Friday, March 2, 2012

Will Lew Rockwell Show at the Next Meeting of the Cato Board?

Lew Rockwell writes:
David Gordon calls to say that since the court filings in the Koch Bros. v. Cato and Ed Crane lawsuit admit that Murray Rothbard was an original stockholder of the Cato Institute, which was his idea and his name, but pass over what happened to his shares (they were illegally taken from him before he was purged), the shares--still his property--would have passed, with the rest of his estate, to his widow Joey, and then to my control. So do I own stock in the Cato Institute?
I spoke to David Gordon last night and David made clear to me that the only reason Murray did not fight on in his battle against Ed Crane and Charles Koch is that he did not have proof of his ownership, since Charles Koch held the stock and the shareholder agreement. The agreement that is now a public document, decades later, because of the Koch brothers  lawsuit against Ed Crane and the widow of Bill Niskanen, proves that Murray was an original shareholder.

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

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

Lew probably has more important things to do, but somewhere Murray is having a good laugh.


  1. Following the links to an account of the dispute, it sounds as though Cato shares don't transfer the way ordinary shares of stock do. They can't be sold or given to anyone other than the Cato Institute itself without first offering the existing shareholders the opportunity to buy them. That's the basis for the Koch position that Bill Niskanen's shares don't pass to his widow, which is what the current lawsuit appears to be about.

    Assuming that's correct, Murray's shares didn't pass to his widow, or from her to Lew Rockwell.

    1. David,

      I take your point re the agreement, but then why are they taking Kathyrn Washburn to court? If she has no legal control over the shares.

      It seems that the Kochs are implying that possession has some kind of significance. Wouldn't the Koch position suggest that they should have also taken Joey Rothbard to court?

    2. The reason gentlemen is that the 1977 shareholder's agreement only speaks of transfers made by a shareholder. This is separate and distinct from transfers that occur by operation of law. I think the Kochs lose this case unless 1977 Kansas corporate law is unusual.

      In a typical Delaware law context, unless you say specifically otherwise, a transfer that occurs by operation of law is not hindered by a provision in a shareholders' agreement that restricts transfers effected "by a shareholder" (whatever the type of restriction). Those provisions simply don't apply.

      As I posted in a prior thread, Murray's shares were probably subject to being reacquired, but it probably should have been at fair market value and not the $12 par value. There is also an interesting fraud possibility if he never saw the shareholders' agreement that he signed.

      Possession matters as Robert suspects, but if Murray was paid the proper consideration, the improper seizure by the Kochs would have only entitled Murray to damages. The issue is that I doubt he was paid the proper consideration.

    3. It's not clear that shares cannot be transferred to heirs upon death. The language of the agreement is far to vague on that point. But Murray definitely had no legal right to any shares of Cato, since the majority of shareholders voted to get rid of him.

  2. I wonder what insane tactics the Koch's would have to come up with the prevent Rockwell from being on the board.

    It is funny to me that the Koch's decades of acting like certain people didn't exist has backfired on them.

  3. Section 3 of the 1977 Agreement says that shareholders cannot dispose of their shares unless they first offer the shares to the other shareholders. It is not clear why this would apply to shares in the estate of a deceased shareholder. The deceased shareholder hasn't disposed of his shares. They remain part of his estate; why wouldn't they pass to his heirs? I imagine this will be a key issue in the lawsuit.

    David Gordon

    1. That is correct Mr. Gordon, and is why the Kochs probably lose this lawsuit. If this were Delaware, I would expect an open and shut summary judgment.

      -Houston corporate attorney

  4. Ohhhhhhhh, this could get real good, real fast. Can't wait for Lew's next move!

    Dale Fitz

  5. Oh my, I think Lew should "find" some time to make this an issue.

    Call it a "lesson" on property rights given to the Koch's, not free of charge either.


  6. Ah man this is hilarious, happy birthday Murray!

  7. I really hope that Lew goes for it. At the very least, he could sell the shares and put the money to work at the Mises Institute.

  8. I hope Mr. Rockwell does make something out of this.

    If he does not have time to go himself, perhaps he could send someone with a proxy? If that's possible for these shares?

  9. So...if Cato wins and shares not turned over can pass at death, then... not only does Kathryn become a shareholder, but by the same logic, Rothbard's heir becomes a long-lost shareholder, and the two Kochs are joined (and outnumbered) by Crane, Washburn, and Rockwell.