The Case Against Lina Hidalgo and Why I Am Not Voting For Her

For my whole life I never have followed local politics closely. I was aware of who my local mayor was but never got into the weeds of who ran the city or county. What has changed over the past few years though is the crime, safety, and security. Although I haven't been robbed or a victim (yet) my concern is Harris County has gotten out of control and I no longer feel safe in a city I was raised in and have lived in since the early 1990's. 

In November 2022 there will be an election for Harris County Judge. The title is a little misleading since this isn't actually a judge that adjudicates cases it is more symbolic of an individual that can yield expansive power and takes part in a multi-billion-dollar budget and allocating resources for the city of Houston. The Harris County Judge also sits on a Commissioner's Court that creates the agenda items and budget for the city. Currently the Commissioner's Court has Adrian Garcia, Rodney Ellis, Tom Ramsey, Jack Cagle, and Lina Hidalgo). Hidalgo, Garcia, and Ellis are Democrats and Ramsey and Cagle are Republicans. Lina Hidalgo is currently the county judge and is running for a reelection in November 2022. Hidalgo was elected in 2018 in a close race with Ed Emmett. It is important to point out that the election was close with Hidalgo only beating Emmett by a little over 1.6% of the vote. Part of the reason for this was at the time it was possible for voters to perform a straight ballot vote (all Democratic/all Republican). Many people even within the Democratic party were unaware of Hidalgo since she didn't have any experience and at the time she was running was only in her late 20's when she ran. The following is an outline of what she has done since coming into office. 

COVID Alert System 

To be perfectly honest I had no favorable or unfavorable opinion of Hidalgo considering not much was known about her and she seemed fine with someone aspiring for higher political aspirations. However, this all changed with COVID. In June 2020 Harris county implemented a COVID alert system that was supposed to provide guidance on the danger of COVID. The multi colored system initially started out on Red (severe and stay home) with the exception of going out to get groceries. Before the color system was implemented in April 2020 Hidalgo signed an order (that would be in effect for 30 days) that would fine anyone who didn't wear a mask $1,000. Within a week Hidalgo had changed her mind on this and suspended the fine. In June 2020 Hidalgo signed an order that would require businesses to require their employees/customers to wear masks (unless eating or drinking because you know COVID takes breaks for that) and stay 6 feet apart with a potential $1,000 fine for the business owner (but not the customer). It is important to remember that during this time the number of COVID cases was actually declining!  Hidalgo responded to the fine that it's purpose was to "educate" people and businesses. After almost a year on being on red on May 18, 2021 Hidalgo finally lowered the COVID alert to orange. As I write this in September 2022 the current Harris County alert system shows the county at a Yellow (Medium) alert even though the Texas Medical Center in May 2022 decided to stop reporting the number of COVID cases (since they are so low). Hidalgo herself didn't even follow her own rules. As Bill King accurately pointed out in this article Hidalgo on January 11, 2022 Hidalgo held a press conference to announce that Harris County was in a red alert status however by February 9, 2022 (while still on a red alert status) Hidalgo held a rally were people weren't wearing marks or required that individuals be vaccinated. Apparently when you are fundraising you are in the Green alert status. 

COVID Medical Tent 

In April 2020 Harris County Commissioner's Court approved spending up to $60 million on a medical shelter structure at NRG Park. The site would have 250 beds and only be in operation for 60 days. Let's do that math on this. $60 million for 250 beds for 60 days would say that the cost would be $4,000 per day per bed! The last time I checked you could probably rent out the Four Seasons hotel cheaper (and hire multiple nurses to take care of you too). Ultimately Harris County had to pay $17 million for the medical facilities and there were 0 patients! The contract for the hospital paid a finance chief a day rate of $2,875/day. Judge Ed Emmett in an interview questioned if there would be a bank at the temporary hospital with that kind of rate. Also at this same time Houston Mayor Sylvester turned had stated that Houston city hospitals had the capacity to capacity to take additional COVID patients. 

COVID Rig Bidding Scandal 

However, all these issues during COVID were pedestrian compared to the bid rigging scandal Lina Hidalgo got involved with. Harris County placed a request for proposal (RFP) to bid on COVID outreach to the community. Generally, the way an RFP should work is you talk to various potential bidders to see what services they can provide, the history of their experience with the project, and what the potential cost might be. In a released document showing the potential winning bids shows Elevate Strategies as the "most qualified" even though staff members for Hidalgo had rated University of Texas (UT) Health Science Center higher by their own metrics. Additionally, Evaluate Strategies had a bid for $19,343,500 and UT Health Science Center had a bid for $7,508,040. So why would a bid be given to a firm that was more expensive and lower quality? Elevate Strategies was run by a woman who had previously worked on some Democratic campaigns for outreach. Elevate Strategies itself was a one person company. However, in large projects like this usually the company will subcontract out the work to other people. The actual proposal from Elevate doesn't mention any relevant experience within the healthcare area (which would be key in specifically a COVID outreach). Also if you look on page 33 of the proposal there are many blank names associated with the team that would make you wonder how could a bid be accepted without understanding the full details. It was discovered that three of Hidalgo's staffers communicated with Felicity Pereyra (founder of Elevate Strategies) in January 2021 and allowed Felicity to review and revise the scope of work before the proposals were made on February 19, 2021. One of the staffers (Mr. Alex Triantaphyllis) was quoted as saying "Take it away and don't let UT in".  In addition to this one of Hidalgo's staffers mentioned "This vaccine thing is getting ridiculous". Alex himself is a Rice University graduate and also graduated from Harvard Law School. Also it was reported that that Harris County Purchasing Office received instructions from Hidalgo's office to disqualify the bid since UT has been previously late on other bids.  Although, there is no evidence of this this doesn't even make sense. Anyone that has been involved in a RFP knows you start with potential candidates that can accomplish the request. No rational person starts with a list of vendors that don't provide work in a timely manner. 

What's even worse then the actual no bid contract is the contract. As Bill King describes in this article when Lina Hidalgo asked for the Elevate Strategies contract to be cancelled a payment $885,000 was sent to Elevate Strategies quickly (even though the invoices had been pending for two weeks). What is even more suspicious is some of the payment amounts exceeded the actual invoices to Elevate Strategies. For example the invoice on August 28, 2021 was for $590,193.94 however the actual amount paid on September 16, 2021 was $885,874 (which would say the amount paid is a 50% increase over what was billed!). When I actually add up all the amounts paid by Harris County I get roughly $2.3 million paid to Elevate Strategies. The contract specifically shows that the vendor can only be paid when services are performed which as Bill King points out would say the amount paid per employee was $100,000 for just one month of work. Hidalgo multiple times in Commissioner's Meetings claimed there was nothing improper over the Elevate Strategies contract and often went after any critics or anyone who would ask questions about the contract during meetings. In this Harris County Commissioner's Court Hidalgo in this video denies it and then says "bring it on". This reminds me of something elementary children say on the playground. Hidalgo also argued with Jack Cagle regarding Elevate Strategies being a one person operation and during the meeting quotes the Elevate Strategy has being a one person shop. As a side note I have watched multiple commissioner's meetings and Lina Hidalgo has a tendency when Jack Cagle or Tom Ramsey speak Lina is either checking her cell phone or looking at her computer (which to me is disrespectful). 

It is fairly obvious the Elevate Strategies contract was a rigged bid and then the staffers of Hidalgo tried to covered up what happened. As a result of this a grand jury indicted 3 staffers that worked Hidalgo in April 2022. It is also worth pointing out that two of Hidalgo's staffers are still on the job (even after being indicted). During this same time the Houston Chronicle (which has defended Hidalgo) wrote a puff piece of Hidalgo being a vegan. There is talk of Hidalgo of being indicted herself. Hidalgo's team claims that this is all just a misunderstanding the texts and e-mails that were leaked were all part of a another project Elevate Strategies was working on. If this were the case why isn't there an RFP (request for proposal) and second why would a staffer say to "slam the door on UT?". Generally the ways these work (since I have been involved in the process) is you first define what you are looking for in terms of the service/product, gather the data from various vendors, and then analyze the data to see what is the best fit. Also in any leadership position you are accountable for the actions of your employees. 

No Bid Security for Hidalgo 

Speaking of no bid contracts in April 2022 the Harris County Commissioner's Court decided to approve a no bid contract to XMiProtection for $121,524 to provide security to Hidalgo for 12 hours a day until July 25, 2022. This was only for a 12 week period. If the cost of the security was annualized it would be almost $500,000. Keep in mind that Lina Hidalgo makes a salary $190,861. Even though I am not a fan of Hidalgo I feel as if she should have security protection but with competitive bidding. 

Crime In Harris County 

Crime currently is a big issue not only in Harris County but around the country. Having lived in Houston since the early 1990's and remember the crime rate being high with specials on local news stations with names like City Under Siege. In more recent times 2019 to 2020 in Harris County violent crime increased 43%. Lina Hidalgo took office in 2018 so if you look at the crime rate since she took office crime has increased around 70%. Houston is one of the most dangerous cities in the country. The current criminal justice system in Harris County is more of a catch and release program. Hidalgo has direct influence over crime since the Harris County Commissioner's Court. Hidalgo repeatedly claims that 2/3's of the budget is spent on crime. The claim has been pointed out to be not accurate for multiple reasons. The first the excludes what Harris County spends on flood control, the toll road system, and public health. If you do the math even conservatively it comes out to less than 1/3 of the budget is spent on law enforcement. However, even this number is highly dubious as if you study this Safe Harris website and look at the bottom portions for "Community" and "Youth Safety and Justice". For instance $31 million is planned to be spent on workforce development programs when the Harris County unemployment rate is 4.8% (on the lower end of a historical low). Also teenage unemployment rates were 8.5% in the summer of 2022. Moreover to the point African American teenage unemployment was around 16%. Although this number sounds high from a historical African American teenage unemployment is near an all time low (since the data was tracked since the early 1970's). $27.1 million would be spent for health initiates, $50 million spent for community infrastructure, $8.4 million for new trails, and many other what late economist Walter Williams would refer to as midnight basketball programs. When I add up all the spending of these "programs" I get roughly about $155 million (this is about half of all the spending on the Safe Harris flyer) that could be directly spent on either hiring more police officers, more prosecutors, and more funding for the court systems to speed up the backlog of cases (recently is was reported there was a backlog 40,000 misdemeanor cases in Harris County). One estimate said it could take just up to 2 years to just make a dent in the criminal case backlog. The average percent of felony cases where a defendant posted bond from 2011 to 2018 (before Hidalgo) took office was about 46%. If you look at the average between 2019 and 2021 the percentage increases to 69% or about a 50% increase. In late 2021 it was reported over 27,000 defendants are currently out on a felony bond. From 2016-2021 over 900 accused felons had committed four or more serious crimes while out on a bond. For example a young man named Clayton Bryant was on bond for 8 felony charges and his criminal history had 36 felony charges. Some Judges in Harris County are worse than others. The average number of defendants was 61%. However Judge Natalia Cornelio was a superstar in this area with 72% of defendants posting bond. On her website for criminal justice she claims "we must acknowledge and work to address these disparities to restore the community's confidence that the system is fair, equitable, and just". Of course these are woke ideal principles and I wonder how far the closest defendant she has lives to her or Lina Hidalgo? 

Gun Buy Backs 

Harris County decided that it would be a great idea to buy back guns in an effort to reduce crime. In July 2022 Harris County offered up to $200 per gun. The funding for this was provided the American Rescue Plan (COVID stimulus). The total cost was around $1.1 million for the gun buyback program. It is important to point out that there was no ID required, nor would Harris County run any type of scan to see if the individual was a criminal. So let's think about this. Probably most law abiding citizens who were in need of cash would turn in there guns when criminals would still have the same amount of guns. Furthermore the ratio of criminals with guns to law abiding citizens increased as a result of this (again funded by Americans in other states). 

Toll Road Financing 

In September 2020 the Commissioner's Court voted to use money from the Harris County Toll Road System and divert that money to other uses (besides transportation). The deal created a new limited government entity and Harris County Toll Road System would provide the Commissioner's Court with an upfront $300 million and then an additional $90 million per year. It should be noted that the whole budget to the Harris County Toll Road System is roughly $900 million/year. Lina Hidalgo was quoted as saying this was a good idea because it will "maximize every dollar". Politicians can never outspend their needs or wants. 

Flood Bond

After Hurricane Harvey Harris County Commissioner's Court agreed to pass a $2.5 billion flood bond. However, the intended use would be based on the "social vulnerability index" which was actually created by the CDC. Some of the factors included in this index are poverty, educational attainment, car ownership and housing quality. This doesn't make any sense as it would assume clouds and rain literally only pours down on poor people. This is just redistributing money from wealthier individuals in Harris County to poorer people and also to gain political brownie points.

Newly Elected Harris County Elections Administrator

Also under Hidalgo's watch was the creation of a newly elected official of "Harris County Elections Administrator". The position was created in 2020 even though this function was already handled at the local level by the tax assessor and the county clerk (historically there were no issues with this either from either political side). The newly created position for Isabel Longoria. In her new position Isabel earned almost $200,000 of income (remember this position was created out of thin air). During her tenure during a primary runoff election 10,000 mail in ballots were left out. In addition to this Harris County was the last county in the state of Texas to count all their ballots (this was out of 254 counties). This disaster could have been avoided by not even creating this position in the first place since the tax assessor and county clerk have run elections for hundreds of years without major issues.  

Personality

On the personal side Lina has demonstrated she can be disrespectful. During the funeral of Corporal Charles Galloway who was killed in an ambush in February 2022 when she was asked to move to her seat she responded "do you know who I am". To me regardless of what political you are in this behavior is disrespectful and childish. Moreover, especially trying to seek the limelight during the funeral of a killed officer is disgraceful. Over past few years and I have seen Lina Hidalgo give interviews. She rarely does an interview that doesn't put her in a positive light and recently whenever she is asked a question she gets highly defensive and goes after them as well. 

Summary and Conclusion

To recap Lina Hidalgo has only been in office since 2019 and since then has been involved in a COVID rig bidding scandal with three of her staffers indicted and tried to cover it up. She kept Harris County on a red alert system for COVID for over a year and she signed an order that would fine anyone that didn't wear a mask $1,000. She also had a no bid contract for her own private security detail. In addition to this she led Harris County to waste $17 million on boondoggle for a COVID medical tent that wasn't even needed or ever took care of any patients. Crime since she has taken office has increased 70% and she is making the problem even worse as she has voted for over $150 million to fight crime however this money is not being used for anything crime related as it goes for bike trails, health initiatives, infrastructure, and other pet projects. She has voted to redirect hundreds of millions of dollars from Harris County Toll Road to other non transportation projects. She voted for a $2.5 billion flood bond that will be based on a "socially vulnerable index" and not based on where the most amount of flooding is. She voted to create a newly position for an election's administrator that was late in reporting the ballots (to be accurate last out of all 254 counties in Texas) and in addition to that left out 10,000 mail in ballots. On top of all this Lina Hidalgo doesn't have a redeeming personality to save her and is not charismatic whatsoever.

The Case Against PTE 2020-02, The DOL Rollover Rule, and Government Agencies Gone Wild

In my regular day to day job, I work in the personal finance industry. I have been in this industry for over a decade. Over time I have worked with many different families, individuals, and people from all walks of life. Generally speaking, many financial advisors work with clients that are about to retire or in retirement and generally they charge an assets under management fee (as a percentage of the assets managed). When clients retire, they have often have different options regarding their retirement accounts (their 401k plan, pension plans, IRA accounts, and health savings accounts (HSA). A recent rule from the Department of Labor (DOL) will dictate the relationship between the advisor and the client of what the advisor can say or do. 

Recently the Department of Labor (DOL) put in force a rule (July 1, 2022) that would affect financial advisors ability to recommend rolling over a 401k, pension plan, or IRA account to another IRA account. The specific rule from the Department of Labor (DOL) is known as PTE 2020-02. The history of PTE 2020-02 has a long and windy road. Something I was completely unaware of is there is a whole website dedicated to the history and evolution of the rule here. The actual origins of the DOL rule started in October 2010 (Proposal 1.0). Later in April 2015 President Barack Obama in a speech mentioned it which then culminated in a April 2016 final rule which was supposed to have started June 9, 2017. The decision was then challenged 6 different times and was vacated in the Fifth Circuit Court in March 2018 (65 page decision is here). Currently there is a lawsuit in the Fifth Court in North Texas (more on this later). 

First it is important to understand what government agencies are involved here. You have the Department of Labor (DOL), the IRS, the Securities and Exchange Commission (SEC). Generally speaking only the SEC regulates financial advisors. To make things a little more complicated there is a law called Employee Retirement Income Security Act of 1974 (also known as ERISA) that is administered by the DOL. ERISA covers for example 401k plans, pension plans, and even health care plans that company offer employees (think of employee benefits). When ERISA was created Title II was the actual legislation that created IRA accounts within the Internal Revenue Code (also known as the tax code). Generally speaking the IRS enforces tax rules related to 401k/IRA accounts. For example if someone takes a distribution from their 401k or IRA account before they are 59 1/2 they potentially could have a 10% penalty (the Department of Labor does not enforce this). It is important to know that Title II "did not authorize the DOL to supervise financial providers over ERISA plans". Common sense would say ERISA has authority over 401k plans however once a transfer is made from a 401k to another investment account (IRA/HSA) the power of ERISA is not carried forward to the IRA account or other account type.  

The issue at stake is there is roughly $7.3 trillion dollars of assets in 401k plans and $13.2 trillion dollars of assets in IRA accounts. In 2016 the DOL tried to estimate the cost to comply with the fiduciary rule would be $31.5 billion over 10 years. The DOL goes on to have the breakthrough conclusion that the legislation would "save" $40 billion over a 10 year period. I tried to actually find a study of how the $40 billion was calculated. In a press release it is mentioned that consumers may be paying 1%/year more. By this what they are trying to say is that an individual who has a 401k plan who then rolls over that 401k plan to an IRA will end up paying 1% more. My favorite part of the whole press release is "Today, the DOL is finalizing rules retirement investment advisers to meet a "fiduciary" standard-putting their clients' best interest before their own profits". This is utterly foolish of course. This presumption is that a financial advisor provides little to no value. Studies from Vanguard show that an advisor actually adds about 3%/year of value. The main reason is financial advisor can often coach their clients against doing foolish things (like wanting to put all their money in cash when the stock declines). People are often not rational with their money. Also why would people work with someone that simply "steals" 1% of their money (real estate, agents, and recruiters take a far higher percentage yet I don't see any legislation for them). 

Looking at actual data shows that for individuals who have under $250k in assets (you know the people the Department of Labor claims are being harmed) the cost that an advisor charges for managing the assets is 1.25%/year. Data from the 401k world shows that 401k plan fees are about .88%-1.19%/year (the fee depends on the size of the 401k plan as usually larger plans aren't as expensive since they have economies of scale). To make the math simple just rounding the average 401k plan fee to 1%/year and comparing it to a cost of 1.25%/year for what a financial advisor charges. This would say the difference is .25%/year or about a 75% less than what the DOL claims! Even being conservative and taking the all in fee of what a financial advisor charges (both the financial planning fee and investment fee) is still less than what the DOL claims. For instance for people that have assets of up to $250,000 their all in fee (financial planning plus underlying investment fees)  is 1.85/year%. Again going back to the logic of the DOL if you take the average 401k plan fee of 1%/year and add the DOL's calculation of an extra 1%/year that financial advisors charge would get 2%. However, over time as individuals build wealth their assets under management fee (as a percentage) will decline. For example for individuals that have $500,000 to $1 million their all in fee (financial planning plus underlying investment fees) would be 1.5%/year. Again this is 25% less than what the DOL calculated. The only limitation to this study was this only focused on independent financial advisors and didn't for example include brokers, insurance agents, or people who just sell investment/insurance products. However, there has been a shift towards independent fee only financial advisor. 

However, consumers over the years have been moving more to advisors who work as an independent fee only financial advisor. In addition to this the data shows that advisors are moving from working away from broker dealers/insurance agents who just sell investment products and shifting more towards independent financial planning firms (who sell advice and not products). The number of broker dealer firms has been declining rapidly. In 2002 there were 5,374 broker dealer firms. In 2021 there 3,394 broker dealer firms. This would say in almost a 20 year period the number there has been almost a 40% decline in the number of broker dealer firms.

Meanwhile at the same time the number of broker dealer firms has declined the number of registered investment advisor firms (RIA) has increased. In 2008 there were 25,073 registered investment advisor firms. In 2017 the number of RIA firms increased to 30,193 (a 20% increase). Given this is some old data I would be willing to say the number would be even greater today. There is a good reason for the growth in RIA firms. RIA firms have to put their clients needs ahead of their own and have to act as a fiduciary (broker/dealers only have to meet a suitability standard which is very vague and broad). As someone who has worked in the industry financial advisors who work for RIA firms are very client focused and are very transparent with how they charge (either an assets under management fee, hourly rate, or some other type of fee arrangement. Also it is important to note that the number of RIA firms increased without any government regulation (consumers choose this). 

The new rules under PTE 2020-02 requires that financial advisors either make a recommendation (with analysis) of why it makes sense to rollover a 401k to IRA, a defined pension to an IRA, an IRA to an IRA, or health savings account (HSA) to an IRA. The alternative is financial advisors can just provide education to their clients on the advantages or disadvantages of making a recommendation. However if an advisor provides the education the advisor can in no way advise/influence/recommend what the client should do (even saying "if it were me I would do this" is prohibited). Each approach is filled with flaws that potentially get an advisor in trouble. If the advisor decides to make a recommendation they have to identify the reasons for the rollover along with the costs associated of doing so. For example when looking at the cost of holding the monies in a 401k plan should the lowest cost investment be used-even if the client doesn't currently doesn't own that investment?  Also the advisor has to calculate the cost rollover of the 401k, pension plan, IRA, or HSA. Although the vast majority of financial advisors charge a percentage of assets they manage what if a advisor charges an annual retainer fee or an hourly fee. How is this analysis performed correctly? Also I am skeptical the DOL even would understand the nuance of this math since as I mentioned before they were completely off the mark on calculating the 1%/year long term cost of how much consumers would be paying in the long run. Also it is up to the advisor to ask the client to try to obtain information on fees/costs associated with the 401k plan/pension plan/HSA which in my experience is not only hard to obtain but more importantly even if you obtain the documentation from the plan it is almost impossible to decipher. Also another issue is that this cost benefit analysis has to be done for each 401k plan/IRA/HSA that is recommended which can be burdensome if a client has a dozen different accounts. Given the fact that people may have 12 different employers in their working career. Each individual account/plan has to be evaluated and analyzed for the total amount of fees based and services offered which could turn into a paper compliance hurricane for an advisor. 

The penalties for violating PTE 2020-02 can be severe as well. Since the DOL considers advice related to rolling a 401k plan over to an IRA or an IRA to IRA as a prohibited transaction (thus the advisor has to receive permission from the government to receive compensation from the client). If it is found that a prohibited transaction has occurred the financial advisor can face penalties of up to 100% of the amount involved and penalties from the IRS as well. This is somewhat insane considering the financial advisor is taking a large risk to in essence just fill out paperwork to inform a client of their rollover options. Also I would point out that clients even before this were asking the questions of the advantages and disadvantages of rolling over their 401k/pension plan/or HSA to an IRA account. Also if a client has been working with an advisor for many years it could easily assumed that the client would trust the advisor and their recommendations (however if the advisor decides to go the education route of providing the advantages and disadvantages to rolling over the 401k/pension plan/IRA or HSA account would be legally barred from making any type of recommendation. 

The last time I checked doctors/attorneys/or any other profession don't face a similar position of giving a patient/client information and the provider not being able to make a recommendation. Also doctors and attorneys deal with matters of life and death. As a result of these new rules some financial advisors will cease to give advice on 401k rollovers due the compliance burden faced.  Also more importantly when I go out to a restaurant and consume food I am not required to sign any type of paperwork or be informed about the advantages or disadvantages to eating a nice steak (as the steak is a rollover from the restaurant to my stomach-the steak could kill me but the last time I checked a 401k has never been the cause of any death). 

Once possible silver lining in this new DOL rollover rule is a recent court case decision. Recently the Supreme Court case West Virginia vs. EPA ruled the the EPA had overstepped it's regulatory authority. Since there was a large economic and political significance to what the EPA was trying to achieve (that was not legislated by Congress) the Supreme Court found the EPA didn't have the authority to act as a de facto Congress and make their own rules. The outcome of the West Virginia vs. EPA decision could have an impact on the DOL rollover rule. Fiduciary responsibility is under the purview of ERISA and ERISA was never given authority from Congress to apply this to IRA accounts. Currently there is a lawsuit in the Fifth Circuit Court challenging the DOL Rollover rule. The recent lawsuit includes arguments from the the EPA decision with Supreme Court Justice Neil Gorsuch making the comment "But the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people's representatives". 

The DOL has overstepped it's regulatory authority by trying to figure out how to creatively work around the legal system to draft rules that will as a result cause advisors to not want to work with clients that are about to retire, currently have 401k plans, IRA plans, pension plans, or HSAs, given they could possibly be subjected to penalties. The penalties include having to reimburse clients for the fees paid on these accounts, a penalty of 100% of the amount involved, and in the extreme case the advisor could be barred from advising on these type of accounts for 10 years! Current and future court cases will ultimately determine the outcome of PTE 2020-02 but the sheer overreach of the DOL should be a warning of government agencies gone wild. 

Chase Koch (son of Charles Koch) and His Wife Annie Breitenbach Koch Divorce

For many years I have covered this Koch family on this blog. Within the past few years it appears that Chase Koch and his wife Annie have been divorced. Someone had made a comment in one of my recent posts about them being divorced. I looked into it and found very scant evidence at first with only one credible article from Inside Philanthropy from September 2020 referring to Annie as the "ex-wife". However, I know recently Chase Koch has been interviewed for many different things and it is noticeable that he is not wearing his wedding ring in the videos for a couple of years. Recently I did notice Chase looked visibly tired when being interviewed with severe dark bags under his eyes both in this June 2021 interview, a Koch industries promotional video in June 2021, at the 2021 TPI Aspen Forum from September 2021.

I can't ascertain the timeline of the divorce. An article from the Wichita Business Journal discusses Annie and Chase talking about the school that they started together in October 2019. In a video with Youth Entrepreneurs in August 2020 Chase is noticeably not wearing a wedding ring. My best guess would be that Chase and his wife Annie separated between late 2019 to early 2020. It is worth pointing out that Liz Koch (mother of Chase Koch) was divorced before she met Charles Koch. 

Chase Koch and Annie Breitenbach were married November 1, 2010. The wedding was covered in a Koch Industries Discovery magazine that all employees receive. Annie at the time was roughly 25 years old and Chase was 33 years old at the time. Annie attended the University of Kansas and had become an RN and worked in the Wichita area. The couple the same year they were married purchased 70 acres of land and a house for $3 million according to this article. The couple have three children together including their first child Charles Gerard Koch who was baptized in June 2012. Annie Koch is media shy and the only video I have seen of her from 2013 when she was the host of a breakfast interview between Chase and his mother Liz Koch. Annie listed all Chase's household duties of being a diaper changer, trash man, and in charge of dog do removal services. She then mentions his professional career and duties and at the end says "Wow babe no wonder you barely make it home for dinner on time". 

There currently can be only speculation as to what happened that led to the divorce. One potential issue that could have put a strain on the marriage was Chase Koch and the hours he worked. Chase would have a very busy day and according to Kochland and his day "started around 6:30 and proceeded-"wall to wall" until 6 or 7 at night" and Chase admitted in this video that he wasn't spending enough of time with his family. Part of the issue was Chase was not delegating and President of Koch Industries Dave Robertson explained to Chase that he was in charge of his own calendar and had to say no to things. Chase felt as if he had to be involved with every little detail and to the point that was almost micromanaging (Charles would admit to micromanaging himself as well). Chase was Executive Vice President of Koch Ag and Energy Solutions from 2014 to 2017. After 2017 Chase became President of Koch Disruptive Technologies which is an subsidiary of Koch Industries that looks at promising technology companies that Koch Industries can invest in to grow and enhance their own business. You can almost think of this division as a venture capital firm within Koch Industries.  

It was reported within the past few years that Charles Koch continues to work weekends (despite being in his 80's) and is a workaholic. People forget that being a workaholic is a type of addiction just like drugs or alcohol that perhaps could be inherited. At one point Liz Koch pointed out that Chase worked to hard and resembled the tendencies of his father (Charles Koch). Charles Koch himself was a workaholic. According to this article in the 1997 from Fortune magazine Charles would put in 12 hours a day at the office and then go home and work some more. Charles would have executives meeting on Saturday mornings and sometimes meetings would last until Saturday evening. and would ask folks to come in on a Saturday or Sunday to the Wichita office. One Sunday in August 1968 Charles Koch called a meeting that started at 4 P.M. and went until midnight! Charles would admit in this interview that Saturday and Sunday are more fun to work anywhere and he would drive employees crazy day or night leaving them voice messages. 

It is important to remember that Chase Koch is a shareholder of Koch Industries stock (he has been on the board of Koch Industries since 2013). My understanding is that various trusts hold the actual Koch Industries Inc. stock and with Kansas being a separate property state as long as Chase can show the assets were his to begin with and weren't commingled with other assets there shouldn't be any issues of him retaining Koch Industries stock. Usually assets in trusts are protected both from creditors and divorce. Of course he will have to provide some type of support for his wife Annie and three children. Also I would think given the many legal battles the Koch family faced in the 1990's and early 2000's that Annie Koch would have signed some type of prenuptial agreement as well. Former Koch shareholder J. Howard Marshall (yes the one married to Anna Nicole Smith) had a prenuptial agreement that would pay Anna Nicole $100,000 for each month they were married and $5 million if they had a child together. It would be interesting to know if Chase Koch had some type of prenuptial agreement with Annie. Also the other issue will be the custody of the children as well in terms of going between Chase and Annie (which won't be easy emotionally).

Another issue is given the couple created the Chase and Annie Foundation (which I covered here) it will be interesting to see if they still work together on this project. Annie herself is involved with the Wonder School (a non traditional school that teaches more of the Socrates method). Currently Annie is the oldest person at the Wonder School and on her about me page is currently reading "Untamed", enjoys running, reading, and kombucha, and has been a vegan since 2016. The initial cost of the school was $1.5 million and the school would pay Wichita State $90,000 per year to use a building on the campus of Wichita State. 

It will be interesting to see how this divorce between Chase and Annie Koch affects the future. Like I said I really haven't seen any news articles directly discussing the issue. Personally I am curious what the cause of the divorce was. Also given Chase has three children and is busy at work is if he will get married again at all. The statistics on divorce are interesting with about 50% of people getting remarried within 5 years of their divorce. It will also be interesting if ultimately the divorce will hurt the career of Chase at Koch Industries too. More importantly it would be interesting down the road given Chase has third children and his aunt Julia Koch has three children as well (to my knowledge Elizabeth Koch doesn't have any children) creating 6 new potential shareholders of Koch Industries. 

Chase Koch Foundation and How Chase Koch Spends His Charity Dollars

Well it has been many years since I have blogged about Chase Koch (son of Charles and Liz Koch). It appears within the past few years (March 15, 2019) has established the Chase and Annie Koch Foundation Inc. Annie is the wife of Chase Koch and I actually blogged about her here. 

The 2018 Chase Koch Foundation tax return (990-PF) shows a $5 million contribution made. This contribution appears it was solely made by Chase Koch himself. The 2019 return for the Chase Koch foundation shows $15 million of contributions. Of the $15 million gift $1 million came from the "KC 2009 Gift Trust" and $14 million "KC 2009 Family Trust". These were trusts that were established back in 2009 from my guess would be Charles Koch (his initials backwards). 

Chase Koch has mentioned before that he is a shareholder of Koch Industries (he is on record saying this on video-see at the 30:14 mark. It is hard if not impossible to figure out how much ownership he has. His father Charles Koch back in 2012 told Daniel Fisher of Forbes magazine that he has been estate planning for "many, many years". 

Uncle David Koch mentioned in a 1999 article that he regularly gave away 50% of his income every year. This is an interesting dynamic if Koch Industries reinvests 90% of their profits back into the business leaving only 10% of the profit available to be distributed to Koch Industries owners and in actuality only around 7% of the profits (based on historical data has been distributed in the form of dividends) and then between federal and city taxes for New York city and New York state is 50% and assuming 50% was given to charity would say that David Koch was living on less than 2% of Koch's profits for his living needs! 

In terms of what charities Chase Koch has supported it appears the largest charity he contributed to in 2019 was the Phoenix Multisport ($1.1 million just to this). Chase Koch has talked about the positive impacts of Phoenix and how the charity has been able to transform lives as a result. Phoenix Multisport is a community that allows individuals who battle addiction to use physical fitness as an outlet for coping with their addiction. You can think of the Phoenix as a sober gym. From their 2020 report the Phoenix has 54% of members who lived in poverty, 61% who were involved with the criminal justice system, and 15% who identified being part of the LBTGQ+  community. The results of the Phoenix have been amazing though. Roughly 87% of individuals report being sober after 3 months (this is impressive compared to the statistic that 40-60% of individuals relapse after 30 days of leaving a rehab program and the percentage of relapse increases to 85% within 1 year. There is no question that this program seems to have a positive impact by improving the lives of not only many people but their families and communities. 

Another large beneficiary ($350,000) of the Chase Koch Foundation is Wonder Inc. Wonder Inc is a private school that is primarily funded by Chase and Annie Koch that will offer K-12 education on the Wichita State University campus. The school is trying to break the mold of traditional educational by allowing children to be more curious (as opposed to a teaching from a top down approach and "put into practice by solving complex real-world problems using critical thinking, creation, collaboration, and innovation". Annie Koch on the Wonder website lists herself as a "mother since 2012, vegan since 2016" and enjoys "reading, running, and Kombucha (tea)" and she is currently reading "Untamed" 

What is crazy is even though the Chase Koch Foundation is a charity it still pays an excise tax (1%) on investment income. Although this was a de minims amount the Chase Koch foundation paid $433 of tax in 2019. Chase's father Charles Koch (who has his own foundation) in 2020 paid over $1 million in excise taxes). Charles Koch appears to have done estate planning at least in 1997 and 2009. As far back as 2016 the Charles Koch Foundation received gifts from the Charles G. Koch 1997 Trust ($30 million), the KC 2009 Family Trust $27.5 million, and the KE 2009 Family Trust $27.5 million, and smaller gifts from the KC 2009 Gift Trust $7.5 million, and the KE 2009 Gift Trust $9.5 million. My guess would be the names of the trusts represent the initials (KC for Charles Koch and KE for Elizabeth Koch). These trusts have continued to provided funding for the Charles Koch foundation over the years. It is hard even as a billionaire to give away money fast enough to overcome estate taxes. However, Charles Koch years ago stated that he planned to give the main bulk of his estate to Stand Together. 

What is interesting is how the Koch family has set up all these private foundations over the years to give money to various charities. To me it becomes too complicated as you have many different organizations that ultimately are trying to achieve a similar objective. One option is to convert the private foundations into a donor advised fund. The benefit of doing this is tax returns don't have to be filled. Also the donations from the donor advised fund can be contributed to various charities without anyone knowing the source. The 990-PF tax return allows the whole world to see who you are giving to and how much. 

I would predict that over time Chase Koch will be given more ownership of Koch Industries given it seems that currently he is the only one of the Koch family working for the company. David Koch has children however they are too young. Fred Koch himself was charitably inclined as back in 1966 and 1967 set up trusts that would pay income for 20 years to charity and then the remainder after the 20 years would be given to his sons. There is no doubt that Charles and Liz Koch will continue to give away substantial sums of money away and Chase Koch will have access to give away a multiple of what his parents were able to give away if Koch Industries shares transfer to him over time. 

Koch Net Worth 1984 to 2021 and 2021 Koch Industries Shareholders Dividend Update

It has been a while since I have updated the net worth statement for Koch Industries. The last update I did was back in 2018 and how things have changed since then. David Koch passed away in August 2019 and his shares went to Julia Koch and family. I blogged extensively on the passing of David Koch here and here. Also I reported how recently Julia Koch had been added to the board of directors of Koch Industries as well. 

Looking at the 2021 Koch website they report $115 billion in revenues (although they claim it comes from Forbes since they don't report revenue numbers but this number must be somewhat accurate. Taking $115 billion of revenue x a 13% profit margin (which was calculated here) would say after tax earning are $11.3 billion (assuming a 24% tax rate which again calculated here) . Koch reinvests 90% of their earnings back into the company which would say $10.2 billion of earnings are reinvested back into Koch Industries every year. The company based off historical information pays out 7% of their earnings as dividends (leaving about 3% for short term liquidity needs). This would say that Koch pays out close to $800 million of dividends to all their shareholders. 

Charles Koch and his family (Chase Koch has mentioned he is a shareholder of Koch Industries here) would earn about $334 million (since they own about 42% interest in Koch Industries). Julia Koch and her family would earn about $334 million. Last but not least the Marshall family would earn $127 million. It is important to remember that Koch Industries is a C-Corporation (I uncovered that here) so the dividends are taxed first at the corporation level (21% under current tax law) and then taxed again individually. For federal income tax purposes Koch shareholders would pay 24% (20% + 3.8% Obamacare tax). In addition to this they would pay state income tax as well. Charles Koch lives in Wichita Kansas so the top income tax rate for that state is 5.7%. This would say that close to 30% of his dividends are taxed. Said another Charles Koch and family would earn $233 million from dividends after taxes were paid. Julia Koch lives in both Florida and New York. My hunch would be that her residence for tax purposes is Florida (which currently doesn't have a state income tax). However, if she truly were a resident of New York City the tax there would be 32% for just living there and throw on federal income taxes of 24% would result in roughly a 56%. To translate this into dollars it would say that Julia Koch and her family would receive $146 million after taxes which would be what she would use for her annual living needs. 

The average compound growth in net worth of Koch Industries has been about 14%/year (again this is a rapid growth rate when looking at when Charles Koch took over the company back in 1967). Some smaller companies are able to achieve this for a decade or two at most and then at some point stall out because as you get larger it is harder to continue to grow. The largest jump in net worth was between 2005 to 2006. This was when Koch Industries purchased Georgia Pacific. I had reported on Georgia Pacific as a case study. Koch Industries grew from $60 billion of revenue (before the Georgia Pacific merger) to $80 billion (after the merger). At the time Koch paid a larger premium (39% premium above the market value of the company). David Koch at the time told the New York Times that Koch Industries could streamline the manufacturing and production processes of Georgia Pacific and reduce the costs by investing in technology. The purchase of Georgia Pacific accelerated the size and number of employees for Koch Industries. This in turn increased the net worth of the Koch shareholders. 

As I have mentioned before Koch Industries pays out 7% of it's earnings as dividends however as a yield for Koch Industries stock the shareholders really do earn a small yield compared to their net worth. For example, if you take the $334 million Charles Koch and his family earn it would say and divide this by his recent net worth of $46 billion would say that the yield on Koch Industries stock is only .7%. If you compare this to yield of the S&P 500 (1.5%) it would say that Koch Industries shareholders could double their current dividend by selling the company and investing into the S&P 500. However, the long term dividends of Koch Industries as I calculated before have grown an astounding 21% per year (this is over a 50+ year period since Charles Koch took over too). Running some math Charles Koch was worth $500 million back in 1985 which exceeded his lifetime goal by a factor of 70) when he first took over the company after his father passed away. 

Without a doubt there is no question that Koch Industries has grown quite exponentially over many many decades. When Charles Koch took over the company after his father passed away in 1967 Koch Industries only paid out $300,000 a year and now that amount in 2021 is roughly $800 million a year. Charles Koch back in 1984 had a reported net worth of only $375 million and now has a net worth of $40 billion. Central to this growth in my view has been two key characteristics. The first is the company philosophy of what is called market based management (MBM). This philosophy is very different than any other company. The philosophy focuses on employees speaking up to share ideas, for all employees to act as if they are business owners, and to think critically about problems they are facing in the business they are in. The other key characteristic is Koch Industries for a long time has reinvested 90% of its earnings back into the business (to my knowledge no other company does this). Given that Koch Industries is private gives them the flexibility to do this. This type of policy would be considered crazy in any public company of board of directors. At any rate no one can deny that Koch Industries is like no other company. 

Julia Koch Joins Koch Industries Board of Directors

Recently I learned that Julia Koch was added to the board of directors of Koch Industries. Honestly, this is not that shocking after David Koch passed and since David Koch had been an executive a Koch Industries since at least 1980 and given his experience with the company it would be logical for her to join after David would pass. Remember Elaine Marshall is also on the Koch Industries board of directors (she has been on the board of directors since 2006) after E. Pierce Marshall passed (son of Howard Marshall II). It would make sense from an estate planning perspective to give Julia Koch shares of Koch Industries and by doing that allow her to be on the board of directors since she is a major shareholder. In terms of estate planning usually when someone passes most of their assets will pass to the spouse (due to an unlimited martial deduction that allows an infinite amount of assets (including Koch Industries stock) to pass to Julia without incurring any estate taxes. However, when Julia Koch passes (which won't be for many decades since she is only currently 58 years old-an interesting fact is that David Koch was 56 when he married Julia-who at the time was only 34) there could be a large estate tax bill that will be paid (assuming no planning has been done which I doubt). The same logic would apply when Charles Koch passes (most likely his wife Liz Koch will receive his shares of Koch Industries stock). 

According to Bloomberg Koch Industries lists the board of directors as Charles Koch, Martin Slack, Richard Fink, Dave Robertson, Elaine Marshall, Steve Feilmeier (former CFO of Koch). In addition to this on March 07, 2013 Jim Hannan, Chase Koch (who is also a Koch Industries shareholder), and Brad Razook were added to the board of directors of Koch Industries. With the addition of Julia Koch this would say Koch Industries has at least 10 people on the board of directors. 

The question is what role will Julia Koch play the board of directors? She hasn't been involved in the company business however still retains a large ownership of the stock. Will she just delegate the corporate decisions to other in the business or have a voice at board of director meetings? As I mentioned previously Koch Industries would generate a fair amount of dividends to help Julia Koch provide for her lifestyle. My last estimate shows that Julia Koch would pull in a little less than $400 million per year just in dividends (which should be sufficient to provide for her spending needs/wants). David Koch in a 1999 MIT Spectrum article mentioned that he/Julia gave away 50% of his income. Even if Julia gave away half her income she would be left with $200 million (before taxes of course) to live off of. She could purchases different homes, remodeling, (she apparently was working with a interior designer to remodel her $40 million New York townhome), and traveling. David Koch once made the comment that one time Julia was given the task of renovating a home for years and he told Julia there was no budget and David commented "she still managed to go over the budget". However, will Julia want more of Koch's earnings paid out as dividends if she wants to increase her lifestyle and possibly lead her to selling her Koch shares to other Koch shareholders?  

Speaking of the Koch finances after David Koch passed when I look at the 2019 David Koch Foundation tax return it shows only $10 million for the assets of the foundation (or said another way Koch Industries shares didn't fund the foundation). I wonder why they even have this set up given for this small amount of money (relative to the overall net worth). What is interesting is the return shows about $7.3 million of a retirement distribution (David Koch may have had his Koch 401k plan/pension plan/other retirements go directly to his foundation upon his death to avoid income taxation). 

The Koch family a number of years established a family office. In general a family office is created to management to handle the day to day financial operations of a wealthy family. For example a family office primarily will handle the investments of the family, tax planning, estate planning, and even be delegated the duty of philanthropic work, making travel arrangements (if the family wants to take trips), paying bills, and other administrative duties. According to this source the Koch family office is named 1888 Management (based in Denver, Colorado) and manages $2 billion of assets. According to this family office source the Koch family office is focused on taking a directs investments and take a sizable stake in certain companies. For example 1888 Management purchased a stake in a telecommunications company X5 OpCo LLC. 

An old article mentions there are seven family officers of the 1888 Management Richard Dinkel (who is currently now the CFO of Koch Industries, Steve Feilmeier (who was the former CFO of Koch Industries), Daniel May (he overseas the investments for the family office, David Koch (this has probably changed to Julia Koch, Anna B. Koch (wife of Chase Koch-son of Charles Koch), and Elizabeth B. Koch (which is the wife of Charles Koch-the daughter is also named Elizabeth Koch but her middle name is Robinson). Usually the family office will mix family members with people that work for the corporation have the family background and vision for where the family wants to go while at the same time putting into place a sense of corporate governance so family members can't run wild. 

I previously covered allegations against Julia Koch made by security detail of the family (however this seems to have stayed quiet and maybe perhaps some type of settlement was reached). Within the past month Julia has been spotted eating out near her Florida home. During the pandemic in June 2020 she retreated to her Hamptons residence from Florida. Her children are growing up too. The oldest David Koch Jr. is attending Duke University and appears to be majoring in political science and government and expected to graduate in 2021. Mary Julia Koch is a history major at Harvard University and is expected to graduate in 2023 (she is also the editor in chief of the Harvard Independent). The youngest John Koch is attending a Manhattan prep school (Mary Julia attended The Spence School). The question is will the children get involved with Koch Industries business over time? Chase Koch has worked within Koch Industries for many years and understands the ropes of the business. He is currently the only next generation Koch involved in the family business. Remember back in the 1980's Charles, David, and Bill Koch were involved in the business (Frederick Koch was not involved but that is still a 75% participation rate). However, over time though as there are more shareholders who each have different needs (some shareholders want more dividends paid out to support their lifestyle-like Bill Koch did back in the 1980s which lead to a corporate coup/people like Charles Koch who regularly reinvests 90% of the earnings of Koch back into the company to grow it-which over time actually leads to an increase in dividends. It is worth pointing out that when Fred Koch passed in 1967 the dividends of Koch Industries were only $300,000. The hard work and growth of Koch Industries of the company reinvesting 90% of their earnings back into the company also helped grow the company size and dividends too. This growth even exceeded even the wildest dreams of Charles Koch who recently said back in 2015 that he looked back in 2013 at his goal for growing the company and it exceeded his own expectations by 70 times. I estimated that his net worth back in 2013 was $35 billion which would say that Charles Koch expected to retire with only $500 million! 

This outstanding growth rate has benefitted all the other shareholders who don't even work for Koch Industries. The Marshall family for example I estimated pull in $140 million of dividends with their 16% interest in Koch Industries and again they don't even work for the company. However, at some point Elaine Marshall will pass and her shares may go to her family members and there will be a new generation of owners. The question will be will there be a revisit of a company battle of the shareholders over control/direction and the dividends of the company. The more shareholders you have the more diverse group of wants you have and the harder it is to keep everyone happy. Usually when a shareholder of a private company wants out the company will offer them a price to buy out their shares so they can walk away and do what they want. Frederick and Bill Koch did this back in the 1980's and got close to a billion dollars. I however pointed out they would have been better off holding on to their Koch Industries shares in the long run (again given the impressive growth of the company). Time will tell however what happens with Julia Koch her role on the board of directors for Koch Industries and how involved she gets (or doesn't get) and whether or not she continues to keep a low profile. My own personal view is that she will keep a low profile. She has managed to keep a low profile (other than going to galas) for over three decades and out of all the Koch family members I have never read about or seen an interview with her.  As Charles Koch one time mentioned "I always followed the mama whale's advice to the baby whale: Son the time you get harpooned is when you come up to spout off". 

400th Post What I Have Learned From Blogging Over The Years

I honestly can't believe this is my 400th blog post. Originally I started to write a blog to keep track of things I was noticing in the world. My first blog post was back in October 30, 2009. My original intention was to keep a diary of my thoughts. At the time I wanted to focus on "finance, economics, current events". Originally I did blog on a garden variety of things-from hair loss, to organ donation, to Tiger Woods. However, probably what this blog is most known for is following Koch Industries and the Koch family over many years. This blog was the first and only blog to have a historical net worth estimate for Charles and David Koch. Also it is on this blog that I calculated the annual dividends (along with net profit) of Charles Koch and David Koch. I haven't tracked my time on the issue but I would say I have spent a few hundred hours studying/following the Koch family.

Back in the early 2010's I was in graduate school and often found free time on my hands to write blog posts and during those years I spend dozens of hours looking up old articles on the Koch family. The graduate school I was at had a subscription to NewsBank database which was a great resource to find articles on the Koch family.  Although, I have seen it sourced in many Koch books such as Kochland and Sons of Wichita one piece I wish I could obtain is the Koch vs. Koch trial transcript. I have been able to find summaries online however the actual transcript would be really interesting to look through. 

What is interesting is I somewhat stumbled upon the Koch family. Back in the early 2010's (while I was in grad school) I became interested in learning more about Walter Williams. I remember watching a video that was a toast to him (here is the video from 2003). At one point Charles Koch speaks saying that him and Walter Williams had been friends since about 1983-1984 (it should be noted when Walter recently passed away Charles contacted Walter's daughter (Devon) to express his condolences). The first post I have had on something Koch related was back on June 23, 2011 when I wrote about the Koch philosophy of management. 

What I am probably most proud of is my ability to research rare items on the Koch family and write wonderful blog posts that are fun, entertaining, and share information that you can't find anywhere else on the internet. I often think of how sloppy some writers are. What I mean by sloppy is they don't get into the nitty gritty details and often use flowery language with not much facts/data. It also irritates me when writers can't get to their point or have a take away or action item. There are a few writers like James Stewart or Bryan Burrough who are able to weave incredible stories with facts and data. If you look back at my blog posts I try to include as much data as possible (perhaps sometimes too much) with appropriate hyperlinks so if people are curious they can check out the resources on their own (you don't have to just take my word for it). 

The most popular post on the blog has been my post on Elizabeth Koch (what is interesting is this all started from a footnote in "Sons of Wichita" and then became a project of mine. People often don't realize a few of the blog posts I have written occurred over many days/sometimes months (often saved as a draft and then I will come back to it for additional ideas or editing). Most posts I try to knock out in a few writing sessions. However some posts I did have writer's block of how to organize or what I felt was the most interesting. To posts that come to mind are the ABKO deal between Koch Industries and Chrysler and the other was the Pine Bend Refinery that Koch owned. Both posts were written over a couple of months of back and fourth. The ABKO deal and Pine Bend refinery are two of my favorite posts though. Also I would challenge anyone to find posts that are more detailed and have more analysis then those two posts. My general process has been to get all the data and do some type of brain dump and then structure the information in an organized fashion. The fun part is what I call the editing of trying to move facts to their respective positions and tidy things up. 

One of the things I was able to break on my blog is that Koch Industries is a C Corporation (and not a S Corporation as S Corporation as Austan Goolsbee tweeted that Koch Industries didn't pay any corporate taxes (the tweet was then deleted). In actuality Austan (who unfortunately is a professor at the University of Chicago) confused the Koch brothers and was confusing Bill Koch with Charles and David Koch. 

My most productive year was in 2011-2012 (at the time I was in graduate school and had a lot of free time on my hands). During this time I read through hundreds of pages from the Koch vs. Koch trial (part 1, part 2, part 3) and tried to boil down all these into the important pieces. Probably the most interesting part was learning the work schedule of Charles Koch. At one point Koch executives were working a full day and part of the Saturday night. In fact there was a meeting on a Sunday in August 1968 that went from 4 P.M. to midnight! Brother David Koch was no slouch either. As I remarked here David woke up at 7:30 A.M. and had his breakfast and would work until 7 P.M. and then go home to his wife, kids, and personal chef. Back in his younger days David (who was a bachelor for many many decades) would spend weekends at the office studying pollution control designs (for fun he would ski). Probably one of my favorite interviews is the one MIT Spectrum did with David Koch back in 1999. In the interview David admits he gives away about half of his income to charity. For fun he enjoys reading biographies, historical fiction, and military fiction (back in the 1980's he mentioned that he read about 24 news/opinion journals (and that didn't even include technical trade journals). Also he takes some of his friends on exotic trips to the Amazon jungle on his private jet. According to David traveling "takes you out of the rut you get locked into as a businessman". I truly believe both Charles and David Koch are interesting individuals who undeniably built an amazing business with an extraordinary long term growth rate. 

One of the largest contributions this blog has made was estimating what Koch Industries earn and the dividends they pay out to shareholders. Koch Industries routinely invests 90% of their earnings back into the company. Well simple math would show that if I knew the revenues I could back calculate how much profit there was. What I probably am most proud of is my research that has put a ballpark estimate on the dividends and profits of Koch Industries. My estimates show that Koch Industries generates roughly $17 billion of earnings (before tax) which would translate into $900 million of dividends available to all Koch shareholders which would say the Koch brothers each pull in close to $400 million of dividend income (dividends have grown at a compound growth of 21%/year-over 50 years!). I also compared Charles Koch as a businessman to John D. Rockefeller here (John Rockefeller retired at 57 and Charles Koch is currently 85 years old and still working at Koch Industries). Speaking of dividends I also wrote how Bill Koch and Frederick Koch (brothers to Charles and David Koch) left billions on the table for their shareholder dispute with their brothers and would both have had more of a net worth and dividends if they never sold their Koch shares. 

Speaking of Bill Koch I also covered the Oxbow Carbon corporate coup that almost lead to the fire sale of Oxbow Carbon (ultimately a judge ruled that Bill Koch would not be forced to sell his company-however the story is still quite interesting). The whole corporate coup was filled with corporate governance issues (such as Bill Koch using the company as as a piggy bank (for his private jet), valuation issues of what Oxbow was really worth, and key executives at Oxbow employees going behind the back of Bill Koch to try to negotiate deals without him knowing. 

It really has been amazing to see the growth of this blog over the years. I have close to almost 250,000 visitors which I never in my wildest dreams never would have believed. What has been really fun is putting my ideas, thoughts, and research out there to share with the rest of the world (yes I do have a worldwide audience). My goal is for someone to stumble upon a blog post and think "Wow this person really does their research when looking into things". I am sure in the coming years there will be more news from Koch Industries and what the succession plan of the company looks like. This experience of blogging has taught me that I truly took the road less traveled.