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The Battle for the Cato Institute
Comments () | Published May 30, 2012

Inside Cato’s glassy headquarters on Massachusetts Avenue, Crane—who earned $454,000 in 2011—is a larger-than-life figure.

“It’s interesting to watch the staff at Cato events—some of them cower around Crane,” a former Cato fellow says.

Crane, who is married, is an office flirt, according to two former female employees. “He’s a big, overweight guy who enjoyed flirting with his attractive, 20-year-old female employees,” says one, who adds that she never thought Crane crossed the line.

Some ex-employees say he behaves as if the think tank is his personal property. “It’s the institute that Ed built, and he runs it his way—either you like it or you don’t,” says one. Staffers joke that Cato stands for “Crane and the others.”

Despite Charles Koch’s strained relationship with Crane, David Koch continued to serve on Cato’s board and provide financial support. Unlike his brother, David was easygoing and affable, says onetime Cato scholar Peter Ferrara.

David Koch and Crane were friends. David told him on several occasions that he thought market-based management was overrated and that everyone at Koch Industries headquarters considered it nuts, Crane says.

In 1993, Crane sent a letter to Charles Koch. “I’d like an opportunity to talk with you about the Cato stock situation,” Crane wrote. “I have for a long time favored the dissolution of the corporation, giving clear legal control of the Institute to the Board of Directors.” Koch politely refused, noting that the agreement was essential to ensuring that Cato remained true to the vision it was founded upon, Crane says.

Over time, Crane grew concerned about the shareholder agreement he had signed. Cato staffers insist that the Kochs’ patronage never influenced their work. But Crane worried that the very existence of the agreement could undermine Cato’s reputation for independence.

In 1993, Crane sent a letter to Charles Koch. “I’d like an opportunity to talk with you about the Cato stock situation,” Crane wrote. “I have for a long time favored the dissolution of the corporation, giving clear legal control of the Institute to the Board of Directors.”

Koch politely refused, noting that the agreement was essential to ensuring that Cato remained true to the vision it was founded upon, Crane says.

At a reception one evening in the mid-1990s, Crane tried to convince David Koch that scrapping the shareholder agreement was in Cato’s best interest.

“Ed, I hear you, and in fact I agree with you,” Koch said, according to Crane. “But I will never cross my brother.”

Meanwhile, in the 1990s, the Koch-funded Institute for Humane Studies, in Arlington—which offers seminars and scholarships for students interested in libertarianism—underwent a change in direction that one former employee described as “the Shadow falling on Rivendell.”

“[Charles] Koch, evidently beginning to despair at the prospects of achieving political goals in his lifetime, became obsessed with a quick fix and decided that IHS needed to have ‘quantifiable results,’ ” onetime IHS professor Roderick T. Long wrote on his personal blog in 2008.

Long said IHS officials began feeding students’ application essays into a computer program that counted how many times the applicants mentioned libertarian heroes such as Ayn Rand or Milton Friedman—regardless of what they actually wrote.

“Then the management began to do things like increasing the size of student seminars, packing them in, and giving the students a political questionnaire at the beginning of the week and another one at the end, to measure how much their political beliefs had shifted,” Long said.

More recently, Americans for Prosperity—a David Koch-founded activist group with ties to the Tea Party—has worked to change public policy by getting Republicans elected. AFP earmarked $45 million for elections in 2010, the Washington Post reported.

Crane says Fink is behind Charles Koch’s newfound willingness to align with Republicans for the sake of near-term results: “He’s hired Fink to do this sort of stuff, and Fink is leading him down the wrong path.”

In 2010, Jane Mayer, a staff writer for the New Yorker, began reporting an article on the Koch brothers. Ed Crane agreed to sit for an interview.

Mayer arrived at Crane’s office with an audio recorder, which she turned on at the start of the interview. Although most of their conversation was on the record, Crane asked that his name not be associated with certain comments he made, Mayer says. This method of attribution is known as “on background.”

Crane says he participated only because Mayer told him the article was about the libertarian influence on the Tea Party—not a profile of the Kochs. “It became very clear a couple of minutes into the interview that she wanted to do a hatchet job on the Kochs,” he says. Crane claims he agreed to speak about the Kochs if his comments were kept off the record—meaning they could not be used in the story.

When Mayer asked about Charles Koch’s book on market-based management, Crane told her he thought the book was garbage but Koch’s subordinates had convinced him it was a masterpiece.

“I recognized that this was going to piss Charles off, which is why I said, ‘It’s off the record,’ ” Crane recalls. “But I wanted Jane to know that I wasn’t a Koch sycophant, because I didn’t want Cato that closely aligned to what Koch’s doing.” Mayer says he’s confusing the terms “on background” and “off the record.”

Several weeks later, a New Yorker fact-checker contacted Crane to confirm his comments. Crane claims he verified the comments but said he had been assured certain ones were off the record. He told the fact-checker to review the audio recording; the fact-checker said Mayer’s device had malfunctioned.

Though she believed the comments in question were among those Crane had made on the record, Mayer removed Crane’s name from the passage and attributed the comments to “a top Cato Institute official.” At the time, Crane seemed comfortable with the change, Mayer says.

Mayer’s story, published in August 2010, exposed the Kochs’ underground support for the Tea Party. It included the following passage: “A top Cato Institute official told me that Charles ‘thinks he’s a genius. He’s the emperor, and he’s convinced he’s wearing clothes.’ ”

Shortly after the article appeared, David Koch called Crane to ask if he was the Cato official quoted. Crane admitted he was.

“Charles is really upset,” David said.

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  • If the Koch faction takes over Cato then -- major prediction -- absolutely nothing will change. For all of its high-minded talk of "independence," Cato and libertarians in general will always push for the Republican position on any issue with the limited exception of drug legalization.

    Still, it's adorable to see them eating each other alive.

  • frosty

    With the exception of drug legalization, same-sex marriage, war, privacy, etc.

  • Oh please, with the exception of someone like Radley Balko glibertarians are 95% ideologically aligned with the GOP and act (and vote) accordingly.

    Legalizing gay marriage is nothing to them compared to protecting mega-companies from having to pay any taxes, let along protecting the rights of individual workers.

  • So, Ed Crane parlays a $12 investment into a $454,000/year sinecure at Cato, and now he's complaining about the Kochs exercising the power of their shares? It seems that he's already established what he is, and now he's just trying haggle about the price.

  • Nancy Carolyn Wood-Phillips

    Several facts and dates are incorrect; did you run this article by Ed Crane III, prior to publishing it? Some of the 'facts' are not actual reality. The most I can take from this article is that the 'Koch as Academic,' and the 'Koch as Legacy,' attitudes are the root of all divides: clay feet one and all. On the other hand I am amazed at the stamina evidenced by Ed Crane III: Yes, he professes to have been immature from time to time, but look at the amount of pressure that he operates under, "thirty second" lag time, at a packed conference, and consider the progress that he has made for America toward freedom. Astounding isn't it! Cato needs to go on and on under his leadership. The Kochs should be endowing Cato as their legacy, not running it aground. What is the long term plan for Cato? (I'm not surprised that the Kochs have no focus there.) I'm so sorry that what should have been the proudest finale to the Koch empire is being dashed against the rocks: however with Ed Crane's helmsmanship to save (the titanic) painstakingly crafted Cato Institute that has become the insignia of freedom in America, not to worry, people, the best of all possible outcomes is assured: it's in Ed's hands. I admire a man who can term himself immature rather than casting that aspersion more appropriately on others: Ed Crane seems humble and introspective to me, yet he is the embodiment of devotion to purpose, and power, I worked at Cato once, in the art Department, I chased Ed, as I am sure all of his female employees do, he seemed then to be a rock of composure and reserve, I'm elated to see that he still possesses that strength.

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