In a move that could have significant impact on institutional libertarianism, Cato Institute founder Charles Koch and his brother David (the latter of whom sits on the boards of both Cato and the Reason Foundation, which publishes this website), are suing Cato, Cato President Ed Crane, and the widow of recently deceased former Cato chairman William Niskanen in a dispute over Niskanen's ownership shares in the $39 million libertarian think tank.
Cato President Ed Crane, who is one of the defendants, has described the suit as an attempted "hostile takeover," an "effort by the Kochs to turn the Cato Institute into some sort of auxiliary for the G.O.P"; the Kochs counter that they intend no such takeover and are instead fighting for the sanctity of contract and rule of law...
The New York Times Tuesday reported more on the "personal acrimony" between Crane and the Kochs:
Mr. Crane, the Cato president, was once close to Charles Koch, sharing libertarian beliefs and traveling with him to China and the Soviet Union as they joined to form Cato in the mid-1970s, officials said. But the two had a falling out, and the Kochs tried to have Mr. Crane removed as president some years ago, the officials said.
Exacerbating tensions was an article in 2010 in The New Yorker magazine, in which an unnamed Cato Institute official was quoted comparing Charles Koch and his "market-based management" philosophies to an "emperor" with no clothes. The quote was said to infuriate Mr. Koch.
Charles and David Koch have rarely attended Cato board meetings in recent years, and Cato officials have rarely been invited to the family's regular galas for influential conservatives. As the relationship with the institute has deteriorated, their donations have declined as well.
Since Cato was formed, the Kochs have donated about $30 million, officials said, but the bulk came in its first decade; by last year, the Kochs gave no money at all.
The Koch's side of the story:
Charles Koch and David Koch went to great lengths to avoid this dispute. Their efforts were numerous, sincere, and went literally up to the last minute.
The disagreement over the shareholders' agreement has been going on for years with Charles Koch and David Koch receiving several proposals from Cato's officers to dissolve the agreement. Charles and David consistently declined these proposals because they feel the shareholder structure is important to preserve donor intent. At the unfortunate passing of one of the four shareholders, Bill Niskanen, some issues came to the forefront with discussions about how his shares should rightfully be disposed.
Charles Koch and David Koch, mindful of how this dispute could be a distraction to Cato and its mission at this critical time, sought to resolve the issue, or alternatively, to table the issue for a year or longer.
* They proposed a standstill agreement to delay any discussion on the shareholders agreement, and to delay any shareholder meetings and maintain the current board of directors for one year or longer.
* They proposed third party mediation.
* They proposed alternative corporate structures for the other side to consider.
All of these efforts were rejected, and Cato's other shareholder [Ed Crane] demanded that a shareholders' meeting be held on March 1 where a new party (Ms. Washburn — Bill Niskanen's widow) would be named a shareholder and new directors would be named.
The court action, filed immediately before the shareholders' meeting, was a last resort to ask the court for help in confirming the meaning of the governing documents and the shareholders' agreement.
More than you ever wanted to know: