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The Envoy

Bloomberg investigation alleges Koch subsidiaries paid bribes, sold to Iran

The Envoy

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Charles and David Koch with singer Samuel Ramey in New York, Nov. 2009. (Patrick McMullan/PatrickMcMullan.com)

Subsidiaries of the global business empire headed by the Koch Brothers, who have helped bankroll an array of conservative, anti-regulatory causes, made illegal payments to win foreign contracts, Bloomberg Markets magazine reports in a detailed investigation in its November issue. In addition, foreign subsidiaries belonging to Koch Industries sold millions in petrochemical equipment to an Iranian methanol plant, Bloomberg also reports.

In September 2008, a team of researchers sent by Koch Industries to its subsidiary in Arles, France, "found evidence of improper payments to secure contracts in six countries dating back to 2002, authorized by the business director of the company's Koch-Glitsch affiliate in France," Bloomberg's Asjylyn Loder and David Evans write.

Koch Industries, based in Wichita, Kan., was reportedly none too pleased when the allegations came to light internally. Instead of recognizing the work of Ludmila Egorova-Farine--the ethics compliance officer who first brought the alleged bribes from the French subsidiary to the company's attention--the company took Egorova-Farines off the case. Koch management then fired her a year later, Loder and Evans report.

The Bloomberg Markets investigation also found that "Koch Industries--in addition to being involved in improper payments to win business in Africa, India and the Middle East--has sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism," Loder and Evans write.

"Internal company records show that Koch Industries used its foreign subsidiary to sidestep a U.S. trade ban barring American companies from selling materials to Iran," Loder and Evans write. "Koch-Glitsch offices in Germany and Italy continued selling to Iran until as recently as 2007, the records show. The company's products helped build a methanol plant for Zagros Petrochemical Co., a unit of Iran's state-owned National Iranian Petrochemical Co., the documents show."

Former Koch-Glitsch sales engineer George Bentu also contended that officials with the Department of Homeland Security interviewed him for more than four hours at the U.S. consulate in Frankfurt in 2008 "about documents showing details of the company's trades with Iran." A DHS spokesman declined to comment to Bloomberg about Bentu's allegations.

"Every single chance they had to do business with Iran, or anyone else, they did," Bentu told the Bloomberg Markets reporters.

A Justice Department spokeswoman also declined to confirm or deny to Bloomberg whether the department is investigating allegations that Koch subsidiaries violated the U.S. Foreign Corrupt Practices Act. Under that law, U.S. firms are prohibited from paying bribes to win foreign contracts.

But former Justice Department environmental crimes unit prosecutor David Uhlmann wasn't so restrained. "How much lawless behavior are we going to tolerate from any one company?" he said to Bloomberg. "Corporate cultures reflect the priorities of the corporation and its senior officials."

Melissa Cohlmia, a spokeswoman for Koch Industries, told Bloomberg by email: "During the relevant time frame covered in your article, U.S. law allowed foreign subsidiaries of U.S. multinational companies to engage in trade involving countries subject to U.S. trade sanctions, including Iran, under certain conditions." All of Koch Industries's units have since stopped trade with Iran, she said.

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