Fred Koch: Oil Man against Communism: Fred Koch, the Founder of Koch Industries, Experienced Abuses by Industries Large Enough to Run Roughshod over Others and by a Communist Government, and He Fought Back

By Scaliger, Charles | The New American, June 20, 2011 | Go to article overview

Fred Koch: Oil Man against Communism: Fred Koch, the Founder of Koch Industries, Experienced Abuses by Industries Large Enough to Run Roughshod over Others and by a Communist Government, and He Fought Back


Scaliger, Charles, The New American


In the year 1930, the city of Tiflis (now Tbilisi) was a captive capital. The ancient city in the heart of the Caucasus, with its mountain scenery and splendid architecture, was enduring, with the rest of the Soviet Union, the onset of Stalin's reign of terror. As elsewhere in the Soviet Union, ordinary people had become practiced in the arts of sullen self-preservation. Perhaps that was why no one offered to help the men working to extricate one of their party from an overturned car before the badly damaged vehicle burst into flames. The men wore business suits and spoke English, though few of the passersby recognized the unfamiliar tongue. The man trapped in the car, on the other hand, was a feral-faced communist "handler," a man with considerable clout in the Soviet government.

[ILLUSTRATION OMITTED]

Eventually, the foreigners managed to pull out their little "guide," whose name was Jerome Livshitz. As soon as he was on his feet, Livshitz addressed one of the foreigners, a young man scarcely 30. "Why did you save my life?" Livshitz asked. "We are enemies. I would not have saved yours. Perhaps when the revolution comes to the U.S.A. and I return there, I will spare your lives."

Many years later, the American businessman who had helped to rescue Livshitz still expressed astonishment at the little Bolshevik's cruel and unyielding ideology.

"[Livshitz] told me that if his own mother stood in the way of the revolution he would strangle her with his bare hands," he wrote. "This is the mark of a hard-core Communist. They will do anything-anything." The businessman's name was Fred C. Koch.

Building a Business

At the time, Fred Koch was already a wunderkind in the petroleum industry. Born in 1900 the son of a Dutch immigrant from Quanah, Texas, Fred had graduated from MIT in 1922 with a chemical engineering degree. He was first employed by the Texas Company in Port Arthur, Texas, and then by the Medway Oil and Storage Company in Kent, England, where he was chief engineer. Only three years after graduation from college, Koch rejoined an MIT classmate at Keith-Winkler Engineering, a petrochemical engineering concern in Wichita, Kansas. His friend P. C. Keith soon moved on, however, and later in 1925, the firm was renamed the WinklerKoch Engineering Company.

[ILLUSTRATION OMITTED]

Within two years, Koch had devised a more efficient procedure for cracking crude oil--the process by which crude oil is refined into gasoline and other products. Cracking was first invented by a Russian engineer, Vladimir Shukhov, in the late 19th century. By the 1920s, the petroleum industry was fully fledged, in no small measure in response to the needs of the burgeoning automobile industry. Then as now, the petroleum industry was dominated by a few mega-corporations that did not scruple to enlist the power of the state to enforce their near-monopolistic dominance of the industry at the expense of smaller would-be competitors. Koch's new royalty-free thermal cracking process, by producing higher yields of refined gasoline from crude oil and reducing down time, helped smaller companies to better compete with their larger, more entrenched, and belter-capitalized rivals. The latter lost no time in attacking Koch, filing no less than 44 lawsuits against WinklerKoch and all its customers in a contemptible campaign to force the company out of business. That Winkler-Koch won every lawsuit but one (and that verdict was later overturned when it was discovered that the judge had been bribed) is evidence enough that the full-frontal legal assault on the upstart Koch was inspired by no higher motives than envy and greed. We must suppose that, as a result of the campaign to sue him out of the refining business, Fred Koch must have begun to understand that the modern American business sector was not nearly as free-market as it was cracked up to be.

Vindicated though he must have felt at staving off the lawsuits, they proved to be Pyrrhic victories. …

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