Thursday, March 1, 2012

Billionaire Koch Brothers Sic Super Lawyer on Widow

Get your popcorn ready, this is going to get real interesting.

The billionaire Koch brothers, David and Charles, have hired super lawyer Daniel Crabtree to sue the widow of William Niskanen, Kathyrn Washburn. Niskanen, who passed away in October  2011, was chairman emeritus at the Cato Institute. Between 1985 and 2008, Niskanen was the chairman of the Cato Institute.

The lawyer the Koch Brothers have hired to sue Washburn is a member of the law firm, Stinson Morrison Hecker LLP.  The firm is based in Kansas City, home of Koch brothers operations.

Crabtree has been selected to:

Missouri & Kansas Super Lawyers 2011
Missouri & Kansas Super Lawyers 2010
Missouri & Kansas Super Lawyers 2009
Missouri & Kansas Super Lawyers 2008
Missouri & Kansas Super Lawyers 2007
Missouri & Kansas Super Lawyers 2006
Missouri & Kansas Super Lawyers 2005

Apparently, Washburn has not returned to the Cato institute the 16 shares that Niskanen held.

According to the Koch brothers in the suit, she is required to return the shares.

The Koch brothers are also suing the current Cato president, Ed Crane.

According to the suit, Cato was divided before Niskanen's death between four shareholders: the two Koch brothers, Cato president Crane, and Niskanen.

The Koch brothers believe that they have the option to buy Niskanen’s shares, while Cato officials (i.e.Crane) believe that the shares belong to Niskanen’s widow, Kathryn Washburn.

Ed Crane has issued the following statement:
Charles G. Koch has filed a lawsuit as part of an effort to gain control of the Cato Institute, which he co-founded with me in 1977. While Mr. Koch and entities controlled by him have supported the Cato Institute financially since that time, Mr. Koch and his affiliates have exercised no significant influence over the direction or management of the Cato Institute, or the work done here. 
Mr. Koch’s actions in Kansas court yesterday represent an effort by him to transform Cato from an independent, nonpartisan research organization into a political entity that might better support his partisan agenda. We view Mr. Koch’s actions as an attempt at a hostile takeover, and intend to fight it vehemently in order to continue as an independent research organization, advocating for Individual liberty, limited government, free markets and peace.
It's a bit hard to swallow that the Koch brothers had little significant influence over Cato. It is not so hard to swallow that they want to maintain that control and Crane is attempting to fight off the Koch brothers in a joint effort with the widow of Niskanen.

An additional note, and it is not clear how big a point this is going to be, but it is very interesting. Court documents show that an original shareholder Cato Institute agreement was signed in 1977  by Charles Koch, George Pearson, Roger L MacBride, Murray N. Rothbard and Edward H. Crane III

Note well the name, Murray N. Rothbard. He had a falling out with the Charles Koch and Ed Crane and it does not appear that Rothbard ever signed away his rights as a shareholder. That this document surfaces in this lawsuit, thus may be very interesting.

Here's David Gordon explaining the period:
 Koch and Crane had no adequate answer to Rothbard’s devastating indictment. They responded instead by attempting to remove him from the Cato Institute Board of Directors. The Board was completely under Charles Koch’s sway; if it did not do his bidding, he could call a stockholders’ meeting and replace the Board. Naturally, this state of affairs was not publicized. Koch and Crane demanded that Rothbard surrender his own shares of stock in Cato; when he refused, they illegally took them from him.

As Rothbard recounted the story in the January-April 1981 issue, Crane informed him by letter that his personal antagonism toward Crane required him to leave the Cato Board. "Crane concluded that, because of the alleged antagonism, ‘we believe it would be difficult, if not impossible, for you to objectively evaluate ongoing and future Cato projects as a Board member.’ In other words, disagreement with Crane robs one of ‘objectivity’; unfailing agreement and lickspittle fawning upon Crane is the only way to make sure that you are superbly and consistently ‘objective’." Not only was Rothbard a founding member of the Cato Board and an original stockholder: he had suggested the name "Cato" for the Institute. But none of this mattered to Crane and Koch. 
Rothbard nevertheless appeared at the Cato Board meeting held on "Black Friday," March 27, 1981, in San Francisco. He argued that his disputes with Crane over LP policy should not affect his standing on the Board. "So since the Cato Institute, as a tax-exempt institution…is not supposed to have anything to do with partisan politics, how dare Crane make my stand within the LP a criterion for my continued shareholder or board membership at Cato?"
Koch and Crane, of course, rejected Rothbard’s claim. "Crane, aided and abetted by Koch, ordered me [Rothbard] to leave Cato’s regular quarterly board meeting…. The Crane/Koch action was not only iniquitous and high-handed, but also illegal, as my attorneys informed them before and during the meeting. They didn’t care. What’s more..., in order to accomplish this foul deed to their own satisfaction, Crane/Koch literally appropriated and confiscated the shares which I had naively left in Koch's Wichita office for ‘safekeeping,’ an act clearly in violation of our agreement as well as contrary to every tenet of libertarian principle."
With this backstory, it is mighty odd that a second Cato Institute shareholder agreement appears in the court documents without any explanation as to what happened to the original shareholders Rothbard and MacBride. Will this require investigation?

In any case, Rothbard would have no idea that the original document signed by him and held from him by Charles Koch would appear in a court document as supporting evidence between the two combatants who originally illegally threw Rothbard out of the Cato Institute.

As one follower of this latest Koch soap opera says:
I can hear Murray's delightful laugh!


  1. "The billionaire Koch brothers, David and Charles, have hired super lawyer Daniel Crabtree to sue the widow of William Niskanen, Kathyrn Washburn."

    That sure does make the Koch bros out to be no good low down s.o.b's.
    I knew they were bad, but this,... yeesh.

  2. As with you, I was also very curious about the saga of Rothbard's shares in Cato. As a corporate attorney myself, It was fascinating to see his signature as a stockholder in the 1977 stockholder agreement.

    There is a provision in the agreement that provides that a majority can forcibly buy the shares of a single holder for the price that holder paid. I imagine this is the provision the Kochs used to get rid of Murray.

    The problem is that I am skeptical that such a provision would have been enforceable under Kansas law. In most cases, a redemption of shares must be effected at the fair market value. Here, the agreement says Murray paid $12, which by the terms of the agreement would be the redemption price...this is hardly the FMV.

    Thus, the Kochs may very well have stolen Murray's shares; at a minimum they did not follow proper procedure when kicking him off the board.

    As to the new dispute, the agreement only prohibits a member from transferring its stock. It doesn't address transfers that happen by operation of law. Without looking at Kansas case law, I think the Kochs lose this battle.

  3. I may actually have to root for Koch on this one. Based on Rothbard's account it sounds like Crane was the instigator of the dispute that led to seizing Rothbard's shares, then Koch sided with Crane giving him the majority. That doesn't exonerate Koch any, but it does quite literally turn this into a case of reaping what you sow for Crane.

    In either case Cato is the poster child of a DC Beltway libertarian organization, and it became so more directly under Crane's direct watch than Koch's less direct funding. So the worst that could result is the status quo of the "Cosmotarian Cato" that continues to stab real libertarians like Ron Paul in the back because they aren't chic and "cultured" enough or close enough to the seat of federal power. I think that's what likely happens if Crane wins - Cato remains the same old cosmotarian Stato for the foreseeable future.

    If Koch wins...well the up side is he'd probably clear house of the Crane folks and that includes some of the most noxious Beltway cosmotarian types. The down side of course is he'd probably replace them with a new crew of other Beltway idiots of his own. But I don't see how that can be any worse than what's already there, so it's probably the lesser evil.

  4. Haha, wouldn't it be brilliant if the court reinstated Murray's share thus granting them to Rockwell as the executor of his estate!

    One can dream...

    1. We got anyone who could file an Amicus brief making the case that yes the original shareholder's agreement is intact, but that means to resolve what to do with Niskanen's shares also means you have to resolve the lingering matter of Rothbard's shares. The question then would be whether those shares can transfer to the executors of Rothbard AND Niskanen's estates.

    2. Cato's performance profile has changed slowly since Crane and the Koch's had their falling out. Since then, Cato has started to publish on monetary policy, to talk about the gold standard (prior to that, the last paper, if I recall correctly, was published in 1988), and they have even had Ron Paul speak at a couple of events. There is every reason to suspect that Cato finally came to realize that the Kochs were corporatists who have been intentionally sapping the time, strength and energy of the best minds of the libertarian movement for over a decade in order to keep them from influencing actual events in the U.S. as neocons were executing a slow motion takeover of the country. An amicus or even simple media coverage of the fleecing of Rothbard would prove a pattern of behavior that would call the Kochs' intentions and reputation into question. That would serve Cato well. It might also set in motion the repair of a rift in the movement that has handicapped libertarianism for almost a quarter of century. Just imagine where we might be now if Cato and the Mises people hadn't been, possibly through the Kochs' manipulations, undermining each other all this time?

  5. I tend to think the question of prior infighting and mishandling of shares will simply be used to illustrate the improper purpose, and then to determine how much further back the IRS should look when ringing up the tax bill after disregarding their 501c3 status. I mean really. Two of three shareholders, related by blood, who by agreement must elect each other to the Board, and who control half of the Board seats by virtue of being shareholders?