a three-way race to become chairman of the Kansas Republican Party. Trump often touts Pompeo’s credentials as a top student at West Point and at Harvard Law School, but in six years as a member of Congress he never chaired a subcommittee or faced a genuinely competitive election, and he served just over a year at the C.I.A. He spent much of his career running a struggling Wichita aviation company. Pompeo’s disclosure forms reveal that he is the poorest member of Trump’s Cabinet, listing family assets worth roughly, in 2018, between two hundred thousand and seven hundred and fifty thousand dollars.
Watch “The Backstory”: Susan B. Glasser reports on how Mike Pompeo reinvented himself and went from an obscure congressman to Trump's most influential adviser on international affairs.
Born in 1963, Pompeo was one of three children in a working-class family in Southern California. His father, Wayne, was a Navy radioman in the Korean War. His mother, Dorothy Mercer, was one of ten children of small-town Kansas pool-hall owners. In conservative Orange County, Wayne was a passionate liberal, according to two sources who heard this from the future Secretary. Pompeo does not speak publicly about his political disagreements with his father, but they began early on: he has said that, as a teen-ager, he read Ayn Rand’s “The Fountainhead,” and became a staunch conservative. The valedictorian of his public high school, he was nominated for West Point by his congressman, Bob Dornan, a fiery hard-right favorite of the defense industry. “That should give you a good idea of where I am coming from politically if ‘B-1 Bob’ chose me for West Point,” Pompeo told the conservative magazine Human Events, in 2011.
Pompeo thrived at West Point, where he majored in engineering management. “Man, it’s hard to be No. 1,” a classmate told me. “It’s not just being the smartest person. It’s being the person who shines your shoes the best and also has the most athletic skills.” After marrying his college sweetheart, Leslie Libert, the weekend he graduated, Pompeo took a prestigious posting as a tank commander in the U.S. Army’s 2nd Armored Cavalry Regiment, which patrolled the border between East and West in Germany. Five years later, with the end of the Cold War, the border was gone and Pompeo left the military, having risen to the rank of captain. He went to Harvard Law School, where he was an editor of the Law Review, then moved to Washington, D.C., and joined the blue-chip firm Williams & Connolly.
In the late nineties, however, Pompeo radically changed his life. He quit the law firm after two years and divorced his wife. (He kept the dog, Byron; she got the cat, Keats.) He moved to Kansas, his late mother’s home state, where, in early 1997, he and “three of my best friends in the whole world” from West Point, as he put it recently, started a company, Thayer Aerospace. Their aim was to acquire firms that manufactured specialized machinery for aviation companies clustered in Wichita, a city known as “the air capital of the world.” Pompeo became Thayer’s C.E.O.
While buying one of the companies for the new firm, he met Susan Justice Mostrous, a former Wichita State University homecoming queen. As the vice-president of a local bank, she was sitting on the other side of the negotiating table. “It’s true,” Pompeo told an interviewer, jokingly. “She took my money twice.” In 2000, he and Susan married and he adopted her son from her second marriage.
Pompeo became a deacon of Wichita’s Eastminster Church, an evangelical congregation that eventually quit the mainstream Presbyterian Church because of its support for gay clergy. Over time, Pompeo got to know some of the city’s wealthiest benefactors, including David Murfin, one of the largest independent oil producers in Kansas, and Charles and David Koch, the billionaire Republican donors and skeptics of environmental regulation, whose company is headquartered in Wichita. In 1998, the Kochs’ venture-capital fund made a key early investment in Thayer. Within a few years, Pompeo was a trustee of the Flint Hills Center for Public Policy, which also has ties to the Kochs, and he was an early recruit for the Kochs’ national political organization, Americans for Prosperity.
In 2010, amid the Tea Party backlash to President Obama, Pompeo made another career switch, running for an open Congress seat in the state’s Fourth District. The establishment climber from California had become a heartland evangelical. Pompeo ran a nasty race against the Democrat, an Indian-American state legislator named Raj Goyle, who, unlike Pompeo, had grown up in Wichita. Pompeo’s campaign tweeted praise for an article calling Goyle a “turban topper,” and a supporter bought billboards urging residents to “vote american—vote pompeo.” In the heavily Republican district in a heavily Republican year, he won easily. “Pompeo’s singular ability is in navigating power,” Goyle told me. “On that I give him massive respect, the way he mapped Wichita power, the way he mapped D.C. power, the way he mapped Trump.”
The narrative of Pompeo’s transformation has been rewritten over the years, or never told at all. Most notably, the Kochs were far more significant backers of his business than he has publicly acknowledged. In 2011, the Washington Post reported that, according to Pompeo and his aides, the investment by the Kochs’ venture-capital fund “amounted to less than 2 percent” of Thayer’s total. Their statement was highly misleading. Corporate documents for 2003 filed with the Kansas secretary of state but not previously reported show that the Kochs’ fund had a nearly twenty-per-cent interest in Thayer. The Kochs were also involved in the firm’s management. Both the president and the chief financial officer of the Kochs’ venture fund sat, at various times, on Thayer’s board of directors, and in 2000 the fund helped secure loans of up to four million dollars for the firm to buy property. The Kochs’ extensive involvement was not a secret: their fund announced on its Web site that it was part of Thayer’s “equity sponsor group,” adding that it had given Pompeo’s firm wide-ranging support, including “acquisition capital, strategic input at the board level, and guidance in environmental risk issues.”
The environmental risk turned out to be significant. Air Capitol Plating, an aircraft-parts processing company that Thayer took over in 1999, had for years been the subject of environmental complaints because of its use of the toxic chemical trichloroethylene, or TCE, dangerous traces of which had leaked into the local groundwater. In 2000, Thayer entered into a legal consent order with Kansas authorities, in which it admitted to the pollution and agreed to clean it up.
To address the problem, Thayer had brought in another Koch-backed firm, Cherokee, which specialized in “risk management services” for firms “that face environmental challenges.” A new entity, Cherokee Thayer, assumed liability for the cleanup, although it appears that little if any cleanup was carried out. Instead, the company and the authorities spent years arguing over the extent of the contamination and what to do about it. Meanwhile, the firm continued to pollute, failed to file required reports in 2003, 2004, and 2005, and was fined more than a hundred thousand dollars by the Environmental Protection Agency. In 2005, the state found high levels of TCE in nearby residential wells, resulting in a “threat to human health,” and the E.P.A. named it a High Priority Violator. According to the State of Kansas, this month, twenty years after Thayer purchased A.C.P., a permeable barrier will finally be installed to insure that no additional TCE flows from the site into the water supply.
In speeches, Pompeo often describes Thayer as a “small” company and himself as a “small businessman.” He has reminisced about Thayer as “a small, dirty, smelly, beautiful machine shop.” In fact, by 2000, according to a press release that year, the Kochs and other wealthy backers had invested ninety million dollars in the firm. Despite that funding, Thayer struggled financially when Pompeo ran it—another aspect of his past that Pompeo has publicly sought to revise. During his first run for Congress, in 2010, one of his Republican-primary rivals, a local millionaire named Wink Hartman, claimed that Pompeo was “forced out” of Thayer after having mismanaged the company into financial trouble, the Wichita Eagle reported. Pompeo denied the accusation, saying that he left Thayer on “excellent terms,” while acknowledging some difficulties, which he blamed on a downturn in the aviation industry after the 9/11 attacks.
But the company’s problems began before 9/11 and continued well beyond. In 1999, the Thayer subsidiary Air Capitol Plating started going downhill. According to testimony from Randy Birchfield, a West Point classmate whom Pompeo recruited to run A.C.P., business had slowed and there were layoffs, cutbacks in bonuses and health-care benefits, and rumors of imminent bankruptcy. “Clearly, the trend lines were moving in a direction that wasn’t comforting for anyone,” Birchfield said, in a deposition in a lawsuit between Thayer and A.C.P.’s former owners. The firm’s difficulties persisted. Thayer’s former human-resources manager, Kenneth Bollinger, said that he “directed the systematic layoff of nearly half the employees after 9/11.” A company balance sheet showed that, as of May, 2004, Thayer had just thirty-one thousand dollars in cash on hand and a negative “net worth” of almost thirty-three million dollars. In 2005 and 2006, venders sued Thayer for more than three hundred thousand dollars in unpaid bills. In both years, Thayer authorized new shares to be issued, which would raise needed capital but could also dilute the stakes of early shareholders such as the Kochs’ fund.
By April of 2006, Pompeo was no longer leading the company. The firm’s post-Pompeo president lists on his résumé today the “successful turnaround” of Thayer, which was renamed Nex-Tech Aerospace and sold to the private-equity firm Highland Capital, in April, 2007, with the assistance of a company that advertised expertise in the “wind-down” of “overleveraged and underperforming companies.” The same month as the sale, the Wichita Business Journal reported that the new C.E.O. described his job as being to “rebuild a reputation damaged by an era of missed deliveries and slow supplier payments.” Pompeo personally held a ten-per-cent interest in the firm as of 2003, but his financial-disclosure forms and his modest net worth suggest that he did not make much money from selling it.
Pompeo, however, soon landed with one of his Wichita contacts, David Murfin, the Kansas oil tycoon. Murfin named Pompeo president of Sentry International, an oil-services firm that manufactured parts in China and elsewhere and sold them in the U.S. One Sentry joint venture was with a subsidiary of the Chinese national oil firm Sinopec, although Pompeo later told the Senate that he had no business ties to foreign government-owned entities. Like the Kochs, Murfin was a major player in Kansas Republican politics. Kelly Arnold, at that time the Sedgwick County G.O.P. chairman, told me that Murfin was “a key person for anybody running for office.” In January, 2007, Pompeo ran for the chairmanship of the Kansas Republican Party, against Tim Huelskamp, a future congressman, and Kris Kobach, a firebrand who represented the Party’s anti-immigrant right wing. “Pompeo’s pitch to the Party was: I’m going to run this thing like a business,” Dan Rasure, who helped Pompeo in that race, told me. “To the rest of the world this may sound crazy, given how much Pompeo has catered to the ultra-conservatives once he became elected, but, in Kansas terms, Pompeo is just straight-up what would be considered a moderate.” Coming into the state G.O.P. convention, Pompeo believed that he “had the race sewn up,” Rasure said, but Kobach flipped a bloc of votes, and won.
Rasure stayed in touch with Pompeo, and persuaded him to become the first investor in his new alternative-energy startup, Sunflower Wind, which planned to make wind turbines. Pompeo, who personally invested as much as a hundred thousand dollars, served on the board and was a key adviser to the young C.E.O., who considered his advice invaluable. “I would never bet against Pompeo,” Rasure told me. But the firm went bust after one of its turbine blades cracked, and everyone involved lost money.
Pompeo had better luck in politics. By 2010, Wichita’s U.S. representative, Todd Tiahrt, had decided to run for the Senate. In the crowded Republican primary to succeed him, Pompeo was again backed by the city’s business élite. Murfin became his campaign co-chairman. Pompeo won the primary with thirty-nine per cent of the vote.
Soon after arriving on Capitol Hill, in 2011, he was the subject of articles in both the Los Angeles Times and the Washington Post, in which he was portrayed, as one Kansas professor told the Post, as the new “congressman from Koch.” That Post article is where Pompeo and his aides misrepresented the Kochs’ investment in Thayer as an almost negligible two per cent. Pompeo would never again be directly challenged about Thayer. When he ran for reëlection in 2014, he aired a campaign ad touting his “remarkable success” leading the company.
His positions evolved along with the story of his past. When Pompeo got to Congress, he argued that wind power was an expensive boondoggle and campaigned to end a production tax credit for wind technology, even though, not long before, he had personally invested in Sunflower Wind. By the time Pompeo joined the Trump Administration, he had written Sunflower out of his history, omitting from his Senate confirmation questionnaire his position as a member of its board.
In Washington, Pompeo found a way onto the House Energy and Commerce Committee, the critical panel for the business interests of his Kansas patrons. He appointed a former Koch lawyer as his chief of staff and acquired a reputation as a fierce defender of the Kochs. “Stop Harassing the Koch Brothers” was the title of an op-ed that he wrote in 2012, in which he dismissed attacks on them as “evidence of a truly Nixonian approach to politics.” Two years later, he called the Kochs “great men.” His loyalty was rewarded: according to the Center for Responsive Politics, in 2010, 2012, 2014, and 2016 he received more campaign funds from the Kochs’ network than any other candidate in the country.
But Pompeo hoped to make his mark in Congress on national security, and the Intelligence Committee was the panel that he most wanted to serve on. He got there in part by aiding the committee’s chairman, Mike Rogers, who sought Pompeo’s help in quelling an incipient rebellion by his fellow Tea Party members over the renewal of the wide-ranging surveillance authorized in the U.S.A. Patriot Act after 9/11.
On the committee, Pompeo was regarded by his colleagues as smart and hardworking, “very bright, very politically shrewd,” as Adam Schiff, a Democrat, put it, “with a certain pugnacious quality to his persona.” Pompeo gained attention as one of the most partisan promoters of conspiracy theories about the killing of the U.S. Ambassador and three other Americans at a diplomatic post in Benghazi, Libya, in 2012. For years, Pompeo criticized Secretary of State Hillary Clinton’s handling of the incident, and, when the select committee that was created to investigate it issued a bipartisan report clearing her, Pompeo and Jim Jordan, Republican of Ohio, were the only dissenters, arguing that Clinton knew Benghazi was a “terrorist attack” but, with the 2012 Presidential election only two months away, she covered it up.
Pompeo confronted Clinton when she testified before the panel on October 22, 2015. He badgered her about why she had given her private e-mail address to her outside political adviser, Sidney Blumenthal, but not to the Ambassador to Libya. Their encounter was widely seen as a disaster for Pompeo, and he later told a local Republican club in Kansas that even his wife, Susan, had given him an F for his performance.
“He was a Benghazi crazy,” a former senior intelligence official who dealt with Pompeo told me. Although his allegations were discredited, the investigation revealed that Clinton had deleted thirty thousand e-mails from a private server that she used while she was Secretary of State. Given that a subsequent F.B.I. investigation into Clinton’s e-mails hung over her 2016 campaign, the former official said of Pompeo, “at the end of the day, he succeeded beyond his wildest dreams.”ADVERTISEMENT
Obama’s nuclear deal with Iran was another obsession. Pompeo befriended the Arkansas senator Tom Cotton, a younger fellow Harvard graduate and Army veteran, and they argued that not only would the deal fail to stop Iran from obtaining a nuclear weapon; it was also an appeasement of the world’s worst sponsor of terrorism. In 2015, they travelled together to Vienna and then revealed what they said were “secret side deals” that the Obama team had agreed to with the Iranians. Pompeo’s pronouncements on Benghazi and on the Iran deal led to new media prominence on Fox News and other right-wing outlets, where he became one of the fiercest critics of Obama’s foreign policy. He trafficked in outlandish theories and engaged in slashing personal attacks. On “Meet the Press,” Pompeo called Clinton’s role in Benghazi “worse, in some ways, than Watergate.”
But Pompeo grew restless in the House. In 2014, according to a Kansas Republican he consulted, Pompeo briefly considered challenging Kansas’s senior senator, Pat Roberts, in that year’s primary. In the spring of 2016, he publicly flirted with a challenge to the state’s other Republican senator, before dropping that, too.
By the 2016 Republican National Convention, Pompeo had, at least in public, changed his mind about Trump. “I am excited for a commander in chief who fearlessly puts America out in front,” he told the Wichita Eagle while in Cleveland as Trump accepted the nomination. He expressed even more excitement about Trump’s running mate, Mike Pence, whom Pompeo considered a “friend and mentor” from their time together in Congress. Pence, too, had strong ties to the Kochs, and Pompeo found a connection to Pence’s campaign in Marc Short, a veteran operative for the Kochs’ organization. Although the Kochs had opposed Trump in the Republican primaries, Short signed on as an adviser to Pence and is now his chief of staff. “Marc knows Mike well,” a Republican friend of Pompeo’s told me, and Short got Pompeo to help Pence with debate preparation that fall. When Trump won, Pence repaid the favor by recommending Pompeo.
The weekend after the election, Pompeo called a Kansas Republican who had worked for Trump and told him that he hoped to become either C.I.A. director or Secretary of the Army. The two decided that he should work his ties to Pence and to a West Point classmate, David Urban, who had run Trump’s campaign in Pennsylvania. Urban was also hearing from Steve Bannon, Trump’s ultranationalist chief strategist, who called Urban to suggest that he urge “the old man” to name Pompeo to the C.I.A. post. Urban did so.
On Wednesday, November 16th, Pompeo was summoned to Trump Tower for an interview with the President-elect. The men had never met, and still disagreed about key issues, such as Russia. Trump wanted to lift sanctions on Vladimir Putin’s regime, and disdained the U.S. intelligence community’s finding that Russia had intervened on his behalf in the election. “You’re wrong about Putin,” Trump told Pompeo, according to an account that Pompeo later offered to Republican insiders. “No,” Pompeo said. “You’re wrong.” Two days later, Trump announced that Pompeo was his nominee for the C.I.A. job. Trump seemed to know little about him, and Representative Devin Nunes, a member of Trump’s transition team, later said that he didn’t think Pompeo had even filled out a vetting questionnaire.
After the announcement, Jeff Roe, Ted Cruz’s former campaign manager, called Trump’s son-in-law, Jared Kushner, and reminded him of Trump’s fury at Pompeo’s Kansas caucus speech. As Tim Alberta recounts in his book, “American Carnage,” Kushner put the call on speaker, so that Trump could hear. “No! That was him? We’ve got to take it back,” the President-elect roared. “This is what I get for letting Pence pick everyone.” But the appointment stood. Two weeks later, Pompeo was hanging out with Trump in Urban’s box at the Army-Navy football game.
Pompeo reminded other Republicans that he and Trump had a common enemy: Barack Obama. “He just made his political peace with reality—this is our President,” a former official in the George W. Bush Administration told me. Just months earlier, Pompeo had compared the “authoritarian” Obama to Trump, but Pompeo now saw joining Trump’s Cabinet as “an opportunity to kind of right the wrongs,” the former Bush official said. On January 23rd, Pompeo was confirmed, in a 66–32 vote. By then, he had deleted his entire congressional Twitter account, including a plea to the President-elect, days before Trump named him C.I.A. director, to “make the undemocratic practice of executive orders a thing of the past.” Trump, of course, did no such thing.
When Pompeo arrived at the C.I.A., he faced a political furor generated by the new President. Days before his swearing-in, Trump had compared the U.S. intelligence community to Nazi Germany for its handling of a secret dossier on Trump’s Russia ties. Then, at a welcoming ceremony in the lobby of C.I.A. headquarters, the President had attacked the agency again and made false claims about the size of the crowd at his Inauguration. Still, Pompeo managed to soothe the C.I.A. bureaucracy. He promised members of the Directorate of Operations that they would no longer be micromanaged, as they were under Obama. He vowed “to serve as an important bridge, if not a heat shield, not just from the White House but from any sort of political attacks,” Juan Zarate, a former U.S. official whom Pompeo asked to lead his transition to the C.I.A., told me. Pompeo also personally delivered the President’s Daily Brief to Trump, giving the C.I.A. valuable access to a skeptical President. “Mike got them in the room every day, and that is the most important thing the agency expects to have with its director,” the former senior intelligence official said. Pompeo used the sessions to establish a friendly relationship with the President, a contrast to Trump’s friction-filled dealings with other top national-security advisers. “He clicked with Mike early on, and Mike has had the benefit of that. Mike gets the President,” Christopher Ruddy, a friend of Trump’s, told me. Steve Scalise said that he remembers White House meetings in which “the President would look to Mike Pompeo before he even looked to Tillerson to get his assessment on different hot spots. That told me the President had incredible trust for Mike’s judgment, and it’s well founded.”
Pompeo and his wife, who played an active role both in his office on the Hill and at the C.I.A., cultivated relationships not only with Trump but inside Trumpworld. One of these was with the Cabinet’s glitziest couple, Treasury Secretary Steven Mnuchin and his wife, Louise Linton. They made a seemingly odd foursome—the poorest member of Trump’s inner circle and one of its richest, an evangelical Kansan and an actress who got in trouble for vamping in opera-length black leather gloves at the U.S. Mint. Yet Linton recently told Los Angeles magazine that her favorite thing in Washington was dinner with the Pompeos. When the interviewer seemed incredulous, she replied, “But Pompeo is fun! He’s warm; he’s gregarious; he’s a great storyteller. He’s a lovely man. I love his wife, Susan.”
Pompeo seemed to relish the C.I.A. job. He told a friend that, while flying around the world to meetings on a U.S. government plane, he would read the agency’s secret histories of wars in places like Afghanistan and Central America. Still, the former senior intelligence official said, “he wasn’t satisfied with being C.I.A. director. He wanted to be national-security adviser or Secretary of State.”
By the fall of 2017, Rex Tillerson was in trouble with the President. That summer, he had called Trump a “fucking moron,” and he often disagreed with Trump on policy decisions, such as withdrawing from the Paris climate accord and moving the U.S. Embassy in Israel to Jerusalem. When Trump demanded an immediate withdrawal from the Iran nuclear deal, Tillerson pushed for more time. Most other advisers agreed with Tillerson, but Pompeo, a former senior official told me, twice sat in the White House Situation Room and supported leaving the Iran deal, sidelining his agency’s concerns about doing so.
The Iran deal was one subject on which Trump and Pompeo were closely aligned before 2016. Another former senior intelligence official told me that Pompeo gave “strong brushback” to experts on the Iran desk at the C.I.A. after they concluded that Iran was complying with the terms of the deal—a sore point, since Trump was claiming that Iran was not doing so. The first former senior intelligence official told me that Pompeo challenged the agency’s Iran analysts: “He would ask, ‘What evidence? Are the Iranians cheating?’ ”
At the White House, Pompeo waged what the former senior official saw as a “concerted campaign” to replace Tillerson. The escalating internal fight over Iran played into it. “Pompeo was working it hard. He saw and heard from the President how much he was souring on Tillerson,” the former official told me. “He was making the case to Trump: You’ve got a whole lot of people around you who don’t agree with you. I’m your guy.”
An important proponent of Pompeo was Jared Kushner, who repeatedly clashed with Tillerson after Trump assigned his son-in-law an expansive portfolio that included everything from China to Mexico to Mideast peace. At a Washington social event in late 2017, a guest commented to Kushner on Tillerson’s troubles with Trump. “The problem will be solved very quickly if I have my way,” Kushner responded. When another guest suggested that Pompeo, who was present, should get the job, Kushner replied, “Of course.”
Several months later, in March, 2018, Tillerson was returning home from a trip to Africa when Trump fired him and announced Pompeo as his replacement. “We’re always on the same wavelength,” Trump said. “The relationship has been very good, and that’s what I need.”
In the spring of 2018, on his first day as Secretary of State, Pompeo invoked the bluster of the Second World War general George Patton, vowing that the U.S. would “get its swagger back.” The reference to such an undiplomatic figure was odd, unless you knew that Patton is Trump’s most admired general and that the hagiographic movie about Patton’s life is one of his favorites. Pompeo followed up with a social-media campaign that featured photos of himself and Patton, and a State Department logo with a new motto: the “Department of Swagger.” Diplomats quickly surmised, as a former senior department official put it, that Pompeo’s opening pitch was to a “constituency of one.”
Managing Trump as Secretary of State, however, would prove harder for Pompeo than it had been. As C.I.A. director, Pompeo spent many hours with the President, and he could punt difficult questions by saying that it was not his role to offer policy advice. Now he would often be away travelling, while Bolton, the new national-security adviser and a veteran bureaucratic infighter, had daily Trump time. The State Department was also in disarray from Tillerson’s tenure. Waves of experienced Foreign Service officers quit or were forced out, as Tillerson insisted on an extensive reorganization plan, instituted a hiring freeze, and accepted crippling budget cuts. The White House also blocked State from hiring any of the hundred and forty-nine G.O.P. national-security officials who signed “Never Trump” letters during the campaign.
With State in crisis, Pompeo reached out to some veteran diplomats who had quit or been pushed aside, promoted a career Foreign Service official to serve as the department’s No. 3, lifted Tillerson’s hiring freeze, and consulted all the living former Secretaries of State, including Hillary Clinton, who took his call even though he had savaged her over Benghazi. The gestures helped smooth his Senate confirmation. In the end, Pompeo received even more Democratic votes, seven, than Tillerson had.
Pompeo used his standing with the President as a selling point for a department in need of White House clout and a semblance of stability. “The department appreciates the fact that they have a Secretary who the President trusts,” Fred Fleitz, who served as Bolton’s chief of staff at the National Security Council, told me. Democrats noticed, too. “Morale is better at the State Department. It’s still at a historic low watermark, but people feel better,” Chris Murphy, a Connecticut senator who has vehemently opposed Pompeo on issues such as U.S. military support for Saudi Arabia’s war in Yemen, told me. “There are some silver linings to Pompeo’s time at State that even critics like me can’t ignore.”
Yet Trump’s impulsive style created constant complications for Pompeo, as it did for other officials. Trump undercut Pompeo with his abrupt decision, last December, to withdraw U.S. forces from Syria (which led to the resignation of Defense Secretary James Mattis); his unilateral recognition of Israel’s post-1967 annexation of the Golan Heights (a day after Pompeo, who was in Israel at the time, publicly said that he knew of no such plans); and his spur-of-the-moment decision to cut U.S. foreign aid to Central America. On North Korea, Pompeo was “very skeptical,” according to a former senior U.S. official, that Trump’s talks with Kim Jong Un would produce a breakthrough on denuclearization—a problem, since Trump’s first assignment to Pompeo was to oversee those negotiations. Trump has made a practice of alarming longtime allies, musing aloud about cancelling the mutual-defense treaty with Japan, threatening to pull U.S. troops out of South Korea, deriding Europe’s largest powers as nato deadbeats, and dismissing the European Union as a “foe.” All of this has made for tense Pompeo visits in normally friendly precincts.
In Washington, though, Pompeo has managed to maintain Trump’s confidence while remaining on speaking terms with a foreign-policy establishment that is deeply unsettled by the President. “He’s in a sense become the real adult in the room,” Ian Bremmer, the founder of the geopolitical advisory firm the Eurasia Group, told me. “It is less the case than he would like, but vastly more the case than anyone else.” Pompeo’s Republican friend told me, “He’s not an enabler of Trump. He does a lot to try to manage him.” Others believe that Pompeo is merely posturing. He is a politician who knows his audience; he wants to give the impression that “he generally agrees but he’s working with this wild man,” another former senior State Department official, who has met with Pompeo privately, told me. “He always has this sheepish ‘I know,’ but won’t show his hand.” He suggests, without being specific, the former official added, that he’s got “his finger in the dike.”
When it comes to personnel, Pompeo has sent the right signals to the G.O.P. establishment by hiring a few Republican opponents of the President. He tapped Elliott Abrams, who wrote an anti-Trump op-ed in 2016, to be his special envoy to Venezuela. (Trump blocked Tillerson’s attempt to hire Abrams.) He asked Jim Jeffrey, George W. Bush’s deputy national-security adviser, to serve as the special envoy for Syria, even though he signed a Never Trump letter. This spring, Pompeo appointed the Fox News contributor Morgan Ortagus to be his spokesperson, although she, like Pompeo, had publicly opposed Trump in 2016, prompting the conservative magazine The National Interest to observe that “Mike Pompeo’s house has become a hall of NeverTrump.”
In each case, Pompeo carefully managed the President. “He’ll be meeting with Trump about something else and then, like, at the end of the meeting he’ll be, like, ‘Oh, by the way, I’m bringing on Jim Jeffrey,’ ‘Oh, by the way, I’m bringing on Elliott Abrams,’ ” the Republican close to Pompeo told me. Trump agreed to the moves, but only because the jobs did not require Senate confirmation. “It’s fairly clear he has a deal with the President where if there’s no confirmation hearing, where people can talk about the 2016 race, then he can hire whoever he wants,” a senior Administration official told me.
Fifteen months after Pompeo took over the State Department, the question is not whether he has stayed in Trump’s good favor but to what ends Pompeo is using the relationship. He “agrees certain things the President has mandated don’t make any sense,” a third former senior department official told me. When Trump unilaterally cut two hundred and thirty million dollars that was meant to help stabilize parts of Syria where U.S. forces were present, Pompeo “went to the President several times to fix it. He just lost,” the former official said. He concluded that this typified Pompeo’s approach. “He will go at Trump to try to change his mind, but if he can’t he’ll go, ‘O.K., we’re doing what the President has said.’ ”
Pompeo’s own ideological agenda is also becoming clearer, as indicated by recent controversies over orders to U.S. diplomatic missions not to fly the gay-pride flag; the creation of a new State Department commission stocked with conservatives to review human-rights policy based on “natural” rights; and comments by the Secretary that were skeptical of climate change at an international climate-change conference. In the end, Pompeo may be remembered as the most conservative, ideologically driven Secretary of State ever to serve. He is certainly no sentimentalist about the world, and, while he does not share Trump’s affinity for dictators like Putin and Kim Jong Un, he has remained notably silent on human-rights abuses in places such as North Korea. In Saudi Arabia, he smiled during a photo op with the Crown Prince soon after the gruesome killing of the dissident columnist Jamal Khashoggi, and angered many members of Congress, including some in his own Party, by appearing to dismiss concerns about it. Pompeo and his advisers had thought that the episode would be a repeat of China’s 1989 massacre of protesters in Tiananmen Square: a controversy that produced outrage in Congress but then passed. Instead, Pompeo was “struck and frustrated by how it hasn’t blown over,” the Republican friend told me.
Pompeo is also more political than any other recent Secretary, with the exception, perhaps, of Hillary Clinton. In some ways, he’s approached the job like a future Presidential candidate, hosting Republican strategists such as Karl Rove and wealthy patrons such as the former Goldman Sachs C.E.O. Lloyd Blankfein at regular “Madison Dinners,” named for the fifth Secretary of State (and fourth President). The dinners are orchestrated by Pompeo’s wife, Susan, who travels frequently with him and whose unusual requests are now being investigated by congressional Democrats after a whistle-blower complained that the couple was inappropriately using government resources and treating Pompeo’s security detail as “UberEats with guns,” CNN reported.
At times, Pompeo’s concern for his political image can seem to shape policy decisions. Last September, he ordered the closure of the U.S. consulate in the Iraqi city of Basra, despite objections from some State Department officials. “He did not want Basra to be his Benghazi,” a former senior U.S. official who discussed the decision with Pompeo said. Another former senior U.S. official, with experience in Iraq, told me, “Absolutely, it was an overreaction. He wears Benghazi around his neck.”
In a recent speech at the Claremont Institute, in California, Pompeo outlined his version of the Trump doctrine, claiming that “realism” “restraint,” and “respect” guided the President’s approach to the world. It was his most ambitious explanation yet of the Administration’s foreign policy, asserting that renewed nationalism is necessary as the U.S. faces a new era of great-power competition with China and Russia. It sounded plausible, Republican, and entirely unlike the President.
“The problem with the speech is that it doesn’t reflect Trump’s foreign policy,” said Brett McGurk, a former State Department official who oversaw the anti-Islamic State coalition, until he quit in protest over Trump’s decision to pull out of Syria. “It’s not based on realism. It’s not based on restraint. It’s based on declaring grand objectives, few of which the Administration is willing or able to meet.” This gets at a central challenge of Pompeo’s tenure: turning Trump’s tweets and “instincts” into a coherent foreign policy, as his policy-planning chief often put it. Pompeo insists on that goal, though doing so often involves essentially ignoring the President himself. On Syria, for example, Pompeo, Bolton, and other officials disagreed with Trump’s order to immediately withdraw U.S. forces, but they sought to manage him rather than confront him, as Mattis did, while enlisting other allies, such as the Israelis and members of Congress, to lobby Trump for a reversal. In public, Pompeo defended the decision, arguing, in defiance of the facts, that it constituted a continuation of Trump’s policy. Eventually, Trump agreed to keep some troops in Syria.
The episode was one of many in which Pompeo has struggled to avoid coming into public conflict with the President. In recent months, Pompeo has repeatedly tangled with members of Congress and journalists who ask about the President’s policies and his inflammatory statements. Such questions, he has said, are “silly,” “bizarre,” “ticky-tack,” “insulting and ridiculous and frankly ludicrous.” Yet none of the people I spoke with thought Pompeo harbored any illusions about the President. In private, Pompeo’s gripes sometimes echo those expressed by fired predecessors, among them H. R. McMaster, Trump’s second national-security adviser. One of the former senior officials told me that he had heard identical complaints from Pompeo and McMaster: “ ‘We put together carefully crafted policies on things and the President blows it up with a tweet, and I have to go in and put Humpty Dumpty back together.’ ”
Until now, Pompeo has derived his power by being better than anyone else at anticipating where Trump is going to end up and managing to get himself there. As Senator Chris Coons, a Democrat on the Foreign Relations Committee, put it, Pompeo has cultivated a “special skill,” figuring out “how to get Trump moving in the direction he wants.”
The risks of getting publicly out of synch with Trump, however, have gone up for Pompeo this summer, as tensions with Iran rise. The President, a self-styled grand global dealmaker, has said that his goal after withdrawing from the nuclear deal is to bring Iran back to the negotiating table for a better deal. Pompeo, an Iran hawk far longer than he has been a Trump supporter, has been driving the Administration’s hard-line “maximum pressure” strategy. The possibility of a real divide with Trump emerged in June, after Iran shot down a U.S. drone. Pompeo and his internal rival Bolton, a longtime advocate of Iranian “regime change,” initially backed a retaliatory military strike, and Trump agreed, only to reverse himself when planes were already in the air. Even before that incident, Fred Fleitz, Bolton’s former chief of staff at the N.S.C., had told me that Bolton and Pompeo are closely aligned on Iran, at least. “He and John are on the same sheet of music,” Fleitz said.
Whatever their ideological convergence on Iran, relations between the two seem to have worsened in recent months, to the extent that the former White House official was told recently that they are “not even on speaking terms” and communicate largely through intermediaries. Pompeo, asked last month about his relationship with Bolton, noted, “There’s always tension among leaders of different organizations.”
But for now it’s Bolton, not Pompeo, who appears to be the odd man out. In a sign of Pompeo’s ability to remain in Trump’s good graces, the President publicly bristled at Bolton, not him, after the aborted Iran strike. Then, with Pompeo by his side, Trump made an unprecedented, hastily arranged visit with Kim Jong Un to the North Korean side of the Demilitarized Zone, while Bolton went off on a previously scheduled trip to Mongolia.
In March, Pompeo returned to Kansas for a State Department summit on global entrepreneurship. Amid speculation about whether he will run for a Senate seat next year, Pompeo was asked how long he planned to serve at State. “I’m going to be there until he tweets me out of office,” he responded, to knowing laughs. A few weeks later, Pompeo celebrated his first anniversary as Trump’s Secretary of State, hardly an assured accomplishment in the President’s ever-changing Cabinet. Pompeo marked the occasion with an unusual all-hands pep rally in the lobby of the State Department, “Uptown Funk” blaring as he entered. The Secretary, referencing his own pledge, a year earlier, to stress “swagger,” now redefined the department’s job even more explicitly as serving Trump—“the premier agency delivering on behalf of the President of the United States.”
The capstone of the event was the unveiling of a banner, hanging two stories high, containing a new “professional ethos” statement that Pompeo read out loud to the diplomats, requiring their “unfailing professionalism,” “uncompromising personal and professional integrity,” and “unstinting respect.” The ethos was Pompeo’s personal project, overseen by Ulrich Brechbuhl, his friend since West Point and a co-founder of Thayer Aerospace, who is now serving as his State Department counsellor. The oath stirred controversy about why it was needed, given that diplomats already swear an oath to the Constitution. An early draft was seen as a loyalty oath aimed at leakers. As one of the former senior officials, who saw it, told me, “I ended up feeling like we were in ‘1984,’ not to mention it being incredibly condescending.” Another of the former senior officials attributed the oath to Pompeo’s concern that “he had to show the President [State] is adding value to what the President is trying to accomplish.” That, too, seemed to be the goal of the new departmental motto that Pompeo had adopted: “One team, one mission.”
The word “mission” was the tell. Pompeo in public often refers to the “mission set” he’s been assigned by Trump, presenting himself as a mere executor of the President’s commands. “He’s very focussed on whatever the mission is. He’s a West Point guy: Trump wants a deal, so I’ll get a deal,” another of the former officials said. The official noted that Pompeo uses the language of “an Army captain, a guy who went to West Point and got out before he became a general.”
This behavior is the reason that Pompeo has succeeded in becoming the lone survivor of Trump’s original national-security team. At the start of his Administration, the President had bragged about “my generals.” But, now that he has pushed out the actual generals who served as his chief of staff, his national-security adviser, and his Defense Secretary, it seems clear that Trump was uncomfortable with such leaders, and rejected their habits of command and independent thinking. He wanted a Mike Pompeo, not a Jim Mattis, a captain trained to follow orders, not a general used to giving them.
The pep rally gave Pompeo an opportunity to show the President that his troops were loyal, too. There were no references to Iran or North Korea or America’s global role, only the vow to serve Trump as his “premier agency,” and the promise of fealty. This, in the end, may be Mike Pompeo’s real mission set. Just as he rewrote his business troubles into a success story, he has reinvented himself as the ultimate soldier for Trump. As he left the celebration, the Secretary shook hands and posed for selfies. Playing on loudspeakers was a song by the Canadian pop star Shawn Mendes: “There’s Nothing Holdin’ Me Back.” ♦
Published in the print edition of the August 26, 2019, issue, with the headline “The Secretary of Trump.”
Susan B. Glasser is a staff writer at The New Yorker, where she writes a weekly column on life in Washington. She co-wrote, with Peter Baker, “The Man Who Ran Washington.”More:Mike PompeoSecretary of StatePres. Donald TrumpRepublicansKoch BrothersForeign Policy
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