Now that Rep. Adam Schiff and the House Intelligence Committee have opened an investigation into the Russia affair, and President Donald Trump has darkly warned in his State of the Union speech that “America will never be a socialist country,” it seems timely to recall a long-forgotten tale of revenge over unrequited love, in which members of the Koch family, which had helped build Joseph Stalin’s oil refineries, found their investments nationalized and themselves embittered.
In 1925, Fred C. Koch joined his MIT classmate Lewis E. Winkler to found the Winkler-Koch Engineering Company in Wichita, Kansas. After losing patent infringement lawsuits to more established oil and gas companies, they sought business overseas. Between 1929 and 1932, during Stalin’s first Five-Year Plan, Winkler-Koch built 15 thermal cracking units for Stalin, turning crude oil into gasoline.
Jane Mayer, in a book that grew out of a 2010 article in The New Yorker, an unauthorized assessment of the Koch family’s spending habits, “Dark Money” (2016), quotes Gus diZerega, a “former friend of Charles Koch”: “As the Soviets became a stronger military power, Fred felt a certain amount of guilt at having helped build them up.”
Perhaps. But that did not stop Winkler-Koch, in 1934, from providing engineering plans and overseeing construction of a huge oil refinery near Hamburg under the direction of Adolf Hitler, whom Fred Koch approached directly, purportedly greeting him with: “Heil Hitler.” The Winkler-Koch factory became a major source of fuel for the Luftwaffe (German Air Force) and the mechanized tank and motorized attack forces that powered the Blitzkrieg into Belgium, Denmark, Poland and France. The factory was destroyed by Allied bombers late in the war.
After these investments in Stalin and Hitler, Fred Koch devolved into a fervent anti-Communist, though his soft spot for fascists persisted, as he wrote admiringly of Mussolini’s suppression of the left. In 1958, he helped found the John Birch Society, whose members considered then-president Dwight D. Eisenhower a Communist agent.
In his own country, Koch also held distinct views on people he referred to as “coloreds.” “The colored man looms large in the Communist plot to take over America,” Koch wrote. Jane Mayer notes that Koch’s argument was that welfare payments would attract blacks to cities where they would foment a “vicious race war.” Koch predicted that Communists would “infiltrate the highest offices of government in the U.S. until the President is a Communist, unknown to the rest of us.”
Koch thus became an avowed enemy of those from whom he could not make money, as his ideology trailed behind the money. By the 1990s and 2000s, however, Koch Sr. and his sons would reverse this direction, pouring hundreds of millions into efforts to affect the ideological stripe of American politics, reflected most fully in the Tea Party and now the president.
During the same period, another self-made multimillionaire named Fred Trump Sr. was exploring his own relationship with the black population of Queens. On Memorial Day, 1927, he was arrested during a Ku Klux Klan protest against the “Catholic police of New York City,” according to Philip Bump in the Washington Post.
Fred Trump’s second son, Donald, was introduced to the New York real estate market by his father, who had grown rich on FHA-backed federal housing contracts. Donald began receiving money transfers from Fred Sr. almost from birth, according to recent reporting in the New York Times by David Barstow, Susanne Craig and Russ Buettner. All told, the Times documented 295 streams of revenue created by Trump Sr. to enrich his son as Donald careened from “one financial disaster to the next.” To date, while the Times article has been noted by New York tax authorities, the illegality of these transfers has yet to catch up. When he died in 1999, Fred Trump Sr. had effectively bailed out his errant and incompetent son for 25 years.
While Donald Trump’s real-estate business skidded and hit bottom in the 1990s and early 2000s, a geopolitical drama was unfolding in Russia. As the Soviet state imploded, a “new Russia” emerged that, in many ways, looked a lot like the oligarchic, kleptocratic structure of the former Soviet Union, but now branded itself as an exemplar of democracy and privatization. Privatization, especially of formerly national oil revenues, was of particular notice. And the revenue streams for the oligarchs who seized control of these assets were huge.
Donald Trump’s need for real estate cash infusions, as more and more banks refused to lend to him, lined up with the Russian oligarchs’ need to launder billions of rubles pilloried from privatization schemes, including some remnants of the Koch-built oil and gas works. Russian oligarchs were looking for places in the West to convert their dirty money, skimmed from privatization, into real property assets preferably denominated in dollars. Trump was ready, willing and able to launder their plunder through real estate in New York, Florida and elsewhere, with the help of a few remaining cooperating financial institutions such as Deutsche Bank.
The oligarchs were also appreciative, and the ascendant Vladimir Putin marked Donald Trump, in Lenin’s words, as a useful idiot. When he announced his bid for president in 2015, an ambition he had harbored for years, most Republicans thought him a fool. But as his appeal to his xenophobic and undereducated base became an electoral avalanche, and he was nominated, Republicans everywhere became docile and loyal. The Kremlin moved in to aid and assist, working with Trump Jr. and son-in-law Kushner on the campaign targeting efforts, as Manafort sent polling and other campaign data through his Ukrainian contacts to Moscow for use by the Internet Research Service. Even the clear evidence of Kremlin involvement in his run elicited not condemnation from the Republican Party but compliance. This was clear in both Rep. Paul Ryan and Sen. Mitch McConnell’s strong advice to their Republican colleagues in the House and Senate to steer clear of the Russian connection in the interest of retaining Republican political control.
At this point, in late 2016, after the election that would deliver much more to Russia than envisioned even in the fiction of the Manchurian Candidate, the GOP had staked its future to Putin and his program of destabilizing democracies in the West. Indeed, emerging evidence suggests KGB involvement in the Brexit vote and in the far-right movement of Marie Le Pen in France as well.
The right — in America, in Britain and in France — is now owned by the Russian deep state, and through willing enablers such as the NRA, has become a conduit for Russian funds and influence. So now the final revenge of the KGB’s Russia for the West has been revealed. They have nearly destroyed British parliamentary democracy. They have deeply undermined post-war French modernism. And they have helped install in the U.S. a buffoonish puppet, less intelligent if less inebriated than Boris Yeltsin, whose weakness Vladimir Putin also came to exploit. While few care to admit it, the result may very well be the end of the American experiment in democracy.
Let us retrace our steps. From the 1930s to the 1950s, the Koch family, oblivious in the interest of profits to the national interest, or the threat posed by fascism or communism, sought to do deals with Hitler and Stalin in Germany and Russia. In the 1980s and 1990s, Donald Trump inherited and largely squandered his father’s real estate empire, launching scheme after ill-fated scheme, only to be bailed out by the senior Trump. As the 2000s broke, Trump turned to Russian oligarchs seeking a haven for funds from their profiteering of former Soviet assets. The oligarchs’ gangster-like methods of nationalization as privatization combined Stalin’s forced takeovers with monetizing formerly national assets. Then, former Soviet agents in the KGB, led by Putin, began a program of money-laundering which met the needs of both the oligarchs and the Trump Organization as the Trump family became Putin’s latter-day useful idiots. Then, in 2016, the odd Russian bet on one such idiot, like a bet on 23 red on a roulette wheel, paid off big time.
At that point, the problem for both Trump and (to a lesser extent, having already won the bet) Putin, became how to cover and obfuscate the obvious quid pro quo. The cover has been like a thin gauze, the quid pro quo obvious to all. The question now is one of survival for American democratic institutions, largely absent the Republican Party, which is trapped, compromised, traitorous and corrupted.
Carlisle Ford Runge is a Distinguished McKnight University Professor of Applied Economics and Law, University of Minnesota. The views expressed are his own and not those of the University of Minnesota.
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