A lawsuit by the Koch brothers threatens the Cato Institute’s reputation for independence
When scholars at the libertarian Cato Institute came out against the Gulf War, Olin Foundation president William E Simon was outraged. The foundation ended up withdrawing its support and, according to Brian Doherty in his book Radicals for Capitalism, Cato ended up losing nearly $1 million in funding as a result. Cato’s opposition to the war on drugs and its support for civil liberties have also led to tension with the mainstream conservative movement.
Since the 1950s, America’s conservative movement has allied conservatives with libertarians. Almost anyone who opposed liberals was welcome — even ex-Trotskyite neoconservatives. While think tanks like the Heritage Foundation attempt to fuse conservative and libertarian ideas, Cato has always been a libertarian think tank. But now a lawsuit may threaten Cato’s independence and draw it into the mainstream conservative effort to unseat Barack Obama.
Brothers Charles and David Koch have filed a lawsuit for control of the Washington based think tank but Cato president Ed Crane and his supporters are fighting back. The Institute has created a ‘Save Cato’ web page and supporters have created a ‘Save Cato’ Facebook page and are tweeting using the #savecato hashtag.
Cato has always relied on the Kochs for financial support and Charles Koch is one of the think tank’s founders.But as Cato research fellow Julian Sanchez writes: "after years of benign neglect, the Kochs have suddenly decided to use their existing shares in the Institute to attempt to pack the board with loyalists, several of whom are straight-up GOP operatives."
Former Cato vice president for research, Brink Lindsey writes:
Regardless of their intentions, the Kochs cannot take over Cato without destroying it. The mere act of converting Cato into a legally Koch-controlled entity – through a highly public and hotly contested legal proceeding, no less – would change Cato’s fundamental character in a way that would fatally compromise its hard-earned reputation for intellectual independence.
Even liberals are buying into the debate. At the Washington Post Ezra Klein declares that Cato is: "among a handful of think tanks whose work I regularly read and trust." It is not part party political the way the Heritage Foundation is, says Klein. Cato advocates libertarian principles "when Democrats are in power, and when Republicans are in power."
At Salon, Alex Pareene writes: "Cato is mostly antiwar, decidedly anti-drug war, and sponsors a lot of good work on civil liberties. That … is basically what the Kochs don’t like about them, because white papers on decriminalization don’t help Republicans get elected."
Ever since Friedrich Hayek advised Institute of Economic Affairs (IEA) founder Anthony Fisher to focus on intellectuals and ideas rather than on politicians and elections, free market think tanks have taken a long term view of political change. In his book, Brian Doherty cites one longtime Koch lieutenant’s view of the original Koch strategy::
Politicians, ultimately, are just actors playing out a script. The idea is, one gets better and quicker results aiming not at the actors but at the scriptwriters, to help supply the themes and words for the scripts — to try to influence the areas where policy ideas percolate from: academia and think tanks (p 410).
But in a endnote he acknowledges that more recently the Kochs have changed tack, funding Republican candidates like George W Bush as well as libertarian intellectual work. Applied to Cato’s work, this partisan political approach would steer scholars away from ideas and policies that are unacceptable to the conservative mainstream and Republican candidates.
In particular, some Cato scholars worry that a more politically focused Cato Institute may abandon its principled libertarian stance on foreign policy and the war on drugs. And as Cato research fellow Jason Kuznicki writes: "A socially conservative, hawkish Cato wouldn’t be Cato anymore. It would be the west annex of the Heritage Foundation."
On 1 March 2012 Charles and David Koch filed a lawsuit for control of the Cato Institute. Cato is a 501(c)(3) nonprofit but unlike most nonprofits, it is a corporation controlled by a small number of shareholders. Until recently, the shareholders were Charles Koch, David Koch, Ed Crane and William Niskanen. Each held 25 per cent of the stock. The trouble began when William Niskanen in died October last year.
As the Washington Post’s TW Farnam explains, Cato, shareholders cannot sell or otherwise dispose of their shares without first offering to sell them to the corporation for the price they paid (Niskanen paid $1 for each of his 16 shares). The Koch brothers claim that the agreement obliges Niskanen’s widow, Kathryn Washburn, to offer to sell her husband’s shares to the corporation.
If the Charles and David Koch succeed, they will end up with the majority of shares. This will enable them to stack the board with their own supporters and control the organisation.
Control of the board
The Koch’s critics claim they are trying to remove Ed Crane from the board and his position as president. According to Cato senior fellow Jerry Taylor, the struggle for control began last year:
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.
Tension between Charles Koch and Ed Crane dates back to the early 1990s when Koch left the board of directors. According to the New Yorker’s Jane Mayer, Crane may have "had been insufficiently respectful of Charles’s management philosophy".
What’s at stake?
According to Cato research fellow Julian Sanchez the Koch brothers want to change the think tank’s direction:
There’s every indication that they (and their proxies on the board) think Cato would be more useful if it were integrated more tightly into the Koch portfolio of advocacy groups—Americans for Prosperity, etc.—for which it could serve as a source of intellectual ammunition in the ongoing struggle to defeat Barack Obama and the Democratic Party.
Sanchez says he will resign if the Kochs take control: "I can’t imagine being able to what I do unless I’m confident my work is being judged on the quality of the arguments it makes, not its political utility—or even, ultimately, ideological purity."
Cato’s director of foreign policy studies, Justin Logan and senior fellow Jerry Taylor are worried about the influence of new board members, particularly John Hinderaker. Hinderaker supported George W Bush’s policies in the Middle East and is often described as a neoconservative (Tony Woodlieff, one of the Koch’s nominees to the board, claims that Taylor has misrepresented his views).
Cato’s director of health policy studies, Michael Cannon says the Koch takeover poses an “existential threat” to the institution while former Cato vice president for research, Brink Lindsey argues that the takeover: "would change Cato’s fundamental character in a way that would fatally compromise its hard-earned reputation for intellectual independence."
But not everyone is so worried about the takeover. Former Cato research fellow Will Wilkinson writes: "I do suspect that a Koch-controlled Cato would work more closely with the Republican Party, which I don’t at all like. Yet I’ve seen very little evidence that a Koch-controlled Cato would look a lot different ideologically than Cato does currently."
Other members of the think tank community worry about Ed Crane’s strategy. The Manhattan Institute’s Ted Frank argues that Cato’s litigation position: "seems to be calculated to maximize the benefit to Ed Crane (either as head of Cato or head of a future hypothetical Cato-in-Exile), rather than Cato and the libertarian movement."
Meanwhile, Cato grows weaker the longer the dispute goes on. According Skip Oliva’s interview with Cato chairman Robert Levy, some of the think tank’s large donors have refused to contribute as long as there’s a possibility that the Koch’s will take control.
As the Hungry Beast video below explains, the Koch brothers wide ranging involvement in conservative and libertarian causes has seen their network dubbed the ‘Kochtopus’. Libertarians have constantly ridiculed the idea that the Koch’s control Cato. As Jason Kuznicki writes: "The people who spin elaborate fantasies about the Kochs acting as our puppet masters were, and are, dead wrong. They’ve been wrong since at least the early 90s, if not earlier."
But as Alex Pareene writes in Salon : "One mildly amusing side effect of all this has been a bunch of pro-Cato libertarians continuing to mock liberals for imagining the Kochs to be powerful and nefarious while … bemoaning their insidious plot to destroy Cato from the inside."