Why the Koch Brothers Failed To Take Over Cato

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June 25 2012 7:37 PM

Cato at Peace

Ed Crane steps down to end the Koch brothers’ attempted coup at Cato, and libertarians cheer.

David Koch attends the 2011 New York City Opera Spring Gala.
David Koch at the David H. Koch Theater, Lincoln Center, on April 21, 2011 in New York City

Photo by Marc Stamas/Getty Images.

Shortly before 3 p.m. today, the men and women of the Cato Institute strolled into the renovated Friedrich von Hayek Auditorium to confirm their good news. Five days earlier, the Washington Post broke news of a settlement between David Koch, Charles Koch, and America’s largest, longest-lived libertarian think tank. Ed Crane, 68, Cato’s president since its 1977 genesis in San Francisco, would step down. His replacement would be John Allison, 64, a banker who’d endowed college courses on the work of Ayn Rand.

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

Bob Levy, chairman of the Cato board, took the stage first and explained the deal—a new board of directors (minus Crane and Charles Koch) and the end of the “shareholder” system that started the whole conflict. The avuncular Crane spoke next, introducing the staff to Allison. After meeting the new boss, the Cato-ites got to field questions about a treaty that had been hashed out over two months—from two in-person meetings in the Kochs’ home base of Wichita, Kan., to some increasingly fruitful conference calls, all apparently moderated by Allison. There would be 16 board members, 11 of them unaffiliated with the Kochs.

“I didn’t see today as Ed’s swan song,” says Levy. “He’s going to stay on for a while as CEO, and after that, he’s going to remain a very important consultant on fundraising and other issues.” What about all of that public Jell-O wrestling with two of the planet’s richest men? “We’ve gotten past that.” David Koch had stopped donating to Cato, but "if everybody behaves in a way that was contemplated, he'll be a supporter in the future as he was in the past."

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Three months ago, Crane told me that he was ready to leave his empire—“I'll step down if it ends this thing”—if the warring families agreed to two conditions. “We end the shareholder agreement, and we have a majority on the board of directors who are not part of the Koch group.” That’s exactly what he got. If it’s a win for Cato’s current team, it’s also a story about how the Koch family’s new, ’roided-up political activism has divided the small world of professional libertarians. (Disclosure: I worked at Reason magazine, which got Koch funding, for two-and-a-half years.)

The great war for Cato had lasted just nine months. It started on Oct. 26, 2011, with the death of William Niskanen. He’d joined the think tank 26 years earlier, after stints in the Ford and the Reagan administrations. Crane’s Cato was on an endless quest to make libertarians respectable—suits and ties ‘round the clock—and Niskanen helped. He got four of the 16 total shares in Cato, putting him on the same footing as Crane, Charles Koch, and George Pearson, Charles’ political consigliere.

The Cato shareholder agreement was succinct. “Cease to be a shareholder,” and the shares were up for grabs. Niskanen’s widow tried to claim ownership. The Kochs didn’t buy it. They proposed a new crop of board members, with closer ties to their interests. Later in 2011 they met with Bob Levy, the chairman of Cato’s board, and described a think tank that could (in Levy’s words) “provide intellectual ammunition that we can then use at Americans for Prosperity and our allied organizations.” And they wanted Ed Crane out.