Here’s what David Gordon has to say: http://www.lewrockwell.com/gordon/gordon37.html
Crane and Koch could not tolerate what they deemed blatant disloyalty. Even though Rothbard was the leading theorist of libertarianism and the Cato Institute had been established to promote his views, they expected him to obey the orders sent down from on high. No one at all acquainted with Rothbard could have reasonably expected him to do so. He was always his own man and would agree with Dante: “Follow your own course, and let the people say what they will.”
Rothbard was removed from his position at Cato, and he was no longer invited to lecture at the summer conferences of the Institute for Humane Studies, another organization under Koch’s patronage. Rothbard did not go quietly. He was, it will be recalled, a stockholder in the Cato Institute; and he intended to make clear his opposition to current policy at stockholders’ meetings. In addition, his public criticisms would draw attention to a fact that Koch preferred to keep hidden, i.e., that the stockholders, principally Koch himself, and not the Board of Directors, held final control.
Koch and Crane were determined to prevent Rothbard from doing so. Koch refused to return Rothbard’s shares, which he had supposedly been holding in safekeeping for him. When Rothbard appeared at the Cato offices for a stockholders’ meeting, Crane informed him that his shares had been voided. Though the legality of this was eminently questionable, Rothbard elected not to pursue the case further. Lawsuits against billionaires often have unhappy endings.
After Rothbard departed from Cato, he joined forces with the Mises Institute, established in 1982 by Lew Rockwell. The new group was a standing reproach to Koch and Crane, since its consistent defense, encouragement, and development of a Rothbardian program were exactly the program that the Cato Institute had betrayed. The Koch forces endeavored to strangle the new group in its cradle. Rockwell received a telephone call from George Pearson, Koch’s Wichita lieutenant in charge of libertarian programs. He screamed at Rockwell that he must on no account found a group named after Ludwig von Mises. Pearson informed him that Mises was an extreme and polarizing figure who should be downplayed. When Rockwell nevertheless proceeded as planned, Koch and his minions actively sought to discourage contributions to the new group.
The Koch’s stole from Rothbard and harassed Rockwell. This is why the Kochtopus is held in such contempt, not (solely) because they’re beltway oriented.