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Ed Crane and the Cato Institute vs. the Kochtopus!

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Ed Crane on the Koch Brothers:

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.

Jonathan Adler on the Koch Brothers:

The Volokh Conspiracy » Koch v. Cato: Cato’s Crane and Cato Chairman Bob Levy charge the [Kochs' law]suit is about transforming Cato into a less independent and more political (if not also more partisan) institution…. Many libertarian-leaning organizations receive money from the Kochs and their foundations and are attacked on this basis. Such attacks can be deflected, as financial support is not the same thing as control. But if the Koch brothers themselves represent the controlling majority of an organization’s board, that organization is, by definition, a Koch-run enterprise…. They will forevermore characterize the Cato Institute as “Koch-controlled” — and, as a legal matter, they will be correct…. [A]ny benefit from whatever changes they could make will be outweighed to the permanent damage to Cato’s reputation caused by turning it into a de facto Koch subsidiary.  In short, they will have destroyed the Cato Institute to save it.

Jerry Taylor on the Koch Brothers:

The Volokh Conspiracy » Koch v. Cato — A View from Cato: There is more, however, that might be said about the Kochs’ dishonest narrative…. Last year, they used their shares to place two of their operatives – Kevin Gentry and Nancy Pfotenhauer – on our board against the wishes of every single board member save for David Koch. Last Thursday, they used their shares to force another four new board members on us (the most that their shares would allow at any given meeting); Charles Koch, Ted Olson (hired council for Koch Industries), Preston Marshall (the largest shareholder of Koch Industries save for Charles and David), and Andrew Napolitano (a frequent speaker at Koch-sponsored events).  Those four – who had not previously been involved with Cato either financially or organizationally –were likewise opposed by every member of our board save for Gentry, Pfotenhauer, and David Koch.  To make room for these Koch operatives, we were forced to remove four long-time, active board members, two of whom were our biggest donors.  At this moment, the Kochs now control seven of our 16 board seats, two short of outright control.

Why are they forcing out Cato board members, all strong, principled libertarians who have been heavily involved with Cato – financially and organizationally – for years?  The answer was given in early November of last year…. They told Bob [Levy] that they intended to use their board majority to remove Ed Crane from Cato and transform our Institute into an intellectual ammo-shop for American for Prosperity and other allied (presumably, Koch-controlled) organizations…. Let’s take a look at a few of these new board members of ours.  Kevin Gentry is a social conservative activist who’s also vice-chair of the Virginia GOP.  Nancy Pfotenauer is a former spokesperson for the McCain campaign who has argued on television in favor of the Iraq war…. Ted Olson is a Republican super-lawyer who’s never identified himself as a libertarian…. [T]he Koch brothers also nominated –but were unable to elect – eight additional individuals… the executive vice president of Koch Industries, a staff lawyer for Koch Industries, a staff lawyer for the Charles Koch Foundation, a former Director of Federal Affairs for Koch Industries, a former Executive Director of the National Republican Senatorial Committee (and who was, incidentally, a McCain bundler), and a lifelong Wichita friend of Charles Koch… [and] a couple of people with public profiles that make the jaw drop:

  • John Hinderaker… whose firm counts Koch Industries as a client. Hinderaker has written, “It must be very strange to be President Bush.  A man of extraordinary vision and brilliance approaching to genius, he can’t get anyone to notice.  He is like a great painter or musician who is ahead of his time, and who unveils one masterpiece after another to a reception that, when not bored, is hostile.”  Hinderaker supports the Patriot Act and the Iraq War and calls himself a neocon.

  • Tony Woodlief, who has been president of two Koch-created nonprofits and vice president of the Charles Koch Foundation. Woodlief has blogged about “the rotten heart of libertarianism,” calling it “a flawed and failed religion posing as a philosophy of governance”….

As far as Charles’ declaration that Cato “not be subject to the personal preferences of individual officers or directors,” it’s hard to square that with the obvious implications of his suit.  If Ed were to have his way and the shareholder agreement was dissolved, Ed would answer to 16 autonomous board members.  If Charles were to have his way and the shareholder agreement was to govern Cato, then the board – and the president – would ultimately answer to Charles….

[T]he Kochs and their entities have given Cato about 8 percent of the dollars we’ve raised since the founding of the Institute and only about 4 percent over the past decade (and not one penny last year).  They have no special claim over Cato as donors. Sometimes I hear that this is less about donor intent than it is about founder intent.  Well, if we define “founders” as those initially given shares in Cato, only three of the five original shareholders remain alive and thus can have an informed opinion about these goings-on; Charles, Ed, and George Pearson.  Two of those three are appalled by what is going on and want the shareholder agreement dissolved….

Maybe the Kochs will prevail in the courts.  Maybe not.  I’m not a lawyer, but our legal people think we’ve got a stronger case than they do.  Regardless, as you well note, this bid by the Kochs to take over Cato – if successful – can only lead to the destruction of the most prominent and influential libertarian think tank in the world.  Anyone who considers Cato an asset to the public policy debate cannot be happy with what they are doing here…. Shareholder control has been dormant for decades.  The shareholders have not met – in person or on the telephone – from 1981 through 2008.  No shareholder had asked for a meeting over that time despite a requirement of annual meetings.  In every sense, the Board of Directors has run the Cato Institute, not the shareholders.  Whatever success Cato has had, it is success that was produced by the Cato’s board of directors, management, staff, and donors – not the shareholders who, save for Ed and Bill Niskanen, have been uninvolved in Cato for decades…

Skip Oliva:

Koch vs. Cato at Under Penalty of Catapult: Even Ed Crane’s statement yesterday blasting the lawsuit made no attempt to deny the legal merits of its position. He simply accused the Kochs of planning a “hostile takeover.” Yet it’s nothing of the sort. This is an exercise of shareholder rights under a legally executed contract. Besides, a free-market group like Cato should have no objection to hostile takeovers, which foster competition in the market for corporate management.

Paulite and likely author of some of the racist Ron Paul newsletters Lew Rockwell bids for 1/5 control of the Cato Institute:

'Cato Putsch'? « Blog: The actual putsch was the defenestration of Murray Rothbard some 30 years ago, but see this American Conservative blog by Jordan Bloom. Jane Mayer of the New Yorker has her own blog, but she ignores Murray's role in the founding of Cato. Of course, I speak of the original Cato, the libertarian powerhouse in San Francisco, not the  regime-friendly version in DC.

NB: I get report after report that the entire Kochtopus is in turmoil. They fear that the gravy train is about to leave the station, and they won't be on it. A number of them are right.

And Bob Wenzel writes: Will Lew Rockwell Show at the Next Meeting of the Cato Board?: [T]he only reason Murray [Rothbard] 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…

[…] Beltarians versus WaPoists on Koch-Cato: It's not hard to understand why the Kochs want Murray Rothbard buried in a memory hole, given the fact that Rothbard was heaved out of the Cato institute because of Murray's principled libertarian stand versus the opportunistic desires of the billionaires and that a feud is again now arising that does two things, raise the question of the Kochs as opportunists over principle, once again and once again brings to the surface   Rothbard's original ownership in the institute, this time with documentation that the Kochs originally kept away from Rothbard. An ownership that now traces to Lew Rockwell, founder of the Mises Institute, an Institute the Kochs failed to shut down though they tried, an institute that remains steadfast in principle and has been free from the power operas that have flared around the Kochs in the 20th century and now the 21st century.