In Defense of Live Nation, High Ticket Prices, and the Department of Justice Investigation

Recently I purchased a ticket to go see Sebastian Maniscalco and was surprised how much I made in "ticket fees" when I ordered the tickets. I was curious to see what caused the high ticket price and decided as a result to write this blog post. 

Recently the U.S. Department of Justice sued Live Nation (Ticketmaster is a subsidiary of Live Nation as a result of a merger back in 2009).  The central claim is that Live Nation has monopoly power over people who would like to see a live event and therefore should be broken and as a result to create more competition to potentially lower ticket prices. 

According to the Justice Department Live Nation controls about 80% of ticketing for major events and 60% of concert promotions 60% of concert promotions at major concert venues. The CEO of Live Nation disputes the percentages given how the Justice Department has a more narrow definition of what a major concert venue is. Live Nation President Joe Burchtold went on CNBC to explain when you look at potential comparable venues their market share is only 50-60%.  

Part of the issue is a lack of understanding how the business works. You have multiple groups in the mix. First you actually have the actual artist, then you have the business team for the artist, then you have the promoter, then you have the actual venue, and then you have the ticketing company. The artist and their business team have to decide what the financials for the tour look like and select a promoter they would like to use. Live Nation and AEG Presents are the two largest promoters in the industry. The promoter can offer cash guarantees for the tour (the guarantee will depend on tour expenses and how popular the artist is the guarantee will depend on tour expenses and how popular the artist is). In addition to the cash guarantees the artist may get a percentage of ticket sales depending on how successful the show is. The promoter has all the financial risk as they have to ensure the tour is financial successful and have to work the logistics of obtaining the venue, transportation, and have to work with the business team of the artist to price the tickets at a reasonable level. Live Nation in 2023 paid artists $13 billion. Live Nation for 2023 had revenue of $22.75 billion. In addition to this Ticketmaster has spent over $1 billion since the merger with Live Nation to improve the technology. During COVID Live Nation had to borrow $1.2 billion to borrow $1.2 billion 

Taylor Swift's Eras Tour grossed $1 billion in revenue, with each show grossing $17 million, the average ticket price was $238, and 4.3 million tickets being sold. The cost of the logistics and transportation was $30 million. In addition to this Taylor paid the crew $55 million in bonuses as the tour had 50 production truck drivers. So just the transportation and logistics was $85 million. Also the tour had 131 different performers . Forbes put some pencil to paper and estimated for the first 22 performances roughly $300 million of revenue for the tour was earned, Taylor and her team earned $110 million from performance (after touring/production costs) and Taylor earning $30 million (after expenses, taxes, agent, and publicist). The Eras Tour ended up having 152 shows so doing some math would say Taylor made $207 million after expenses and fees from the tour. Ticket prices for the same show varied by each city. The highest ticket price in Kansas City was going for $450,000 while in Seattle were going for a little over $4,000 (for essentially the same show). The artist usually makes 90% of the ticket fee. LiveNation keeps around 6% of the ticket price and the profit margin (given LiveNation has their own costs) and has a profit margin of 2% on tickets. So if the average ticket price for Taylor Swift was $238 Live Nation made less than $5 per ticket. AEG was the promoter for the Eras Tour and their profit on promoting is 2% so add another $5 per ticket. So on a $238 ticket Live Nation made $5 per ticket so $21.5 million (on 4.3 million ticket sold) and AEG the promoter made $21.5 million of profit during the Taylor Swift Eras tour compared to $207 million Taylor Swift made after expenses (closest thing to a profit margin for an apples to apples comparison). Part of the reason why ticket prices for Taylor Swift were so expensive is two fold. One is she had not toured in at least 3-4 years and post COVID there was pent up demand to see in person concerts which fueled over 14 million people trying to obtain 2.4 million tickets which caused the Live Nation site to crash. The demand was so high that Taylor in order to meet the demand would have had to play 900 concerts (20 times the concerts she performed or over 3,000 shows which would have added another 2.5 years to her tour-assuming she performed every single night). 

Most people are upset (including myself) about the service fees for the price of one ticket. However, the venue determines what the service fees are and Live Nation or the ticketing company passes these fees along to the consumer. The venue gets about 67% of the service fee and the ticketing company only earns 7% of the service fee. For all the venues that Live Nation owns they have moved to all-in-pricing since Fall 2023 and actually have seen an 8% increase in ticket sales as a result. Also the venue gets to decide if the all in price is displayed or if the service fees are charged. The profit margin on this part is only roughly 2%. Also it is important to remember that Live Nation has 50,000 concerts or events. Ultimately only the top 5-10% of artists are able to command high prices as the demand for their performances exceed the supply of available tickets.

The reason for high ticket prices is multi-faceted. Given consumers during COVID weren't able to see live concerts drove up demand for these services. In addition also the cost to produce the actual show increased since COVID. Additionally artists use to make money from album sales or music sales however the artists now have to give the music away and tour in order to make their money back. If anything some artists are underpricing their ticket prices since secondary markets like StubHub and SeatGeek exist. Given that the secondary market for tickets is roughly over $2 billion says that this is precisely how much artists are undercharging. Artists and their management teams have to walk a fine line between being able to make money, while not enraging the fan base of the artist. 

ProPublica The Top 400 Income Earners Americans and Charles and David Koch and Koch Industries Dividend Estimate Update

Within the past year ProPublica released information on the 400 richest Americans. The actual information came from leaked IRS records that came from an IRS contractor. The contractor (Charles Littejohn) is now facing criminal charges for leaking the confidential information to two news organizations (ProPublica was one of the news organizations).

Charles and David Koch showed up on the list of top 400 highest income earners. According to data from ProPublica from 2013 to 2018 Charles Koch earned an average of $213 million per year. His brother David Koch earned on average $234 million per year. It is interesting to point out that Charles was the 153rd highest earning individual in the United States and his brother David was 136th even though they had the same ownership percentage within Koch Industries. There are a couple of reasons why this could be true. The first is David Koch owned many different homes all over the United States and a sale of one of these homes could have increased his adjusted gross income (AGI)-this is the metric that ProPublica used for income. Another potential difference would have been if David Koch's tax and financial advisors sold any other assets (stock/bonds/etc.) during this time period that his brother Charles Koch didn't sell. 

Evaluating these numbers and comparing them to what I previously have estimated is a useful and entertaining exercise (I am curious how close I am). My first dividend estimate back in 2015 suggested that David and Charles Koch were each earned around $200 million per year. My estimates have varied over time given new information that was presented. My last estimate for Koch Industries dividends was that Charles and David Koch each earned around $800 million in dividends however I believe this figure is grossly overstated. The biggest reason for this is the assumed rate of return that Koch Industries earns on their revenues. Steve Feilmeier in this YouTube video stated when Koch Industries evaluated $40 billion of investments over many years the average return was 12-13%. Daniel Fisher for Forbes back in 2012 estimated that Koch Industries earned a 10% pre-tax profit margin. However, this figure seems to be high for a number of reasons. The first is if you look back at publicly available data Koch Industries has historically had a low profit margin. Koch Industries is a large conglomerate of various different companies and no longer just in the oil and gas industry. 

In 1961 Koch Industries generated $3.5 million in profit. Although an exact figure for the revenue of 1961 can't be found the 1960 revenue for Koch Industries was $70 million. This would say the profit margin in the early 1960's for Koch Industries was roughly 5%.  

Back in July 1974 when Forbes did a profile of Charles Koch and Koch Industries the reporter had had Charles Koch if their profits were $100 million and Charles responded to the reporter as a typical engineer would that "You're not off by a whole order of magnitude". According to the Forbes article, in 1974 Koch Industries had revenue of roughly $2 billion which would put their profit margin at 5%.   

In the 1980's Koch Industries continued to have a low profit margin. Beginning in 1980 Koch Industries. In 1982 Koch reported $565 million of pre-tax earnings on roughly $17 billion of sales. The next year the company reported $467 million of pre-tax earnings on $15.6 billion of revenue. In 1988 the company reported a profit of $400 million on $16 billion of revenue. This would say even though the 1980's was a decade of greed Koch Industries on average only had a profit margin of roughly 3%. What is even more interesting is how Koch Industries nearly ended the decade with less profit then at the beginning of the decade. 

In 1994 the Dallas Morning News had estimated that Koch Industries made $308 million in profit on $23.7 billion of revenue. This would say Koch Industries had a profit margin of 1%. In the mid to late 1990's Koch Industries got into trouble investing in projects that ultimately didn't turn out well. Koch in the 1990's was spending plenty of money on Purina Mills and ultimately lost $120 million on it. Charles Koch in this video explains the failures during that time

Using a lower profit margin for Koch Industries of around 5% changes the numbers for how much Koch Industries pays out in dividends. In 2015 (I took the midpoint for the ProPublica estimate) Forbes estimates Koch Industries had $115 billion of revenue. If you take $115 billion revenue x 5% profit margin would say the Koch generates $5.75 billion in profit. Assuming Koch Industries pays 20% for corporate income taxes would say Koch has $4.6 billion of after tax cash available. Koch historically reinvests 90% of their profits back into the company which would say that the company reinvests $4.1 billion back into the company leaving $460 million left over to distribute to shareholders. Since Charles Koch owns 42% of the company it would say that roughly $193 million of Koch Industries dividends would be paid out. David Koch's family would also receive the same amount $193 million) given similar ownership interest. These numbers are also similar to what was reported on the tax return for both Charles and David Koch. Also there may be other income for Charles and David Koch (dividends from stocks/bonds/other investments) that would push up their income. 

The bottom line is Koch Industries is large company with a possibly low profit margin. However, the fact that the company has reinvested 90% of their earnings back into the company has help the company growth dramatically. According to Sons of Wichita the company in 1967 paid out $300,000 in dividends to shareholders. Using the updated figures I would estimate that Koch Industries Inc. paid out $500 million in dividends (based on $125 billion of revenue). This would say over a 56 year period Koch Industries has increased their dividends by 14% per year. Actually this figure seems reasonable given the company has historically grown 12% per year. The story of Koch Industries and it's magnificent growth given their unusual policy of plowing 90% of their earnings back into the company every year. 

Is Charles Koch a Workaholic?

Since I have been covering Charles Koch, Koch Industries, and Koch family for many years one of the things I have wondered is whether or not Charles Koch is a workaholic. In going through a workaholic assessment trying to answer the questions as Charles Koch wood he would get a score of around 68 on the WART which is a workaholic assessment test. A score between 67-100 suggests that someone is considered a highly workaholic. The caveat of course is even though I have followed Charles Koch for over a decade I still can't answer the questions exactly as Charles Koch would. 

According to Sons of Wichita, former Koch Industries President Sterling Varner would remark on Charles "He almost killed us, because this was his whole soul". Sterling pointed out that Charles worked long hours, weekends, holidays in his early years. "Charles worked six, sometimes seven days a week and expect the same of his inner circle... He grew so accustomed to feeling middle of the night calls from employees operating in different time zones" It was not unusual for Charles to call meetings that ran into Saturday night. In 1968 on Sunday night at Koch Industries headquarters in Wichita Charles had a meeting that started at 4:00 PM and lasted 8 hours until midnight on a Sunday night. As I wrote in my analysis of Koch Industries ABKO deal with Chrysler the Koch Industries board back in November 1982 approved the deal on Saturday. Finally when Charles got married to Liz he initially stopped working on weekends which delighted some Koch Industries employees. The company legend is in 1972 when Charles proposed to Liz it was over the phone while paging through his calendar to find an open date. According to Kochland it was not uncommon for Charles to call employees in on a Sunday afternoon and ask them to come up to the Wichita office for a meeting. Also remember this was before the days of cell phones, e-mail, and instant communication. People would literally have to go into the office to get work done. Behavior like that these days would have people questioning the "work/life balance" of their company. From this 1982 Fortune article it states that Charles at the time was working 10 hours a day. From a 1997 Fortune/CNNMoney article reports that Charles would work 12 hour days at the office, then spent more hours working at home. Charles expected executives at Koch Industries to work Saturday morning and sometimes called meetings that ran into Saturday night. This type behavior is a classic of a workaholic. Some habits never change however. 

In more recent times Charles is still putting in a number of hours to his work. Charles wrote in "Good Profit" at the age of 79 was still putting in 9 hour days, leaving to go home early to work out, have dinner, and then put more time into working. Jane Mayer in 2018 reported that Charles arrived at Koch Industries headquarters earlier than many other employees (remember he has been working for Koch Industries since 1961-over 60 years with one company!). The same article mentions a business associate mentions Charles is a workaholic and it looks like he's going to be still working into his 90's. In this November 2020 interview with Axios Charles admits to waking up around 5:45 A.M. and he gets to the office by 7 A.M. to get organized, do administrative work, and catch up from what came in overnight. Charles mentioned in this interview he would call employees and leave voicemails and messages night and day and drive everyone nuts. In the same interview he also mentions working on Saturday and Sunday is more fun than anything else. The former CFO of Koch Industries Steve Feilmeier would say that it's okay to say that you don't know the answer to a question, however if Charles is asking a question you better have the answer back in a couple of hours

Charles in this video reflects on when he first had children he wondered what father would he be given he was working all the time. When his children were young Charles was in charge of taking care of them on Saturdays. He would bring them to the office on Saturdays (as Charles says "when we use to work on Saturday mornings") and the kids would bring things into the office to play with while their father was working. After Charles was done he would treat the kids to lunch at Wendy's. To me that is an interesting picture to see Charles who at the time probably had a net worth of a couple hundred million dollars, earning millions of dollars (the dividend payment from Koch Industries for Charles back in 1980 were $3.7 million per year in addition to his salary) working on a Saturday morning in the 1980's, taking his children to Wendy's for lunch. 

Speaking of lunch up until late 1993 Koch Industries limited employees lunch to 30 minutes (however extended it to 45 minutes). The interesting thing though is some groups within Koch were competitive saying they could get lunch within 20 minutes. At a large company it would seem as if it would take a while just to order your lunch, then sit down and eat it would take at least 20 minutes. 

Not only does Charles Koch work hard he also plays hard too and would do things for fun that most people would consider work. Dan Schulman in his book "Sons of Wichita" mentioned that "To say Charles was a workaholic underplayed the depth of his addiction". Charles would read at least 2 hours a day after putting in so many hours at the office. The learning would not stop with just reading after work though. He would want to use every minute to his advantage. Given his car commute was only 10-15 minutes long he would listen to books on tape and estimates he listen to over a dozen books per year. . Charles remarks "there is so much to learn, so much you need to know that there is not enough time". He enjoys reading so much you can see the books in his bathroom here , the books in his Koch Industries office here, and his home office here. On Sunday afternoons for fun he would have his briefcase in his lap with work papers spread out in the living room while watching NFL games.  

Also in recent years he has a disciplined diet as well and does 90 minute workouts (1/3 Pilates, 1/3 aerobics, and 1/3 weight lifting). From a 1974 Forbes article Charles mentions he would run 2-3 miles several times a week and his objective "is to get the most exercise in the shortest time possible". Upon reflection in 2012 Charles commented he would run 30 miles a week which he claims was stupid since he was pushing himself too hard and his knees gave out. When he was coaching his daughter Elizabeth on running Charles would overdo it by waking up at 5 A.M. on family vacations and practice even in blizzard on Christmas Eve. When Charles was at MIT he played flag football with such intensity and "It was like he was playing the Super Bowl" according to someone who referred the game. Former executive president of Koch Industries Richard Fink mentioned he never had seen someone who is so intense in living every minute that "the one thing you don't want to do is waste Charles's time". He points out in this interview with Ryan Holiday that he tells his employees "bring me into a meeting if you think I can help. If I can't help don't bring me to the meeting". During a three week tour of the Orient in 1983 Charles had planned for every minute of the trip and while others were relaxing at the hotel pool Charles went on an sightseeing excursion and then talked about the excursion throughout dinner. In 1992, he took the family to the Summer Olympics in Spain and Charles wanted to see 4-5 events a day which drove his children crazy. His children swore this would be the last family they would take together. 

Charles over the years has been known for perfectionist tendencies which can be evidence of workaholic tendencies. In 2006 he was rewriting Market Based Management for the 20th time and within the twenty one hour flight from Wichita to China and was so excited with new ideas that he didn't sleep on the whole trip and continued to work. He arrived to China at 1:30 A.M. local time and only slept a few hours as he had to give a four and half hour presentation. Charles was dizzy from not getting enough sleep, fumbling through the slides, and it ended up not being a great presentation. His wife Liz mentions he is a perfectionist about everything. Liz misused a word on market-based management (which Charles created) and she said "he practically went hysterical on me". 

My own views is that Charles Koch has been a work acholic since he started working for Koch Industries in the early 1960's. There is a difference between working hard and wanting to do a good job and working so hard that leaves very little time for relationship, recreation, and rest. During the 1980's it was probably more acceptable to ask people to come in on Saturday or a weekend for that matter to work but if a boss called an employee to come in on a Sunday to the office these days that would be frowned upon given how more people care more about a work life balance. Spending every waking moment consuming information and knowledge is taxing and it is perfectly healthy to just relax and veg out. The brain is a muscle and the analogy would be someone working out their brain 15 hours a day which isn't healthy. 

Charles would say that he enjoys what he does and wants to create value for society which is a good thing, however family members and friends can be hurt in this process. He likes to say "I'm going to ride my bicycle until I fall off"...I mean I don't want to play golf every day, and I can't read all the time". In this WSJ article from 2013 when Charles is asked why he likes working he replies "I like to stay alive, that's one thing". He has said "neither accumulating material goods nor amassing a big pile of money has ever been an incentive for me to work". He is someone who gets excited over ideas and concepts rather than money. A former Koch Industries management consultant mentioned "he's most excited when they've solved some problem". Charles likes the integration of different things for example when Koch bought a shipping terminal and started producing product and which allowed Koch Industries to have an international distribution network that they didn't have before are puzzles he likes to solve. Although Charles's family and friends may have suffered from his workaholic tendencies society is actually much better off because of him being a workaholic. 

Koch Industries Revenue 1984-2022 Historical Analysis

 

For many years I have followed Koch Industries and covered the growth in net worth of both Charles and David Koch here, the Koch Industries dividend policy here, and mostly the dividend policy here. For years I know that Forbes kept track of private companies and their revenues however it is not easy to access and download that information for each company going back to 1984. Luckily I was able to access a local university library that has a subscription to news bank which contains historical articles. Oftentimes years ago Forbes would publish the largest companies in the country and other outlets would pick up the story like UPI, the Detroit Free Press, and The Wichita Eagle.

Koch Industries has a policy to try to reinvest 90% of these companies earnings back into the company period since Koch is privately held it can reinvest that much back into the company. Back in 1984 Koch Industries only had revenue of $14 billion and recently in 2022 the revenue grew to roughly $125 billion. This would say that over a 39 year period the revenue has increased at a compounded rate of 6% per year. However, if you break out the different time periods you see that revenue growth has been stronger recently than in the past. For example, if you analyze the growth rate from 1984 to 1994 you would get roughly a 5.4% compounded growth per year. From 1994 to 2004 Koch Industries increased revenue by a compounded amount of 7.7% per year. However from 2004 to 2014 Koch Industries was able to increase the revenue growth by a compounded 9.56% per year. One of the largest growth engines for Koch Industries was their acquisition of Georgia Pacific which I discussed here. The revenue before the acquisition for Koch was $60 billion and one year later in 2006 jumped to $90 billion (Charles Koch had estimated revenue would be $80 billion after the merger). The addition of Georgia Pacific would increase Koch Industries revenues by 50%. 

Today Koch Industries has evolved from when Charles Koch began working at the firm in the 1960s and the company primarily was in refining and the crude oil gathering business. Today Koch Industries makes equity investments, glass, toilet paper, paper towels, cloud software, refining, fertilizer, transportation, shipping, transportation, electronic connectors, and the list goes on and on. 

Even though Charles Koch is in his twilight years and currently is in his mid 80s he's still pushing hard to try to continue to keep things moving at Koch Industries. It is clear that Charles Koch and his brother David Koch worked very hard to make the company grow over many decades. In the late 1990s there was an article describing how Charles would work 12 hours a day and then go home to work even more, and also he would work on the weekends. When Charles was younger in his career he would have executives come in Saturday mornings to the office (no working from home back then) and sometimes Charles would call a meeting that would run into Saturday evening! According to Kochland Charles would sometimes on Sunday afternoon call employees and ask them to come into the office for a meeting. You can't grow a company by working Monday to Friday 9:00 AM to 5:00 PM. The hard work has resulted in Koch Industries continually growing as they reinvest 90% of their earnings back into the company and the historical growth rate of the revenue has proven this out. 

Felicia Racine vs. Koch Industries and Waiting On Mary Julia Koch

A while back I wrote a post on the body guard for the Koch family (Felicia Racine). At the time she made all sorts of allegations regarding the Koch family. This ultimately led to a lawsuit between Felicia and the Koch family. The original complaint from Felicia and her attorneys can be found here. The counterclaim by Julia Koch and her attorneys can be found here. For example, Felicia claimed that Julia Koch (wife of David Koch did not want to give her husband a feeding tube and locked him months in a room before his death. Felicia made all sorts of other claims that she later backtracked from and made a statement later that the statements were inaccurate or false. 

Felicia was hired as an Executive Protection Specialist for the Koch family via Matador Security Company NY LLC (the company has only been around since 2016). Matador Security had a job description that they posted online and the detailed requirements can be found here. As an executive protection specialist Felicia earned $155,000 per year of generally three weeks on and two weeks off. Felicia and her attorney claim that she on call 24/7 during the time that she worked. When was Felicia was brought on she claims she was told by another female executive protection specialist that Julia Koch goes out to restaurants to meet Charles Manger however the relationship can't be discussed. 

The most interesting part of the lawsuit (the tracking of the lawsuit can be found here) is the life of Mary Julia Koch. Mary Julia Koch is the only daughter of David and Julia Koch. In her younger life Mary Julia was a ballet dancer for the School of American Ballet and was involved with the ballet for almost seven years. Mary Julia went to the Spence School from roughly kindergarten through senior year of high school. She recently graduated from Harvard in 2023 as a history major and was the editor in chief of the Harvard Independent (Harvard student newspaper) for a number of years. In addition this she graduated with a 4.0 GPA and was also named a John Harvard Scholar (top 5% of her class). Currently she works as a journalist for The New York Sun as a freelance National Correspondent. Actually this is somewhat interesting that she is a journalist as her cousin Elizabeth Koch is a publisher, her uncle Charles Koch has published four books, and her great grandfather Harry Koch founded the Quanah Tribune-Chief. 

The lawsuit outlines texts that occurred between Mary Koch, Julia Koch, and Felicia. On June 1, 2019 Julia Koch was concerned about her daughter explaining to Felicia that "Mary is depressed" and a few weeks later "Can you check on Mary Julia she is lonely". The timeline of this makes sense given that her father (David Koch) passed away in August 23, 2019. David was not in good shape for some time and stepped down from Koch Industries back in June 2018. In the fall of 2019, Felicia alleged that while Mary Julia attended Harvard Felicia was in charge of menial-non security tasks such as ordering and purchasing custom smoothies for Mary, doing laundry, purchase tampons, and printing out work assignments and homework. The legal team for Julia and Mary Koch deny this claim however there may be some truth having to perform menial tasks as actual texts show Felicia would be asked to purchase a sun shirt for Mary Julia (this request was from Julia Koch) and texts would show Mary Julia requesting a smoothie-her actual text was "Hi could you please have a smoothie downstairs in 20 mins". It seems as if the Koch family was using the security specialists as someone who would also run errands and menial tasks when their main job should be to protect the family. You would think for the kind of money the Koch family has they could separately pay someone as a personal assistant and not rely on security for this. 

In October 2019 things seemed to get worse at Mary Julia was at China King (it has since closed) and was with some friends and it is alleged that one of her friends was black out drunk and the issue was Mary Julia and all her friends were under aged and Mary Julia's friend ended up going to the hospital as a result. Roughly a week later after this incident Mary Julia went to Austin and Julia Koch was worried her daughter was using a fake ID and Mary Julia believed a fake ID in Texas was a felony (apparently it can range from a Class A misdemeanor all the way to a felony). While Mary Julia was in Texas her mother requested Felicia take Mary out for "nice shopping in Highland Park Village" and that Mary "needs to see the nice side of Dallas and nap tomorrow on the plane". Highland Park Village is one of the most upscale cities in the entire country. 

In November 2019 Mary wanted to rent a party bus to take her and her friends from Cambridge to New Haven Connecticut for the Harvard vs. Yale college football game that was going to take place the next weekend. Mary Julia mentioned "We want to drink on the bus so do you think we should be discreet? None of us are 21 but we can show a fake ID if need to prove our age in order to drink". 

By mid December 2019 (the Harvard calendar from 2019 shows finals were almost over) Mary Julia was out until almost 3 A.M. in the morning partying and drinking and at around 3 A.M. Felicia texted Julia saying that she was home for the night. About a week later Mary Julia was out until 1:30 A.M. partying and her mother requested she come home. However Mary Julia rebuffed her mother and then finally at 2:45 A.M. Mary Julia said she was leaving in an Uber. 

In January 2020 Mary Julia wanted to go to a nightclub called Camelot (based on West Palm Beach Florida) however her mother didn't want her go go and then Julia Koch asked Felicia if Mary Julia had mentioned anything about going to a nightclub. By February 2020 Mary was again partying and drinking into the late hours and one morning asked Felicia to make her coffee (without foam). 

It is hard to know if Mary Julia was partying and going out quite a bit because of just being a college age student (binge drinking for sure) or if this was fueled by her father just recently have passed. Death can do strange things to people were they act out and become a person they never were before. 

Perhaps partying is somewhat of an inherited trait within the Koch family. David Koch while at MIT was in the Beta Theta Pi and lived in the fraternity house.  According to Sons of Wichita, a friend of David Koch's at MIT would say "Dave was always up for a party" and the fraternity would have formal dinners with their dates and then party into the night (however it was mild by modern standards). David would reflect on his days at MIT for "Great friends, wild parties, athletic triumphs, academic successes, and actually learning something useful. The partying continued for David Koch later in life as well. His brother Charles Koch on the other hand was usually the first person to get to the party and the first one to leave however David was more like his mother Mary Koch who would want to stay the whole night. David for New Year's Eve 1993 invited 800 people at his Aspen home (it was voted as one of the best parties in the country to crash). David would also throw major parties at his 15,000 square foot seven bedroom, nine-bathroom Southampton beach home. Friends would say that David would party harder than anyone they knew. David's parties went so late that he ended up serving guests both dinner and breakfast and offering guests six different types of champagne. These parties would require about 40 security guards to keep the riff raft out. Some of these parties had scantily clad women as can be seen here, David is here with a dancer, and here is David making out with his wife Julia. The 7 bedroom, 8000 square foot Aspen, Colorado home that was known for the legendary parties was sold in July 2020 for $23 million. 

There are many allegations made against Julia Koch and Mary Julia Koch. It is somewhat hard to sort out given Felicia Racine by her own admission is not a credible person. However, court documents show both sides of the story in terms of what happened. Felicia for example claims that Julia Koch texted Felicia not to allow Mary Julia's boyfriend (Max) to spent the night in Mary's hotel room (at the Charles Hotel (some irony since her uncle is named Charles too) with Max spending the night with Mary in Mary's bed and Felicia claims she was forced to stay in the same suite. Also there was a allegation that David Jr. didn't have great grades in high school so Julia had to donate $1 million to Duke for a new scoreboard for the baseball team and have David Jr. appointed to a newly created team manager to get him into Duke as a student. David Jr. graduated from Duke University in 2021 with a  degree in political science and government and currently works for Madison Square Garden as a a membership experience executive. I highly doubt these claims of giving Duke money to get David Jr. in are true for multiple reasons. The first is a couple of years ago there was a major investigation into parents doing this back in 2019 and known as the Varsity Blues Scandal. If David Koch attended Duke from 2017 to 2021 it seems odd that this wouldn't be a prime target (if the alleged allegations really occurred. Also if this really did occur I am sure someone would talk (as people can be induced to talk to the media). 

There is a contrast from the children of David Koch and Charles Koch. Charles Koch has two children Chase Koch and Elizabeth Koch. Chase works as an executive at Koch Industries and also is on the board of directors. Elizabeth Koch runs different wellness non profit organizations. Both children appear to be productive people. However, the difference is how Charles Koch raised his children. Although Charles was a billionaire in the mid 1990's he would still eat dinner every night with his family and without the help of any servants. Also during dinner every night Charles Koch would ask his children how an example of how they exemplified the school's principles of love, faith, honor, or courage. Chase Koch (son of Charles Koch) during his teenage years old was sent to a feedlot in Syracuse, Kansas and Chase would work 80 hours a week (7 days a week) doing manual labor. Charles and David Koch themselves did manual labor growing up. Charles started working at the age of 6 on the family and David Koch told Avenue Magazine in 2014 he would working from 7:30 A.M. until 5:30 P.M. and then one summer David worked 10 hours a day, seven days a week, doing manual labor jobs and the temperature got to 115 degrees. His first weeks earnings were used to buy a plane ticket back home too. 

Compare all this to David Koch who moved out of his 1040 Fifth Avenue apartment even though it was 5,300 square feet with 5 bedrooms. David commented that it wasn't large enough for himself, his family, Julia's mother, and 3 nannies. The family moved in 2004 moved into a 9,000 square foot, 18 room duplex in order to accommodate the growing family. Also David when he worked at Koch Industries would get into his New York office around 9 A.M. and end up getting home by 7 P.M. When he got home the family had a private chef prepare dinner for the family. 

My own view following the Koch family for over a decade is that David's children feel a sense of entitlement. This may stem from the fact that although David wanted the best for his children in terms of sending them to the best schools and giving them the best education. However, given David had over the top parties, hired help from the time the children were very young (3 nannies seems like quite a bit when you have three children), and a private chef may perhaps have spoiled the children when they were younger. It is hard to know what would have happened if David's children ended up living with Uncle Charles Koch. Charles would have his children listen to economics tapes on Sunday evening after dinner. 

While many of the allegations made by Felicia Racine are exaggerated or just bold face lies there is some truth via the actual text messages sent between Felicia, Mary Julia Koch, and Julia Koch. The text messages show a daughter who is a partying college student (who ended up with a 4.0 GPA) focused on a fake ID and a worried mother who is concern about her daughter being a partier, getting in trouble, and also worried about her daughter's mental health. Again it is hard to know if Mary Julia's behavior occurred as a result of her father passing or if she had that same lifestyle beforehand. The lifestyle that Mary Julia Koch is accustomed to is a life of luxury, people waiting on her, and having access to nearly anything she would like. In this post I estimated that Koch Industries pays out around $800 million per year in dividends to Julia Koch and her family. Having said this Mary Julia is a fantastic writer and her writing is clear, lucid, and entertaining and her articles from the Harvard Independent can be found here. It is interesting to see how she and her brothers David Jr, and John Mark develop over the next couple of decades. The big question is will any of David's children join Koch Industries. Julia Koch is already on the board of directors of Koch Industries so it would be interesting if any of the children get added to this over time. 

Response to New York Times Article on Elizabeth R Koch, and Mental Health Within Koch Family

Recently the New York Times had an article about Elizabeth Koch. I could tell that there was an article regarding Elizabeth Koch because I saw traffic for my blog exponentially increase once the article was posted. It has been almost eight years since I wrote a post about Elizabeth Koch. At the time I wrote a post there was very little written about or given she rarely spoke to the media or granted interviews. Overtime there have been a few articles that have been written about her however it has mostly covered her career within the publishing industry. The author of the New York Times article you can tell initially had bias against Elizabeth however the author's view appeared to have changed their own "perception box" after speaking with Elizabeth for two hours. Even the now President of Unlikely Collaborators was a little skeptical of Elizabeth Koch. Perception can sometimes appear to be reality. 

The main purpose of the article was to discuss the non profit work Elizabeth is doing and how she is trying to shift and change the mindset of how people think. One of the nonprofits Elizabeth help start is Unlikely Collaborators. She was the co-founder of Unlikely Collaborators in 2019 and originated after Elizabeth herself had dealt with and obsessive compulsive disorder, a eating disorder, and actually spend time in a mental institution. The other nonprofit is Tiny Blue Dot Foundation. Both organizations have a similar purpose in terms of help people self evaluate themselves and their own biases to help them increase their own self awareness and raise their own emotional intelligence (probably not a bad thing especially since it seems like we have a polarized country and polarizing times). Elizabeth in this video describes the Perception Box as this "invisible mental box, that every human being alive lives inside that distorts their perceptions". On the Unlikely Collaborators website writes "Elizabeth R. Koch doesn't know. But she is perpetually trying to figure it out". 

In terms of the how the organizations are funded if you look at Tiny Blue Dot Foundation and their Form 990 (which they have to file with the IRS) you can see in 2018 the KE 2009 Family Trust contributed about $12.6 million to the Tiny Blue Dot Foundation and the KE 2009 Gift Trust contributed about $14.3 million to the Tiny Blue Dot Foundation. In 2019 there were contributions made to Tiny Blue Dot Foundation from two Koch trusts. $9 million dollars was donated from the KE 2009 Family Trust and $1 million was contributed from the 2009 KE Gift Trust. Generally the year represents the year the trust was created (my educated guess is KE is Elizabeth's initials backwards as her brother Chase utilizes a trust with the initials KC that I wrote about in this post). At this time the IRS hasn't released the 2020 tax return (due to the backlog of tax returns) however Tiny Blue Dot Foundations shows $75 million of contributions made. The Tiny Blue Dot Foundation shows around $96 million of assets in the summary of the 2021 summary of their 2021 Form 990 tax return. The main purpose of the contributions are to be used for research in improving the well-being, physical, and mental health of people. There is no question that these monies came from Charles and Liz Koch however I would argue I would rather these monies spent on something possibly useful for society than it being used to buy a Ferrari (David Koch was once quoted as saying I like nice play things and I drive a Ferrari...but I don't have fifteen").  

Tiny Blue Foundation will fund projects up for 3 years and a total funding amount of $900,000. The actual process to receive funding is not easy as the foundation requires studies that has empirical, statistical, and sound neuroscience related to the perception box. The foundation tries to find 10 projects based off this criteria. So if we assume that each project is granted $900,000 then the foundation roughly spends $9 million per year on research. Some of the grants have gone to Brown University, UCLA, Massachusetts General Hospital. Tiny Blue Dot has even given money to Multidisciplinary Association for Psychedlic Studies to look at research for using drugs like ecstasy and Molly. Elizabeth herself has admitted to using psychedelics even though they are currently illegal. She mentions when she took psychedelics she felt as if there were Looney Tunes coming out of her body. In addition to this, she has also experimented with ayahuasca this is a hallucinogen tea and also at one point in her life was at a nudist colony (I am sure her father Charles Koch was happy about this). When Elizabeth wrote about a relationship back in 2007 and briefly loses her boyfriend for a couple of hours she comments "I cannot go back to panic attacks and meltdowns and doctors and pharmaceuticals and terrifying my parents and staring down at dark well of nothing you do ever will be good enough you privileged waste of flesh". At that time she described herself as a "pinwheel of anxiety, a black cough of misery, critical and disgruntled to the extreme". Elizabeth admitted to taking drugs to help her overcome it. It would make sense that someone who has had struggles with their own mental health would want to try to help others who may be struggling as well. 

When Elizabeth came home with her boyfriend in April 2006 she described the dinner with her parents as a PowerPoint presentation of her accomplishments add talked so much and talked so fast she didn't even allow her father to ask her questions like "Are you sure you're busy enough?". In 2009 when her father Charles Koch was in the hospital getting shoulder surgery and Elizabeth was at his bed in discussing neuroplasticity Charles asked Elizabeth "Are you sure you're busy enough?

Elizabeth is similar in some ways to her father. She mentions that on a plane trip to Shanghai she worked during the 14 hour flight which is similar to when her father Charles Koch was working on his book Market Based Management in 2006 and went on a 21 hour flight to China and worked on the book the whole trip and then admits in this video the next day he gave an incoherent presentation the next day (due to the lack of sleep). When Elizabeth was with her boyfriend in Kyoto at a train station and observes how the urban planning from her point of view didn't make any sense and remarked "What kind of fucking idiot of an urban planner would think that cramming a hotel, a fourteen-story mall, and the country's second largest train station under one roof would be a good idea?. This is a perfect example of the clusterfuck of misery that results from central-planning". Her father Charles would be proud of her. 

It appears though that Elizabeth did not get along with her parents when she was younger. Elizabeth mentions in her post that she would prefer moth eaten sweaters and flea market jeans and rarely wore makeup or combed her hair and the thought of shopping made her sick. Her mother disapproved of her poor boring it and felt she could only get approval from her mother by purchasing $200 on knee socks just to make her mother happy.  Elizabeth mentions in the post that she wrote in 2007 "I do not toss money around like garden fertilizer, especially not in places where anyone is likely to see me. I want people to like me, and as a small child growing up in a small town I learned that having money makes people sort of hate you on the spot, so for most of my life I have invested rates amounts of creative energy into presenting they don't have any". Over time this has changed it appears as everyone of the Koch family spent Christmas together in Las Vegas at a Steve Wynn resort.

Charles Koch in his book "Believe in People" does mention a little bit about his relationship with Elizabeth when she was younger. He mentions a time when Elizabeth was running track as a pre teenager and he noticed that Elizabeth was not giving it her all. Charles would then provide additional training to Elizabeth and would have a tendency to have her run at 5:00 AM on family vacations and also had her run during a blizzard on Christmas Eve. Elizabeth in the article confirms this rigorous schedule for track and mentions that even when they were on vacation Charles was getting Elizabeth up at 5:00 AM to run. She adds that in the winter when it would be snowing in Wichita, Kansas Charles would drive beside her in a car and be usually playing economics tapes while she was running (talk about being hardcore). When Charles noticed that Elizabeth wasn't giving her all he pushed her to find something that she was passionate about other then track in to give 100%. According to Believe in People (written by her father), Elizabeth first tried to explains she was a bohemian who didn't enjoy athletic competition but was interested in writing and painting, so she then pushed herself at writing and painting and won national painting and writing awards and also became a top student in her class that allowed her to attend Princeton University. Charles writes that although it took her many years (she is now in her late 40's) to figure out what fulfilled her he believes that Elizabeth has found her North Star. Charles mentions in an e-mail that he could not be more proud of his daughter Elizabeth and mentions that he wanted his children to discover their own gifts and apply themselves enter with to their maximum potential.

My own view is that some of Elizabeth's mental illness is somewhat of a inherited genetic trait. If you look at her father Charles Koch he was a workaholic (a type of addiction and form of mental illness when you think about it) when working at Koch Industries he would routinely work 12 hour days and work, weekends, and on vacations. Former Koch Industries President Sterling Varner said of Charles "he almost killed us, because this was his whole soul". In Sons of Wichita Daniel Shulman writes "Charles worked six , sometimes seven days a week and expected the same of his inner circle...he grew so accustomed to fielding middle of the night calls from employees operating in different time zones". It was not unusual for Charles to call meetings that ran into Saturday night. In 1968, on a Sunday night at Koch Industries Charles had a meeting that began at 4:00 PM and lasted until Sunday at midnight. According to Kochland it was not uncommon for Charles to call employees in on Sunday afternoon and ask them to come to the Koch Industries office for a meeting (in a world without cell phones/e-mail either). All this evidence from multiple difference sources points to someone who is a classic workaholic. Charles Koch is quite a reader however I am unsure if he ever read "Chained to the Desk". Also related to mental health in 1973 when Koch Industries decided to enter the super tanker business since there was strong demand for US oil imports and Charles Koch decided to place a large (one directional bet) on building a supertanker of his own and it is estimated lost $50 million on the bad bet. At the time Charles had a near mental breakdown as he kept flying back and forth to London to renegotiate the debt. Charles also in "Believe in People" writes about how he personally dealt with depression when he and his brother David Koch faced a lawsuit from his own brothers and other shareholders of Koch Industries. The lawsuit started in 1980 and did not end until 2021. Charles mentions he became completely absorbed with preparing for the trial which led him and other executives at the company to make bad business decisions. By the time the trial was over Charles mentions he was in a deep depression and could barely function even though he believed Koch Industries had done nothing wrong. He mentions that the deep depression lasted for 6 months after the trial was over. However Charles was able to recover from the depression which he says was not easy bye working hard and getting back into the company daily exercise and a supportive community from family and friends.

Even Uncle Bill Koch himself spent several years on the couch and at one point went multiple times a week (this sounds similar to Elizabeth) and talks about how unhappy he was in this 1994 Vanity Fair article and how he had a "self-destructive character" which Bill believed was from low self esteem (similar to Elizabeth). A main cause of the psychological issues Bill was having was problems working within the family business at Koch Industries. Although, he had some initial success as he joined the business in 1974 as a salesperson and brokered a complex deal that made Koch Industries $1 million, Bill would drive other people crazy with endless questions, memos, and as brother David would explain "he'd write a report that would be one-half why he loved a business, one-half why we shouldn't be in the business" (this is similar to Elizabeth and her non completed novel of 1,400 pages and 30 plot lines). After Bill was forced out at Koch Industries from 1981 to 1983 according to brother David Koch Bill Koch was in a funk and was "almost lifeless" and he couldn't get out of bed in the morning, he couldn't sleep (he even resorted to taking a sleeping pill), he would just stay at home and watch television and turned into a vegetable. Charles Koch many years ago had his own definition of mental illness is "someone who is willing and capable of dealing with the world". For even Charles Koch I don't believe he would today agree with his own statement that he made years ago. My overall point here is that other members of the Koch family (Uncle Bill) have exhibited similar traits to Elizabeth in terms of having to deal with mental health for a period of time and Bill Koch himself had an obsessive nature as well (again similar to brother Charles and Elizabeth Koch). 

The Twitter universe of course blew up with comments regarding the quote from Elizabeth Koch saying how she did not want to be hated. There are also accusations that Elizabeth has given to Republican candidates however there is some confusion on this aspect as her mother shares a similar name however has a different middle name. There is a Elizabeth Koch in Cleveland, Ohio however she is both married and retired and the contributions were made over a decade ago which would not be the same Elizabeth Koch as the one that lives in California and to my knowledge has only been recently married. However facts don't seem to get and the way of sensationalized reporting and Jacob Silverman on Twitter has made this claim however it is unsubstantiated and does not pass the funny looks test. It is amazing how people make accusations and claims without any unsubstantiated facts that are then spread to other people without looking at the real evidence. This incorrect statement was then run in an article by The Nation article by author Jeet Heer. You would think this would just be basic journalism to check out the facts before reporting them. 

I think the reporter from the New York Times was a little bit surprised when they met Elizabeth Koch and realized how "hippie dippie woo woo"-the title Elizabeth gives herself even by California standards. The New York Times reporter was offered a blanket by Elizabeth and the reporter said no (the reporter later regrets saying no to the blanket). Although the New York Times reporter did find Elizabeth easygoing and upbeat and even asked Elizabeth how much money she inherited in which Elizabeth had laughed at that comment. As someone who has actually watched videos of Elizabeth Koch and read her actual work she comes off as more of a therapist than someone who is actually an incredibly clear writer who has a history of working through emotional, family, and mental issues. This psychiatrist after reading the New York Times article regarding Elizabeth's approach to mental health said "Let's see". 

Although I am no psychologist or psychiatrist I think this workaholism trait that Elizabeth's father (Charles) had may be associated with an inherited trait (as her Uncle Bill also exhibited these traits over his life) for a lack of balance which appears to be what Elizabeth is trying to focus on through Tiny Dot Foundation and Unlikely Collaborators to get people to reduce their anxiety increase their well-being and funding innovative strategies for mental health. As I wrote in this post John Rockefeller Jr. had mental breakdowns (starting at age 13) before he joined Standard Oil and only worked for the company for ten years.  Also I don't think it is as unreasonable as people believe if they grew up in the Koch household what the changes of those same individuals having the same behavior. When Elizabeth was in sixth grade with other girls on the playground they made the comment she was a "rich bitch". Elizabeth strikes me as one of the artist, alternative kids in school, who is highly intelligent but is also on their own wavelength. What is interesting is how people judge someone based off her comment that she wanted people to like her (this viewpoint hasn't changed in almost sixteen years). Hilary Plum (a college professor) wrote 27 reasons why she wouldn't write about Elizabeth Koch (I don't find the reasons either compelling or logical-most of the arguments are on the because she is a Koch...therefore premise). Elizabeth has described herself as apolitical however it seems to be guilt by association since her last name is Koch. It would be as if people want her to dissociate herself from her own family, give up everything she has, and deny herself nearly everything because her last name is Koch. I have watched and read many things she has published and would not remotely get the vibe she is to the right of anything.  Most people who aware of relationships understand that children don't have the exact same political views as their parents.  

Elizabeth Koch has been consistent in her viewpoints. Back in March 2007 she wrote how she wanted for people to like her growing up as she was a small child growing up in Wichita, Kansas. didn't want to be hated and her per interview with the New York Times interview almost exactly sixteen years later makes the comment "I had so much fear people would hate me" and dedicated her life "to not be hated". Time will tell of the impact her organizations are making on society but at least she is moving in the right direction compared to where she use to be. 

Georgia Pacific Dividends and Update to Koch Industries Shareholders Dividend

On my blog over the years I have written many articles regarding the dividend policy of Koch Industries (the only blog on the internet to cover this!). I started writing about the Koch Industries dividends here, wrote about their dividend policy compared to other S&P 500 companies here, and even wrote here about how former Koch shareholders Bill and Frederick Koch walked away from hundreds of millions of dollars in dividends by selling their shares back in the 1980's. In addition to this I have covered Georgia Pacific in depth and even did a case study on Georgia Pacific here. To me the most interesting thing about Koch Industries is that the company continue to reinvests 90% of their profit back into the company. So although the company doesn't pay a large dividend the sheer fact that the company continues to reinvest their dividend has substantially increased the dividend paid out to Koch Industries shareholders over the years. 

Recently an article by Bloomberg Law/Reuters mentioned that Koch Industries received $2.5 billion of dividend payments from Georgia Pacific ($2 billion of this was a special dividend). In 2004 when Koch Industries was looking to purchase just the non consumer products business from Georgia Pacific. Charles Koch explains in this Uncommon Knowledge video with Peter Robinson that Koch Industries wanted Georgia Pacific to divide up their company so Koch Industries could only purchase the non consumer products business however the issue was Georgia Pacific had asbestos liabilities and Koch Industries couldn't only purchase just a portion of the asset base of Georgia Pacific since that would be considered fraudulent transfer. The only option was Koch Industries would have to purchase all of Georgia Pacific and incur the asbestos liabilities. As of 2017 there were still over 64,000 lawsuits despite Bestwall paying out $2.8 billion claims. Bestwall was spending $40 million in just defense fees in 2017 alone and the average payout to claimants increased from $21,000 to $121,000. Due to the increasing costs Koch Industries put the Bestwall unit into Chapter 11 bankruptcy. Koch was able to transfer the asbestos liabilities to BestWall and then transfer the assets to New Georgia Pacific (a newly created entity). So even though Charles Koch was concerned about fraudulent transfer before acquiring Georgia Pacific it looks like Koch Industries was able to get around it with some creative legal maneuvers and legal planning. 

The New Georgia Pacific paid $481 million in total dividends (paid quarterly) to parent company Koch Industries. In addition to this The New Georgia Pacific also paid a special $2 billion dividend as well to Koch Industries. For a moment I will ignore the $2 billion special dividend as this is a one time dividend. Bloomberg Billionaires Index estimate that Charles Koch (who owns 42% of Koch Industries) is worth $68.6 billion as I write this. Bloomberg estimates that of that the portion of Georgia Pacific that Charles Koch owns (again a 42% interest) is worth $18.2 billion. Bloomberg estimates that the total revenue of Georgia Pacific is roughly $21 billion. So if a 42% interest interest in Georgia Pacific is worth $18.2 billion this would say the whole company is worth roughly $43 billion. Also said another way Georgia Pacific would constitute 26% of Koch Industries. So if the Georgia Pacific paid out only $481 million dividends (again excluding the special dividend) and this represents 26% of the Koch Industries one estimate of how much Koch Industries pays out in dividends is $1.9 billion. As an actual dividend yield for Georgia Pacific the dividend is quite low of only 1% (the average dividend payout as I write this is 1.72%). 

The method I have calculated Koch Industries dividends is to base it off the revenue of Koch Industries. Koch Chief Financial Officer (CFO) Richard Dinkel said Koch Industries had $125 billion of revenue in 2021 and on the Koch Equity Development website recently they also reported $125 billion of revenue (with $150 billion of investments since 2003). This would say on average the earnings of Koch Industries is about $9 billion per year. I estimated that Koch Industries earns a 14% return (this figure was from an executive at Koch Industries). So if you take $125 billion of revenue x 14% is about $18 billion of earnings (this is before any tax though). If you assume a 20% corporate tax rate based (based on data from Ed Yardeni) would say that Koch Industries has $14 billion to distribute to shareholders. According to Bill Koch about 7% of the earnings of Koch are paid out as dividends. This would say about $1 billion is paid out as dividends (the estimate of $1.9 billion is close on relative basis even Koch has $125 billion revenue! 

If based off the new information from the New Georgia Pacific dividends paid out to Koch Industries and Koch does pay out $1.9 billion in dividends per year it would say that $800 million is paid out to Charles Koch and his family (Chase Koch has mentioned he is a Koch Industries shareholder as I mentioned in this post) and $800 million is paid out to Julia Koch and her family. Although Julia Koch has never worked for Koch Industries she does serve on the board of directors of the company. The other 16% of Koch Industries is owned by the Marshall family. This estimate would say the Marshall family earns $300 million in dividends from Koch Industries stock. In 1995 J Howard Marshall was earning $5 million in just dividends from Koch Industries stock. He was primarily using the dividend income to pay off debt and also support his lifestyle and the ladies in his life (including Anna Nicole Smith). 

It is hard to believe that Koch Industries back in 1967 only paid out $300,000 of dividends and recently estimated to pay out $1.9 billion would represent a 17% per year increase in dividend payments per year over a 55 year period! Koch Industries continually reinvesting 90% of the earnings back into the company has paid off for the shareholders of the company over the long run. 

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.