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The Kochs are asking a Kansas court to enforce an old agreement that would give the brothers control of the four-person shareholder group that governs the institute as well as the authority to appoint a majority of a separate 16-member board.
The Koch brothers and Cato Institute President Edward Crane currently hold three of those seats. The fourth was vacated when Cato's chairman emeritus died in October. The Kochs argue that the shares should revert to the remaining three founders instead of to the chairman's wife.
Cato scholars fear that the brothers intend to fold the nonprofit into their empire of explicitly Republican groups because the Kochs have been backers of Americans for Prosperity and FreedomWorks. Both organizations played an active and crucial role in 2010 by helping Republicans secure control of the House and gain seats in the Senate.
The liberal watchdog group Common Cause called Friday for an IRS investigation of the Kochs' efforts "to use Cato's corporate structure and tax-exempt status to serve their own political and economic interests."
Cannon said he was working on a book to be published by Cato with another health care expert, who backed out when the lawsuit was filed because he did not "want his work to be dismissed."
As controversial as the Koch brand has become in Washington, D.C., convincing Cato sympathizers to publicly voice their support may be difficult given the Kochs' reach.
Conservative organizations including Americans for Prosperity, the Club for Growth and FreedomWorks did not respond to Roll Call's requests for comment. Even Norquist, who rarely passes up an interview opportunity, declined to weigh in.
"There is a nice correlation between people who remain silent and those who receive Koch money," said Jim Harper, director of information policy studies at Cato.
Privately, conservative power brokers in Washington admit they are alarmed by the institute's decision to take this family feud public, a concern heightened by Cannon's pitch at the Wednesday meeting.
Some may even be rooting for the Koch takeover. Republicans do not have an action-oriented research organization to match the might of the Center for American Progress, which was established during George W. Bush's administration as an outpost for Democrats.
"A lot of people in the Republican establishment look at places like Cato and [the American Enterprise Institute] ... and think that [they're] just too sleepy," said an official at another conservative think tank.
Indeed, Cato scholars — as isolationist in practice as they are in policy — have long prided themselves on staying above the political fray.
"We're afraid that a Vichy Cato would look like CAP," Taylor said. "That's a relatively new model and not one that is well-represented on the right."
Koch officials deny any political motivation.
"We view recent events as evidence that Cato's leadership has turned its back on these core principles," Charles Koch said in a statement released Thursday night. "Some have speculated that we would micro-manage the enterprise. Others have suggested we would turn Cato into a partisan Republican organization. These rumors are absolutely false."
When Wes Edwards, deputy general counsel of Koch Companies Public Sector LLC, was asked about the think tank's recent actions and the scholars' resignation threats, he said, "We think it is unfortunate."